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 29, 2014
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))
Item 2.02 Results of Operations and Financial Condition
On October 29, 2014, Piedmont Office Realty Trust, Inc. (the “Registrant”) issued a press release announcing its financial results for the third quarter 2014 and published supplemental information for the third quarter 2014 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 October 29, 2014. | |
99.2 | Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the Third Quarter 2014. | |
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) | ||||
Date: October 29, 2014 | 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 October 29, 2014. | |
99.2 | Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the Third Quarter 2014. | |
EXHIBIT 99.1
Piedmont Office Realty Trust Reports Third Quarter 2014 Results
ATLANTA, October 29, 2014 --Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of primarily Class A office properties located predominantly in nine of the largest U.S. office markets, today announced its results for the quarter ended September 30, 2014.
Highlights for the Three Months Ended September 30, 2014:
• | Achieved Core Funds From Operations ("CFFO") of $0.38 per diluted share for the quarter ended September 30, 2014; |
• | Completed approximately 684,000 square feet of leasing during the third quarter with approximately 389,000 square feet of the activity related to new tenants; |
• | Acquired 1155 Perimeter Center West, a Class-A office building located in the Central Perimeter submarket of Atlanta, GA, furthering the Company's strategy of aggregating assets in select sub-markets; and |
• | Further expanded its regional teams with the addition of Thomas R. Prescott as Executive Vice President of the Midwest region. |
Donald A. Miller, CFA, President and Chief Executive Officer said, "Third quarter was a solid quarter for us from both a financial and leasing perspective. In particular, I am pleased that the majority of our leasing activity during the third quarter related to new leases, as the leasing of currently vacant space remains our top priority.”
Results for the Third Quarter ended September 30, 2014
Piedmont's net income available to common stockholders for the third quarter of 2014 was $9.2 million, or $0.06 per diluted share, as compared with $19.1 million, or $0.12 per diluted share, for the third quarter of 2013. The prior quarter's results included $0.02 per diluted share in non-recurring insurance recoveries whereas the current quarter's results reflect $0.03 per diluted share of additional depreciation expense resulting from properties acquired as well as several large tenant build outs over the last twelve months.
Revenues for the quarter ended September 30, 2014 were $144.6 million, as compared with $143.4 million for the same period a year ago, primarily attributable to increased reimbursement revenue as a result of the expiration of lease abatements for operating expenses on certain recently commenced leases.
Property operating costs were $62.0 million for the quarter ended September 30, 2014, as compared to the prior period of $58.1 million, primarily as a result of additional expenses associated with properties acquired since the third quarter of 2013, as well as increased occupancy at certain assets. General and administrative expenses were $5.8 million for the third quarter of both the current and prior year.
Funds From Operations ("FFO") for the current quarter totaled $58.7 million, or $0.38 per diluted share, compared to $65.0 million, or $0.39 per diluted share, for the quarter ended September 30, 2013. The prior quarter FFO results include $0.02 per diluted share in net insurance recoveries related to Hurricane Sandy casualty losses.
Core FFO, which excludes acquisition costs and the insurance recoveries mentioned above, totaled $58.8 million, or $0.38 per diluted share, for the current quarter, as compared to $61.1 million, or $0.37 per diluted share, for the quarter ended September 30, 2013. Per share results reflect a reduction in weighted average shares outstanding as a result of shares repurchased pursuant to the Company's stock repurchase plan.
Adjusted FFO (“AFFO”) for the third quarter of 2014 totaled $21.8 million, or $0.14 per diluted share, compared to $34.0 million, or $0.21 per diluted share, in the third quarter of 2013 primarily due to increased capital expenditures associated with large tenant build outs at Aon Center in Chicago, IL and 1901 Market Street in Philadelphia, PA, among others.
Leasing Update
During the third quarter of 2014, the Company executed approximately 684,000 square feet of leasing throughout its markets with approximately 389,000 square feet of the activity related to new tenants.
As of September 30, 2014, the Company had approximately 1.7 million square feet of commenced leases that were in some form of abatement, as well as approximately 0.6 million square feet of executed leases for currently vacant space yet to commence. Same store net operating income (on a cash basis) for the quarter was $68.2 million, a 2% increase over the second quarter of 2014, but a 2.5% decrease from the third quarter of the prior year, reflecting the large number of leases currently in abatement, as well as the non-recurrence of certain rental income recognized in the third quarter of 2013 related to a lease restructuring transaction.
The Company's overall portfolio was 87.5% leased as of September 30, 2014, up from 87.0% as of the end of second quarter of 2014 and up from 86.7% a year ago. Further, the stabilized portfolio was 89.0% leased as of September 30, 2014. The weighted average lease term remaining was approximately 7.3 years as of quarter end, also up slightly compared to second quarter of 2014. Details outlining Piedmont's significant upcoming lease expirations and the status of current leasing activity can be found in the Company's quarterly supplemental information package available at www.piedmontreit.com.
Capital Markets and Other Activities
During the three months ended September 30, 2014, Piedmont acquired 1155 Perimeter Center West, a Class-A property located in the Central Perimeter submarket of Atlanta, Georgia. The 376,694 square foot property includes a 12-story office building, and an adjoining trading floor and data center, as well as an 8-level parking structure. Piedmont purchased the property for $80.75 million or $214 per square foot. The building serves as the corporate headquarters for its three tenants. This transaction, together with the Company's existing assets, brings the Atlanta area portfolio to approximately 1.5 million square feet and furthers the Company's strategy of expanding its presence in desirable sub-markets within specifically identified office markets.
Also during the quarter, Thomas R. Prescott joined the Company as its Executive Vice President for the Midwest Region. Prescott, who will report to Donald A. Miller, CFA, President & CEO of Piedmont, will
be responsible for all of the Midwest Region's leasing, asset management, acquisitions, dispositions, and development projects. Piedmont's Midwest Region is currently comprised of approximately 6.5 million square feet of office space, located in metropolitan Chicago and Minneapolis.
Subsequent to Quarter End
Fourth Quarter Dividend Declaration
On October 29, 2014, the board of directors of Piedmont declared dividends for the fourth quarter 2014 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on November 28, 2014, payable on December 19, 2014.
Land Acquisition
On October 28, 2014, Piedmont entered into a binding agreement to purchase approximately 25.2 acres of land adjacent to its 400 TownPark property in Lake Mary, FL. The land is located within a mixed-use development consisting of office, retail, residential and a hotel. If consummated, the acquisition would add to Piedmont's developable land holdings and allow Piedmont to control a site that is complementary to the 400 TownPark building.
Guidance for 2014
Based on management's expectations, the Company is narrowing its guidance for full-year 2014 as follows:
(in millions, except per share data) | Low | High | |||
Net Income | $35 | - | $37 | ||
Add: Depreciation, Amortization, and Other | 195 | - | 198 | ||
Less: Gain on Sale of Real Estate Assets | (2 | ) | - | (2) | |
Core FFO | $228 | - | $233 | ||
Core FFO per diluted share | $1.48 | - | $1.50 | ||
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 lease commencements and expirations, the timing of repairs and maintenance, capital expenditures, capital markets activities 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
This release contains certain supplemental non-GAAP financial measures such as FFO, AFFO, Core FFO, Same store net operating income, and Core EBITDA. See below for definitions and reconciliations of these metrics to their most comparable GAAP metric.
Conference Call Information
Piedmont has scheduled a conference call and an audio web cast for Thursday, October 30, 2014 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 November 12, 2014, and may be accessed by dialing (877)660-6853 for participants in the United States and Canada and (201)612-7415 for international participants, followed by conference identification code 13591744. 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 2014 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, 2014 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 a fully-integrated and self-managed real estate investment trust (REIT) specializing in the ownership and management of high-quality Class A office buildings located primarily in nine of the largest U.S. office markets, including Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Minneapolis, New York and Washington, D.C. Approximately 73% of Annualized Lease Revenue is from tenants that are investment grade-rated or governmental tenants, or large, nationally-recognized companies not requiring investment ratings. The Company is headquartered in Atlanta, GA, with local management offices in each of its major markets. Investment grade-rated by Standard & Poor's (BBB) and Moody's (Baa2), Piedmont has maintained a relatively low leverage strategy throughout its sixteen year operating history. 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 and Other, Gain on Sale of Real Estate Assets, Core FFO and Core FFO per diluted share for the year ending December 31, 2014.
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: market and
economic conditions remain challenging and the demand for office space, rental rates and property values may continue to lag the general economic recovery causing the Company's business, results of operations, cash flows, financial condition and access to capital to be adversely affected or otherwise impact performance, including the potential recognition of impairment charges; the success of the Company's real estate strategies and investment objectives, including the Company's ability to identify and consummate suitable acquisitions; lease terminations or lease defaults, particularly by one of the Company's large lead tenants; the impact of competition on the Company's efforts to renew existing leases or re-let space on terms similar to existing leases; changes in the economies and other conditions of the office market in general and of the specific markets in which the Company operates, particularly in Chicago, Washington, D.C., and the New York metropolitan area; economic and regulatory changes, including accounting standards, that impact the real estate market generally; additional risks and costs associated with directly managing properties occupied by government tenants; adverse market and economic conditions may continue to adversely affect the Company and could cause the Company to recognize impairment charges or otherwise impact the Company's performance; availability of financing and the Company's lending banks' ability to honor existing line of credit commitments; costs of complying with governmental laws and regulations; uncertainties associated with environmental and other regulatory matters; potential changes in political environment and reduction in federal and/or state funding of the Company's governmental tenants; the Company may be subject to litigation, which could have a material adverse effect on the Company's financial condition; the Company's ability to continue to qualify as a real estate investment trust under the Internal Revenue Code; and other factors detailed in the Company`s most recent Annual Report on Form 10-K for the period ended December 31, 2013, and other documents the Company files with the Securities and Exchange Commission.
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, 2014 | December 31, 2013 | ||||||
(unaudited) | |||||||
Assets: | |||||||
Real estate assets, at cost: | |||||||
Land | $ | 696,429 | $ | 688,761 | |||
Buildings and improvements | 4,307,467 | 4,144,509 | |||||
Buildings and improvements, accumulated depreciation | (1,063,515 | ) | (979,934 | ) | |||
Intangible lease assets | 150,336 | 146,197 | |||||
Intangible lease assets, accumulated amortization | (75,409 | ) | (71,820 | ) | |||
Construction in progress | 43,106 | 24,270 | |||||
Total real estate assets | 4,058,414 | 3,951,983 | |||||
Investments in and amounts due from unconsolidated joint ventures | 7,638 | 14,388 | |||||
Cash and cash equivalents | 8,815 | 6,973 | |||||
Tenant receivables, net of allowance for doubtful accounts | 28,403 | 31,145 | |||||
Straight line rent receivables | 163,917 | 139,406 | |||||
Restricted cash and escrows | 908 | 394 | |||||
Prepaid expenses and other assets | 36,733 | 24,771 | |||||
Goodwill | 180,097 | 180,097 | |||||
Interest rate swaps | 434 | 24,176 | |||||
Deferred financing costs, less accumulated amortization | 7,969 | 8,759 | |||||
Deferred lease costs, less accumulated amortization | 284,974 | 283,996 | |||||
Total assets | $ | 4,778,302 | $ | 4,666,088 | |||
Liabilities: | |||||||
Unsecured debt, net of discount | $ | 1,784,412 | $ | 1,014,680 | |||
Secured debt | 449,427 | 987,525 | |||||
Accounts payable, accrued expenses, and accrued capital expenditures | 135,320 | 128,818 | |||||
Deferred income | 21,958 | 22,267 | |||||
Intangible lease liabilities, less accumulated amortization | 44,981 | 47,113 | |||||
Interest rate swaps | 3,358 | 4,526 | |||||
Total liabilities | 2,439,456 | 2,204,929 | |||||
Stockholders' equity : | |||||||
Common stock | 1,543 | 1,575 | |||||
Additional paid in capital | 3,669,541 | 3,668,906 | |||||
Cumulative distributions in excess of earnings | (1,345,609 | ) | (1,231,209 | ) | |||
Other comprehensive income | 11,758 | 20,278 | |||||
Piedmont stockholders' equity | 2,337,233 | 2,459,550 | |||||
Non-controlling interest | 1,613 | 1,609 | |||||
Total stockholders' equity | 2,338,846 | 2,461,159 | |||||
Total liabilities and stockholders' equity | $ | 4,778,302 | $ | 4,666,088 | |||
Number of shares of common stock outstanding at end of period | 154,325 | 157,461 | |||||
Piedmont Office Realty Trust, Inc. | |||||||||||||||
Consolidated Statements of Income | |||||||||||||||
Unaudited (in thousands) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 114,529 | $ | 115,170 | $ | 338,720 | $ | 329,177 | |||||||
Tenant reimbursements | 29,579 | 27,329 | 79,253 | 76,895 | |||||||||||
Property management fee revenue | 533 | 890 | 1,568 | 2,034 | |||||||||||
Total revenues | 144,641 | 143,389 | 419,541 | 408,106 | |||||||||||
Expenses: | |||||||||||||||
Property operating costs | 62,027 | 58,137 | 177,434 | 162,516 | |||||||||||
Depreciation | 35,366 | 30,295 | 103,154 | 89,289 | |||||||||||
Amortization | 14,235 | 13,685 | 42,407 | 33,895 | |||||||||||
General and administrative | 5,814 | 5,849 | 17,514 | 16,677 | |||||||||||
Total operating expenses | 117,442 | 107,966 | 340,509 | 302,377 | |||||||||||
Real estate operating income | 27,199 | 35,423 | 79,032 | 105,729 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (18,654 | ) | (19,331 | ) | (55,592 | ) | (53,932 | ) | |||||||
Other income (expense) | 524 | (596 | ) | 68 | (1,944 | ) | |||||||||
Net recoveries from casualty events and litigation settlements | (8 | ) | 3,919 | 4,514 | 7,311 | ||||||||||
Equity in income/(loss) of unconsolidated joint ventures | 89 | 46 | (510 | ) | 604 | ||||||||||
Loss on consolidation of VIE | — | (898 | ) | — | (898 | ) | |||||||||
Total other income (expense) | (18,049 | ) | (16,860 | ) | (51,520 | ) | (48,859 | ) | |||||||
Income from continuing operations | 9,150 | 18,563 | 27,512 | 56,870 | |||||||||||
Discontinued operations: | |||||||||||||||
Operating income | 16 | 537 | 996 | 2,391 | |||||||||||
Impairment loss | — | — | — | (6,402 | ) | ||||||||||
Gain on sale of real estate assets | — | — | 1,198 | 16,258 | |||||||||||
Income from discontinued operations | 16 | 537 | 2,194 | 12,247 | |||||||||||
Gain on sale of real estate | — | — | 1,140 | — | |||||||||||
Net income | 9,166 | 19,100 | 30,846 | 69,117 | |||||||||||
Less: Net income attributable to noncontrolling interest | (4 | ) | (4 | ) | (12 | ) | (12 | ) | |||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 19,096 | $ | 30,834 | $ | 69,105 | |||||||
Weighted average common shares outstanding - diluted | 154,561 | 164,796 | 154,665 | 166,734 | |||||||||||
Per Share Information -- diluted: | |||||||||||||||
Income from continuing operations | $ | 0.06 | $ | 0.11 | $ | 0.19 | $ | 0.34 | |||||||
Income from discontinued operations | $ | — | $ | 0.01 | $ | 0.01 | $ | 0.07 | |||||||
Net income available to common stockholders | $ | 0.06 | $ | 0.12 | $ | 0.20 | $ | 0.41 | |||||||
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 | Nine Months Ended | ||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | ||||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 19,096 | $ | 30,834 | $ | 69,105 | |||||||
Depreciation (1) (2) | 35,286 | 31,050 | 103,132 | 91,905 | |||||||||||
Amortization (1) | 14,248 | 13,939 | 42,660 | 34,509 | |||||||||||
Impairment loss (1) | — | — | — | 6,402 | |||||||||||
Gain on sale of real estate assets (1) | — | — | (2,169 | ) | (16,258 | ) | |||||||||
Loss on consolidation | — | 898 | — | 898 | |||||||||||
Funds from operations* | 58,696 | 64,983 | 174,457 | 186,561 | |||||||||||
Acquisition costs | 110 | 60 | 539 | 1,374 | |||||||||||
Net recoveries from casualty events and litigation settlements | 8 | (3,919 | ) | (4,514 | ) | (7,328 | ) | ||||||||
Core funds from operations* | 58,814 | 61,124 | 170,482 | 180,607 | |||||||||||
Deferred financing cost amortization | 598 | 674 | 2,076 | 1,911 | |||||||||||
Amortization of note payable step-up | (120 | ) | — | (126 | ) | — | |||||||||
Amortization of discount on Senior Notes | 47 | 30 | 128 | 47 | |||||||||||
Depreciation of non real estate assets | 141 | 97 | 370 | 300 | |||||||||||
Straight-line effects of lease revenue (1) | (6,780 | ) | (5,076 | ) | (23,950 | ) | (14,655 | ) | |||||||
Stock-based and other non-cash compensation expense | 1,139 | 719 | 3,046 | 1,489 | |||||||||||
Net effect of amortization of above or below-market in-place lease intangibles (1) | (1,010 | ) | (1,757 | ) | (3,653 | ) | (4,067 | ) | |||||||
Acquisition costs | (110 | ) | (60 | ) | (539 | ) | (1,374 | ) | |||||||
Non-incremental capital expenditures (3) | (30,890 | ) | (21,705 | ) | (70,862 | ) | (59,992 | ) | |||||||
Adjusted funds from operations* | $ | 21,829 | $ | 34,046 | $ | 76,972 | $ | 104,266 | |||||||
Weighted average common shares outstanding - diluted | 154,561 | 164,796 | 154,665 | 166,734 | |||||||||||
Funds from operations per share (diluted) | $ | 0.38 | $ | 0.39 | $ | 1.13 | $ | 1.12 | |||||||
Core funds from operations per share (diluted) | $ | 0.38 | $ | 0.37 | $ | 1.10 | $ | 1.08 | |||||||
Adjusted funds from operations per share (diluted) | $ | 0.14 | $ | 0.21 | $ | 0.50 | $ | 0.63 | |||||||
(1) Includes adjustments for consolidated properties, including discontinued operations, 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"): FFO is calculated 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, impairment losses, and gains or losses on consolidation, 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 may provide valuable
comparisons of operating performance between periods and with other REITs. FFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income. We believe that FFO is a beneficial indicator of the performance of an equity REIT. However, other REITs may not define FFO in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than we do; therefore, our computation of FFO may not be comparable to that of such other REITs.
Core Funds From Operations ("Core FFO"): We calculate Core FFO by starting with FFO, as defined by NAREIT, and adjusting for certain non-recurring items such as gains or losses on the early extinguishment of debt, acquisition-related costs and other significant non-recurring items. Such items create significant earnings volatility. We believe Core FFO provides a meaningful measure of our operating performance and more predictability regarding future earnings potential. Core FFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income; therefore, it should not be compared to other REITs' equivalent to Core FFO.
Adjusted Funds From Operations ("AFFO"): AFFO is calculated by deducting from Core FFO non-incremental capital expenditures and acquisition-related costs and adding back non-cash items including non-real estate depreciation, straight lined rents and fair value lease revenue, non-cash components of interest expense and compensation expense, and by making similar adjustments for unconsolidated partnerships and joint ventures. Although AFFO may not be comparable to that of other REITs, we believe it provides a meaningful indicator of our ability to fund cash needs and to make cash distributions to equity owners. AFFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income, as an alternative to net cash flows from operating activities or as a measure of our liquidity.
Piedmont Office Realty Trust, Inc. | |||||||||||||||
Core EBITDA, Property Net Operating Income, Same Store Net Operating Income | |||||||||||||||
Unaudited (in thousands) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | ||||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 19,096 | $ | 30,834 | $ | 69,105 | |||||||
Net income attributable to noncontrolling interest | 4 | 4 | 12 | 12 | |||||||||||
Interest expense | 18,654 | 19,331 | 55,592 | 53,932 | |||||||||||
Depreciation (1) | 35,427 | 31,147 | 103,502 | 92,204 | |||||||||||
Amortization (1) | 14,248 | 13,939 | 42,660 | 34,509 | |||||||||||
Acquisition costs | 110 | 60 | 539 | 1,374 | |||||||||||
Impairment loss | — | — | — | 6,402 | |||||||||||
Net recoveries from casualty events and litigation settlements | 8 | (3,919 | ) | (4,514 | ) | (7,328 | ) | ||||||||
Gain on sale of real estate assets (1) | — | — | (2,169 | ) | (16,258 | ) | |||||||||
Loss on consolidation | — | 898 | — | 898 | |||||||||||
Core EBITDA* | 77,613 | 80,556 | 226,456 | 234,850 | |||||||||||
General & administrative expenses (1) | 5,808 | 5,921 | 17,550 | 16,940 | |||||||||||
Management fee revenue | (299 | ) | (636 | ) | (839 | ) | (1,248 | ) | |||||||
Other expense/(income) (1) | 21 | 550 | 54 | 560 | |||||||||||
Straight line effects of lease revenue (1) | (6,780 | ) | (5,076 | ) | (23,950 | ) | (14,655 | ) | |||||||
Amortization of lease-related intangibles (1) | (1,010 | ) | (1,757 | ) | (3,653 | ) | (4,067 | ) | |||||||
Property Net Operating Income (cash basis)* | 75,353 | 79,558 | 215,618 | 232,380 | |||||||||||
Acquisitions | (6,887 | ) | (6,056 | ) | (18,072 | ) | (10,621 | ) | |||||||
Dispositions | (6 | ) | (1,184 | ) | (1,523 | ) | (3,874 | ) | |||||||
Other investments | (213 | ) | (2,328 | ) | 258 | (7,539 | ) | ||||||||
Same Store NOI (cash basis)* | $ | 68,247 | $ | 69,990 | $ | 196,281 | $ | 210,346 | |||||||
Change period over period in same store NOI | (2.5 | )% | N/A | (6.7 | )% | N/A | |||||||||
(1) Includes amounts attributable to consolidated properties, including discontinued operations, and our proportionate share of amounts attributable to unconsolidated joint ventures.
*Definitions
Core EBITDA: Core EBITDA is defined as net income before interest, taxes, depreciation and amortization and incrementally removing any impairment losses, gains or losses from sales of property, or other significant non-recurring items. We do not include impairment losses in this measure because we feel these types of losses create volatility in our earnings and make it difficult to determine the earnings generated by our ongoing business. We believe Core EBITDA is a reasonable measure of our liquidity. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative measurement of cash flows from operating activities or other GAAP basis liquidity measures. Other REITs may calculate Core EBITDA differently and our calculation should not be compared to that of other REITs.
Property Net Operating Income ("Property NOI"): Property NOI is defined as real estate operating income with the add-back of corporate general and administrative expense, depreciation and amortization, and impairment losses and the deduction of net operating income associated with property management performed by Piedmont for other organizations. We 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 eliminated. The Company uses this measure to assess its operating results and believes it is important in assessing operating performance. Property NOI is a non-GAAP measure which does not have any standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies.
