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): July 29, 2015
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 July 29, 2015, Piedmont Office Realty Trust, Inc. (the “Registrant”) issued a press release announcing its financial results for the second quarter 2015, and published supplemental information for the second quarter 2015 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 July 29, 2015. | |
99.2 | Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the Second Quarter 2015. | |
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: July 29, 2015 | 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 July 29, 2015. | |
99.2 | Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the Second Quarter 2015. | |
EXHIBIT 99.1
Piedmont Office Realty Trust Reports Second Quarter 2015 Results
ATLANTA, July 29, 2015 --Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of primarily Class A office properties located in select sub-markets of major U.S. cities, today announced its results for the quarter ended June 30, 2015.
Highlights for the Three Months Ended June 30, 2015:
• | Achieved Core Funds From Operations ("Core FFO") of $0.39 per diluted share and Adjusted Funds from Operations ("AFFO") of $0.30 per diluted share; |
• | Achieved 11% growth in both cash-basis Property Net Operating Income ("NOI") and Same Store NOI over second quarter of the prior year; |
• | Completed approximately 572,000 square feet of leasing, including approximately 325,000 square feet of new leasing; |
• | Sold three assets totaling approximately $109 million and entered into binding contracts to sell two additional properties totaling approximately $33 million; |
• | Recast its $500 million line of credit and secured a $160 million mortgage; and |
• | Repurchased 2.6 million shares of its common stock at an average price of $17.45 per share. |
Donald A. Miller, CFA, President and Chief Executive Officer said, "Second quarter was a very busy one for us as we continued to deliver solid financial results, executed over a half million square feet of leasing, recycled out of three non-strategic assets, positioned ourselves to recycle out of three more, and successfully refinanced over half a billion of maturing debt. Overall, we are pleased with our accomplishments this quarter and believe we are well-positioned from both a balance sheet and leasing and transaction pipeline perspective as we head into the second half of the year. ”
Results for the Quarter ended June 30, 2015
Piedmont's net income available to common stockholders for the second quarter of 2015 was $30.0 million, or $0.20 per diluted share, as compared with $12.3 million, or $0.08 per diluted share, for the second quarter of 2014. The current quarter's results reflect approximately $0.14 per diluted share in non-recurring items consisting of $0.17 per diluted share gain on sales of three assets during the quarter, offset by a $0.03 per diluted share impairment charge as a result of classifying two assets as held for sale as of June 30, 2015. The second quarter of the prior year included $0.03 per diluted share in non-recurring items consisting of $0.02 per diluted share in gains on sales of assets and $0.01 per diluted share in insurance recoveries. The current quarter's results also reflect increased revenue due to properties acquired since the second quarter of the prior year, offset by increased depreciation and amortization expense.
Revenues for the quarter ended June 30, 2015 were $146.7 million, as compared with $138.6 million for the same period a year ago, primarily attributable to properties acquired since the second quarter of the prior year.
Property operating costs increased to $61.5 million for the quarter ended June 30, 2015, as compared to the prior period of $57.1 million, primarily as a result of properties acquired since the second quarter of 2014 and increases in recoverable property tax expense at certain properties. General and administrative expenses were $8.1 million for the quarter ended June 30, 2015 as compared to $7.1 million for the quarter ended June 30, 2014 primarily due to increased performance-based compensation costs driven by improved operating results and stock performance.
Funds From Operations ("FFO") for the current quarter totaled $59.6 million, or $0.39 per diluted share, compared to $57.7 million, or $0.37 per diluted share, for the quarter ended June 30, 2014, reflecting increased contributions from properties acquired over the last twelve months, the commencement of several significant leases, and the expiration of various operating expense abatement periods since the second quarter of the prior year. Such increases were partially offset by decreased insurance recoveries in the current quarter as compared to the second quarter of the prior year.
Core FFO, which excludes acquisition costs, loss on extinguishment of an interest rate swap during the quarter, and the above-mentioned insurance recoveries, totaled $59.8 million, or $0.39 per diluted share, compared to $56.6 million, or $0.37 per diluted share, for the quarter ended June 30, 2014 with the increase being primarily attributable to increased contributions from properties acquired over the last twelve months, the commencement of several significant leases, and the expiration of various operating expense abatement periods since the second quarter of the prior year.