Same Store Net Operating Income ("Same Store NOI"): Same Store NOI is calculated as the Property NOI attributable to the properties owned or placed in service during the entire span of the current and prior year reporting periods. Same Store NOI excludes amounts attributable to unconsolidated joint venture assets. We 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 eliminated. We believe Same Store NOI is an important measure of comparison of our properties' operating performance from one period to another. Other REITs may calculate Same Store NOI differently and our calculation should not be compared to that of other REITs.
EXHIBIT 99.2
Quarterly Supplemental Information
September 30, 2014
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 | |||
Key Performance Indicators | Research Coverage | |||
Financials | Non-GAAP Reconciliations & Other Detail | |||
Balance Sheets | Property Detail | |||
Income Statements | Risks, Uncertainties and Limitations | |||
Funds From Operations / Adjusted Funds From Operations | ||||
Same Store Analysis | ||||
Capitalization Analysis | ||||
Debt Summary | ||||
Debt Detail | ||||
Debt 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 | ||||
Value-Add 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 package 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. Prior to the second quarter of 2014, when the Company sold properties or was under a binding contract to sell properties, it restated historical income statements with the financial results of the sold or under contract assets presented in discontinued 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 a fully-integrated and self-managed real estate investment trust (“REIT”) specializing in the acquisition, ownership, management, development and disposition of high-quality Class A office buildings located primarily in some of the largest U.S. office markets. Approximately 90% of the Company's Annualized Lease Revenue ("ALR") is generated from properties located in Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Minneapolis, New York, and Washington, D.C. Approximately 73% of the Company's ALR is from tenants that are investment grade-rated or governmental tenants or large, nationally-recognized companies not requiring investment ratings. Piedmont is headquartered in Atlanta, GA, with local management offices in each of its major markets. Investment grade-rated by Standard & Poor's and Moody's, the Company has maintained a relatively low leverage strategy throughout its sixteen year operating history.
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 | As of | ||||
September 30, 2014 | December 31, 2013 | ||||
Number of consolidated office properties (1) | 74 | 78 | |||
Rentable square footage (in thousands) (1) | 21,472 | 21,490 | |||
Percent leased (2) | 87.5 | % | 87.2 | % | |
Percent leased - stabilized portfolio (3) | 89.0 | % | 89.7 | % | |
Capitalization (in thousands): | |||||
Total debt - principal amount outstanding | $2,236,049 | $2,003,525 | |||
Equity market capitalization | $2,722,296 | $2,601,254 | |||
Total market capitalization | $4,958,345 | $4,604,779 | |||
Total debt / Total market capitalization | 45.1 | % | 43.5 | % | |
Total debt / Total gross assets | 37.8 | % | 35.0 | % | |
Common stock data | |||||
High closing price during quarter | $19.87 | $18.90 | |||
Low closing price during quarter | $17.64 | $15.96 | |||
Closing price of common stock at period end | $17.64 | $16.52 | |||
Weighted average fully diluted shares outstanding during quarter (in thousands) | 154,561 | 160,450 | |||
Shares of common stock issued and outstanding (in thousands) | 154,325 | 157,461 | |||
Rating / outlook | |||||
Standard & Poor's | BBB / Stable | BBB / Stable | |||
Moody's | Baa2 / Stable | Baa2 / Stable | |||
Employees | 128 | 121 | |||
(1) | As of September 30, 2014, our consolidated office portfolio consisted of 74 properties (exclusive of our equity interest in one property owned through an unconsolidated joint venture and one out of service property, 3100 Clarendon Boulevard). During the first quarter of 2014, we sold 11107 and 11109 Sunset Hills Boulevard, two office properties comprised of 142,000 square feet, located in Reston, VA. During the second quarter of 2014, we sold 1441 West Long Lake Road, a 108,000 square foot office building located in Troy, MI, 4685 Investment Drive, a 77,000 square foot office building located in Troy, MI, and 2020 West 89th Street, a 68,000 square foot office building located in Leawood, KS, and acquired 5 Wall Street, a 182,000 square foot office building located in Burlington, MA. During the third quarter of 2014, we acquired 1155 Perimeter Center West, a 377,000 square foot office building located in Atlanta, GA. For additional detail on asset transactions, please refer to page 37. |
(2) | Calculated as leased square footage plus square footage associated with executed new leases for currently 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 and one out of service property. Please refer to page 26 for additional analyses regarding Piedmont's leased percentage. |
(3) | Please refer to page 38 for information regarding value-add properties, data for which is removed from stabilized portfolio totals. |
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 | Laura P. Moon | Raymond L. Owens |
Chief Executive Officer, President | Chief Financial Officer, Executive | Chief Accounting Officer and | Executive Vice President, |
and Director | Vice President, and Treasurer | Senior Vice President | Capital Markets |
Joseph H. Pangburn | Thomas R. Prescott | Carroll A. Reddic, IV | Robert K. Wiberg |
Executive Vice President, | Executive Vice President, | Executive Vice President, | Executive Vice President, |
Southwest Region | Midwest Region | Real Estate Operations and Assistant | Mid-Atlantic Region and |
Secretary | Head of Development | ||
Board of Directors | |||
W. Wayne Woody | Michael R. Buchanan | Wesley E. Cantrell | William H. Keogler, Jr. |
Director, Chairman of the Board of | Director | Director | Director |
Directors and Chairman of | |||
Governance Committee | |||
Frank C. McDowell | Donald A. Miller, CFA | Raymond G. Milnes, Jr. | Donald S. Moss |
Director, Vice Chairman of the | Chief Executive Officer, President | Director and Chairman of | Director |
Board of Directors and Chairman | and Director | Audit Committee | |
of Compensation Committee | |||
Jeffery L. Swope | |||
Director and Chairman of | |||
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 September 30, 2014
Financial Results (1)
Funds from operations (FFO) for the quarter ended September 30, 2014 was $58.7 million, or $0.38 per share (diluted), compared to $65.0 million, or $0.39 per share (diluted), for the same quarter in 2013. FFO for the nine months ended September 30, 2014 was $174.5 million, or $1.13 per share (diluted), compared to $186.6 million, or $1.12 per share (diluted), for the same period in 2013. The decrease in dollar amount of FFO for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was principally related to reduced operating income attributable to tenant transition-related downtime at Aon Center in Chicago, IL, and 6021 Connection Drive in Irving, TX, and lease expirations at 3100 Clarendon Boulevard and 4250 North Fairfax Drive in Arlington, VA, offset somewhat by operating income contributions from newly acquired properties, leases that have recently commenced, and leases under which operating expense recovery abatements have burned off. An additional contributor to the decrease in dollar amount of FFO was reduced insurance recoveries in 2014 related to casualty events and litigation settlements. The change in per share FFO for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was also impacted by the reduced weighted average shares outstanding in 2014 as a result of the Company's stock repurchase program. Since the beginning of 2013, Piedmont has repurchased 13.4 million shares at an average price of $16.96 per share. No shares were repurchased during the third quarter of 2014.
Core funds from operations (Core FFO) for the quarter ended September 30, 2014 was $58.8 million, or $0.38 per share (diluted), compared to $61.1 million, or $0.37 per share (diluted), for the same quarter in 2013. Core FFO for the nine months ended September 30, 2014 was $170.5 million, or $1.10 per share (diluted), compared to $180.6 million, or $1.08 per share (diluted), for the same period in 2013. Core FFO is defined as FFO with incremental adjustments for certain non-recurring items such as net recoveries or losses from casualty events and litigation settlements, acquisition-related costs and other significant non-recurring items. The change in Core FFO for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 is primarily attributable to the items described above for changes in FFO, with the exception of the insurance recoveries related to casualty events and litigation settlements, which were removed from Core FFO since they are considered to be non-recurring.
Adjusted funds from operations (AFFO) for the quarter ended September 30, 2014 was $21.8 million, or $0.14 per share (diluted), compared to $34.0 million, or $0.21 per share (diluted), for the same quarter in 2013. AFFO for the nine months ended September 30, 2014 was $77.0 million, or $0.50 per share (diluted), compared to $104.3 million, or $0.63 per share (diluted), for the same period in 2013. The decrease in AFFO for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily related to the items described above for changes in FFO and Core FFO, in addition to the deduction of increased straight line rent adjustments in 2014 when compared to 2013 and increased non-incremental capital expenditures in 2014. Piedmont experienced a period of high lease expirations from 2011 to 2013. Given the leasing environment over the last several years, many of the recent lease transactions include rental abatements, which typically occur at the beginning of a new lease's term. Many of the replacement or renewal leases with rental abatements are in the early stages of the new leases' terms, resulting in increased straight line rent adjustments for the Company. The increase in capital expenditures in 2014 when compared to 2013 is also related to the high volume of new lease transactions recently completed by the Company.
Operations & Leasing
On a square footage leased basis, our total office portfolio was 87.5% leased as of September 30, 2014, as compared to 87.0% in the prior quarter and 86.7% a year earlier. Please refer to page 26 for additional leased percentage information.
The weighted average remaining lease term of our portfolio was 7.3 years(2) as of September 30, 2014 as compared to 7.1 years at December 31, 2013.
As previously disclosed, Piedmont commenced the redevelopment of its 3100 Clarendon Boulevard property, a 252,000 square foot office and retail property located in Arlington, VA, during the first quarter of 2014. The building's existing retail tenants will remain in occupancy during the redevelopment. Therefore, from an accounting standpoint, the office component of the building will be out of service and the retail portion of the building, comprised of approximately 28,000 square feet, will remain in service during the redevelopment. However, for the purposes of statistical reporting throughout this supplemental report, the entire building has been removed from Piedmont's operating portfolio. For additional information regarding the redevelopment of 3100 Clarendon Boulevard, please refer to the Financing and Capital Activity section within the Financial Highlights of this report.
(1) | |
(2) | Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of September 30, 2014) is weighted based on Annualized Lease Revenue, as defined on page 40. |
5
During the three months ended September 30, 2014, the Company completed 684,000 square feet of total leasing. Of the total leasing activity during the quarter, we signed renewal leases for 295,000 square feet and new tenant leases for 389,000 square feet. During the nine months ended September 30, 2014, we completed 1,859,000 square feet of total leasing activity, inclusive of activity associated with our unconsolidated joint venture assets. The consolidated office portion of this total was 1,794,000 square feet, consisting of 803,000 square feet of renewal leases and 991,000 square feet of new tenant leases. The average committed capital cost for all leases signed during the nine months ended September 30, 2014 at our consolidated office properties was $5.03 per square foot per year of lease term. Average committed capital cost per square foot per year of lease term for renewal leases signed during the nine months ended September 30, 2014 was $4.73 and the same measure for new leases was $5.22 (see page 33).
During the three months ended September 30, 2014, we executed seven leases greater than 20,000 square feet at our consolidated office properties. Information on those leases is set forth below.
Tenant | Property | Property Location | Square Feet Leased | Expiration Year | Lease Type |
Jones Lang LaSalle | Aon Center | Chicago, IL | 199,730 | 2032 | Renewal / Expansion |
Mitsubishi Hitachi Power Systems | 400 TownPark | Lake Mary, FL | 75,321 | 2026 | New |
Lochbridge | 150 West Jefferson | Detroit, MI | 48,915 | 2027 | New |
Engle Martin & Associates | Glenridge Highlands Two | Atlanta, GA | 39,719 | 2026 | New |
Oracle | 400 Bridgewater Crossing | Bridgewater, NJ | 33,555 | 2020 | Renewal |
Aon Service Corporation | Crescent Ridge II | Minnetonka, MN | 32,326 | 2025 | New |
Caelus Energy | One Lincoln Park | Dallas, TX | 21,425 | 2022 | Renewal / Expansion |
As of September 30, 2014, there was one tenant whose lease was scheduled to expire at or during the eighteen month period following the end of the third quarter of 2014 which individually contributed greater than 1% in net Annualized Lease Revenue ("ALR") expiring over the next eighteen months. Information regarding the leasing status of the space associated with that tenant's lease is presented below.
Tenant | Property | Property Location | Net Square Footage Expiring | Net Percentage of Current Quarter Annualized Lease Revenue Expiring (%) | Expiration (1) | Current Leasing Status |
KeyBank | 2 Gatehall Drive | Parsippany, NJ | 200,000 | 1.1% | Q1 2016 | The tenant is not expected to renew its lease. The space is currently being marketed. |
Piedmont focuses its marketing efforts on large corporate office space users. The average size of lease in the Company's portfolio is approximately 30,000 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.
Tenant | Property | Property Location | Square Feet Leased | Space Status | Estimated Commencement Date | New / Expansion |
Preferred Apartment Advisors | The Medici | Atlanta, GA | 70,499 | Vacant | Q4 2014 | New |
Mitsubishi Hitachi Power Systems | 400 TownPark | Lake Mary, FL | 75,321 | Vacant | Q1 2015 | New |
Schlumberger Technology Corporation | 1430 Enclave Parkway | Houston, TX | 53,258 | Not Vacant | Q2 2015 | New |
Catamaran | Windy Point II | Schaumburg, IL | 50,686 | Vacant | Q1 2015 | New |
6
Occupancy versus NOI Analysis
Piedmont had been in a period of high lease rollover from 2010 to 2013. This rollover and the overall economic slowdown during this period have resulted in a decrease in leased percentage, some rental rate rolldowns, and an even larger decrease in economic leased percentage due to rental abatement concessions provided under many of the new leases and lease renewals. In turn, these abatements and lower rental rates have resulted in a lower cash basis Same Store NOI than might otherwise be anticipated given the overall leased percentage and the historical relationship between leased percentage and Same Store NOI. As of September 30, 2014, our overall leased percentage was 87.5% and our economic leased percentage was 78.7%. 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 space which have not commenced (amounting to approximately 566,000 square feet of leases as of September 30, 2014, or 2.7% 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 1.7 million square feet of leases as of September 30, 2014, or a 6.1% impact to leased percentage on an economic basis). Please see the chart below for a listing of major contributors to this factor. |
As the executed but not commenced leases begin and the rental abatement periods expire, there will be greater Same Store NOI growth than might otherwise be expected based on changes in overall leased percentage alone during that time period.
Due to the current economic environment, many recently negotiated leases provide for rental abatement concessions to tenants. Rental abatements typically occur at the beginning of a new lease's term. Since 2010, Piedmont has signed approximately 14.2 million square feet of leases within its consolidated office portfolio. Due to the large number of new leases in the Company's portfolio, abatements provided under those new leases have impacted the Company's current cash net operating income and AFFO. Presented below is a schedule of leases with abatements of greater than 50,000 square feet that are either currently under abatement or will be so within the next twelve months.
Tenant | Property | Property Location | Square Feet | Remaining Abatement Schedule | Lease Expiration |
Catamaran | Windy Point II | Schaumburg, IL | 250,000 | February through October 2014 | Q1 2025 |
Union Bank | 800 North Brand Boulevard | Glendale, CA | 51,706 | February through November 2014 | Q4 2024 |
TMW Systems | Eastpoint I | Mayfield Heights, OH | 59,804 | January through December 2014 | Q4 2024 |
GE Capital | 500 West Monroe Street | Chicago, IL | 52,845 | December 2013 through December 2014 | Q4 2027 |
Epsilon Data Management | 6021 Connection Drive | Irving, TX | 221,898 | June 6, 2014 through January 6, 2015 | Q2 2026 |
Piper Jaffray | US Bancorp Center | Minneapolis, MN | 123,882 | June 2014 through May 2015 | Q4 2025 |
Miller Canfield | 150 West Jefferson | Detroit, MI | 109,261 | January through March 2015 (entire space); month of January 2016 (69,974 square feet) | Q2 2026 |
Catamaran | Windy Point II | Schaumburg, IL | 50,686 | March 2015 through April 2016 | Q1 2025 |
Aon | Aon Center | Chicago, IL | 413,778 | January through May 2015 & 2016 (382,076 square feet); January 2014 through March 2015 (31,702 square feet) | Q4 2028 |
Integrys | Aon Center | Chicago, IL | 167,026 | May through September 2014, 2015 & 2016 | Q2 2029 |
Thoughtworks | Aon Center | Chicago, IL | 52,529 | January through March 2015, 2016 & 2017 | Q4 2023 |
Americredit | Chandler Forum | Chandler, AZ | 113,171 | September 2015, 2016, 2017 (62,521 square feet); September through November 2014 (50,650 square feet) | Q4 2021 |
Mitsubishi Hitachi Power Systems | 400 TownPark | Lake Mary, FL | 75,321 | February and March 2015, 2016, 2017, and 2018 | Q1 2026 |
Guidance Software | 1055 East Colorado Boulevard | Pasadena, CA | 86,790 | August through December 2014; August through October 2020 | Q2 2024 |
Financing and Capital Activity
As of September 30, 2014, our ratio of debt to total gross assets was 37.8%. This debt ratio is based on total principal amount outstanding for our various loans at September 30, 2014.
On July 30, 2014, the Board of Directors of Piedmont declared a dividend for the third quarter of 2014 of $0.20 per common share outstanding to stockholders of record as of
the close of business on August 29, 2014. The dividend was paid on September 19, 2014. The Company's dividend payout percentage for the nine months ended September 30, 2014 was 54% of Core FFO and 120% of AFFO.
7
Dispositions (1)
There were no dispositions completed during the quarter ended September 30, 2014.
For additional information on dispositions completed during the previous eighteen months, please refer to page | . | |
Acquisitions
On August 28, 2014, Piedmont acquired 1155 Perimeter Center West, a twelve-story, 377,000 square foot office building in Atlanta, GA. The purchase price was $80.8 million, or $214 per square foot. The 100% leased, LEED-certified building was constructed in 2000. Well-located within the Central Perimeter submarket, the project is located adjacent to the Sandy Springs station of Atlanta's mass transit railway system and is easily accessed by commuters. Additionally, the property affords tenants quick, walkable access to the area's deep retail amenity base. The acquisition allowed the Company to further its strategic objective of increasing ownership in targeted submarkets within its core operating markets, and it complements Piedmont's ownership of the nearby Glenridge Highlands Two. Additional details regarding the acquisition are available in a transaction summary that is posted on the Investor Relations page of the Company's website, www.piedmontreit.com.
Finance
On August 21, 2014, Piedmont closed on the extension of the $300 million unsecured term loan that was originally put in place in 2011. The maturity date of the loan was extended from November 22, 2016 to January 15, 2020. In addition to the extension of the maturity date, the interest rate was reduced by 30 basis points. The interest rate options available under the credit facility are all floating interest rates. However, Piedmont had previously entered into interest rate swaps to effectively fix the interest rate under this loan. The interest rate swaps that were previously existing will continue to be applied to this loan, resulting in an effective fixed rate of 2.39% through the termination date of the swaps of November 22, 2016. No additional funds were borrowed under the facility through this transaction. Subsequent to quarter end, the Company entered into three forward-starting interest rate swaps in order to fix the interest rate under this facility from November 22, 2016 to the maturity date of January 15, 2020; please find additional information on the swaps under the heading Subsequent Events below.
On August 6, 2014, Piedmont entered into two interest rate swaps in order to fix the interest rate for the remaining unhedged portion of the $300 million unsecured term loan that was put in place at the end of 2013. The swaps have a combined notional amount of $100 million and a blended rate of 1.55%, resulting in an effective fixed rate of 2.75% inclusive of the spread for the term loan. When combined with the existing $200 million notional amount of swaps for the $300 million unsecured 2013 term loan, the blended effective fixed rate under the facility is 2.78%.
Development
During the first quarter of 2014, Piedmont commenced the redevelopment of its 3100 Clarendon Boulevard property, a 252,000 square foot office and retail property located adjacent to the Clarendon Metro Station in Arlington, VA. Until the end of 2013, the property had been predominantly leased to the U.S. Government (Defense Intelligence Agency) for the previous 15+ years. The expiration of the U.S. Government's lease afforded Piedmont the opportunity to upgrade and reposition the property in order to attract private sector tenants and to capture the incremental value potential for the location (attributable primarily to nearby amenities desirable to tenants, including housing, retail, and transportation). The project remains on schedule; the office tower redevelopment should be completed during the first several months of 2015 and the retail portion of the redevelopment should be completed during the first half of 2015. During the redevelopment, the office component of the building will be out of service and the retail portion of the building, comprised of approximately 28,000 square feet, will remain in service. However, for the purposes of statistical reporting on the Company's assets in this supplemental report, the entire building will be removed from Piedmont's operating portfolio. It is anticipated that the costs to redevelop the building will be approximately $31 million to $33 million, approximately $7.4 million of which had been recorded in work in progress as of September 30, 2014. Following the completion of the redevelopment, the Company anticipates incurring additional re-leasing costs.
During the fourth quarter of 2013, Piedmont announced the development of Enclave Place, a 301,000 square foot office building located in Houston, TX. The 11-story building is being constructed on Piedmont's 4.7 acre development site adjacent to its 1430 Enclave Parkway property and located within a deed-restricted and architecturally-controlled office park in Houston's Energy Corridor. Ground was broken in April 2014, and physical construction is targeted to be completed during the third quarter of 2015. The development costs are anticipated to be approximately $85 million to $90 million, inclusive of leasing costs. Approximately $20.6 million had been recorded in work in progress as of September 30, 2014. The development of Enclave Place follows Piedmont's recent success in buying the near-vacant 1200 Enclave Parkway for approximately $124 per square foot in 2011, leasing it to stabilization, and then selling it for approximately $326 per square foot two years after acquisition.
(1) | On April 1, 2014, Piedmont early-adopted the provisions of Financial Accounting Standards Board ASU 2014-08. As such, Piedmont will no longer reclassify to discontinued operations the operating income associated with newly-sold single assets or small portfolios which do not represent a strategic shift or significant impact on Piedmont's future operations. There will be no restatement for prior periods and all operating income associated with assets either sold or under binding contract to sell as of the end of the first quarter of 2014 will continue to be reflected in discontinued operations. Assuming future sales do not meet the new criteria for reclassification as discontinued operations, such future sales will not be presented in discontinued operations. |
8
Stock Repurchase Program
During the third quarter of 2014, the Company did not repurchase any shares of common stock under its share repurchase program. Since the stock repurchase program began in December 2011, the Company has repurchased a total of 18.9 million shares at an average price of $16.92 per share, or approximately $319.5 million in aggregate (before consideration of transaction costs). As of quarter end, Board-approved capacity remaining for additional repurchases under the stock repurchase plan totaled approximately $37.2 million.
Subsequent Events
On October 29, 2014, the Board of Directors of Piedmont declared a dividend for the fourth quarter of 2014 of $0.21 per common share outstanding to stockholders of record as of the close of business on November 28, 2014. The dividend is to be paid on December 19, 2014.
Subsequent to the end of the third quarter of 2014, Piedmont entered into three forward-starting interest rate swaps in order to fix the future interest rate for the $300 million unsecured term loan that was put in place in 2011, the maturity date of which was recently extended to 2020. The swaps fix the effective interest rate for the loan for the period of time from the original maturity date of November 22, 2016 to the new maturity date of January 15, 2020. The swaps have a combined notional amount of $300 million and a blended rate of 2.20%, resulting in an effective fixed rate for the extension period of 3.35% inclusive of the spread for the loan.
On October 28, 2014, Piedmont entered into a binding agreement to purchase approximately 25.2 acres of land adjacent to its 400 TownPark property in Lake Mary, FL. The land is located within a mixed-use development consisting of office, retail, residential and a hotel. The development is located at the intersection of Interstate 4 and Highway 417. The Company believes that the site will become even more desirable over the next several years upon the completion of Orlando's ring road, which has been fully approved and runs adjacent to the property. The site will accommodate over 650,000 square feet of office space and is currently entitled for approximately 160,000 square feet of office space. The acquisition adds to the Company's developable land holdings and allows the Company to control a site that is directly competitive to 400 TownPark.
Guidance for 2014
The Company is adjusting its financial guidance for calendar year 2014 to the upper end of its previously published range. This guidance is based upon management's expectations at this time. The revised financial guidance is as follows:
Low | High | ||
Core Funds from Operations | $228 million | $233 million | |
Core Funds from Operations per diluted share | $1.48 | $1.50 | |
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 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.
9
Piedmont Office Realty Trust, Inc.
Key Performance Indicators
Unaudited (in thousands except for per share data)
This section of our supplemental report includes non-GAAP financial measures, including, but not limited to, Core Earnings Before Interest, Taxes, Depreciation, and Amortization (Core EBITDA), Funds from Operations (FFO), Core Funds from Operations (Core FFO), and Adjusted Funds from Operations (AFFO). Definitions of these non-GAAP measures are provided on page 40 and reconciliations are provided beginning on page 42. |
Three Months Ended | ||||||||||||||
9/30/2014 | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | ||||||||||
Selected Operating Data | ||||||||||||||
Percent leased (1) | 87.5 | % | 87.0 | % | 86.7 | % | 87.2 | % | 86.7 | % | ||||
Percent leased - stabilized portfolio (1) (2) | 89.0 | % | 88.9 | % | 88.8 | % | 89.7 | % | 89.5 | % | ||||
Rental income | $114,529 | $113,287 | $110,904 | $113,929 | $115,170 | |||||||||
Total revenues | $144,641 | $138,580 | $136,320 | $141,504 | $143,389 | |||||||||
Total operating expenses | $117,442 | $112,024 | $111,043 | $106,353 | $107,966 | |||||||||
Real estate operating income | $27,199 | $26,556 | $25,277 | $35,151 | $35,423 | |||||||||
Core EBITDA | $77,613 | $74,745 | $74,098 | $79,627 | $80,556 | |||||||||
Core FFO | $58,814 | $56,614 | $55,054 | $59,866 | $61,124 | |||||||||
Core FFO per share - diluted | $0.38 | $0.37 | $0.36 | $0.37 | $0.37 | |||||||||
AFFO | $21,829 | $23,105 | $32,038 | $12,752 | $34,046 | |||||||||
AFFO per share - diluted | $0.14 | $0.15 | $0.21 | $0.08 | $0.21 | |||||||||
Gross dividends | $30,865 | $30,865 | $30,858 | $32,158 | $32,880 | |||||||||
Dividends per share | $0.200 | $0.200 | $0.200 | $0.200 | $0.200 | |||||||||
Selected Balance Sheet Data | ||||||||||||||
Total real estate assets | $4,058,414 | $3,968,329 | $3,924,352 | $3,951,983 | $3,872,952 | |||||||||
Total gross real estate assets | $5,197,338 | $5,072,559 | $4,998,289 | $5,003,737 | $4,905,913 | |||||||||
Total assets | $4,778,302 | $4,661,826 | $4,611,945 | $4,666,088 | $4,576,553 | |||||||||
Net debt (3) | $2,226,326 | $2,098,704 | $2,024,503 | $1,996,158 | $1,808,168 | |||||||||
Total liabilities | $2,439,456 | $2,304,641 | $2,232,987 | $2,204,929 | $2,055,870 | |||||||||
Ratios | ||||||||||||||
Core EBITDA margin (4) | 53.7 | % | 53.9 | % | 53.8 | % | 55.5 | % | 55.3 | % | ||||
Fixed charge coverage ratio (5) | 4.0 x | 4.0 x | 3.8 x | 4.0 x | 4.2 x | |||||||||
Average net debt to Core EBITDA (6) | 6.9 x | 6.8 x | 6.9 x | 5.9 x | 5.4 x | |||||||||
(1) | Please refer to page 26 for additional leased percentage information. |
(2) | Please refer to page 38 for additional information on value-add properties, data for which is removed from stabilized portfolio totals. |
(3) | Net debt is calculated as the total principal amount of debt outstanding minus cash and cash equivalents and escrow deposits and restricted cash. The increase in net debt over the last year is primarily attributable to three property acquisitions completed during the fourth quarter of 2013 and two property acquisitions completed year-to-date in 2014, as well as capital expenditures and stock repurchases, all of which were largely funded with debt. |
(4) | Core EBITDA margin is calculated as Core EBITDA divided by total revenues (including revenues associated with discontinued operations). |
(5) | The fixed charge coverage ratio is calculated as Core EBITDA divided by the sum of interest expense, principal amortization, capitalized interest and preferred dividends. The Company had no preferred dividends during any of the periods presented; the Company had capitalized interest of $541,349 for the quarter ended September 30, 2014, $460,251 for the quarter ended June 30, 2014, $384,843 for the quarter ended March 31, 2014, and $31,486 for the quarter ended December 31, 2013; the Company had principal amortization of $193,560 for the quarter ended September 30, 2014 and $64,223 for the quarter ended June 30, 2014. |
(6) | Core EBITDA is annualized for the purposes of this calculation. The average net debt to Core EBITDA ratios for the third and fourth quarters of 2013 and the first, second and third quarters of 2014 are higher than our historical performance on this measure primarily as a result of increased net debt attributable to five property acquisitions completed during 2013 and two property acquisitions completed during 2014, as well as capital expenditures and stock repurchases, all of which were largely funded with debt. This measure has also been impacted by downtime associated with recent re-tenanting efforts, as well as rent roll downs. For the purposes of this calculation, we use the average daily balance of debt outstanding during the period, less cash and cash equivalents and escrow deposits and restricted cash as of the end of the period. |
10
Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)
September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | September 30, 2013 | |||||||||||||||
Assets: | |||||||||||||||||||
Real estate, at cost: | |||||||||||||||||||
Land assets | $ | 696,429 | $ | 690,559 | $ | 684,831 | $ | 688,761 | $ | 677,467 | |||||||||
Buildings and improvements | 4,307,467 | 4,202,053 | 4,144,220 | 4,144,509 | 4,028,454 | ||||||||||||||
Buildings and improvements, accumulated depreciation | (1,063,515 | ) | (1,030,098 | ) | (1,003,577 | ) | (979,934 | ) | (962,217 | ) | |||||||||
Intangible lease asset | 150,336 | 145,179 | 140,391 | 146,197 | 137,614 | ||||||||||||||
Intangible lease asset, accumulated amortization | (75,409 | ) | (74,132 | ) | (70,360 | ) | (71,820 | ) | (70,744 | ) | |||||||||
Construction in progress | 43,106 | 34,768 | 28,847 | 24,270 | 62,378 | ||||||||||||||
Total real estate assets | 4,058,414 | 3,968,329 | 3,924,352 | 3,951,983 | 3,872,952 | ||||||||||||||
Investments in and amounts due from unconsolidated joint ventures | 7,638 | 7,549 | 13,855 | 14,388 | 18,668 | ||||||||||||||
Cash and cash equivalents | 8,815 | 8,563 | 9,271 | 6,973 | 15,972 | ||||||||||||||
Tenant receivables, net of allowance for doubtful accounts | 28,403 | 25,024 | 22,196 | 31,145 | 31,006 | ||||||||||||||
Straight line rent receivable | 163,917 | 156,010 | 148,491 | 139,406 | 136,505 | ||||||||||||||
Escrow deposits and restricted cash | 908 | 911 | 751 | 394 | 385 | ||||||||||||||
Prepaid expenses and other assets | 36,733 | 32,132 | 28,154 | 24,771 | 28,725 | ||||||||||||||
Goodwill | 180,097 | 180,097 | 180,097 | 180,097 | 180,097 | ||||||||||||||
Interest rate swap | 434 | — | 464 | 24,176 | 19,192 | ||||||||||||||
Deferred financing costs, less accumulated amortization | 7,969 | 8,386 | 8,545 | 8,759 | 7,990 | ||||||||||||||
Deferred lease costs, less accumulated amortization | 284,974 | 274,825 | 275,769 | 283,996 | 265,061 | ||||||||||||||
Total assets | $ | 4,778,302 | $ | 4,661,826 | $ | 4,611,945 | $ | 4,666,088 | $ | 4,576,553 | |||||||||
Liabilities: | |||||||||||||||||||
Unsecured debt | $ | 1,784,412 | $ | 1,657,408 | $ | 1,617,297 | $ | 1,014,680 | $ | 835,650 | |||||||||
Secured debt | 449,427 | 449,677 | 412,525 | 987,525 | 987,525 | ||||||||||||||
Accounts payable, accrued expenses, and accrued capital expenditures | 135,320 | 126,273 | 130,530 | 128,818 | 159,675 | ||||||||||||||
Deferred income | 21,958 | 21,923 | 23,042 | 22,267 | 26,575 | ||||||||||||||
Intangible lease liabilities, less accumulated amortization | 44,981 | 43,389 | 45,227 | 47,113 | 41,435 | ||||||||||||||
Interest rate swaps | 3,358 | 5,971 | 4,366 | 4,526 | 5,010 | ||||||||||||||
Total liabilities | 2,439,456 | 2,304,641 | 2,232,987 | 2,204,929 | 2,055,870 | ||||||||||||||
Stockholders' equity: | |||||||||||||||||||
Common stock | 1,543 | 1,543 | 1,543 | 1,575 | 1,613 | ||||||||||||||
Additional paid in capital | 3,669,541 | 3,668,836 | 3,669,561 | 3,668,906 | 3,668,424 | ||||||||||||||
Cumulative distributions in excess of earnings | (1,345,609 | ) | (1,323,907 | ) | (1,305,321 | ) | (1,231,209 | ) | (1,165,794 | ) | |||||||||
Other comprehensive loss | 11,758 | 9,104 | 11,562 | 20,278 | 14,827 | ||||||||||||||
Piedmont stockholders' equity | 2,337,233 | 2,355,576 | 2,377,345 | 2,459,550 | 2,519,070 | ||||||||||||||
Non-controlling interest | 1,613 | 1,609 | 1,613 | 1,609 | 1,613 | ||||||||||||||
Total stockholders' equity | 2,338,846 | 2,357,185 | 2,378,958 | 2,461,159 | 2,520,683 | ||||||||||||||
Total liabilities, redeemable common stock and stockholders' equity | $ | 4,778,302 | $ | 4,661,826 | $ | 4,611,945 | $ | 4,666,088 | $ | 4,576,553 | |||||||||
Common stock outstanding at end of period | 154,325 | 154,324 | 154,278 | 157,461 | 161,271 | ||||||||||||||
11
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended | ||||||||||||||||||||
9/30/2014 | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 114,529 | $ | 113,287 | $ | 110,904 | $ | 113,929 | $ | 115,170 | ||||||||||
Tenant reimbursements | 29,579 | 24,745 | 24,929 | 27,358 | 27,329 | |||||||||||||||
Property management fee revenue | 533 | 548 | 487 | 217 | 890 | |||||||||||||||
144,641 | 138,580 | 136,320 | 141,504 | 143,389 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Property operating costs | 62,027 | 57,136 | 58,271 | 58,263 | 58,137 | |||||||||||||||
Depreciation | 35,366 | 34,144 | 33,644 | 31,691 | 30,295 | |||||||||||||||
Amortization | 14,235 | 13,599 | 14,573 | 11,195 | 13,685 | |||||||||||||||
General and administrative | 5,814 | 7,145 | 4,555 | 5,204 | 5,849 | |||||||||||||||
117,442 | 112,024 | 111,043 | 106,353 | 107,966 | ||||||||||||||||
Real estate operating income | 27,199 | 26,556 | 25,277 | 35,151 | 35,423 | |||||||||||||||
Other income / (expense): | ||||||||||||||||||||
Interest expense | (18,654 | ) | (18,012 | ) | (18,926 | ) | (19,651 | ) | (19,331 | ) | ||||||||||
Other income / (expense) | 524 | (366 | ) | (90 | ) | (392 | ) | (596 | ) | |||||||||||
Net recoveries / (loss) from casualty events and litigation settlements (1) | (8 | ) | 1,480 | 3,042 | 4,500 | 3,919 | ||||||||||||||
Equity in income / (loss) of unconsolidated joint ventures (2) | 89 | (333 | ) | (266 | ) | (4,280 | ) | 46 | ||||||||||||
Gain / (loss) on consolidation | — | — | — | — | (898 | ) | ||||||||||||||
(18,049 | ) | (17,231 | ) | (16,240 | ) | (19,823 | ) | (16,860 | ) | |||||||||||
Income from continuing operations | 9,150 | 9,325 | 9,037 | 15,328 | 18,563 | |||||||||||||||
Discontinued operations: | ||||||||||||||||||||
Operating income, excluding impairment loss | 16 | 514 | 466 | 506 | 537 | |||||||||||||||
Impairment loss | — | — | — | (1,242 | ) | — | ||||||||||||||
Gain / (loss) on sale of properties | — | 1,304 | (106 | ) | 15,034 | — | ||||||||||||||
Income / (loss) from discontinued operations (3) | 16 | 1,818 | 360 | 14,298 | 537 | |||||||||||||||
Gain on sale of real estate | — | 1,140 | — | — | — | |||||||||||||||
Net income | 9,166 | 12,283 | 9,397 | 29,626 | 19,100 | |||||||||||||||
Less: Net income attributable to noncontrolling interest | (4 | ) | (4 | ) | (4 | ) | (3 | ) | (4 | ) | ||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 12,279 | $ | 9,393 | $ | 29,623 | $ | 19,096 | ||||||||||
Weighted average common shares outstanding - diluted | 154,561 | 154,445 | 155,025 | 160,450 | 164,796 | |||||||||||||||
Net income per share available to common stockholders - diluted | $ | 0.06 | $ | 0.08 | $ | 0.06 | $ | 0.18 | $ | 0.12 | ||||||||||
(1) | Presented on this line are net expenses and insurance reimbursements related to 1) two class action lawsuits settled in 2013 and 2) damage caused by Hurricane Sandy in October 2012. |
(2) | During the fourth quarter of 2013, Piedmont recorded an impairment charge of $4.4 million related to its equity ownership interest in Two Park Center in Hoffman Estates, IL. Please refer to page 39 for additional information about Piedmont's unconsolidated joint venture interests as of September 30, 2014. |
(3) | Reflects operating results for 350 Spectrum Loop in Colorado Springs, CO, which was sold on November 1, 2013; 8700 South Price Road in Tempe, AZ, which was sold on December 30, 2013; 11107 and 11109 Sunset Hills Road in Reston, VA, which were sold on March 19, 2014; and 1441 West Long Lake Road and 4685 Investment Drive in Troy, MI, which were sold on April 30, 2014. In the future, it is less likely that any additional single-asset or small portfolio dispositions will be reclassed to discontinued operations; please find additional information on this change in the Financing and Capital Activity section of Financial Highlights. |
12
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
9/30/2014 | 9/30/2013 | Change ($) | Change (%) | 9/30/2014 | 9/30/2013 | Change ($) | Change (%) | ||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
Rental income | $ | 114,529 | $ | 115,170 | $ | (641 | ) | (0.6 | )% | $ | 338,720 | $ | 329,177 | $ | 9,543 | 2.9 | % | ||||||||
Tenant reimbursements | 29,579 | 27,329 | 2,250 | 8.2 | % | 79,253 | 76,895 | 2,358 | 3.1 | % | |||||||||||||||
Property management fee revenue | 533 | 890 | (357 | ) | (40.1 | )% | 1,568 | 2,034 | (466 | ) | (22.9 | )% | |||||||||||||
144,641 | 143,389 | 1,252 | 0.9 | % | 419,541 | 408,106 | 11,435 | 2.8 | % | ||||||||||||||||
Expenses: | |||||||||||||||||||||||||
Property operating costs | 62,027 | 58,137 | (3,890 | ) | (6.7 | )% | 177,434 | 162,516 | (14,918 | ) | (9.2 | )% | |||||||||||||
Depreciation | 35,366 | 30,295 | (5,071 | ) | (16.7 | )% | 103,154 | 89,289 | (13,865 | ) | (15.5 | )% | |||||||||||||
Amortization | 14,235 | 13,685 | (550 | ) | (4.0 | )% | 42,407 | 33,895 | (8,512 | ) | (25.1 | )% | |||||||||||||
General and administrative | 5,814 | 5,849 | 35 | 0.6 | % | 17,514 | 16,677 | (837 | ) | (5.0 | )% | ||||||||||||||
117,442 | 107,966 | (9,476 | ) | (8.8 | )% | 340,509 | 302,377 | (38,132 | ) | (12.6 | )% | ||||||||||||||
Real estate operating income | 27,199 | 35,423 | (8,224 | ) | (23.2 | )% | 79,032 | 105,729 | (26,697 | ) | (25.3 | )% | |||||||||||||
Other income / (expense): | |||||||||||||||||||||||||
Interest expense | (18,654 | ) | (19,331 | ) | 677 | 3.5 | % | (55,592 | ) | (53,932 | ) | (1,660 | ) | (3.1 | )% | ||||||||||
Other income / (expense) | 524 | (596 | ) | 1,120 | 187.9 | % | 68 | (1,944 | ) | 2,012 | 103.5 | % | |||||||||||||
Net recoveries / (loss) from casualty events and litigation settlements (1) | (8 | ) | 3,919 | (3,927 | ) | (100.2 | )% | 4,514 | 7,311 | (2,797 | ) | (38.3 | )% | ||||||||||||
Equity in income / (loss) of unconsolidated joint ventures | 89 | 46 | 43 | 93.5 | % | (510 | ) | 604 | (1,114 | ) | (184.4 | )% | |||||||||||||
Gain / (loss) on consolidation | — | (898 | ) | 898 | 100.0 | % | — | (898 | ) | 898 | 100.0 | % | |||||||||||||
(18,049 | ) | (16,860 | ) | (1,189 | ) | (7.1 | )% | (51,520 | ) | (48,859 | ) | (2,661 | ) | (5.4 | )% | ||||||||||
Income from continuing operations | 9,150 | 18,563 | (9,413 | ) | (50.7 | )% | 27,512 | 56,870 | (29,358 | ) | (51.6 | )% | |||||||||||||
Discontinued operations: | |||||||||||||||||||||||||
Operating income, excluding impairment loss | 16 | 537 | (521 | ) | (97.0 | )% | 996 | 2,391 | (1,395 | ) | (58.3 | )% | |||||||||||||
Impairment loss | — | — | — | — | % | — | (6,402 | ) | 6,402 | 100.0 | % | ||||||||||||||
Gain / (loss) on sale of properties | — | — | — | — | % | 1,198 | 16,258 | (15,060 | ) | (92.6 | )% | ||||||||||||||
Income / (loss) from discontinued operations (2) | 16 | 537 | (521 | ) | (97.0 | )% | 2,194 | 12,247 | (10,053 | ) | (82.1 | )% | |||||||||||||
Gain on sale of real estate | — | — | — | — | % | 1,140 | — | 1,140 | — | % | |||||||||||||||
Net income | 9,166 | 19,100 | (9,934 | ) | (52.0 | )% | 30,846 | 69,117 | (38,271 | ) | (55.4 | )% | |||||||||||||
Less: Net income attributable to noncontrolling interest | (4 | ) | (4 | ) | — | — | % | (12 | ) | (12 | ) | — | — | % | |||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 19,096 | $ | (9,934 | ) | (52.0 | )% | $ | 30,834 | $ | 69,105 | $ | (38,271 | ) | (55.4 | )% | |||||||
Weighted average common shares outstanding - diluted | 154,561 | 164,796 | 154,665 | 166,734 | |||||||||||||||||||||
Net income per share available to common stockholders - diluted | $ | 0.06 | $ | 0.12 | $ | 0.20 | $ | 0.41 | |||||||||||||||||
(1) | Presented on this line are net expenses and insurance reimbursements related to 1) two class action lawsuits settled in 2013 and 2) damage caused by Hurricane Sandy in October 2012. |
(2) | Reflects operating results for 1111 Durham Avenue in South Plainfield, NJ, which was sold on March 28, 2013; 1200 Enclave Parkway in Houston, TX, which was sold on May 1, 2013; 350 Spectrum Loop in Colorado Springs, CO, which was sold on November 1, 2013; 8700 South Price Road in Tempe, AZ, which was sold on December 30, 2013; 11107 and 11109 Sunset Hills Road in Reston, VA, which were sold on March 19, 2014; and 1441 West Long Lake Road and 4685 Investment Drive in Troy, MI, which were sold on April 30, 2014. In the future, it is less likely that any additional single-asset or small portfolio dispositions will be reclassed to discontinued operations; please find additional information on this change in the Financing and Capital Activity section of Financial Highlights. |
13
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 | Nine Months Ended | |||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 19,096 | $ | 30,834 | $ | 69,105 | ||||||||
Depreciation (1) (2) | 35,286 | 31,050 | 103,132 | 91,905 | ||||||||||||
Amortization (1) | 14,248 | 13,939 | 42,660 | 34,509 | ||||||||||||
Impairment loss (1) | — | — | — | 6,402 | ||||||||||||
Loss / (gain) on sale of properties (1) | — | — | (2,169 | ) | (16,258 | ) | ||||||||||
Loss / (gain) on consolidation | — | 898 | — | 898 | ||||||||||||
Funds from operations | 58,696 | 64,983 | 174,457 | 186,561 | ||||||||||||
Adjustments: | ||||||||||||||||
Acquisition costs | 110 | 60 | 539 | 1,374 | ||||||||||||
Net (recoveries) / loss from casualty events and litigation settlements (1) | 8 | (3,919 | ) | (4,514 | ) | (7,328 | ) | |||||||||
Core funds from operations | 58,814 | 61,124 | 170,482 | 180,607 | ||||||||||||
Adjustments: | ||||||||||||||||
Deferred financing cost amortization | 598 | 674 | 2,076 | 1,911 | ||||||||||||
Amortization of note payable step-up | (120 | ) | — | (126 | ) | — | ||||||||||
Amortization of discount on senior notes | 47 | 30 | 128 | 47 | ||||||||||||
Depreciation of non real estate assets | 141 | 97 | 370 | 300 | ||||||||||||
Straight-line effects of lease revenue (1) | (6,780 | ) | (5,076 | ) | (23,950 | ) | (14,655 | ) | ||||||||
Stock-based and other non-cash compensation expense | 1,139 | 719 | 3,046 | 1,489 | ||||||||||||
Amortization of lease-related intangibles (1) | (1,010 | ) | (1,757 | ) | (3,653 | ) | (4,067 | ) | ||||||||
Acquisition costs | (110 | ) | (60 | ) | (539 | ) | (1,374 | ) | ||||||||
Non-incremental capital expenditures (3) | (30,890 | ) | (21,705 | ) | (70,862 | ) | (59,992 | ) | ||||||||
Adjusted funds from operations | $ | 21,829 | $ | 34,046 | $ | 76,972 | $ | 104,266 | ||||||||
Weighted average common shares outstanding - diluted | 154,561 | 164,796 | 154,665 | 166,734 | ||||||||||||
Funds from operations per share (diluted) | $ | 0.38 | $ | 0.39 | $ | 1.13 | $ | 1.12 | ||||||||
Core funds from operations per share (diluted) | $ | 0.38 | $ | 0.37 | $ | 1.10 | $ | 1.08 | ||||||||
Adjusted funds from operations per share (diluted) | $ | 0.14 | $ | 0.21 | $ | 0.50 | $ | 0.63 | ||||||||
(1) | Includes adjustments for consolidated properties, including discontinued operations, and for our proportionate share of amounts attributable to unconsolidated joint ventures. |
(2) | Excludes depreciation of non real estate assets. |
(3) | Non-incremental capital expenditures are defined on page 40. |
14