AFFO for the second quarter of 2015 totaled $45.7 million, or $0.30 per diluted share, compared to $23.1 million, or $0.15 per diluted share, in the second quarter of 2014 primarily due to the same factors mentioned above, as well as decreased non-incremental capital expenditures and effect of straight-line rent adjustments as a result of the completion of certain large tenant build outs and the expiration of rental abatement periods, respectively, since the second quarter of the prior year.
Leasing Update
The Company's total leasing volume for the three months ended June 30, 2015 was approximately 572,000 square feet, including approximately 325,000 square feet, or 57%, related to new leasing. Highlights for the quarter included a 108,000 square foot, 13-year anchor tenant lease for 500 TownPark in Lake Mary, FL, a new 135,000 square foot building to be developed adjacent to the Company's existing 400 TownPark property; an approximately 62,0000 square foot, 13-year new lease with Norris McLaghlin & Marcus, P.A. at 400 Bridgewater Crossing in Bridgewater, NJ; an approximately 19,000, 10-year new lease with the Economic Policy Institute at 1225 Eye Street in Washington, D.C. and an approximately 78,000, 12-year renewal with AT&T at Aon Center in downtown Chicago. Other notable renewals included an approximately 47,000 square foot, 10+ year renewal at Arlington Gateway in Arlington, VA, and a 10-year renewal totaling over 38,000 square feet at 1225 Eye Street in Washington, D.C.
The Company's overall portfolio was approximately 89% leased as of June 30, 2015, up 200 basis points from 87% a year ago, and the weighted average lease term remaining was approximately 7.1 years as of June 30, 2015. Cash basis Property NOI for the quarter was $80.4 million, up from $72.6 million in the second quarter of 2014, primarily reflecting continued improvement in the Company's economic occupancy as certain significant leases commenced and abatement periods continued to expire, as well as
the contribution from acquisitions over the last twelve months. As of June 30, 2015, the Company had approximately 1.1 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. Details outlining Piedmont's significant upcoming lease expirations, the status of current leasing activity, and a schedule of significant near-term abatement periods can be found in the Company's quarterly supplemental information package available at www.piedmontreit.com.
Acquisition and Disposition Activity
As previously announced, during the three months ended June 30, 2015, Piedmont disposed of the following properties:
• | 5601 Headquarters Drive in Plano, TX, an approximately 166,000 square foot office building constructed in 2001 and 100% leased to Intuit, Inc for $33.7 million (or $203 per square foot); |
• | River Corporate Center in Tempe, AZ , an approximately 133,000 square foot office building constructed in 1998 and 100% leased to US Foods, Inc. for $24.6 million ($185 per square foot); and, |
• | Copper Ridge in Lyndhurst, NJ, an approximately 268,000 square foot, Class A, multi-tenant office building constructed in 1989, and 86.6% leased to various tenants, including anchor tenant, Ralph Lauren. Copper Ridge was purchased by a regional real estate operator for approximately $50.6 million ($189 per square foot). |
The sales of the above assets resulted in a $26.6 million gain that is included in the Company's operational results for the three months ended June 30, 2015.
Additionally, during the quarter ended June 30, 2015, the Company entered into binding contracts to dispose of:
• | Eastpoint I &II, sister buildings totaling approximately 171,000 square feet, in Mayfield Heights, OH for $18.5 million ($108 per square foot). The properties were reclassified as held for sale as of June 30, 2015, which resulted in the recognition of a $5.4 million impairment charge during the quarter. The sale of these two assets was consummated on July 28, 2015 and concludes the Company's exit from the Cleveland, OH market; and, |
• | 3750 Brookside Pkwy, an approximate 105,000 square foot, building located in Alpharetta, GA, and 92% leased to four tenants for approximately $14.1 million ($134 per square foot). The transaction is expected to close during the third quarter of 2015. |
Subsequent to quarter end, Piedmont's transactional activity included:
• | the acquisition of 80 Central Street, an approximately 150,000 square foot, Class A, office building located in the Interstate 495/Route 2 sub-market of Boxborough, MA. 80 Central Street is adjacent to and shares certain building systems with the Company's existing 90 Central Street asset. The building, which is currently 93% leased to seven tenants, was acquired for $13.5 million ($90 per square foot); |
• | the execution of a binding contract to sell Chandler Forum, a 150,000 square foot building located in Phoenix, AZ and leased to a single tenant. The transaction is anticipated to close during third quarter of 2015; and, |
• | the execution of a binding contract to sell Aon Center, a 2.7 million square foot trophy tower located at 200 East Randolph Street in downtown Chicago and 86% leased to multiple tenants for a |
gross sales price of $712 million (approximately $260 per square foot). Estimated net sales proceeds from the transaction, which is expected to close during the fourth quarter of 2015, are anticipated to be $640 million after deducting buyer-assumed lease abatements and approximately $48.0 million in contractual tenant capital improvements and leasing commissions. Piedmont intends to use the proceeds to enhance the Company's balance sheet through the pay-down of debt and to position the Company to potentially fund strategic acquisitions and/or selective share repurchases, depending upon the opportunities that arise.