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | ||||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 19,096 | $ | 30,834 | $ | 69,105 | |||||||
Net income attributable to noncontrolling interest | 4 | 4 | 12 | 12 | |||||||||||
Interest expense (1) | 18,654 | 19,331 | 55,592 | 53,932 | |||||||||||
Depreciation (1) | 35,427 | 31,147 | 103,502 | 92,204 | |||||||||||
Amortization (1) | 14,248 | 13,939 | 42,660 | 34,509 | |||||||||||
Acquisition costs | 110 | 60 | 539 | 1,374 | |||||||||||
Impairment loss (1) | — | — | — | 6,402 | |||||||||||
Net (recoveries) / loss from casualty events and litigation settlements (1) | 8 | (3,919 | ) | (4,514 | ) | (7,328 | ) | ||||||||
Loss / (gain) on sale of properties (1) | — | — | (2,169 | ) | (16,258 | ) | |||||||||
Loss / (gain) on consolidation | — | 898 | — | 898 | |||||||||||
Core EBITDA | 77,613 | 80,556 | 226,456 | 234,850 | |||||||||||
General & administrative expenses (1) | 5,808 | 5,921 | 17,550 | 16,940 | |||||||||||
Management fee revenue (2) | (299 | ) | (636 | ) | (839 | ) | (1,248 | ) | |||||||
Other (income) / expense (1) (3) | 21 | 550 | 54 | 560 | |||||||||||
Straight-line effects of lease revenue (1) | (6,780 | ) | (5,076 | ) | (23,950 | ) | (14,655 | ) | |||||||
Amortization of lease-related intangibles (1) | (1,010 | ) | (1,757 | ) | (3,653 | ) | (4,067 | ) | |||||||
Property net operating income (cash basis) | 75,353 | 79,558 | 215,618 | 232,380 | |||||||||||
Deduct net operating (income) / loss from: | |||||||||||||||
Acquisitions (4) | (6,887 | ) | (6,056 | ) | (18,072 | ) | (10,621 | ) | |||||||
Dispositions (5) | (6 | ) | (1,184 | ) | (1,523 | ) | (3,874 | ) | |||||||
Other investments (6) | (213 | ) | (2,328 | ) | 258 | (7,539 | ) | ||||||||
Same store net operating income (cash basis) | $ | 68,247 | $ | 69,990 | $ | 196,281 | $ | 210,346 | |||||||
Change period over period | (2.5 | )% | N/A | (6.7 | )% | * | N/A | ||||||||
* Explanation for Change in Same Store Net Operating Income for the Nine Months Ended September 30, 2014 | ||||||
Property | Location | Amount | Explanation | |||
Aon Center | Chicago, IL | $ | (10,948 | ) | Expiration of the BP lease in December 2013; income from BP recognized the entirety of the first three quarters of 2013; replacement leases covering 97% of the former BP space provided replacement tenants with rental abatements during some portion of the first nine months of the year. | |
6021 Connection Drive | Irving, TX | (6,325 | ) | Expiration of the Nokia lease in December 2013; income from Nokia recognized the entirety of the first nine months of 2013; lease restructuring income from Nokia recognized in 2013; replacement lease with Epsilon Data Management commenced at the end of the second quarter of 2014; rent is abated for the first several months of the Epsilon lease. | ||
Subtotal | $ | (17,273 | ) | |||
Amount of Variance Explained | 123 | % | Greater than 100% explained; difference represents net operating income growth at other assets within the portfolio. | |||
15
Same Store Net Operating Income | |||||||||||||||||||||||
Top Seven Markets | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | ||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||
New York (7) | $ | 12,611 | 18.5 | $ | 11,404 | 16.3 | $ | 36,021 | 18.4 | $ | 35,849 | 17.0 | |||||||||||
Washington, D.C. (8) | 10,622 | 15.6 | 13,094 | 18.7 | 34,435 | 17.5 | 42,962 | 20.4 | |||||||||||||||
Chicago (9) (10) | 10,261 | 15.0 | 9,672 | 13.8 | 21,223 | 10.8 | 27,340 | 13.0 | |||||||||||||||
Minneapolis (11) | 4,507 | 6.6 | 5,531 | 7.9 | 15,204 | 7.7 | 16,374 | 7.8 | |||||||||||||||
Boston | 4,943 | 7.2 | 4,880 | 7.0 | 14,834 | 7.6 | 14,509 | 6.9 | |||||||||||||||
Dallas (12) | 3,144 | 4.6 | 6,199 | 8.9 | 9,765 | 5.0 | 13,842 | 6.6 | |||||||||||||||
Los Angeles | 2,697 | 4.0 | 3,151 | 4.5 | 9,573 | 4.9 | 9,772 | 4.7 | |||||||||||||||
Other (13) | 19,462 | 28.5 | 16,059 | 22.9 | 55,226 | 28.1 | 49,698 | 23.6 | |||||||||||||||
Total | $ | 68,247 | 100.0 | $ | 69,990 | 100.0 | $ | 196,281 | 100.0 | $ | 210,346 | 100.0 | |||||||||||
(1) | Includes amounts attributable to consolidated properties, including discontinued operations, and our proportionate share of amounts attributable to unconsolidated joint ventures. |
(2) | Presented net of related operating expenses incurred to earn the revenue; therefore, the information presented on this line will not tie to the data presented on the income statements. |
(3) | Figures presented on this line may not tie back to the relevant sources as some activity is attributable to property operations and is, therefore, presented in property net operating income. |
(4) | Acquisitions consist of Arlington Gateway in Arlington, VA, purchased on March 4, 2013; 5 & 15 Wayside Road in Burlington, MA, purchased on March 22, 2013; Royal Lane Land in Irving, TX, purchased on August 1, 2013; 5301 Maryland Way in Brentwood, TN, the remaining equity interest in which was purchased on August 12, 2013; 6565 North MacArthur Boulevard in Irving, TX, purchased on December 5, 2013; One Lincoln Park in Dallas, TX, purchased on December 20, 2013; 161 Corporate Center in Irving, TX, purchased on December 30, 2013; 5 Wall Street in Burlington, MA, purchased on June 27, 2014; and 1155 Perimeter Center West in Atlanta, GA, purchased on August 28, 2014. |
(5) | Dispositions consist of 1111 Durham Avenue in South Plainfield, NJ, sold on March 28, 2013; 1200 Enclave Parkway in Houston, TX, sold on May 1, 2013; 350 Spectrum Loop in Colorado Springs, CO, sold on November 1, 2013; 8700 South Price Road in Tempe, AZ, sold on December 30, 2013; 11107 and 11109 Sunset Hills Road in Reston, VA, sold on March 19, 2014; 1441 West Long Lake Road and 4685 Investment Drive in Troy, MI, sold on April 30, 2014; and 2020 West 89th Street in Leawood, KS, sold on May 19, 2014. |
(6) | Other investments consist of operating results from our investments in unconsolidated joint ventures and our redevelopment projects. Additional information on our unconsolidated joint ventures and redevelopment projects can be found on page 39. The operating results from both the office and retail portions of 3100 Clarendon Boulevard in Arlington, VA, are included in this line item, consisting of net operating income/(loss) of $56,000 and ($230,000) for the three months and the nine months ended September 30, 2014, respectively, and net operating income of $2.0 million and $5.8 million for the three months and the nine months ended September 30, 2013, respectively. |
(7) | The increase in New York Same Store Net Operating Income for the three months ended September 30, 2014 as compared to the same period in 2013 was primarily attributable to increased rental income at 200 Bridgewater Crossing in Bridgewater, NJ, associated with the end of the rental abatement periods under several new leases. |
(8) | The decrease in Washington, D.C. Same Store Net Operating Income for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily attributable to the expiration of several leases at 4250 North Fairfax Drive in Arlington, VA, and 9211 Corporate Boulevard in Rockville, MD, offset somewhat by increased rental income associated with the renewal of the National Park Service lease at 1201 Eye Street in Washington, D.C. An additional contributor to the decrease in Washington, D.C. Same Store Net Operating Income for the nine months ended September 30, 2014 as compared to the same period in 2013 was the expiration of the Office of the Comptroller of the Currency lease at One Independence Square in Washington, D.C. |
(9) | The increase in Chicago Same Store Net Operating Income for the three months ended September 30, 2014 as compared to the same period in 2013 was primarily related to the expirations of the rental abatement periods associated with several new leases at 500 West Monroe Street in Chicago, IL. The decrease in Chicago Same Store Net Operating Income for the nine months ended September 30, 2014 as compared to the same period in 2013 was primarily related to tenant transitions at Aon Center in Chicago, IL. The main contributors to the decrease in net operating income contribution from Aon Center were: 1) downtime between the expiration of the BP lease and the commencement of one of the replacement leases with Integrys, 2) gross rental abatements associated with several of the replacement leases for the space formerly occupied by BP, and 3) rental rate roll downs associated with several new leases replacing the expired BP lease. |
(10) | The percentage contribution from Chicago to our total Same Store Net Operating Income is smaller than our geographic concentration percentage in Chicago, which is presented on an ALR basis (see page 34), primarily because of the large number of leases with gross rent abatements and a number of leases yet to commence for currently vacant spaces (the projected gross rent for which is included in our ALR calculation). As the gross rent abatements burn off and as executed but not commenced leases begin, the Same Store Net Operating Income percentage contribution from Chicago should increase and should be more closely aligned with our Chicago concentration percentage as presented on page 34. |
(11) | The decrease in Minneapolis Same Store Net Operating Income for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily related to a renewal-related contraction by US Bancorp and downtime and/or rental abatements associated with several replacement leases for spaces formerly occupied by US Bancorp at US Bancorp Center in Minneapolis, MN. |
(12) | The decrease in Dallas Same Store Net Operating Income for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily related to a tenant transition at 6021 Connection Drive in Irving, TX. Specifically, the decrease in net operating income contribution from 6021 Connection Drive was predominantly related to: 1) the downtime between the expiration of the Nokia lease at the end of 2013 and the commencement of the Epsilon lease, which occurred at the end of the second quarter of 2014, 2) rental abatement concessions provided to Epsilon for the first several months of its lease term, and 3) the recognition of lease restructuring income from Nokia in 2013. |
(13) | The increase in Other Same Store Net Operating Income for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily related to: 1) the restructured Independence Blue Cross lease at 1901 Market Street in Philadelphia, PA, 2) increased rental income at Glenridge Highlands Two in Atlanta, GA, attributable to increased economic occupancy at the building, and 3) the expiration of the rental abatement period for a new tenant and the sale of density rights at Sarasota Commerce Center II in Sarasota, FL. |
16
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Accrual Basis)
Unaudited (in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | ||||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 19,096 | $ | 30,834 | $ | 69,105 | |||||||
Net income attributable to noncontrolling interest | 4 | 4 | 12 | 12 | |||||||||||
Interest expense (1) | 18,654 | 19,331 | 55,592 | 53,932 | |||||||||||
Depreciation (1) | 35,427 | 31,147 | 103,502 | 92,204 | |||||||||||
Amortization (1) | 14,248 | 13,939 | 42,660 | 34,509 | |||||||||||
Acquisition costs | 110 | 60 | 539 | 1,374 | |||||||||||
Impairment loss (1) | — | — | — | 6,402 | |||||||||||
Net (recoveries) / loss from casualty events and litigation settlements (1) | 8 | (3,919 | ) | (4,514 | ) | (7,328 | ) | ||||||||
Loss / (gain) on sale of properties (1) | — | — | (2,169 | ) | (16,258 | ) | |||||||||
Loss / (gain) on consolidation | — | 898 | — | 898 | |||||||||||
Core EBITDA | 77,613 | 80,556 | 226,456 | 234,850 | |||||||||||
General & administrative expenses (1) | 5,808 | 5,921 | 17,550 | 16,940 | |||||||||||
Management fee revenue (2) | (299 | ) | (636 | ) | (839 | ) | (1,248 | ) | |||||||
Other (income) / expense (1) (3) | 21 | 550 | 54 | 560 | |||||||||||
Property net operating income (accrual basis) | 83,143 | 86,391 | 243,221 | 251,102 | |||||||||||
Deduct net operating (income) / loss from: | |||||||||||||||
Acquisitions (4) | (7,781 | ) | (6,832 | ) | (20,609 | ) | (11,831 | ) | |||||||
Dispositions (5) | (6 | ) | (1,437 | ) | (1,469 | ) | (4,880 | ) | |||||||
Other investments (6) | (222 | ) | (2,345 | ) | 230 | (7,628 | ) | ||||||||
Same store net operating income (accrual basis) | $ | 75,134 | $ | 75,777 | $ | 221,373 | $ | 226,763 | |||||||
Change period over period | (0.8 | )% | N/A | (2.4 | )% | * | N/A | ||||||||
* Explanation for Change in Same Store Net Operating Income for the Nine Months Ended September 30, 2014 | ||||||
Property | Location | Amount | Explanation | |||
Aon Center | Chicago, IL | $ | (7,170 | ) | Expiration of the BP lease in December 2013; income from BP recognized the entirety of the first nine months of 2013; replacement leases covering 97% of the former BP space provided replacement tenants with operating expense recovery abatements during some portion of the first nine months of the year or only recently commenced. | |
6021 Connection Drive | Irving, TX | (4,553 | ) | Expiration of the Nokia lease in December 2013; income from Nokia recognized the entirety of the first nine months of 2013; lease restructuring income from Nokia recognized in 2013; replacement lease with Epsilon Data Management commenced at the end of the second quarter of 2014. | ||
Subtotal | $ | (11,723 | ) | |||
Amount of Variance Explained | 217 | % | Greater than 100% explained; difference represents net operating income growth at other assets within the portfolio. | |||
17
Same Store Net Operating Income | |||||||||||||||||||||||
Top Seven Markets | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
9/30/2014 | 9/30/2013 | 9/30/2014 | 9/30/2013 | ||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||
New York | $ | 11,953 | 15.9 | $ | 12,325 | 16.3 | $ | 37,391 | 16.9 | $ | 38,466 | 17.0 | |||||||||||
Washington, D.C. (7) | 11,147 | 14.8 | 12,899 | 17.0 | 36,113 | 16.3 | 43,177 | 19.0 | |||||||||||||||
Chicago (8) (9) | 12,768 | 17.0 | 12,350 | 16.3 | 33,290 | 15.0 | 37,019 | 16.3 | |||||||||||||||
Minneapolis (10) | 4,970 | 6.6 | 5,865 | 7.7 | 16,468 | 7.4 | 17,404 | 7.7 | |||||||||||||||
Boston | 4,917 | 6.6 | 4,883 | 6.5 | 14,829 | 6.7 | 14,789 | 6.5 | |||||||||||||||
Los Angeles (11) | 3,650 | 4.9 | 3,206 | 4.2 | 11,729 | 5.3 | 9,684 | 4.3 | |||||||||||||||
Dallas (12) | 4,742 | 6.3 | 5,979 | 7.9 | 11,188 | 5.1 | 13,639 | 6.0 | |||||||||||||||
Other (13) | 20,987 | 27.9 | 18,270 | 24.1 | 60,365 | 27.3 | 52,585 | 23.2 | |||||||||||||||
Total | $ | 75,134 | 100.0 | $ | 75,777 | 100.0 | $ | 221,373 | 100.0 | $ | 226,763 | 100.0 | |||||||||||
(1) | Includes amounts attributable to consolidated properties, including discontinued operations, and our proportionate share of amounts attributable to unconsolidated joint ventures. |
(2) | Presented net of related operating expenses incurred to earn the revenue; therefore, the information presented on this line will not tie to the data presented on the income statements. |
(3) | Figures presented on this line may not tie back to the relevant sources as some activity is attributable to property operations and is, therefore, presented in property net operating income. |
(4) | Acquisitions consist of Arlington Gateway in Arlington, VA, purchased on March 4, 2013; 5 & 15 Wayside Road in Burlington, MA, purchased on March 22, 2013; Royal Lane Land in Irving, TX, purchased on August 1, 2013; 5301 Maryland Way in Brentwood, TN, the remaining equity interest in which was purchased on August 12, 2013; 6565 North MacArthur Boulevard in Irving, TX, purchased on December 5, 2013; One Lincoln Park in Dallas, TX, purchased on December 20, 2013; 161 Corporate Center in Irving, TX, purchased on December 30, 2013; 5 Wall Street in Burlington, MA, purchased on June 27, 2014; and 1155 Perimeter Center West in Atlanta, GA, purchased on August 28, 2014. |
(5) | Dispositions consist of 1111 Durham Avenue in South Plainfield, NJ, sold on March 28, 2013; 1200 Enclave Parkway in Houston, TX, sold on May 1, 2013; 350 Spectrum Loop in Colorado Springs, CO, sold on November 1, 2013; 8700 South Price Road in Tempe, AZ, sold on December 30, 2013; 11107 and 11109 Sunset Hills Road in Reston, VA, sold on March 19, 2014; 1441 West Long Lake Road and 4685 Investment Drive in Troy, MI, sold on April 30, 2014; and 2020 West 89th Street in Leawood, KS, sold on May 19, 2014. |
(6) | Other investments consist of operating results from our investments in unconsolidated joint ventures and our redevelopment projects. Additional information on our unconsolidated joint ventures and redevelopment projects can be found on page 39. The operating results from both the office and retail portions of 3100 Clarendon Boulevard in Arlington, VA, are included in this line item, consisting of net operating income/(loss) of $58,000 and ($220,000) for the three months and the nine months ended September 30, 2014, respectively, and net operating income of $2.0 million and $5.8 million for the three months and the nine months ended September 30, 2013, respectively. |
(7) | The decrease in Washington, D.C. Same Store Net Operating Income for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily attributable to the expiration of several leases at One Independence Square in Washington, D.C., 4250 North Fairfax Drive in Arlington, VA, and 9211 Corporate Boulevard in Rockville, MD, offset somewhat by increased rental income associated with the renewal of the National Park Service lease at 1201 Eye Street in Washington, D.C. |
(8) | The increase in Chicago Same Store Net Operating Income for the three months ended September 30, 2014 as compared to the same period in 2013 was primarily related to the expirations of the operating expense recovery abatement periods associated with several new leases at 500 West Monroe Street in Chicago, IL. The decrease in Chicago Same Store Net Operating Income for the nine months ended September 30, 2014 as compared to the same period in 2013 was primarily related to tenant transitions at Aon Center in Chicago, IL. The main contributors to the decrease in net operating income contribution from Aon Center were: 1) downtime between the expiration of the BP lease and the commencement of one of the replacement leases with Integrys, 2) operating expense recovery abatements (which abatements are not included in straight line rent adjustments) associated with several of the replacement leases for the space formerly occupied by BP, and 3) rental rate roll downs associated with several new leases replacing the expired BP lease. |
(9) | The percentage contribution from Chicago to our total Same Store Net Operating Income is smaller than our geographic concentration percentage in Chicago, which is presented on an ALR basis (see page 34), primarily because of the large number of leases with operating expense recovery abatements (which abatements are not included in straight line rent adjustments) and a number of leases yet to commence for currently vacant spaces (the projected gross rents for which are included in our ALR calculation). As operating expense recovery abatements burn off and as executed but not commenced leases begin, the Same Store Net Operating Income percentage contribution from Chicago should increase and should be more closely aligned with our Chicago concentration percentage as presented on page 34. |
(10) | The decrease in Minneapolis Same Store Net Operating Income for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily related to a renewal-related contraction by US Bancorp and downtime associated with a replacement lease for space formerly occupied by US Bancorp at US Bancorp Center in Minneapolis, MN. |
(11) | The increase in Los Angeles Same Store Net Operating Income for the nine months ended September 30, 2014 as compared to the same period in 2013 was primarily related to increased rental income associated with the new lease with Guidance Software at 1055 East Colorado Boulevard in Pasadena, CA, which commenced in mid-2013, along with increased rental income associated with new leases with Union Bank and Front Porch Communities at 800 North Brand Boulevard in Glendale, CA, both of which commenced in early 2014. |
(12) | The decrease in Dallas Same Store Net Operating Income for the three months and the nine months ended September 30, 2014 as compared to the same periods in 2013 was primarily related to a tenant transition at 6021 Connection Drive in Irving, TX. Specifically, the decrease in net operating income contribution from 6021 Connection Drive was predominantly related to: 1) the downtime between the expiration of the Nokia lease at the end of 2013 and the commencement of the Epsilon lease, which occurred at the end of the second quarter of 2014, and 2) the recognition of lease restructuring income from Nokia in 2013. |
(13) | The increase in Other Same Store Net Operating Income for the three months ended September 30, 2014 as compared to the same period in 2013 was primarily related to: 1) increased rental income under the restructured Independence Blue Cross lease at 1901 Market Street in Philadelphia, PA, and 2) the sale of density rights at Sarasota Commerce Center II in Sarasota, FL. The increase in Other Same Store Net Operating Income for the nine months ended September 30, 2014 as compared to the same period in 2013 was primarily related to: 1) increased rental income under the restructured Independence Blue Cross lease at 1901 Market Street in Philadelphia, PA, 2) increased rental income at Glenridge Highlands Two in Atlanta, GA, attributable to several new leases commencing in 2013 and 2014, and 3) increased rental income at Eastpoint I in Mayfield Heights, OH, related to the commencement of a new lease with TMW Systems in early 2014. |
18
Piedmont Office Realty Trust, Inc.
Capitalization Analysis
Unaudited (in thousands except for per share data)
As of | As of | |||||||
September 30, 2014 | December 31, 2013 | |||||||
Common stock price (1) | $ | 17.64 | $ | 16.52 | ||||
Total shares outstanding | 154,325 | 157,461 | ||||||
Equity market capitalization (1) | $ | 2,722,296 | $ | 2,601,254 | ||||
Total debt - principal amount outstanding | $ | 2,236,049 | $ | 2,003,525 | ||||
Total market capitalization (1) | $ | 4,958,345 | $ | 4,604,779 | ||||
Total debt / Total market capitalization | 45.1 | % | 43.5 | % | ||||
Total gross real estate assets | $ | 5,197,338 | $ | 5,003,737 | ||||
Total debt / Total gross real estate assets (2) | 43.0 | % | 40.0 | % | ||||
Total debt / Total gross assets (3) | 37.8 | % | 35.0 | % | ||||
(1) | Reflects common stock closing price as of the end of the reporting period. |
(2) | Gross real estate assets is defined as total real estate assets with the add back of accumulated depreciation and accumulated amortization related to real estate assets. |
(3) | Gross assets is defined as total assets with the add back of accumulated depreciation and accumulated amortization related to real estate assets. |
19
Piedmont Office Realty Trust, Inc.
Debt Summary
As of September 30, 2014
Unaudited ($ in thousands)
Floating Rate & Fixed Rate Debt
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate | Weighted Average Maturity | ||
Floating Rate | $440,000 | (2) | 1.34% | 34.7 months | |
Fixed Rate | 1,796,049 | 3.90% | 71.6 months | ||
Total | $2,236,049 | 3.39% | 64.3 months | ||
Unsecured & Secured Debt
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate | Weighted Average Maturity | |||
Unsecured | $1,790,000 | 2.85% | (3) | 73.6 months | ||
Secured | 446,049 | 5.55% | 27.0 months | |||
Total | $2,236,049 | 3.39% | 64.3 months | |||
Debt Maturities
Maturity Year | Secured Debt - Principal Amount Outstanding (1) | Unsecured Debt - Principal Amount Outstanding (1) | Weighted Average Stated Interest Rate | Percentage of Total | |
2014 | $— | $— | N/A | —% | |
2015 | 105,000 | — | 5.29% | 4.7% | |
2016 | 167,525 | — | 5.55% | 7.5% | |
2017 | 140,000 | 440,000 | (4) | 2.40% | 25.9% |
2018 | — | — | N/A | —% | |
2019 + | 33,524 | 1,350,000 | 3.40% | 61.9% | |
Total | $446,049 | $1,790,000 | 3.39% | 100.0% | |
(1) | All of Piedmont's outstanding debt as of September 30, 2014 was interest-only debt with the exception of the $33.5 million of debt associated with 5 Wall Street located in Burlington, MA. |
(2) | Amount represents the outstanding balance as of September 30, 2014, on the $500 million unsecured revolving credit facility. Both the $300 million unsecured term loan that closed in 2011 and the $300 million unsecured term loan that closed in 2013 have stated variable rates. However, Piedmont entered into $300 million in notional amount of interest rate swap agreements which effectively fix the interest rate on the 2011 unsecured term loan at 2.39% through November 22, 2016 (please see page 21 for information on additional swap agreements for this loan that will become effective after November 22, 2016), assuming no credit rating change for the Company, and $300 million in notional amount of interest rate swap agreements which effectively fix the interest rate on the 2013 unsecured term loan at 2.78% through its maturity date of January 31, 2019, assuming no credit rating change for the Company. The 2011 unsecured term loan and the 2013 unsecured term loan, therefore, are reflected as fixed rate debt. |
(3) | The weighted average interest rate is a weighted average rate for amounts outstanding under our $500 million unsecured revolving credit facility, our unsecured senior notes and our unsecured term loans. As presented herein, the weighted average stated interest rate is calculated based upon the principal amounts outstanding. |
(4) | The initial maturity date of the $500 million unsecured revolving credit facility is August 19, 2016; however, there are two, six-month extension options available under the facility providing for a final extended maturity date of August 21, 2017. For the purposes of this schedule, we reflect the maturity date of the facility as the final extended maturity date of August 2017. |
20
Piedmont Office Realty Trust, Inc.
Debt Detail
Unaudited ($ in thousands)
Facility | Property | Stated Rate (1) | Maturity | Principal Amount Outstanding as of September 30, 2014 | ||||
Secured | ||||||||
$105.0 Million Fixed-Rate Loan | US Bancorp Center | 5.29 | % | 5/11/2015 | $ | 105,000 | ||
$125.0 Million Fixed-Rate Loan | Four Property Collateralized Pool (2) | 5.50 | % | 4/1/2016 | 125,000 | |||
$42.5 Million Fixed-Rate Loan | Las Colinas Corporate Center I & II | 5.70 | % | 10/11/2016 | 42,525 | |||
$140.0 Million WDC Fixed-Rate Loans | 1201 & 1225 Eye Street | 5.76 | % | 11/1/2017 | 140,000 | |||
$35.0 Million Fixed-Rate Loan (3) | 5 Wall Street | 5.55 | % | 9/1/2021 | 33,524 | |||
Subtotal / Weighted Average (4) | 5.55 | % | $ | 446,049 | ||||
Unsecured | ||||||||
$500.0 Million Unsecured Line of Credit (5) | N/A | 1.34 | % | (6) | 8/21/2017 | $ | 440,000 | |
$350.0 Million Unsecured Senior Notes (7) | N/A | 3.40 | % | 6/1/2023 | 350,000 | |||
$400.0 Million Unsecured Senior Notes (8) | N/A | 4.45 | % | 3/15/2024 | 400,000 | |||
$300.0 Million Unsecured 2011 Term Loan | N/A | 2.39 | % | (9) | 1/15/2020 | 300,000 | ||
$300.0 Million Unsecured 2013 Term Loan | N/A | 2.78 | % | (10) | 1/31/2019 | 300,000 | ||
Subtotal / Weighted Average (4) | 2.85 | % | $ | 1,790,000 | ||||
Total Debt - Principal Amount Outstanding / Weighted Average Stated Rate (4) | 3.39 | % | $ | 2,236,049 | ||||
GAAP Accounting Adjustments (11) | (2,210 | ) | ||||||
Total Debt - GAAP Amount Outstanding | $ | 2,233,839 | ||||||
(1) | All of Piedmont’s outstanding debt as of September 30, 2014, was interest-only debt with the exception of the $33.5 million of debt associated with 5 Wall Street located in Burlington, MA. |
(2) | The four property collateralized pool includes 1430 Enclave Parkway, Windy Point I and II, and 1055 East Colorado Boulevard. |
(3) | The loan is amortizing based upon a 25-year amortization schedule. |
(4) | Weighted average is based on the principal amount outstanding and interest rate at September 30, 2014. |
(5) | All of Piedmont’s outstanding debt as of September 30, 2014, was term debt with the exception of $440 million outstanding on our unsecured revolving credit facility. The $500 million unsecured revolving credit facility has an initial maturity date of August 19, 2016; however, there are two, six-month extension options available under the facility providing for a total extension of up to one year to August 21, 2017. The final extended maturity date is presented on this schedule. |
(6) | The interest rate presented for the $500 million unsecured revolving credit facility is the weighted average interest rate for all outstanding draws as of September 30, 2014. Piedmont may select from multiple interest rate options with each draw under this facility, including the prime rate and various length LIBOR locks. All LIBOR selections are subject to an additional spread (1.175% as of September 30, 2014) over the selected rate based on Piedmont’s current credit rating. |
(7) | The $350 million unsecured senior notes were offered for sale at 99.601% of the principal amount. The resulting effective cost of the financing is approximately 3.45% before the consideration of transaction costs and proceeds from interest rate hedges. After the application of proceeds from interest rate hedges, the effective cost of the financing is approximately 3.43%. |
(8) | The $400 million unsecured senior notes were offered for sale at 99.791% of the principal amount. The resulting effective cost of the financing is approximately 4.48% before the consideration of transaction costs and proceeds from interest rate hedges. After the application of proceeds from interest rate hedges, the effective cost of the financing is approximately 4.10%. |
(9) | The $300 million unsecured term loan that closed in 2011 has a stated variable rate; however, Piedmont entered into interest rate swap agreements which effectively fix the interest rate on this loan at 2.39% until November 22, 2016, assuming no credit rating change for the Company. Subsequent to quarter end, Piedmont entered into interest rate swap agreements which effectively fix the interest rate on this loan at 3.35% from November 22, 2016 to January 15, 2020, assuming no credit rating change for the Company. |
(10) | The $300 million unsecured term loan that closed in 2013 has a stated variable rate; however, Piedmont entered into interest rate swap agreements which effectively fix the interest rate on this loan at 2.78% through its maturity date of January 31, 2019, assuming no credit rating change for the Company. |
(11) | The GAAP accounting adjustments relate to the original issue discounts and fees associated with the $350 million unsecured senior notes, the $400 million unsecured senior notes and the $300 million unsecured 2011 term loan, along with debt fair value adjustments associated with the assumed 5 Wall Street debt. The original issue discounts and fees, along with the debt fair value adjustments, will be amortized to interest expense over the contractual term of the related debt. |
21
Piedmont Office Realty Trust, Inc.
Debt Analysis
As of September 30, 2014
Unaudited
Bank Debt Covenant Compliance (1) | Required | Actual |
Maximum Leverage Ratio | 0.60 | 0.39 |
Minimum Fixed Charge Coverage Ratio (2) | 1.50 | 3.58 |
Maximum Secured Indebtedness Ratio | 0.40 | 0.08 |
Minimum Unencumbered Leverage Ratio | 1.60 | 2.58 |
Minimum Unencumbered Interest Coverage Ratio (3) | 1.75 | 5.60 |
Bond Covenant Compliance (4) | Required | Actual |
Total Debt to Total Assets | 60% or less | 42.7% |
Secured Debt to Total Assets | 40% or less | 8.6% |
Ratio of Consolidated EBITDA to Interest Expense | 1.50 or greater | 4.19 |
Unencumbered Assets to Unsecured Debt | 150% or greater | 255% |
Three Months Ended | Nine Months Ended | Year Ended | |
Other Debt Coverage Ratios | September 30, 2014 | September 30, 2014 | December 31, 2013 |
Average net debt to core EBITDA (5) | 6.9 x | 6.9 x | 5.4 x |
Fixed charge coverage ratio (6) | 4.0 x | 4.0 x | 4.3 x |
Interest coverage ratio (7) | 4.0 x | 4.0 x | 4.3 x |
(1) | Debt covenant compliance calculations relate to specific calculations detailed in the relevant credit agreements. |
(2) | Defined as EBITDA for the trailing four quarters (including the Company's share of EBITDA from unconsolidated interests), less one-time or non-recurring gains or losses, less a $0.15 per square foot capital reserve, and excluding the impact of straight line rent leveling adjustments and amortization of intangibles divided by the Company's share of fixed charges, as more particularly described in the credit agreements. This definition of fixed charge coverage ratio as prescribed by our credit agreements is different from the fixed charge coverage ratio definition employed elsewhere within this report. |
(3) | Defined as net operating income for the trailing four quarters for unencumbered assets (including the Company's share of net operating income from partially-owned entities and subsidiaries that are deemed to be unencumbered) less a $0.15 per square foot capital reserve divided by the Company's share of interest expense associated with unsecured financings only, as more particularly described in the credit agreements. |
(4) | Please refer to the Indenture dated May 9, 2013, and the Indenture and the Supplemental Indenture dated March 6, 2014, for additional information on the relevant calculations. |
(5) | For the purposes of this calculation, we use the average daily balance of debt outstanding during the period, less cash and cash equivalents and escrow deposits and restricted cash as of the end of the period. |
(6) | Fixed charge coverage is calculated as Core EBITDA divided by the sum of interest expense, principal amortization, capitalized interest and preferred dividends. The Company had no preferred dividends during the periods ended September 30, 2014 and December 31, 2013. The Company had capitalized interest of $541,349 for the three months ended September 30, 2014, $1,386,443 for the nine months ended September 30, 2014, and $31,486 for the year ended December 31, 2013. The Company had principal amortization of $193,560 for the three months ended September 30, 2014 and $257,783 for the nine months ended September 30, 2014. |
(7) | Interest coverage ratio is calculated as Core EBITDA divided by the sum of interest expense and capitalized interest. The Company had capitalized interest of $541,349 for the three months ended September 30, 2014, $1,386,443 for the nine months ended September 30, 2014, and $31,486 for the year ended December 31, 2013. |
22
Piedmont Office Realty Trust, Inc.
Tenant Diversification (1)
As of September 30, 2014
(in thousands except for number of properties)
Tenant | Credit Rating (2) | Number of Properties | Lease Expiration (3) | Annualized Lease Revenue | Percentage of Annualized Lease Revenue (%) | Leased Square Footage | Percentage of Leased Square Footage (%) | |
U.S. Government | AA+ / Aaa | 5 | (4) | $44,265 | 7.6 | 886 | 4.7 | |
State of New York | AA+ / Aa1 | 1 | 2019 | 23,926 | 4.1 | 481 | 2.6 | |
US Bancorp | A+ / A1 | 3 | 2023 / 2024 | 21,107 | 3.6 | 733 | 3.9 | |
Independence Blue Cross | No rating available | 1 | 2033 | 17,266 | 3.0 | 801 | 4.3 | |
GE | AA+ / Aa3 | 2 | 2027 | 15,116 | 2.6 | 453 | 2.4 | |
Aon | A- / Baa2 | 2 | 2028 | 14,900 | 2.6 | 460 | 2.4 | |
Nestle | AA / Aa2 | 1 | 2021 | 11,898 | 2.1 | 401 | 2.1 | |
City of New York | AA / Aa2 | 1 | 2020 | 9,987 | 1.7 | 313 | 1.7 | |
KPMG | No rating available | 2 | 2027 | 9,157 | 1.6 | 279 | 1.5 | |
Technip | BBB+ | 1 | 2018 | 8,790 | 1.5 | 204 | 1.1 | |
Gallagher | No rating available | 1 | 2018 | 8,539 | 1.5 | 307 | 1.6 | |
Caterpillar Financial | A / A2 | 1 | 2022 | 7,805 | 1.4 | 312 | 1.7 | |
DDB Needham | BBB+ / Baa1 | 1 | 2018 | 7,734 | 1.3 | 213 | 1.1 | |
Catamaran | BB+ / Ba2 | 1 | 2025 | 7,394 | 1.3 | 301 | 1.6 | |
Jones Lang LaSalle | BBB- / Baa2 | 1 | 2032 | 7,164 | 1.2 | 201 | 1.1 | |
Harvard University | AAA / Aaa | 2 | 2017 | 7,145 | 1.2 | 110 | 0.6 | |
Gemini | A / A3 | 1 | 2021 | 6,544 | 1.1 | 205 | 1.1 | |
Harcourt | BBB+ | 1 | 2016 | 6,494 | 1.1 | 195 | 1.0 | |
Edelman | No rating available | 1 | 2024 | 6,489 | 1.1 | 184 | 1.0 | |
Key Bank | A- / A3 | 2 | 2016 | 6,418 | 1.1 | 210 | 1.1 | |
Raytheon | A / A3 | 2 | 2019 | 6,271 | 1.1 | 440 | 2.3 | |
Epsilon Data Management | No rating available | 2 | 2026 | 6,058 | 1.0 | 250 | 1.3 | |
First Data Corporation | B / B3 | 1 | 2020 | 6,008 | 1.0 | 195 | 1.0 | |
Archon Group | A- / Baa1 | 2 | 2018 | 5,810 | 1.0 | 235 | 1.3 | |
Ralph Lauren | A / A3 | 1 | 2019 | 5,808 | 1.0 | 178 | 0.9 | |
Integrys | A- / A3 | 1 | 2029 | 5,772 | 1.0 | 181 | 1.0 | |
Henry M. Jackson | No rating available | 2 | 2022 | 5,590 | 1.0 | 145 | 0.8 | |
Towers Watson | No rating available | 1 | 2017 | 5,537 | 1.0 | 123 | 0.7 | |
Other | Various | 285,604 | 49.2 | 9,783 | 52.1 | |||
Total | $580,596 | 100.0 | 18,779 | 100.0 | ||||
23
Tenant Diversification
September 30, 2014 as compared to December 31, 2013
(1) | This schedule presents all tenants contributing 1.0% or more to Annualized Lease Revenue. |
(2) | Credit rating may reflect the credit rating of the parent or a guarantor. When available, both the Standard & Poor's credit rating and the Moody's credit rating are provided. |
(3) | Unless otherwise indicated, Lease Expiration represents the expiration year of the majority of the square footage leased by the tenant. |
(4) | There are several leases with several different agencies of the U.S. Government with expiration years ranging from 2015 to 2027. |
24
Piedmont Office Realty Trust, Inc.
Tenant Credit Rating & Lease Distribution Information
As of September 30, 2014
Tenant Credit Rating (1)
Annualized Lease Revenue (in thousands) | Percentage of Annualized Lease Revenue (%) | ||
AAA / Aaa | $54,765 | 9.4 | |
AA / Aa | 86,614 | 14.9 | |
A / A | 122,084 | 21.0 | |
BBB / Baa | 48,031 | 8.3 | |
BB / Ba | 33,449 | 5.8 | |
B / B | 26,125 | 4.5 | |
Below | 0 | 0.0 | |
Not rated (2) | 209,528 | 36.1 | |
Total | $580,596 | 100.0 | |
Lease Distribution
Number of Leases | Percentage of Leases (%) | Annualized Lease Revenue (in thousands) | Percentage of Annualized Lease Revenue (%) | Leased Square Footage (in thousands) | Percentage of Leased Square Footage (%) | |||
2,500 or Less | 201 | 31.1 | $21,478 | 3.7 | 186 | 1.0 | ||
2,501 - 10,000 | 192 | 29.7 | 33,826 | 5.8 | 1,051 | 5.6 | ||
10,001 - 20,000 | 80 | 12.4 | 33,387 | 5.8 | 1,133 | 6.0 | ||
20,001 - 40,000 | 69 | 10.6 | 59,835 | 10.3 | 1,982 | 10.6 | ||
40,001 - 100,000 | 52 | 8.0 | 93,519 | 16.1 | 3,087 | 16.4 | ||
Greater than 100,000 | 53 | 8.2 | 338,551 | 58.3 | 11,340 | 60.4 | ||
Total | 647 | 100.0 | $580,596 | 100.0 | 18,779 | 100.0 | ||
(1) | Credit rating may reflect the credit rating of the parent or a guarantor. Where differences exist between the Standard & Poor's credit rating for a tenant and the Moody's credit rating for a tenant, the higher credit rating is selected for this analysis. |
(2) | The classification of a tenant as "not rated" does not indicate that the tenant is of poor credit quality, but can indicate that the tenant or the tenant's debt, if any, has not been rated. Included in this category are such tenants as Independence Blue Cross, McKinsey & Company and KPMG. |
25
Piedmont Office Realty Trust, Inc.
Leased Percentage Information
(in thousands)
Impact of Strategic Transactions on Leased Percentage
The Company’s stated long-term growth strategy includes the recycling of capital from certain stabilized or non-core assets into office properties located in focused operating markets. Some of the recently acquired properties are value-add properties which are defined as low-occupancy properties acquired at attractive bases with earnings growth and value appreciation potential achievable through leasing up such assets to a stabilized occupancy. Because the value-add properties have large vacancies, they negatively affect Piedmont’s overall leased percentage. In order to identify the effect they have on Piedmont’s overall leased percentage, the following information is being provided. The analysis below: 1) removes the impact of the value-add properties from Piedmont’s overall office portfolio total under the heading “Stabilized Portfolio Analysis”; 2) provides a year-over-year comparison of leased percentage on the same subset of properties under the heading “Same Store Analysis”; and 3) provides a year-over-year comparison of leased percentage on the same subset of stabilized properties under the heading "Same Store Stabilized Analysis".
Three Months Ended | Three Months Ended | ||||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||||
Leased Square Footage | Rentable Square Footage | Percent Leased (1) | Leased Square Footage | Rentable Square Footage | Percent Leased (1) | ||||||||||
As of June 30, 20xx | 18,352 | 21,086 | 87.0 | % | 17,878 | 20,704 | 86.4 | % | |||||||
New leases | 1,110 | 1,342 | |||||||||||||
Expired leases | (1,060 | ) | (1,248 | ) | |||||||||||
Other | — | 9 | — | 56 | |||||||||||
Subtotal | 18,402 | 21,095 | 87.2 | % | 17,972 | 20,760 | 86.6 | % | |||||||
Acquisitions during period | 377 | 377 | 336 | 346 | |||||||||||
Dispositions during period | — | — | — | — | |||||||||||
As of September 30, 20xx (2) | 18,779 | 21,472 | 87.5 | % | 18,308 | 21,106 | 86.7 | % | |||||||
Nine Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||||
Leased Square Footage | Rentable Square Footage | Percent Leased (1) | Leased Square Footage | Rentable Square Footage | Percent Leased (1) | ||||||||||
As of December 31, 20xx | 18,737 | 21,490 | 87.2 | % | 17,935 | 20,500 | 87.5 | % | |||||||
New leases | 3,377 | 2,526 | |||||||||||||
Expired leases | (3,313 | ) | (2,775 | ) | |||||||||||
Other (3) | (247 | ) | (182 | ) | 3 | 53 | |||||||||
Subtotal | 18,554 | 21,308 | 87.1 | % | 17,689 | 20,553 | 86.1 | % | |||||||
Acquisitions during period | 559 | 559 | 914 | 940 | |||||||||||
Dispositions during period | (334 | ) | (395 | ) | (295 | ) | (387 | ) | |||||||
As of September 30, 20xx (2) | 18,779 | 21,472 | 87.5 | % | 18,308 | 21,106 | 86.7 | % | |||||||
Stabilized Portfolio Analysis | |||||||||||||||
Less value-add properties (4) | (841 | ) | (1,309 | ) | 64.2 | % | (877 | ) | (1,637 | ) | 53.6 | % | |||
Stabilized Total (2) | 17,938 | 20,163 | 89.0 | % | 17,431 | 19,469 | 89.5 | % | |||||||
Same Store Analysis | |||||||||||||||
Less acquisitions / dispositions after September 30, 2013 or redevelopments (4) (5) | (1,142 | ) | (1,186 | ) | 96.3 | % | (867 | ) | (933 | ) | 92.9 | % | |||
Same Store Total (2) | 17,637 | 20,286 | 86.9 | % | 17,441 | 20,173 | 86.5 | % | |||||||
Same Store Stabilized Analysis | |||||||||||||||
Less value-add same store properties (4) | (1,135 | ) | (1,641 | ) | 69.2 | % | (877 | ) | (1,637 | ) | 53.6 | % | |||
Same Store Stabilized Total (2) | 16,502 | 18,645 | 88.5 | % | 16,564 | 18,536 | 89.4 | % | |||||||
26
(1) | Calculated as leased square footage as of period end with the addition of square footage associated with uncommenced leases for spaces vacant as of period end, divided by total rentable square footage as of period end, expressed as a percentage. |
(2) | The square footage associated with leases with end of period expiration dates is included in the end of the period leased square footage. |
(3) | Effective January 1, 2014, 3100 Clarendon Boulevard was taken out of service due to the redevelopment of the property. The adjustments to square footage presented on this line in 2014 primarily relate to the removal of 3100 Clarendon Boulevard from our operating portfolio. For additional information regarding the redevelopment of 3100 Clarendon Boulevard, please refer to the Financing and Capital Activity section of Financial Highlights. |
(4) | |
(5) | Dispositions completed during the previous twelve months are deducted from the previous period data and acquisitions completed during the previous twelve months are deducted from the current period data. |
27
Piedmont Office Realty Trust, Inc.