Financing Activity
During the three months ended June 30, 2015, Piedmont replaced its existing $500 Million Unsecured Line of Credit with a new $500 million unsecured line of credit facility priced at LIBOR plus 100 basis points and entered into a $160 million 3.48% note payable secured by a mortgage against its 1901 Market Street building located in Philadelphia, PA (the "$160 Million Mortgage Note"). The $160 Million Mortgage Note replaced a $105 million mortgage that was secured by a separate property and paid off earlier in the second quarter. In connection with the mortgage, the Company utilized $160 million of 7 year, forward-starting interest rate swaps.
Additionally, during the second quarter, Piedmont repurchased 2.6 million shares of its common stock at an average price of $17.45 per share and the Board of Directors of Piedmont renewed the Company's stock repurchase program, authorizing an additional $200 million in repurchases of the Registrant's common stock over the next two years. Piedmont intends to use the sales proceeds from recent and potential future property dispositions for general corporate purposes including, but not limited to, funding the repurchase of shares under the stock repurchase program, paying down debt, or funding future acquisitions, while maintaining or improving the Company's leverage metrics.
Other Events
Third Quarter Dividend Declaration
On July 29, 2015, the board of directors of Piedmont declared dividends for the third quarter 2015 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on August 28, 2015, payable on September 18, 2015.
Guidance for 2015
Including the anticipated disposition of Aon Center, combined with management's expectations of operational results for the remainder of 2015, the Company is narrowing its previous guidance and increasing the midpoint for full-year 2015 as follows:
(in millions, except per share data) | Low | High | |||
Net Income | $152 | - | $160 | ||
Add: Depreciation, Amortization, and Other | 208 | - | 214 | ||
Less: Gain on Sale of Real Estate Assets | (120 | ) | - | (126) | |
Core FFO | $240 | - | $248 | ||
Core FFO per diluted share | $1.58 | - | $1.62 | ||
These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections. Actual results could differ materially from these estimates based on a variety of factors, including those discussed under "Forward Looking Statements" below. Note that individual quarters may fluctuate on both a cash basis and an accrual basis due to lease commencements and expirations, abatement periods, the timing of repairs and maintenance, capital expenditures, capital markets activities, seasonal general and administrative expenses, and one-time revenue or expense events. In addition, the Company's guidance is based on information available to management as of the date of this release.
Non-GAAP Financial Measures
This release contains certain supplemental non-GAAP financial measures, such as FFO, AFFO, Core FFO, Same Store NOI, Property NOI, 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, July 30, 2015 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 August 13, 2015, 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 13612422. A web cast replay will also be available after the conference call in the Investor Relations section of the Company's website. During the audio web cast and conference call, the Company's management team will review second quarter 2015 performance, discuss recent events, and conduct a question-and-answer period.
Supplemental Information
Quarterly supplemental information as of and for the period ended June 30, 2015 can be accessed on the Company`s website under the Investor Relations section at www.piedmontreit.com.
About Piedmont Office Realty Trust
Piedmont Office Realty Trust, Inc. (NYSE: PDM) is an owner, manager, developer, and operator of high-quality, Class A office properties located in select sub-markets of major U.S. cities. Its geographically-diversified, over $6 billion portfolio is comprised of more than 21 million square feet. The Company is a fully-integrated, self-managed real estate investment trust (REIT) with local management offices in each of its major markets and is investment-grade rated by Standard & Poor’s (BBB) and Moody’s (Baa2). For more information, see www.piedmontreit.com.
Forward Looking Statements
Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company intends for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as
applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of the Company`s performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "believe," "continue" or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters. Examples of such statements in this press release include, but are not limited to, whether the Company's balance sheet and leasing and transaction pipeline will remain well positioned for the remainder of 2015; whether the Company's dispositions of assets will close; the Company's anticipated use of the net sales proceeds of Aon Center; and 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, 2015.