Rental Rate Roll Up / Roll Down Analysis (1)
(in thousands)
Three Months Ended | ||||||
September 30, 2014 | ||||||
Square Feet | % of Total Signed During Period | % of Rentable Square Footage | % Change Cash Rents (2) | % Change Accrual Rents (3) (4) | ||
Leases executed for spaces vacant one year or less | 292 | 47.1% | 1.4% | (1.1)% | 10.5% | |
Leases executed for spaces excluded from analysis (5) | 328 | 52.9% | ||||
Nine Months Ended | ||||||
September 30, 2014 | ||||||
Square Feet | % of Total Signed During Period | % of Rentable Square Footage | % Change Cash Rents (2) | % Change Accrual Rents (3) (4) | ||
Leases executed for spaces vacant one year or less | 1,056 | 58.8% | 4.9% | 3.8% | 8.5% | |
Leases executed for spaces excluded from analysis (5) | 739 | 41.2% | ||||
(1) | The population analyzed consists of consolidated office leases executed during the period with lease terms greater than one year. Retail leases, as well as leases associated with storage spaces, management offices, and unconsolidated joint venture assets, were excluded from this analysis. |
(2) | For the purposes of this analysis, the cash rents last in effect for the previous leases were compared to the initial cash rents of the new leases in order to calculate the percentage change. |
(3) | For the purposes of this analysis, the accrual basis rents for the previous leases were compared to the accrual basis rents of the new leases in order to calculate the percentage change. For newly signed leases which have variations in accrual basis rents, whether because of known future expansions, contractions, lease expense recovery structure changes, or other similar reasons, the weighted average of such accrual basis rents is used for the purposes of this analysis. |
(4) | For leases under which a tenant may use, at its discretion, a portion of its tenant improvement allowance for expenses other than those related to improvements to its space, an assumption is made that the tenant elects to use any such portion of its tenant improvement allowance for improvements to its space prior to the commencement of its lease, unless the Company is notified otherwise by the tenant. This assumption is made based upon the historical tenant improvement allowance usage patterns of the Company's tenants. |
(5) | Represents leases signed at our consolidated office assets that do not qualify for inclusion in the analysis primarily because the spaces for which the new leases were signed had been vacant for greater than one year. |
28
Piedmont Office Realty Trust, Inc.
Lease Expiration Schedule
As of September 30, 2014
(in thousands)
OFFICE PORTFOLIO | GOVERNMENTAL ENTITIES | ||||||||
Annualized Lease Revenue (1) | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Annualized Lease Revenue (1) | Percentage of Annualized Lease Revenue (%) | Percentage of Current Year Total Annualized Lease Revenue Expiring (%) | |||
Vacant | $— | — | 2,693 | 12.5 | $— | — | N/A | ||
2014 (2) | 4,671 | 0.8 | 127 | 0.6 | — | — | — | ||
2015 (3) | 22,275 | 3.8 | 758 | 3.5 | 2,511 | 0.4 | 11.3 | ||
2016 | 30,925 | 5.3 | 1,095 | 5.1 | 1,457 | 0.3 | 4.7 | ||
2017 | 58,587 | 10.1 | 1,383 | 6.5 | 11,241 | 1.9 | 19.2 | ||
2018 | 51,396 | 8.8 | 1,660 | 7.7 | 308 | 0.1 | 0.6 | ||
2019 | 75,324 | 13.0 | 2,571 | 12.0 | 23,926 | 4.1 | 31.8 | ||
2020 | 46,850 | 8.1 | 1,683 | 7.8 | 9,987 | 1.7 | 21.3 | ||
2021 | 38,489 | 6.6 | 1,281 | 6.0 | — | — | — | ||
2022 | 31,363 | 5.4 | 1,048 | 4.9 | — | — | — | ||
2023 | 29,956 | 5.2 | 1,060 | 4.9 | — | — | — | ||
2024 | 46,683 | 8.0 | 1,518 | 7.1 | — | — | — | ||
2025 | 23,615 | 4.1 | 889 | 4.1 | — | — | — | ||
2026 | 16,214 | 2.8 | 645 | 3.0 | — | — | — | ||
2027 | 55,473 | 9.6 | 1,375 | 6.4 | 29,097 | 5.0 | 52.5 | ||
Thereafter | 48,775 | 8.4 | 1,686 | 7.9 | — | — | — | ||
Total / Weighted Average | $580,596 | 100.0 | 21,472 | 100.0 | $78,527 | 13.5 | |||
Average Lease Term Remaining | |
9/30/2014 | 7.3 years |
12/31/2013 | 7.1 years |
(1) | Annualized rental income associated with newly executed leases for currently occupied space is incorporated herein only at the expiration date for the current lease. Annualized rental income associated with such new leases is removed from the expiry year of the current lease and added to the expiry year of the new lease. These adjustments effectively incorporate known roll ups and roll downs into the expiration schedule. |
(2) | Includes leases with an expiration date of September 30, 2014 aggregating 12,000 square feet and Annualized Lease Revenue of $193 thousand. |
(3) | Leases and other revenue-producing agreements on a month-to-month basis, aggregating 12,000 square feet and Annualized Lease Revenue of $0.7 million, are assigned a lease expiration date of a year and a day beyond the period end date. |
29
Piedmont Office Realty Trust, Inc.
Lease Expirations by Quarter
As of September 30, 2014
(in thousands)
Q4 2014 (1) | Q1 2015 | Q2 2015 | Q3 2015 | |||||||||
Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | |||||
Atlanta | — | $3 | 29 | $535 | — | $— | — | $— | ||||
Austin | — | — | — | — | — | — | — | — | ||||
Boston | — | 50 | — | — | — | — | 126 | 2,493 | ||||
Central & South Florida | — | — | 19 | 451 | 7 | 182 | — | — | ||||
Chicago | 15 | 336 | 8 | 224 | 24 | 786 | 142 | 4,174 | ||||
Dallas | 3 | 73 | 34 | 933 | 12 | 283 | 26 | 684 | ||||
Detroit | 2 | 12 | — | — | 39 | — | — | — | ||||
Houston | — | — | — | — | — | — | — | — | ||||
Los Angeles | — | — | — | — | — | — | — | — | ||||
Minneapolis | 18 | 502 | — | — | 5 | 148 | 27 | 987 | ||||
Nashville | — | — | — | — | — | — | — | — | ||||
New York | 53 | 2,657 | 2 | 101 | 23 | 759 | 3 | 360 | ||||
Philadelphia | — | — | — | — | — | — | — | — | ||||
Phoenix | — | — | — | — | — | — | — | — | ||||
Washington, D.C. | 26 | 1,000 | 9 | 378 | 51 | 2,833 | 53 | 2,254 | ||||
Other | 10 | 208 | — | — | — | — | — | — | ||||
Total / Weighted Average (3) | 127 | $4,841 | 101 | $2,622 | 161 | $4,991 | 377 | $10,952 | ||||
(1) | Includes leases with an expiration date of September 30, 2014 aggregating 12,000 square feet and expiring lease revenue of $134 thousand. No such adjustments are made to other periods presented. |
(2) | Expiring lease revenue is calculated as expiring square footage multiplied by the gross rent per square foot of the tenant currently leasing the space. |
(3) | Total expiring lease revenue in any given year will not tie to the expiring Annualized Lease Revenue presented on the Lease Expiration Schedule on the previous page as the Lease Expiration Schedule accounts for the revenue effects of newly signed leases. Reflected herein are expiring revenues based on in-place rental rates. |
30
Piedmont Office Realty Trust, Inc.
Lease Expirations by Year
As of September 30, 2014
(in thousands)
12/31/2014 (1) | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | ||||||||||
Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | |||||
Atlanta | — | $3 | 29 | $593 | 18 | $369 | 45 | $1,085 | 110 | $2,279 | ||||
Austin | — | — | — | — | 195 | 6,500 | — | 1 | — | — | ||||
Boston | — | 50 | 126 | 2,493 | 3 | 193 | 98 | 6,250 | 147 | 6,277 | ||||
Central & South Florida | — | — | 30 | 721 | 71 | 1,843 | 161 | 3,945 | 40 | 982 | ||||
Chicago | 15 | 336 | 198 | 5,672 | 73 | 2,270 | 132 | 9,798 | 625 | 20,342 | ||||
Dallas | 3 | 73 | 91 | 2,358 | 61 | 1,544 | 222 | 5,628 | 387 | 9,525 | ||||
Detroit | 2 | 12 | 61 | 453 | 28 | 636 | 63 | 1,273 | 8 | 190 | ||||
Houston | — | — | — | — | — | — | — | 2 | 150 | 6,278 | ||||
Los Angeles | — | — | 3 | 68 | 93 | 2,938 | 54 | 1,929 | 25 | 678 | ||||
Minneapolis | 18 | 502 | 39 | 1,394 | 33 | 1,109 | 48 | 1,563 | 35 | 1,175 | ||||
Nashville | — | — | — | — | 201 | 2,579 | — | — | — | — | ||||
New York | 53 | 2,657 | 35 | 1,466 | 281 | 9,131 | 61 | 1,950 | 91 | 2,283 | ||||
Philadelphia | — | — | — | — | — | — | — | — | — | — | ||||
Phoenix | — | — | — | — | — | — | — | — | — | — | ||||
Washington, D.C. | 26 | 1,000 | 140 | 6,917 | 38 | 1,813 | 485 | 25,014 | 26 | 1,034 | ||||
Other | 10 | 208 | 6 | 32 | — | — | 14 | 353 | 16 | 369 | ||||
Total / Weighted Average (3) | 127 | $4,841 | 758 | $22,167 | 1,095 | $30,925 | 1,383 | $58,791 | 1,660 | $51,412 | ||||
(1) | Includes leases with an expiration date of September 30, 2014 aggregating 12,000 square feet and expiring lease revenue of $134 thousand. No such adjustments are made to other periods presented. |
(2) | Expiring lease revenue is calculated as expiring square footage multiplied by the gross rent per square foot of the tenant currently leasing the space. |
(3) | Total expiring lease revenue in any given year will not tie to the expiring Annualized Lease Revenue presented on the Lease Expiration Schedule on page 29 as the Lease Expiration Schedule accounts for the revenue effects of newly signed leases. Reflected herein are expiring revenues based on in-place rental rates. |
31
Piedmont Office Realty Trust, Inc.
Capital Expenditures & Commitments
For the quarter ended September 30, 2014
Unaudited (in thousands)
For the Three Months Ended | |||||||||||||||||||
9/30/2014 | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | |||||||||||||||
Non-incremental | |||||||||||||||||||
Building / construction / development | $ | 6,135 | $ | 3,734 | $ | 720 | $ | 11,372 | $ | 1,465 | |||||||||
Tenant improvements | 18,209 | 18,276 | 11,531 | 24,798 | 11,854 | ||||||||||||||
Leasing costs | 6,546 | 4,141 | 1,570 | 6,815 | 8,386 | ||||||||||||||
Total non-incremental | 30,890 | 26,151 | 13,821 | 42,985 | 21,705 | ||||||||||||||
Incremental | |||||||||||||||||||
Building / construction / development | 23,390 | 12,465 | 6,776 | 8,418 | 4,826 | ||||||||||||||
Tenant improvements | 7,802 | 8,394 | 7,627 | 10,181 | 9,780 | ||||||||||||||
Leasing costs | 2,400 | 2,824 | 2,386 | 2,747 | 2,043 | ||||||||||||||
Total incremental | 33,592 | 23,683 | 16,789 | 21,346 | 16,649 | ||||||||||||||
Total capital expenditures | $ | 64,482 | $ | 49,834 | $ | 30,610 | $ | 64,331 | $ | 38,354 | |||||||||
Non-incremental tenant improvement commitments (1) | |||||||
Non-incremental tenant improvement commitments outstanding as of June 30, 2014 | $ | 63,411 | |||||
New non-incremental tenant improvement commitments related to leases executed during period | 16,161 | ||||||
Non-incremental tenant improvement expenditures | (18,209 | ) | |||||
Less: Tenant improvement expenditures fulfilled through accrued liabilities already presented on Piedmont's balance sheet, expired commitments or other adjustments | 2,030 | ||||||
Non-incremental tenant improvement commitments fulfilled, expired or other adjustments | (16,179 | ) | |||||
Total as of September 30, 2014 | $ | 63,393 | |||||
NOTE: | The information presented on this page is for all consolidated assets. |
(1) | Commitments are unexpired contractual non-incremental tenant improvement obligations for leases executed in current and prior periods that have not yet been incurred and have not otherwise been presented on Piedmont's financial statements. The four largest commitments total approximately $38.0 million, or 60% of the total outstanding commitments. |
32
Piedmont Office Realty Trust, Inc.
Contractual Tenant Improvements and Leasing Commissions
For the Three Months Ended September 30, 2014 | For the Nine Months Ended September 30, 2014 | For the Year Ended | ||||||||
2013 | 2012 | 2011 | ||||||||
Renewal Leases | ||||||||||
Number of leases | 14 | 46 | 56 | 45 | 48 | |||||
Square feet | 294,933 | 802,767 | 2,376,177 | 1,150,934 | 2,280,329 | |||||
Tenant improvements per square foot (1) | $51.46 | $22.23 | $14.24 | $19.12 | $33.29 | |||||
Leasing commissions per square foot | $17.75 | $9.43 | $4.66 | $6.64 | $9.97 | |||||
Total per square foot | $69.21 | $31.66 | $18.90 | $25.76 | $43.26 | |||||
Tenant improvements per square foot per year of lease term | $4.97 | $3.32 | $1.88 | $2.90 | $3.93 | |||||
Leasing commissions per square foot per year of lease term | $1.71 | $1.41 | $0.62 | $1.01 | $1.18 | |||||
Total per square foot per year of lease term | $6.68 | (2) | $4.73 | (2) | $2.50 | $3.91 | (3) | $5.11 | (3) | |
New Leases (4) | ||||||||||
Number of leases | 23 | 78 | 87 | 92 | 76 | |||||
Square feet | 324,557 | 979,529 | 1,050,428 | 1,765,510 | 1,588,271 | |||||
Tenant improvements per square foot (1) | $47.08 | $32.48 | $35.74 | $47.64 | $41.21 | |||||
Leasing commissions per square foot | $20.80 | $15.02 | $12.94 | $18.49 | $15.38 | |||||
Total per square foot | $67.88 | $47.50 | $48.68 | $66.13 | $56.59 | |||||
Tenant improvements per square foot per year of lease term | $4.49 | $3.57 | $4.17 | $4.30 | $4.19 | |||||
Leasing commissions per square foot per year of lease term | $1.98 | $1.65 | $1.51 | $1.67 | $1.57 | |||||
Total per square foot per year of lease term | $6.47 | $5.22 | $5.68 | $5.97 | $5.76 | |||||
Total | ||||||||||
Number of leases | 37 | 124 | 143 | 137 | 124 | |||||
Square feet | 619,490 | 1,782,296 | 3,426,605 | 2,916,444 | 3,868,600 | |||||
Tenant improvements per square foot (1) | $49.17 | $27.86 | $20.83 | $36.39 | $36.54 | |||||
Leasing commissions per square foot | $19.35 | $12.50 | $7.20 | $13.81 | $12.19 | |||||
Total per square foot | $68.52 | $40.36 | $28.03 | $50.20 | $48.73 | |||||
Tenant improvements per square foot per year of lease term | $4.72 | $3.47 | $2.64 | $3.91 | $4.05 | |||||
Leasing commissions per square foot per year of lease term | $1.86 | $1.56 | $0.91 | $1.48 | $1.35 | |||||
Total per square foot per year of lease term | $6.58 | (2) | $5.03 | (2) | $3.55 | $5.39 | $5.40 | |||
NOTE: | This information is presented for our consolidated office assets only and excludes activity associated with storage and licensed spaces. |
(1) | For leases under which a tenant may use, at its discretion, a portion of its tenant improvement allowance for expenses other than those related to improvements to its space, an assumption is made that the tenant elects to use any such portion of its tenant improvement allowance for improvements to its space prior to the commencement of its lease, unless the Company is notified otherwise by the tenant. This assumption is made based upon the historical tenant improvement allowance usage patterns of the Company's tenants. |
(2) | During 2014, we completed one large, 15-year lease renewal and expansion with a significant capital commitment: Jones Lang LaSalle at Aon Center in Chicago, IL. If the costs associated with this lease were to be removed from the average committed capital cost calculation, the average committed capital cost per square foot per year of lease term for renewal leases and total leases completed during the three months ended September 30, 2014 would be $3.39 and $5.84, respectively, and the same measure for renewal leases and total leases completed during the nine months ended September 30, 2014 would be $2.39 and $4.52, respectively. |
(3) | During 2011, we completed two large, 15-year lease renewals with significant capital commitments: NASA at Two Independence Square in Washington, D.C. and GE at 500 West Monroe Street in Chicago, IL. If the costs associated with these renewals were to be removed from the average committed capital cost calculation, the average committed capital cost per square foot per year of lease term for renewal leases in 2011 would be $2.80. During 2012, we completed one large, long-term lease renewal with an above-average capital commitment with US Bancorp at US Bancorp Center in Minneapolis, MN. If the costs associated with this renewal were to be removed from the average committed capital cost calculation, the average committed capital cost per square foot per year of lease term for renewal leases in 2012 would be $2.73. |
(4) | Since 2010, Piedmont has selectively employed a value-add strategy for new property acquisitions. Piedmont defines value-add properties as those acquired with low occupancies at attractive bases with earnings growth and value appreciation potential achievable through leasing up such assets to stabilized occupancies. Because the value-add properties have large vacancies, many of which have not previously been leased (first generation spaces), the leasing of those vacancies negatively affects Piedmont’s contractual tenant improvements on a per foot and a per foot per year basis for new leases. |
33
Piedmont Office Realty Trust, Inc.
Geographic Diversification
As of September 30, 2014
($ and square footage in thousands)
Location | Number of Properties | Annualized Lease Revenue | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Leased Square Footage | Percent Leased (%) |
Chicago | 6 | $129,507 | 22.3 | 4,834 | 22.5 | 3,880 | 80.3 |
Washington, D.C. | 12 | 93,096 | 16.0 | 3,035 | 14.1 | 1,986 | 65.4 |
New York | 6 | 84,217 | 14.5 | 2,434 | 11.4 | 2,359 | 96.9 |
Dallas | 10 | 44,369 | 7.6 | 1,906 | 8.9 | 1,859 | 97.5 |
Minneapolis | 4 | 44,173 | 7.6 | 1,617 | 7.5 | 1,437 | 88.9 |
Boston | 8 | 40,664 | 7.0 | 1,476 | 6.9 | 1,476 | 100.0 |
Atlanta | 7 | 30,525 | 5.3 | 1,446 | 6.7 | 1,247 | 86.2 |
Los Angeles | 4 | 29,925 | 5.2 | 1,010 | 4.7 | 988 | 97.8 |
Detroit | 3 | 17,587 | 3.0 | 817 | 3.8 | 738 | 90.3 |
Philadelphia | 1 | 17,266 | 3.0 | 801 | 3.7 | 801 | 100.0 |
Houston | 1 | 10,583 | 1.8 | 313 | 1.5 | 313 | 100.0 |
Central & South Florida | 4 | 10,815 | 1.9 | 473 | 2.2 | 451 | 95.3 |
Nashville | 2 | 10,384 | 1.8 | 513 | 2.4 | 513 | 100.0 |
Phoenix | 3 | 8,238 | 1.4 | 432 | 2.0 | 395 | 91.4 |
Austin | 1 | 6,499 | 1.1 | 195 | 0.9 | 195 | 100.0 |
Other | 2 | 2,748 | 0.5 | 170 | 0.8 | 141 | 82.9 |
Total / Weighted Average | 74 | $580,596 | 100.0 | 21,472 | 100.0 | 18,779 | 87.5 |
34
Piedmont Office Realty Trust, Inc.
Geographic Diversification by Location Type
As of September 30, 2014
(square footage in thousands)
CBD / URBAN INFILL | SUBURBAN | TOTAL | ||||||||||||||
Location | State | Number of Properties | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Number of Properties | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Number of Properties | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | |||
Chicago | IL | 2 | 17.7 | 3,707 | 17.3 | 4 | 4.6 | 1,127 | 5.2 | 6 | 22.3 | 4,834 | 22.5 | |||
Washington, D.C. | DC, VA, MD | 9 | 15.5 | 2,696 | 12.5 | 3 | 0.5 | 339 | 1.6 | 12 | 16.0 | 3,035 | 14.1 | |||
New York | NY, NJ | 1 | 7.6 | 1,028 | 4.8 | 5 | 6.9 | 1,406 | 6.6 | 6 | 14.5 | 2,434 | 11.4 | |||
Dallas | TX | 1 | 1.1 | 262 | 1.2 | 9 | 6.5 | 1,644 | 7.7 | 10 | 7.6 | 1,906 | 8.9 | |||
Minneapolis | MN | 1 | 4.5 | 932 | 4.3 | 3 | 3.1 | 685 | 3.2 | 4 | 7.6 | 1,617 | 7.5 | |||
Boston | MA | 2 | 2.2 | 173 | 0.8 | 6 | 4.8 | 1,303 | 6.1 | 8 | 7.0 | 1,476 | 6.9 | |||
Atlanta | GA | 3 | 4.1 | 960 | 4.5 | 4 | 1.2 | 486 | 2.2 | 7 | 5.3 | 1,446 | 6.7 | |||
Los Angeles | CA | 3 | 4.5 | 876 | 4.1 | 1 | 0.7 | 134 | 0.6 | 4 | 5.2 | 1,010 | 4.7 | |||
Detroit | MI | 1 | 1.9 | 487 | 2.3 | 2 | 1.1 | 330 | 1.5 | 3 | 3.0 | 817 | 3.8 | |||
Philadelphia | PA | 1 | 3.0 | 801 | 3.7 | — | — | — | — | 1 | 3.0 | 801 | 3.7 | |||
Houston | TX | — | — | — | — | 1 | 1.8 | 313 | 1.5 | 1 | 1.8 | 313 | 1.5 | |||
Central & South Florida | FL | — | — | — | — | 4 | 1.9 | 473 | 2.2 | 4 | 1.9 | 473 | 2.2 | |||
Nashville | TN | 1 | 1.3 | 312 | 1.5 | 1 | 0.5 | 201 | 0.9 | 2 | 1.8 | 513 | 2.4 | |||
Phoenix | AZ | — | — | — | — | 3 | 1.4 | 432 | 2.0 | 3 | 1.4 | 432 | 2.0 | |||
Austin | TX | — | — | — | — | 1 | 1.1 | 195 | 0.9 | 1 | 1.1 | 195 | 0.9 | |||
Other | — | — | — | — | 2 | 0.5 | 170 | 0.8 | 2 | 0.5 | 170 | 0.8 | ||||
Total / Weighted Average | 25 | 63.4 | 12,234 | 57.0 | 49 | 36.6 | 9,238 | 43.0 | 74 | 100.0 | 21,472 | 100.0 | ||||
35
Piedmont Office Realty Trust, Inc.
Industry Diversification
As of September 30, 2014
($ and square footage in thousands)
Percentage of | ||||||
Number of | Percentage of Total | Annualized Lease | Annualized Lease | Leased Square | Percentage of Leased | |
Industry | Tenants | Tenants (%) | Revenue | Revenue (%) | Footage | Square Footage (%) |
Governmental Entity | 5 | 1.0 | $78,527 | 13.5 | 1,690 | 9.0 |
Business Services | 88 | 16.8 | 62,271 | 10.7 | 2,359 | 12.6 |
Depository Institutions | 17 | 3.3 | 45,967 | 7.9 | 1,619 | 8.6 |
Engineering, Accounting, Research, Management & Related Services | 40 | 7.6 | 44,885 | 7.7 | 1,225 | 6.5 |
Nondepository Credit Institutions | 16 | 3.1 | 37,377 | 6.5 | 1,279 | 6.8 |
Insurance Agents, Brokers & Services | 17 | 3.2 | 36,624 | 6.3 | 1,283 | 6.8 |
Insurance Carriers | 23 | 4.4 | 31,487 | 5.4 | 1,283 | 6.8 |
Communications | 36 | 6.9 | 22,837 | 3.9 | 732 | 3.9 |
Security & Commodity Brokers, Dealers, Exchanges & Services | 29 | 5.5 | 22,308 | 3.9 | 778 | 4.2 |
Real Estate | 19 | 3.6 | 14,966 | 2.6 | 475 | 2.5 |
Educational Services | 8 | 1.5 | 14,583 | 2.5 | 395 | 2.1 |
Automotive Repair, Services & Parking | 5 | 1.0 | 14,072 | 2.4 | 49 | 0.3 |
Food & Kindred Products | 3 | 0.6 | 12,124 | 2.1 | 408 | 2.2 |
Electronic & Other Electrical Equipment & Components, Except Computer | 10 | 1.9 | 11,978 | 2.1 | 428 | 2.3 |
Fabricated Metal Products, Except Machinery & Transportation Equipment | 5 | 1.0 | 11,667 | 2.0 | 319 | 1.7 |
Other | 202 | 38.6 | 118,923 | 20.5 | 4,457 | 23.7 |
Total | 523 | 100.0 | $580,596 | 100.0 | 18,779 | 100.0 |
36
Piedmont Office Realty Trust, Inc.
Property Investment Activity
As of September 30, 2014
($ and square footage in thousands)
Acquisitions Over Previous Eighteen Months
Property | Location | Acquisition Date | Percent Ownership (%) | Year Built | Purchase Price | Rentable Square Footage | Percent Leased at Acquisition (%) | |
Royal Lane Land | Irving, TX | 8/1/2013 | 100 | N/A | $2,600 | N/A | N/A | |
5301 Maryland Way | (1) | Brentwood, TN | 8/12/2013 | 100 | 1989 | 18,500 | 201 | 100 |
4685 Investment Drive | (1) | Troy, MI | 8/12/2013 | 100 | 2000 | 10,000 | 77 | 100 |
2020 West 89th Street | (1) | Leawood, KS | 8/12/2013 | 100 | 1992 | 4,250 | 68 | 85 |
6565 North MacArthur Boulevard | Irving, TX | 12/5/2013 | 100 | 1998 | 46,600 | 260 | 93 | |
One Lincoln Park | Dallas, TX | 12/20/2013 | 100 | 1999 | 56,654 | 262 | 79 | |
161 Corporate Center | Irving, TX | 12/30/2013 | 100 | 1998 | 16,000 | 105 | 91 | |
5 Wall Street | Burlington, MA | 6/27/2014 | 100 | 2008 | 62,498 | 182 | 100 | |
1155 Perimeter Center West | Atlanta, GA | 8/28/2014 | 100 | 2000 | 80,750 | 377 | 100 | |
$297,852 | 1,532 | 94 | ||||||
Dispositions Over Previous Eighteen Months
Property | Location | Disposition Date | Percent Ownership (%) | Year Built | Sale Price | Rentable Square Footage | Percent Leased at Disposition (%) | |
1200 Enclave Parkway | Houston, TX | 5/1/2013 | 100 | 1999 | $48,750 | 150 | 100 | |
350 Spectrum Loop | Colorado Springs, CO | 11/1/2013 | 100 | 2001 | 30,050 | 156 | 100 | |
8700 South Price Road | Tempe, AZ | 12/30/2013 | 100 | 2000 | 21,500 | 132 | 100 | |
11107 Sunset Hills Road | Reston, VA | 3/19/2014 | 100 | 1985 | 20,000 | 101 | 100 | |
11109 Sunset Hills Road | Reston, VA | 3/19/2014 | 100 | 1984 | 2,600 | 41 | — | |
1441 West Long Lake Road | Troy, MI | 4/30/2014 | 100 | 1999 | 7,850 | 108 | 88 | |
4685 Investment Drive | Troy, MI | 4/30/2014 | 100 | 2000 | 11,500 | 77 | 100 | |
2020 West 89th Street | Leawood, KS | 5/19/2014 | 100 | 1992 | 5,800 | 68 | 90 | |
Two Park Center | (2) | Hoffman Estates, IL | 5/29/2014 | 72 | 1999 | 8,825 | 194 | — |
$156,875 | 1,027 | 79 | ||||||
(1) | Piedmont purchased its joint venture partner's equity interest in the asset. The gross value of the asset agreed upon by the partners for the buyout is presented on this schedule as the purchase price. The additional capital invested across the three assets included in the buyout transaction amounted to $14.7 million. |
(2) | The sale price and rentable square footage presented are gross figures and have not been adjusted for Piedmont's ownership percentage. Total Percent Leased at Disposition for dispositions completed during the previous eighteen months includes this property at Piedmont's pro rata share of ownership. |
37
Piedmont Office Realty Trust, Inc.
Value-Add Activity
As of September 30, 2014
($ and square footage in thousands)
Presented below are properties that were acquired employing a value-add strategy. Once a property acquired under a value-add strategy reaches 80% leased, it is deemed stabilized for the purposes of supplemental reporting and will be removed from the value-add classification.
Value-Add Properties
Property | Location | Acquisition Date | Percent Ownership (%) | Year Built | Purchase Price | Rentable Square Footage | Current Percent Leased (%) | Percent Leased at Acquisition (%) | Real Estate Gross Book Value | Estimated Cost to Stabilize (per VACANT square foot) | |
Suwanee Gateway One | Suwanee, GA | 9/28/2010 | 100 | 2008 | $7,875 | 142 | — | — | $7,953 | $40 - 60 | |
500 West Monroe Street | (1) | Chicago, IL | 3/31/2011 | 100 | 1991 | 227,500 | 966 | 66 | 49 | 239,035 | $60 - 90 |
5301 Maryland Way | (2) | Brentwood, TN | 8/12/2013 | 100 | 1989 | 18,500 | 201 | 100 | 100 | 15,457 | $50 - 75 |
$253,875 | 1,309 | 64 | 51 | $262,445 | |||||||
Properties Removed From Value-Add Classification This Year
Property | Location | Acquisition Date | Percent Ownership (%) | Year Built | Purchase Price | Rentable Square Footage | Current Percent Leased (%) | Percent Leased at Acquisition (%) | Real Estate Gross Book Value | Estimated Cost to Stabilize (per VACANT square foot) | |
The Medici | (3) | Atlanta, GA | 6/7/2011 | 100 | 2008 | $13,210 | 156 | 83 | 12 | $16,481 | $35 - 60 |
400 TownPark | Lake Mary, FL | 11/10/2011 | 100 | 2008 | $23,865 | 176 | 93 | 19 | $23,820 | $35 - 50 | |
Sold Properties That Were Acquired Under Value-Add Strategy
Property | Location | Disposition Date | Acquisition Date | Percent Ownership (%) | Year Built | Rentable Square Footage | Sale Price | Purchase Price | Percent Leased at Disposition (%) | Percent Leased at Acquisition (%) |
1200 Enclave Parkway | Houston, TX | 5/1/2013 | 3/30/2011 | 100 | 1999 | 150 | $48,750 | $18,500 | 100 | 18 |
(1) | The investment in this property was converted from a structured finance investment to an owned real estate asset through a UCC foreclosure of an equity ownership interest on March 31, 2011. The purchase price presented represents the estimated fair value of the real estate assets comprising the property as of the date of the transaction. The percent leased at acquisition reflects the space leased by Marsh USA as vacant, as the tenant had already announced plans to vacate prior to Piedmont's assumption of ownership of the asset. |
(2) | While the property was 100% leased at acquisition, it is anticipated that the single-tenant building will become vacant at the end of the current lease term and the building will have to be re-leased on a multi-tenant basis. For this reason, the building was acquired as a value-add property. Piedmont purchased its joint venture partner's equity interest in the asset. The gross value of the asset agreed upon by the partners for the buyout is presented on this schedule as the purchase price. |
(3) | The percent leased at acquisition reflects the space leased by BV Card Assets as vacant, as the tenant had already announced plans to vacate prior to Piedmont's acquisition of the property. |
38
Piedmont Office Realty Trust, Inc.
Other Investments
As of September 30, 2014
($ and square footage in thousands)
Unconsolidated Joint Venture Properties
Property | Location | Percent Ownership (%) | Year Built | Piedmont Share of Real Estate Net Book Value | Real Estate Net Book Value | Rentable Square Footage | Percent Leased (%) |
8560 Upland Drive | Parker, CO | 72 | 2001 | $7,226 | $10,052 | 148.6 | 100 |
$7,226 | $10,052 | 148.6 | 100 | ||||
Land Parcels
Property | Location | Adjacent Piedmont Property | Acres | Approximate Current Value |
Gavitello | Atlanta, GA | The Medici | 2.0 | $2,500 |
Glenridge Highlands III | Atlanta, GA | Glenridge Highlands Two | 3.0 | 1,725 |
State Highway 161 | Irving, TX | Las Colinas Corporate Center II | 4.5 | 1,200 |
Royal Lane | Irving, TX | 6011, 6021 and 6031 Connection Drive | 10.6 | 2,600 |
20.1 | $8,025 | |||
Development and Redevelopment
Property | Location | Adjacent Piedmont Property | Construction Type | Targeted Completion Date | Anticipated Stabilization Date | Percent Leased (%) | Square Feet | Current Basis (Accrual) | Capital Expended (Cash) | Estimated Additional Capital Required (Cash) |
Enclave Place | Houston, TX | 1430 Enclave Parkway | Development | Q3 2015 | Q4 2016 | N/A | 300.9 | $22,471 | $16,890 | $68 to $73 million |
3100 Clarendon Boulevard (1) | Arlington, VA | Not Applicable | Redevelopment | Q2 2015 (2) | Q4 2016 | 10 | 252.0 | 60,471 | 5,338 | $49 to $51 million |
552.9 | $82,942 | $22,228 | $117 to $124 million | |||||||
(1) | The Current Basis presented is that of the office portion of the property only. The retail portion of the property remains in service and retail tenants will remain in occupancy during the redevelopment. |
(2) | The redevelopment of the office tower is anticipated to be completed during the first several months of 2015; the retail portion of the redevelopment is anticipated to be completed during the first half of 2015. |
39
Piedmont Office Realty Trust, Inc.
Supplemental Definitions
Included in this section are management's statements regarding certain non-GAAP financial measures provided in this supplemental report and reasons why management believes that these measures provide useful information to investors about the Company's financial condition and results of operations. Reconciliations of these non-GAAP measures are included beginning on page 42. |
Adjusted Funds From Operations ("AFFO"): AFFO is calculated by deducting from Core FFO non-incremental capital expenditures and acquisition-related costs and adding back non-cash items including non-real estate depreciation, straight lined rents and fair value lease revenue, non-cash components of interest expense and compensation expense, and by making similar adjustments for unconsolidated partnerships and joint ventures. Although AFFO may not be comparable to that of other REITs, we believe it provides a meaningful indicator of our ability to fund cash needs and to make cash distributions to equity owners. AFFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income, as an alternative to net cash flows from operating activities or as a measure of our liquidity. |
Annualized Lease Revenue ("ALR"): ALR is calculated by multiplying (i) rental payments (defined as base rent plus operating expense reimbursements, if payable by the tenant on a monthly basis under the terms of a lease that has been executed, but excluding a) rental abatements and b) rental payments related to executed but not commenced leases for space that was covered by an existing lease), by (ii) 12. In instances in which contractual rents or operating expense reimbursements are collected on an annual, semi-annual, or quarterly basis, such amounts are multiplied by a factor of 1, 2, or 4, respectively, to calculate the annualized figure. For leases that have been executed but not commenced relating to un-leased space, ALR is calculated by multiplying (i) the monthly base rental payment (excluding abatements) plus any operating expense reimbursements for the initial month of the lease term, by (ii) 12. Unless stated otherwise, this measure excludes our unconsolidated joint venture interests. |
Core EBITDA: Core EBITDA is defined as net income before interest, taxes, depreciation and amortization and incrementally removing any impairment losses, gains or losses from sales of property, or other significant non-recurring items. We do not include impairment losses in this measure because we feel these types of losses create volatility in our earnings and make it difficult to determine the earnings generated by our ongoing business. We believe Core EBITDA is a reasonable measure of our liquidity. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative measurement of cash flows from operating activities or other GAAP basis liquidity measures. Other REITs may calculate Core EBITDA differently and our calculation should not be compared to that of other REITs. |
Core Funds From Operations ("Core FFO"): We calculate Core FFO by starting with FFO, as defined by NAREIT, and adjusting for certain non-recurring items such as gains or losses on the early extinguishment of debt, acquisition-related costs and other significant non-recurring items. Such items create significant earnings volatility. We believe Core FFO provides a meaningful measure of our operating performance and more predictability regarding future earnings potential. Core FFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income; therefore, it should not be compared to other REITs' equivalent to Core FFO. |
EBITDA: EBITDA is defined as net income before interest, taxes, depreciation and amortization. We believe EBITDA is an appropriate measure of our ability to incur and service debt. EBITDA should not be considered as an alternative to cash flows from operating activities, as a measure of our liquidity or as an alternative to net income as an indicator of our operating activities. Other REITs may calculate EBITDA differently and our calculation should not be compared to that of other REITs. |
Funds From Operations ("FFO"): FFO is calculated 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, impairment losses, and gains or losses on consolidation, 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 may provide valuable comparisons of operating performance between periods and with other REITs. FFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income. We believe that FFO is a beneficial indicator of the performance of an equity REIT. However, other REITs may not define FFO in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than we do; therefore, our computation of FFO may not be comparable to that of such other REITs. |
Gross Assets: Gross assets is defined as total assets with the add back of accumulated depreciation and accumulated amortization related to real estate assets. |
Gross Real Estate Assets: Gross real estate assets is defined as total real estate assets with the add back of accumulated depreciation and accumulated amortization related to real estate assets. |
Incremental Capital Expenditures: Incremental Capital Expenditures are defined as capital expenditures of a non-recurring nature that incrementally enhance the underlying assets' income generating capacity. Tenant improvements, leasing commissions, building capital and deferred lease incentives ("Leasing Costs") 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 included in this measure. |
NOI from Unconsolidated Joint Ventures: NOI from Unconsolidated Joint Ventures is defined as Property NOI attributable to our interests in properties owned through unconsolidated partnerships. We present this measure on an accrual basis and a cash basis, which eliminates the effects of straight lined rents and fair value lease revenue. NOI from Unconsolidated Joint Ventures is a non-GAAP measure and therefore may not be comparable to similarly defined data provided by other REITs. |
Non-Incremental Capital Expenditures: Non-Incremental Capital Expenditures are defined as capital expenditures of a recurring nature related to tenant improvements and leasing commissions that do not incrementally enhance the underlying assets' income generating capacity. We exclude first generation tenant improvements and leasing commissions from this measure, in addition to other capital expenditures that qualify as Incremental Capital Expenditures, as defined above. |
Property Net Operating Income ("Property NOI"): Property NOI is defined as real estate operating income with the add-back of corporate general and administrative expense, depreciation and amortization, and impairment losses and the deduction of net operating income associated with property management performed by Piedmont for other organizations. We 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 eliminated. The Company uses this measure to assess its operating results and believes it is important in assessing operating performance. Property NOI is a non-GAAP measure which does not have any standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. |
Same Store Net Operating Income ("Same Store NOI"): Same Store NOI is calculated as the Property NOI attributable to the properties owned or placed in service during the entire span of the current and prior year reporting periods. Same Store NOI excludes amounts attributable to unconsolidated joint venture assets. We 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 eliminated. We believe Same Store NOI is an important measure of comparison of our properties' operating performance from one period to another. Other REITs may calculate Same Store NOI differently and our calculation should not be compared to that of other REITs. |
Same Store Properties: Same Store Properties is defined as properties owned or placed in service during the entire span of the current and prior year reporting periods. Same Store Properties excludes unconsolidated joint venture assets. We believe Same Store Properties is an important measure of comparison of our stabilized portfolio performance. |
40
Piedmont Office Realty Trust, Inc.
Research Coverage
Equity Research Coverage
Paul E. Adornato, CFA | Jed Reagan | Anthony Paolone, CFA | Vance H. Edelson |
BMO Capital Markets | Green Street Advisors | JP Morgan | Morgan Stanley |
3 Times Square, 26th Floor | 660 Newport Center Drive, Suite 800 | 383 Madison Avenue | 1585 Broadway, 38th Floor |
New York, NY 10036 | Newport Beach, CA 92660 | 34th Floor | New York, NY 10036 |
Phone: (212) 885-4170 | Phone: (949) 640-8780 | New York, NY 10179 | Phone: (212) 761-0078 |
Phone: (212) 622-6682 | |||
Steve Manaker, CFA | Michael J. Salinsky | David Rodgers, CFA | John W. Guinee, III |
Oppenheimer & Co. | RBC Capital Markets | Robert W. Baird & Co. | Erin Aslakson |
85 Broad Street | Arbor Court | 200 Public Square | Stifel, Nicolaus & Company |
New York, NY 10004 | 30575 Bainbridge Road, Suite 250 | Suite 1650 | One South Street |
Phone: (212) 667-5950 | Solon, OH 44139 | Cleveland, OH 44139 | 16th Floor |
Phone: (440) 715-2648 | Phone: (216) 737-7341 | Baltimore, MD 21202 | |
Phone: (443) 224-1307 | |||
Michael Lewis, CFA | Brendan Maiorana | ||
SunTrust Robinson Humphrey | Wells Fargo | ||
711 Fifth Avenue, 14th Floor | 7 St. Paul Street | ||
New York, NY 10022 | MAC R1230-011 | ||
Phone: (212) 319-5659 | Baltimore, MD 21202 | ||
Phone: (443) 263-6516 | |||
Fixed Income Research Coverage
Mark S. Streeter, CFA | ||
JP Morgan | ||
383 Madison Avenue | ||
3rd Floor | ||
New York, NY 10179 | ||
Phone: (212) 834-5086 | ||
41
Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations, and Adjusted Funds From Operations Reconciliations
Unaudited (in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2014 | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 12,279 | $ | 9,393 | $ | 29,623 | $ | 19,096 | $ | 30,834 | $ | 69,105 | |||||||||||||
Depreciation | 35,286 | 34,119 | 33,727 | 32,233 | 31,050 | 103,132 | 91,905 | ||||||||||||||||||||
Amortization | 14,248 | 13,608 | 14,804 | 11,511 | 13,939 | 42,660 | 34,509 | ||||||||||||||||||||
Impairment loss | — | — | — | 5,644 | — | — | 6,402 | ||||||||||||||||||||
Loss / (gain) on sale of properties | — | (2,275 | ) | 106 | (15,034 | ) | — | (2,169 | ) | (16,258 | ) | ||||||||||||||||
Loss / (gain) on consolidation | — | — | — | — | 898 | — | 898 | ||||||||||||||||||||
Funds from operations | 58,696 | 57,731 | 58,030 | 63,977 | 64,983 | 174,457 | 186,561 | ||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||
Acquisition costs | 110 | 363 | 66 | 389 | 60 | 539 | 1,374 | ||||||||||||||||||||
Net (recoveries) / loss from casualty events and litigation settlements | 8 | (1,480 | ) | (3,042 | ) | (4,500 | ) | (3,919 | ) | (4,514 | ) | (7,328 | ) | ||||||||||||||
Core funds from operations | 58,814 | 56,614 | 55,054 | 59,866 | 61,124 | 170,482 | 180,607 | ||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||
Deferred financing cost amortization | 598 | 615 | 863 | 676 | 674 | 2,076 | 1,911 | ||||||||||||||||||||
Amortization of note payable step-up | (120 | ) | (6 | ) | — | — | — | (126 | ) | — | |||||||||||||||||
Amortization of discount on senior notes | 47 | 47 | 34 | 30 | 30 | 128 | 47 | ||||||||||||||||||||
Depreciation of non real estate assets | 141 | 115 | 114 | 106 | 97 | 370 | 300 | ||||||||||||||||||||
Straight-line effects of lease revenue | (6,780 | ) | (7,758 | ) | (9,412 | ) | (3,442 | ) | (5,076 | ) | (23,950 | ) | (14,655 | ) | |||||||||||||
Stock-based and other non-cash compensation expense | 1,139 | 1,271 | 636 | 101 | 719 | 3,046 | 1,489 | ||||||||||||||||||||
Amortization of lease-related intangibles | (1,010 | ) | (1,279 | ) | (1,364 | ) | (1,211 | ) | (1,757 | ) | (3,653 | ) | (4,067 | ) | |||||||||||||
Acquisition costs | (110 | ) | (363 | ) | (66 | ) | (389 | ) | (60 | ) | (539 | ) | (1,374 | ) | |||||||||||||
Non-incremental capital expenditures | (30,890 | ) | (26,151 | ) | (13,821 | ) | (42,985 | ) | (21,705 | ) | (70,862 | ) | (59,992 | ) | |||||||||||||
Adjusted funds from operations | $ | 21,829 | $ | 23,105 | $ | 32,038 | $ | 12,752 | $ | 34,046 | $ | 76,972 | $ | 104,266 | |||||||||||||
42
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2014 | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||||||||||
Net income attributable to Piedmont | $ | 9,162 | $ | 12,279 | $ | 9,393 | $ | 29,623 | $ | 19,096 | $ | 30,834 | $ | 69,105 | |||||||||||||
Net income attributable to noncontrolling interest | 4 | 4 | 4 | 3 | 4 | 12 | 12 | ||||||||||||||||||||
Interest expense | 18,654 | 18,012 | 18,926 | 19,651 | 19,331 | 55,592 | 53,932 | ||||||||||||||||||||
Depreciation | 35,427 | 34,234 | 33,841 | 32,340 | 31,147 | 103,502 | 92,204 | ||||||||||||||||||||
Amortization | 14,248 | 13,608 | 14,804 | 11,511 | 13,939 | 42,660 | 34,509 | ||||||||||||||||||||
Acquisition costs | 110 | 363 | 66 | 389 | 60 | 539 | 1,374 | ||||||||||||||||||||
Impairment loss | — | — | — | 5,644 | — | — | 6,402 | ||||||||||||||||||||
Net (recoveries) / loss from casualty events and litigation settlements | 8 | (1,480 | ) | (3,042 | ) | (4,500 | ) | (3,919 | ) | (4,514 | ) | (7,328 | ) | ||||||||||||||
Loss / (gain) on sale of properties | — | (2,275 | ) | 106 | (15,034 | ) | — | (2,169 | ) | (16,258 | ) | ||||||||||||||||
Loss / (gain) on consolidation | — | — | — | — | 898 | — | 898 | ||||||||||||||||||||
Core EBITDA | 77,613 | 74,745 | 74,098 | 79,627 | 80,556 | 226,456 | 234,850 | ||||||||||||||||||||
General & administrative expenses | 5,808 | 7,159 | 4,582 | 5,076 | 5,921 | 17,550 | 16,940 | ||||||||||||||||||||
Management fee revenue | (299 | ) | (281 | ) | (259 | ) | 17 | (636 | ) | (839 | ) | (1,248 | ) | ||||||||||||||
Other (income) / expense | 21 | 3 | 30 | 3 | 550 | 54 | 560 | ||||||||||||||||||||
Straight-line effects of lease revenue | (6,780 | ) | (7,758 | ) | (9,412 | ) | (3,442 | ) | (5,076 | ) | (23,950 | ) | (14,655 | ) | |||||||||||||
Amortization of lease-related intangibles | (1,010 | ) | (1,279 | ) | (1,364 | ) | (1,211 | ) | (1,757 | ) | (3,653 | ) | (4,067 | ) | |||||||||||||
Property net operating income (cash basis) | 75,353 | 72,589 | 67,675 | 80,070 | 79,558 | 215,618 | 232,380 | ||||||||||||||||||||
Deduct net operating (income) / loss from: | |||||||||||||||||||||||||||
Acquisitions | (6,887 | ) | (5,808 | ) | (5,377 | ) | (4,038 | ) | (6,056 | ) | (18,072 | ) | (10,621 | ) | |||||||||||||
Dispositions | (6 | ) | (590 | ) | (927 | ) | (1,214 | ) | (1,184 | ) | (1,523 | ) | (3,874 | ) | |||||||||||||
Other investments | (213 | ) | 90 | 383 | (2,251 | ) | (2,328 | ) | 258 | (7,539 | ) | ||||||||||||||||
Same store net operating income (cash basis) | $ | 68,247 | $ | 66,281 | $ | 61,754 | $ | 72,567 | $ | 69,990 | $ | 196,281 | $ | 210,346 | |||||||||||||
43
Piedmont Office Realty Trust, Inc.