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 affecting the office market in general and 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, 2014, 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 | |||||||
Unaudited (in thousands) | |||||||
June 30, 2015 | December 31, 2014 | ||||||
(unaudited) | |||||||
Assets: | |||||||
Real estate assets, at cost: | |||||||
Land | $ | 696,713 | $ | 698,519 | |||
Buildings and improvements | 4,262,377 | 4,272,055 | |||||
Buildings and improvements, accumulated depreciation | (1,108,333 | ) | (1,075,395 | ) | |||
Intangible lease assets | 153,106 | 150,037 | |||||
Intangible lease assets, accumulated amortization | (88,954 | ) | (79,860 | ) | |||
Construction in progress | 64,804 | 63,382 | |||||
Real estate assets held for sale, gross | 38,939 | 69,363 | |||||
Real estate assets held for sale, accumulated depreciation and amortization | (12,828 | ) | (23,009 | ) | |||
Total real estate assets | 4,005,824 | 4,075,092 | |||||
Investments in and amounts due from unconsolidated joint ventures | 7,714 | 7,798 | |||||
Cash and cash equivalents | 8,997 | 12,306 | |||||
Tenant receivables, net of allowance for doubtful accounts | 25,474 | 27,711 | |||||
Straight line rent receivables | 171,241 | 167,657 | |||||
Notes receivable | 45,400 | — | |||||
Restricted cash and escrows | 521 | 5,679 | |||||
Prepaid expenses and other assets | 32,791 | 27,820 | |||||
Goodwill | 180,097 | 180,097 | |||||
Interest rate swaps | 8,290 | 430 | |||||
Deferred financing costs, less accumulated amortization | 7,491 | 7,667 | |||||
Deferred lease costs, less accumulated amortization | 283,756 | 278,461 | |||||
Other assets held for sale, net | 3,706 | 4,783 | |||||
Total assets | $ | 4,781,302 | $ | 4,795,501 | |||
Liabilities: | |||||||
Unsecured debt, net of discount | $ | 1,817,538 | $ | 1,828,544 | |||
Secured debt | 502,757 | 449,045 | |||||
Accounts payable, accrued expenses, and accrued capital expenditures | 128,898 | 133,988 | |||||
Deferred income | 26,633 | 22,215 | |||||
Intangible lease liabilities, less accumulated amortization | 41,214 | 43,277 | |||||
Interest rate swaps | 8,411 | 6,417 | |||||
Total liabilities | 2,525,451 | 2,483,486 | |||||
Stockholders' equity : | |||||||
Common stock | 1,518 | 1,543 | |||||
Additional paid in capital | 3,668,378 | 3,666,182 | |||||
Cumulative distributions in excess of earnings | (1,427,312 | ) | (1,365,620 | ) | |||
Other comprehensive income | 12,242 | 8,301 | |||||
Piedmont stockholders' equity | 2,254,826 | 2,310,406 | |||||
Non-controlling interest | 1,025 | 1,609 | |||||
Total stockholders' equity | 2,255,851 | 2,312,015 | |||||
Total liabilities and stockholders' equity | $ | 4,781,302 | $ | 4,795,501 | |||
Number of shares of common stock outstanding at end of period | 151,833 | 154,324 | |||||
Piedmont Office Realty Trust, Inc. | |||||||||||||||
Consolidated Statements of Income | |||||||||||||||
Unaudited (in thousands, except for per share data) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
6/30/2015 | 6/30/2014 | 6/30/2015 | 6/30/2014 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 117,454 | $ | 113,287 | $ | 235,261 | $ | 224,191 | |||||||
Tenant reimbursements | 28,813 | 24,745 | 60,203 | 49,674 | |||||||||||
Property management fee revenue | 467 | 548 | 1,029 | 1,035 | |||||||||||
Total revenues | 146,734 | 138,580 | 296,493 | 274,900 | |||||||||||
Expenses: | |||||||||||||||
Property operating costs | 61,479 | 57,136 | 125,715 | 115,407 | |||||||||||
Depreciation | 36,039 | 34,144 | 72,271 | 67,788 | |||||||||||
Amortization | 14,955 | 13,599 | 29,625 | 28,172 | |||||||||||
Impairment loss on real estate asset | 5,354 | — | 5,354 | — | |||||||||||
General and administrative | 8,083 | 7,145 | 14,490 | 11,700 | |||||||||||
Total operating expenses | 125,910 | 112,024 | 247,455 | 223,067 | |||||||||||
Real estate operating income | 20,824 | 26,556 | 49,038 | 51,833 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (18,172 | ) | (18,012 | ) | (37,188 | ) | (36,938 | ) | |||||||
Other income (expense) | 596 | (366 | ) | 415 | (456 | ) | |||||||||
Net recoveries from casualty events and litigation settlements | — | 1,480 | — | 4,522 | |||||||||||
Equity in income/(loss) of unconsolidated joint ventures | 124 | (333 | ) | 283 | (599 | ) | |||||||||
Total other expense | (17,452 | ) | (17,231 | ) | (36,490 | ) | (33,471 | ) | |||||||
Income from continuing operations | 3,372 | 9,325 | 12,548 | 18,362 | |||||||||||
Discontinued operations: | |||||||||||||||
Operating income | (3 | ) | 514 | (3 | ) | 980 | |||||||||
Loss on sale of real estate assets | — | 1,304 | — | 1,198 | |||||||||||
Income from discontinued operations | (3 | ) | 1,818 | (3 | ) | 2,178 | |||||||||
Gain on sale of real estate | 26,611 | 1,140 | 36,684 | 1,140 | |||||||||||
Net income | 29,980 | 12,283 | 49,229 | 21,680 | |||||||||||
Less: Net income attributable to noncontrolling interest | (4 | ) | (4 | ) | (8 | ) | (8 | ) | |||||||
Net income attributable to Piedmont | $ | 29,976 | $ | 12,279 | $ | 49,221 | $ | 21,672 | |||||||
Weighted average common shares outstanding - diluted | 153,757 | 154,445 | 154,174 | 154,728 | |||||||||||
Per Share Information -- diluted: | |||||||||||||||
Income from continuing operations and gain on sale of real estate assets | $ | 0.20 | $ | 0.07 | $ | 0.32 | $ | 0.13 | |||||||
Income from discontinued operations | $ | — | $ | 0.01 | $ | — | $ | 0.01 | |||||||
Net income available to common stockholders | $ | 0.20 | $ | 0.08 | $ | 0.32 | $ | 0.14 | |||||||
Piedmont Office Realty Trust, Inc. | |||||||||||||||
Funds From Operations, Core Funds From Operations and Adjusted Funds From Operations | |||||||||||||||
Unaudited (in thousands, except for per share data) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
6/30/2015 | 6/30/2014 | 6/30/2015 | 6/30/2014 | ||||||||||||
GAAP net income applicable to common stock | $ | 29,976 | $ | 12,279 | $ | 49,221 | $ | 21,672 | |||||||
Depreciation (1) (2) | 35,935 | 34,119 | 72,032 | 67,846 | |||||||||||
Amortization (1) | 14,971 | 13,608 | 29,657 | 28,412 | |||||||||||
Impairment loss on real estate asset | 5,354 | — | 5,354 | — | |||||||||||
Gain on sale of real estate assets (1) | (26,611 | ) | (2,275 | ) | (36,684 | ) | (2,169 | ) | |||||||
NAREIT funds from operations applicable to common stock* | 59,625 | 57,731 | 119,580 | 115,761 | |||||||||||
Acquisition costs | 3 | 363 | 147 | 429 | |||||||||||
Loss on extinguishment of swaps | 132 | — | 132 | — | |||||||||||
Net recoveries from casualty events | — | (1,480 | ) | — | (4,522 | ) | |||||||||
Core funds from operations applicable to common stock* | 59,760 | 56,614 | 119,859 | 111,668 | |||||||||||
Deferred financing cost amortization | 680 | 615 | 1,404 | 1,478 | |||||||||||
Amortization of note payable step-up | (121 | ) | (6 | ) | (242 | ) | (6 | ) | |||||||
Amortization of discount on Senior Notes | 49 | 47 | 97 | 81 | |||||||||||
Depreciation of non real estate assets | 165 | 115 | 361 | 229 | |||||||||||
Straight-line effects of lease revenue (1) | (3,745 | ) | (7,758 | ) | (8,255 | ) | (17,170 | ) | |||||||
Stock-based and other non-cash compensation expense | 1,692 | 1,271 | 2,417 | 1,907 | |||||||||||
Net effect of amortization of above or below-market in-place lease intangibles (1) | (1,102 | ) | (1,279 | ) | (2,224 | ) | (2,643 | ) | |||||||