Unconsolidated Joint Venture Net Operating Income Reconciliations
Pro rata and unaudited (in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2014 | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||||||||||
Equity in income of unconsolidated joint ventures | $ | 89 | $ | (333 | ) | $ | (266 | ) | $ | (4,280 | ) | $ | 46 | $ | (510 | ) | $ | 604 | |||||||||
Interest expense | — | — | — | — | — | — | — | ||||||||||||||||||||
Depreciation | 61 | 90 | 114 | 150 | 220 | 264 | 829 | ||||||||||||||||||||
Amortization | 13 | 8 | 8 | 34 | 40 | 30 | 125 | ||||||||||||||||||||
Impairment loss | — | — | — | 4,402 | — | — | — | ||||||||||||||||||||
Loss / (gain) on sale of properties | — | 169 | — | — | — | 169 | — | ||||||||||||||||||||
Core EBITDA | 163 | (66 | ) | (144 | ) | 306 | 306 | (47 | ) | 1,558 | |||||||||||||||||
General and administrative expenses | 2 | 12 | 24 | (128 | ) | 79 | 38 | 260 | |||||||||||||||||||
Other (income) / expense | — | — | — | — | — | — | — | ||||||||||||||||||||
Property net operating income (accrual basis) | 165 | (54 | ) | (120 | ) | 178 | 385 | (9 | ) | 1,818 | |||||||||||||||||
Straight-line effects of lease revenue | (7 | ) | (6 | ) | (6 | ) | (3 | ) | (9 | ) | (20 | ) | (101 | ) | |||||||||||||
Amortization of lease-related intangibles | — | — | — | — | — | — | — | ||||||||||||||||||||
Property net operating income (cash basis) | $ | 158 | $ | (60 | ) | $ | (126 | ) | $ | 175 | $ | 376 | $ | (29 | ) | $ | 1,717 | ||||||||||
44
Piedmont Office Realty Trust, Inc.
Discontinued Operations
Unaudited (in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2014 | 6/30/2014 | 3/31/2014 | 12/31/2013 | 9/30/2013 | 9/30/2014 | 9/30/2013 | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||
Rental income | $ | — | $ | 191 | $ | 1,174 | $ | 1,888 | $ | 2,155 | $ | 1,365 | $ | 7,372 | |||||||||||||
Tenant reimbursements | 12 | 2 | 112 | 146 | 181 | 126 | 923 | ||||||||||||||||||||
Property management fee revenue | — | 1 | — | — | — | 1 | — | ||||||||||||||||||||
Other rental income | — | — | — | — | — | — | — | ||||||||||||||||||||
12 | 194 | 1,286 | 2,034 | 2,336 | 1,492 | 8,295 | |||||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||
Property operating costs | 3 | (323 | ) | 505 | 748 | 945 | 185 | 3,352 | |||||||||||||||||||
Depreciation | — | — | 83 | 498 | 632 | 83 | 2,087 | ||||||||||||||||||||
Amortization | — | — | 223 | 281 | 215 | 223 | 489 | ||||||||||||||||||||
General and administrative | (7 | ) | 3 | 3 | 1 | (8 | ) | (1 | ) | 3 | |||||||||||||||||
(4 | ) | (320 | ) | 814 | 1,528 | 1,784 | 490 | 5,931 | |||||||||||||||||||
Other income / (expense): | |||||||||||||||||||||||||||
Interest expense | — | — | — | — | — | — | — | ||||||||||||||||||||
Other income / (expense) | — | — | (6 | ) | — | (15 | ) | (6 | ) | 10 | |||||||||||||||||
Net recoveries / (loss) from casualty events and litigation settlements | — | — | — | — | — | — | 17 | ||||||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | — | — | ||||||||||||||||||||
— | — | (6 | ) | — | (15 | ) | (6 | ) | 27 | ||||||||||||||||||
Operating income, excluding impairment loss and gain / (loss) on sale | 16 | 514 | 466 | 506 | 537 | 996 | 2,391 | ||||||||||||||||||||
Impairment loss | — | — | — | (1,242 | ) | — | — | (6,402 | ) | ||||||||||||||||||
Gain / (loss) on sale of properties | — | 1,304 | (106 | ) | 15,034 | — | 1,198 | 16,258 | |||||||||||||||||||
Income from discontinued operations | $ | 16 | $ | 1,818 | $ | 360 | $ | 14,298 | $ | 537 | $ | 2,194 | $ | 12,247 | |||||||||||||
45
Piedmont Office Realty Trust, Inc.
Property Detail
As of September 30, 2014
(in thousands)
Property | City | State | Percent Ownership | Year Built | Rentable Square Footage Owned | Leased Percentage | Commenced Leased Percentage | Economic Leased Percentage (1) | |||
Atlanta | |||||||||||
11695 Johns Creek Parkway | Johns Creek | GA | 100.0% | 2001 | 101 | 87.1 | % | 87.1 | % | 87.1 | % |
3750 Brookside Parkway | Alpharetta | GA | 100.0% | 2001 | 105 | 91.4 | % | 85.7 | % | 85.7 | % |
Glenridge Highlands Two | Atlanta | GA | 100.0% | 2000 | 427 | 97.9 | % | 86.2 | % | 84.8 | % |
Suwanee Gateway One | Suwanee | GA | 100.0% | 2008 | 142 | — | % | — | % | — | % |
The Dupree | Atlanta | GA | 100.0% | 1997 | 138 | 100.0 | % | 100.0 | % | 89.1 | % |
The Medici | Atlanta | GA | 100.0% | 2008 | 156 | 83.3 | % | 38.5 | % | 32.1 | % |
1155 Perimeter Center West | Atlanta | GA | 100.0% | 2000 | 377 | 100.0 | % | 100.0 | % | 96.3 | % |
Metropolitan Area Subtotal / Weighted Average | 1,446 | 86.2 | % | 77.5 | % | 74.4 | % | ||||
Austin | |||||||||||
Braker Pointe III | Austin | TX | 100.0% | 2001 | 195 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 195 | 100.0 | % | 100.0 | % | 100.0 | % | ||||
Boston | |||||||||||
1200 Crown Colony Drive | Quincy | MA | 100.0% | 1990 | 235 | 100.0 | % | 100.0 | % | 100.0 | % |
90 Central Street | Boxborough | MA | 100.0% | 2001 | 175 | 100.0 | % | 94.9 | % | 94.9 | % |
1414 Massachusetts Avenue | Cambridge | MA | 100.0% | 1873 | 78 | 100.0 | % | 100.0 | % | 100.0 | % |
One Brattle Square | Cambridge | MA | 100.0% | 1991 | 95 | 100.0 | % | 100.0 | % | 100.0 | % |
225 Presidential Way | Woburn | MA | 100.0% | 2001 | 202 | 100.0 | % | 100.0 | % | 100.0 | % |
235 Presidential Way | Woburn | MA | 100.0% | 2000 | 238 | 100.0 | % | 100.0 | % | 100.0 | % |
5 & 15 Wayside Road | Burlington | MA | 100.0% | 1999 / 2001 | 271 | 100.0 | % | 100.0 | % | 100.0 | % |
5 Wall Street | Burlington | MA | 100.0% | 2008 | 182 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 1,476 | 100.0 | % | 99.4 | % | 99.4 | % | ||||
Chicago | |||||||||||
Windy Point I | Schaumburg | IL | 100.0% | 1999 | 187 | 100.0 | % | 100.0 | % | 100.0 | % |
Windy Point II | Schaumburg | IL | 100.0% | 2001 | 301 | 100.0 | % | 83.1 | % | — | % |
Aon Center | Chicago | IL | 100.0% | 1972 | 2,741 | 80.4 | % | 79.2 | % | 68.5 | % |
Two Pierce Place | Itasca | IL | 100.0% | 1991 | 486 | 88.5 | % | 88.5 | % | 88.5 | % |
2300 Cabot Drive | Lisle | IL | 100.0% | 1998 | 153 | 77.1 | % | 73.9 | % | 57.5 | % |
500 West Monroe Street | Chicago | IL | 100.0% | 1991 | 966 | 66.3 | % | 61.5 | % | 54.3 | % |
Metropolitan Area Subtotal / Weighted Average | 4,834 | 80.3 | % | 77.5 | % | 64.3 | % | ||||
Cleveland | |||||||||||
Eastpoint I | Mayfield Heights | OH | 100.0% | 2000 | 85 | 70.6 | % | 70.6 | % | 1.2 | % |
Eastpoint II | Mayfield Heights | OH | 100.0% | 2000 | 85 | 95.3 | % | 95.3 | % | 95.3 | % |
Metropolitan Area Subtotal / Weighted Average | 170 | 82.9 | % | 82.9 | % | 48.2 | % | ||||
46
Property | City | State | Percent Ownership | Year Built | Rentable Square Footage Owned | Leased Percentage | Commenced Leased Percentage | Economic Leased Percentage (1) | |||
Dallas | |||||||||||
3900 Dallas Parkway | Plano | TX | 100.0% | 1999 | 120 | 100.0 | % | 100.0 | % | 100.0 | % |
5601 Headquarters Drive | Plano | TX | 100.0% | 2001 | 166 | 100.0 | % | 100.0 | % | 100.0 | % |
6031 Connection Drive | Irving | TX | 100.0% | 1999 | 232 | 100.0 | % | 100.0 | % | 100.0 | % |
6021 Connection Drive | Irving | TX | 100.0% | 2000 | 222 | 100.0 | % | 100.0 | % | 6.8 | % |
6011 Connection Drive | Irving | TX | 100.0% | 1999 | 152 | 100.0 | % | 100.0 | % | 100.0 | % |
Las Colinas Corporate Center I | Irving | TX | 100.0% | 1998 | 159 | 99.4 | % | 99.4 | % | 99.4 | % |
Las Colinas Corporate Center II | Irving | TX | 100.0% | 1998 | 228 | 99.1 | % | 97.8 | % | 89.9 | % |
6565 North MacArthur Boulevard | Irving | TX | 100.0% | 1998 | 260 | 92.7 | % | 92.7 | % | 92.7 | % |
One Lincoln Park | Dallas | TX | 100.0% | 1999 | 262 | 90.8 | % | 85.1 | % | 77.1 | % |
161 Corporate Center | Irving | TX | 100.0% | 1998 | 105 | 99.0 | % | 99.0 | % | 82.9 | % |
Metropolitan Area Subtotal / Weighted Average | 1,906 | 97.5 | % | 96.6 | % | 82.8 | % | ||||
Detroit | |||||||||||
150 West Jefferson | Detroit | MI | 100.0% | 1989 | 487 | 83.8 | % | 73.7 | % | 70.6 | % |
Auburn Hills Corporate Center | Auburn Hills | MI | 100.0% | 2001 | 120 | 100.0 | % | 100.0 | % | 100.0 | % |
1075 West Entrance Drive | Auburn Hills | MI | 100.0% | 2001 | 210 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 817 | 90.3 | % | 84.3 | % | 82.5 | % | ||||
Central & South Florida | |||||||||||
Sarasota Commerce Center II | Sarasota | FL | 100.0% | 1999 | 149 | 93.3 | % | 93.3 | % | 93.3 | % |
5601 Hiatus Road | Tamarac | FL | 100.0% | 2001 | 100 | 100.0 | % | 100.0 | % | 100.0 | % |
2001 NW 64th Street | Ft. Lauderdale | FL | 100.0% | 2001 | 48 | 100.0 | % | 100.0 | % | 100.0 | % |
400 TownPark | Lake Mary | FL | 100.0% | 2008 | 176 | 93.2 | % | 50.6 | % | 50.6 | % |
Metropolitan Area Subtotal / Weighted Average | 473 | 95.3 | % | 79.5 | % | 79.5 | % | ||||
Houston | |||||||||||
1430 Enclave Parkway | Houston | TX | 100.0% | 1994 | 313 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 313 | 100.0 | % | 100.0 | % | 100.0 | % | ||||
Los Angeles | |||||||||||
800 North Brand Boulevard | Glendale | CA | 100.0% | 1990 | 527 | 99.2 | % | 95.4 | % | 80.6 | % |
1055 East Colorado Boulevard | Pasadena | CA | 100.0% | 2001 | 176 | 97.2 | % | 97.2 | % | 43.8 | % |
Fairway Center II | Brea | CA | 100.0% | 2002 | 134 | 100.0 | % | 100.0 | % | 100.0 | % |
1901 Main Street | Irvine | CA | 100.0% | 2001 | 173 | 92.5 | % | 92.5 | % | 92.5 | % |
Metropolitan Area Subtotal / Weighted Average | 1,010 | 97.8 | % | 95.8 | % | 78.8 | % | ||||
Minneapolis | |||||||||||
Crescent Ridge II | Minnetonka | MN | 100.0% | 2000 | 301 | 87.0 | % | 76.4 | % | 76.4 | % |
US Bancorp Center | Minneapolis | MN | 100.0% | 2000 | 932 | 85.7 | % | 85.2 | % | 76.4 | % |
One Meridian Crossings | Richfield | MN | 100.0% | 1997 | 195 | 100.0 | % | 100.0 | % | 100.0 | % |
Two Meridian Crossings | Richfield | MN | 100.0% | 1998 | 189 | 95.8 | % | 93.7 | % | 93.7 | % |
Metropolitan Area Subtotal / Weighted Average | 1,617 | 88.9 | % | 86.3 | % | 81.3 | % | ||||
47
Property | City | State | Percent Ownership | Year Built | Rentable Square Footage Owned | Leased Percentage | Commenced Leased Percentage | Economic Leased Percentage (1) | |||
Nashville | |||||||||||
2120 West End Avenue | Nashville | TN | 100.0% | 2000 | 312 | 100.0 | % | 100.0 | % | 100.0 | % |
5301 Maryland Way | Brentwood | TN | 100.0% | 1989 | 201 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 513 | 100.0 | % | 100.0 | % | 100.0 | % | ||||
New York | |||||||||||
2 Gatehall Drive | Parsippany | NJ | 100.0% | 1985 | 405 | 100.0 | % | 100.0 | % | 100.0 | % |
200 Bridgewater Crossing | Bridgewater | NJ | 100.0% | 2002 | 309 | 93.9 | % | 93.9 | % | 93.9 | % |
Copper Ridge Center | Lyndhurst | NJ | 100.0% | 1989 | 268 | 86.6 | % | 86.6 | % | 86.6 | % |
60 Broad Street | New York | NY | 100.0% | 1962 | 1,028 | 98.1 | % | 95.6 | % | 95.3 | % |
600 Corporate Drive | Lebanon | NJ | 100.0% | 2005 | 125 | 100.0 | % | 100.0 | % | 100.0 | % |
400 Bridgewater Crossing | Bridgewater | NJ | 100.0% | 2002 | 299 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 2,434 | 96.9 | % | 95.9 | % | 95.8 | % | ||||
Philadelphia | |||||||||||
1901 Market Street | Philadelphia | PA | 100.0% | 1987 | 801 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 801 | 100.0 | % | 100.0 | % | 100.0 | % | ||||
Phoenix | |||||||||||
River Corporate Center | Tempe | AZ | 100.0% | 1998 | 133 | 100.0 | % | 100.0 | % | 100.0 | % |
Desert Canyon 300 | Phoenix | AZ | 100.0% | 2001 | 149 | 100.0 | % | 100.0 | % | 100.0 | % |
Chandler Forum | Chandler | AZ | 100.0% | 2003 | 150 | 75.3 | % | 75.3 | % | 52.7 | % |
Metropolitan Area Subtotal / Weighted Average | 432 | 91.4 | % | 91.4 | % | 83.6 | % | ||||
Washington, D.C. | |||||||||||
1201 Eye Street | Washington | DC | 49.5% (2) | 2001 | 269 | 82.2 | % | 82.2 | % | 82.2 | % |
1225 Eye Street | Washington | DC | 49.5% (2) | 1986 | 225 | 73.3 | % | 64.9 | % | 64.9 | % |
400 Virginia Avenue | Washington | DC | 100.0% | 1985 | 224 | 87.1 | % | 87.1 | % | 83.9 | % |
4250 North Fairfax Drive | Arlington | VA | 100.0% | 1998 | 305 | 36.7 | % | 30.8 | % | 30.8 | % |
9211 Corporate Boulevard | Rockville | MD | 100.0% | 1989 | 115 | — | % | — | % | — | % |
9221 Corporate Boulevard | Rockville | MD | 100.0% | 1989 | 115 | 100.0 | % | 100.0 | % | 100.0 | % |
One Independence Square | Washington | DC | 100.0% | 1991 | 334 | 0.3 | % | 0.3 | % | 0.3 | % |
9200 Corporate Boulevard | Rockville | MD | 100.0% | 1982 | 109 | — | % | — | % | — | % |
Two Independence Square | Washington | DC | 100.0% | 1991 | 606 | 100.0 | % | 100.0 | % | 100.0 | % |
Piedmont Pointe I | Bethesda | MD | 100.0% | 2007 | 186 | 68.8 | % | 68.8 | % | 68.8 | % |
Piedmont Pointe II | Bethesda | MD | 100.0% | 2008 | 223 | 58.7 | % | 54.7 | % | 54.7 | % |
Arlington Gateway (3) | Arlington | VA | 100.0% | 2005 | 324 | 96.3 | % | 90.1 | % | 88.0 | % |
Metropolitan Area Subtotal / Weighted Average | 3,035 | 65.4 | % | 63.3 | % | 62.8 | % | ||||
Grand Total | 21,472 | 87.5 | % | 84.8 | % | 78.7 | % | ||||
(1) | Economic leased percentage excludes the square footage associated with executed but not commenced leases for currently vacant spaces and the square footage associated with tenants receiving rental abatements (after proportional adjustments for tenants receiving only partial rental abatements). |
(2) | Although Piedmont owns 49.5% of the asset, it is entitled to 100% of the cash flows under the terms of the property ownership entity's joint venture agreement. |
(3) | The property consists of approximately 334,000 square feet; however, due to the square footages referenced in several leases, the rentable square footage is currently 324,000 square feet. As the existing leases expire, the affected spaces will be re-leased to the correct square footages. |
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Piedmont Office Realty Trust, Inc.
Supplemental Operating & Financial Data
Risks, Uncertainties and Limitations
Certain statements contained in this supplemental package 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”). We intend 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 our 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.
The following are some of the factors that could cause our actual results and expectations to differ materially from those described in our forward-looking statements: market and economic conditions remain challenging in some markets we operate in and the demand for office space, rental rates and property values may continue to lag the general economic recovery causing our business, results of operations, cash flows, financial condition and access to capital to be adversely affected or otherwise impact performance, including the potential recognition of impairment charges; the success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions; acquisitions of properties may have unknown risks and other liabilities at the time of acquisition; lease terminations or lease defaults, particularly by one of our large lead tenants; 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 of the office market in general and of the specific markets in which we operate; economic and regulatory changes, including accounting standards, that impact the real estate market generally; additional risks and costs associated with directly managing properties occupied by government tenants; adverse market and economic conditions may continue to adversely affect us and could cause us to recognize impairment charges or otherwise impact our performance; availability of financing and our lending banks' ability to honor existing line of credit commitments; we have significant indebtedness and may not be able to meet our debt service obligations; costs of complying with governmental laws and regulations; 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; we may be subject to litigation, which could have a material adverse effect on our financial condition; changes in tax laws impacting real estate investment trusts and real estate in general, as well as our ability to continue to qualify as a real estate investment trust under the Internal Revenue Code; and other factors detailed in our most recent Annual Report on Form 10-K and other documents we file with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this supplemental report. We cannot guarantee the accuracy of any such forward-looking statements contained in this supplemental report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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