Acquisition costs | (3 | ) | (363 | ) | (147 | ) | (429 | ) | |||||||
Non-incremental capital expenditures (3) | (11,641 | ) | (26,151 | ) | (21,928 | ) | (39,972 | ) | |||||||
Adjusted funds from operations applicable to common stock* | $ | 45,734 | $ | 23,105 | $ | 91,342 | $ | 55,143 | |||||||
Weighted average common shares outstanding - diluted | 153,757 | 154,445 | 154,174 | 154,728 | |||||||||||
Funds from operations per share (diluted) | $ | 0.39 | $ | 0.37 | $ | 0.78 | $ | 0.75 | |||||||
Core funds from operations per share (diluted) | $ | 0.39 | $ | 0.37 | $ | 0.78 | $ | 0.72 | |||||||
Adjusted funds from operations per share (diluted) | $ | 0.30 | $ | 0.15 | $ | 0.59 | $ | 0.36 | |||||||
(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 extinguishment of swaps, 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 | |||||||
6/30/2015 | 6/30/2014 | ||||||
Net income attributable to Piedmont | $ | 29,976 | $ | 12,279 | |||
Net income attributable to noncontrolling interest | 4 | 4 | |||||
Interest expense | 18,172 | 18,012 | |||||
Depreciation (1) | 36,100 | 34,234 | |||||
Amortization (1) | 14,971 | 13,608 | |||||
Acquisition costs | 3 | 363 | |||||
Impairment loss on real estate asset | 5,354 | — | |||||
Net recoveries from casualty events and litigation settlements | — | (1,480 | ) | ||||
Gain on sale of real estate assets (1) | (26,611 | ) | (2,275 | ) | |||
Core EBITDA* | 77,969 | 74,745 | |||||
General & administrative expenses (1) | 8,102 | 7,159 | |||||
Management fee revenue | (232 | ) | (281 | ) | |||
Other expense/(income) (1) | (599 | ) | 3 | ||||
Straight line effects of lease revenue (1) | (3,745 | ) | (7,758 | ) | |||
Amortization of lease-related intangibles (1) | (1,102 | ) | (1,279 | ) | |||
Property Net Operating Income (cash basis)* | 80,393 | 72,589 | |||||
Acquisitions | (2,842 | ) | (55 | ) | |||
Dispositions | (562 | ) | (3,230 | ) | |||
Other investments | (251 | ) | 89 | ||||
Same Store NOI (cash basis)* | $ | 76,738 | $ | 69,393 | |||
Change period over period in Property NOI | 10.8 | % | N/A | ||||
Change period over period in Same Store NOI | 10.6 | % | 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
June 30, 2015
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 | ||||
Notice to Readers: |
Please refer to page 48 for a discussion of important risks related to the business of Piedmont Office Realty Trust, Inc., as well as an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information. Considering these risks, uncertainties, assumptions, and limitations, the forward-looking statements about leasing, financial operations, leasing prospects, etc. contained in this quarterly supplemental information report might not occur. |
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. In addition, many of the schedules herein contain rounding to the nearest thousands or millions and, therefore, the schedules may not total due to this rounding convention. 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 an owner, manager, developer and operator of high-quality, Class A office properties located in select sub-markets of major U.S. cities. Its geographically-diversified, approximately $6 billion portfolio is comprised of 21 million square feet. The Company is a fully-integrated, self-managed real estate investment trust ("REIT") with local management offices in each of its major markets and is investment-grade rated by Standard & Poor’s and Moody’s. Piedmont is headquartered in Atlanta, GA.
This data supplements the information provided in our reports filed with the Securities and Exchange Commission and should be reviewed in conjunction with such filings.
As of | As of | ||||
June 30, 2015 | December 31, 2014 | ||||
Number of consolidated office properties (1) | 71 | 74 | |||
Rentable square footage (in thousands) (1) | 20,966 | 21,471 | |||
Percent leased (2) | 88.8 | % | 87.7 | % | |
Capitalization (in thousands): | |||||
Total debt - principal amount outstanding | $2,325,452 | $2,279,787 | |||
Equity market capitalization (3) | $2,670,746 | $2,907,466 | |||
Total market capitalization (3) | $4,996,198 | $5,187,253 | |||
Total debt / Total market capitalization (3) | 46.5 | % | 43.9 | % | |
Total debt / Total gross assets | 38.8 | % | 38.2 | % | |
Common stock data | |||||
High closing price during quarter | $18.99 | $20.00 | |||
Low closing price during quarter | $16.89 | $17.61 | |||
Closing price of common stock at period end | $17.59 | $18.84 | |||
Weighted average fully diluted shares outstanding during quarter (in thousands) | 153,757 | 154,420 | |||
Shares of common stock issued and outstanding (in thousands) at period end | 151,833 | 154,324 | |||
Annual dividend per share (4) | $0.83 | $0.81 | |||
Rating / outlook | |||||
Standard & Poor's | BBB / Stable | BBB / Stable | |||
Moody's | Baa2 / Stable | Baa2 / Stable | |||
Employees | 134 | 130 | |||
(1) | As of June 30, 2015, our consolidated office portfolio consisted of 71 properties (exclusive of our equity interest in one property owned through an unconsolidated joint venture, one property under development, and one property that was taken out of service for redevelopment on January 1, 2014, 3100 Clarendon Boulevard in Arlington, VA). During the first quarter of 2015, we sold 3900 Dallas Parkway, a 120,000 square foot office building located in Plano, TX, and acquired Park Place on Turtle Creek, a 178,000 square foot office building located in Dallas, TX. During the second quarter of 2015, we sold 5601 Headquarters Drive, a 166,000 square foot office building located in Plano, TX, River Corporate Center, a 133,000 square foot office building located in Tempe, AZ, and Copper Ridge Center, a 268,000 square foot office building located in Lyndhurst, NJ. 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, one development property, and one out of service property. Please refer to page 27 for additional analyses regarding Piedmont's leased percentage. |
(3) | Reflects common stock closing price as of the end of the reporting period. |
(4) | Total of the per share dividends paid over the prior four quarters. |
3
Piedmont Office Realty Trust, Inc.
Investor Information
Corporate |
11695 Johns Creek Parkway, Suite 350 |
Johns Creek, Georgia 30097 |
770.418.8800 |
www.piedmontreit.com |
Executive Management | |||
Donald A. Miller, CFA | Robert E. Bowers | Laura P. Moon | Raymond L. Owens |
Chief Executive Officer, President | Chief Financial Officer and Executive | Chief Accounting Officer and | Executive Vice President, |
and Director | Vice President | 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 | |||
Michael R. Buchanan | Wesley E. Cantrell | William H. Keogler, Jr. | Barbara B. Lang |
Director and Chairman of the | Director and Chairman of | Director | Director |
Board of Directors | Governance Committee | ||
Frank C. McDowell | Donald A. Miller, CFA | Raymond G. Milnes, Jr. | Jeffery L. Swope |
Director, Vice Chairman of the | Chief Executive Officer, President | Director and Chairman of | Director and Chairman of |
Board of Directors and Chairman | and Director | Audit Committee | Capital Committee |
of Compensation Committee | |||
Transfer Agent | Corporate Counsel |
Computershare | King & Spalding |
P.O. Box 30170 | 1180 Peachtree Street, NE |
College Station, TX 77842-3170 | Atlanta, GA 30309 |
Phone: 866.354.3485 | Phone: 404.572.4600 |
4
Piedmont Office Realty Trust, Inc.
Financial Highlights
As of June 30, 2015
Financial Results (1)
Funds from operations (FFO) for the quarter ended June 30, 2015 was $59.6 million, or $0.39 per share (diluted), compared to $57.7 million, or $0.37 per share (diluted), for the same quarter in 2014. FFO for the six months ended June 30, 2015 was $119.6 million, or $0.78 per share (diluted), compared to $115.8 million, or $0.75 per share (diluted), for the same period in 2014. The increase in FFO for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily attributable to operating income contributions from 1) the commencement of several new leases, most notably the 222,000 square foot lease with Epsilon Data Management at 6021 Connection Drive in Irving, TX and the 174,000 square foot lease with Integrys at Aon Center in Chicago, IL, 2) new or renewal leases under which operating expense recovery abatements have expired, and 3) net property acquisitions completed since the beginning of 2014, all of which were partially offset by 4) lower non-recurring casualty and litigation insurance recoveries in 2015 over that received in 2014, as well as 5) increased general and administrative expense in 2015 primarily related to higher performance-based compensation expense.
Core funds from operations (Core FFO) for the quarter ended June 30, 2015 was $59.8 million, or $0.39 per share (diluted), compared to $56.6 million, or $0.37 per share (diluted), for the same quarter in 2014. Core FFO for the six months ended June 30, 2015 was $119.9 million, or $0.78 per share (diluted), compared to $111.7 million, or $0.72 per share (diluted), for the same period in 2014. Core FFO is defined as FFO with incremental adjustments for certain non-recurring items such as net insurance recoveries or losses from casualty events and litigation settlements, acquisition-related costs and other significant non-recurring items. The majority of the change in Core FFO for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was attributable to the items described above for changes in FFO, with the primary exception of non-recurring insurance recoveries, which are not included in Core FFO.
Adjusted funds from operations (AFFO) for the quarter ended June 30, 2015 was $45.7 million, or $0.30 per share (diluted), compared to $23.1 million, or $0.15 per share (diluted), for the same quarter in 2014. AFFO for the six months ended June 30, 2015 was $91.3 million, or $0.59 per share (diluted), compared to $55.1 million, or $0.36 per share (diluted), for the same period in 2014. The increase in AFFO for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily related to the items described above for changes in FFO and Core FFO, as well as lesser amounts of straight line rent adjustments and non-incremental capital expenditures in 2015 when compared to 2014. Piedmont experienced a period of high lease expirations from 2011 to 2013. Given the competitive leasing environment over the last several years, many of the leases that the Company entered into during that period included rental abatements, which typically occur at the beginning of a new lease's term. Most of the new or renewal leases with rental abatements are in the early stages of the new leases' terms, resulting in temporarily higher straight line rent adjustments for Piedmont. As the rental abatement periods continue to expire, the straight line rent adjustments will continue to decrease. The higher non-incremental capital expenditures in 2014 when compared to 2015 were also related to the high volume of lease transactions completed during the period from 2011 to 2013; the decrease in non-incremental capital expenditures in 2015 is reflective of the end of this high lease expiration and re-leasing period.
The changes in per share amounts of FFO, Core FFO and AFFO for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 were also impacted by the reduced weighted average shares outstanding in 2015 as a result of the Company's stock repurchase program. Since the beginning of 2014, Piedmont has repurchased 5.8 million shares at an average price of $16.96 per share.
Operations & Leasing
On a square footage leased basis, our total office portfolio was 88.8% leased as of June 30, 2015, as compared to 88.8% in the prior quarter and 87.0% a year earlier. Please refer to page 27 for additional leased percentage information.
The weighted average remaining lease term of our portfolio was 7.1 years(2) as of June 30, 2015 as compared to 7.1 years at December 31, 2014.
(1) | |
(2) | Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of June 30, 2015) is weighted based on Annualized Lease Revenue, as defined on page 39. |
5
As previously disclosed, Piedmont commenced the redevelopment of its 3100 Clarendon Boulevard property, a 262,000 square foot office and retail property located in Arlington, VA, during the first quarter of 2014. The building's retail tenants have remained in occupancy during the redevelopment. Therefore, from an accounting standpoint, the office component of the building was taken out of service and the retail portion of the building, comprised of approximately 28,000 square feet, remained 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.
During the three months ended June 30, 2015, the Company completed 572,000 square feet of total leasing. Of the total leasing activity during the quarter, we signed renewal leases for approximately 246,000 square feet and new tenant leases for approximately 325,000 square feet. During the six months ended June 30, 2015, we completed 1,389,000 square feet of leasing for our consolidated office properties, consisting of 689,000 square feet of renewal leases and 700,000 square feet of new tenant leases. The average committed tenant improvement cost per square foot per year of lease term for renewal leases signed at our consolidated office properties during the six months ended June 30, 2015 was $2.71 and the same measure for new leases was $4.26 (see page 33).
During the three months ended June 30, 2015, we executed seven leases greater than 20,000 square feet with lengths of term of more than one year at our consolidated office properties. Information on those leases is set forth below.
Tenant | Property | Property Location | Square Feet Leased | Expiration Year | Lease Type |
Continental Casualty Company | 500 TownPark (1) | Lake Mary, FL | 108,000 | 2030 | New |
AT&T Illinois | Aon Center | Chicago, IL | 77,921 | 2029 | Renewal |
Norris, McLaughlin & Marcus, P.A. | 400 Bridgewater Crossing | Bridgewater, NJ | 61,642 | 2029 | New |
Nixon & Vanderhye, P.C. | Arlington Gateway | Arlington, VA | 46,531 | 2027 | Renewal |
Coworkrs | 60 Broad Street | New York, NY | 40,000 | 2033 | New |
International Republican Institute | 1225 Eye Street | Washington, DC | 38,092 | 2027 | Renewal |
Jones Day | 150 West Jefferson | Detroit, MI | 20,789 | 2021 | New |
As of June 30, 2015, there were two tenants whose leases were scheduled to expire during the eighteen month period following the end of the second quarter of 2015 which individually contributed greater than 1% in net Annualized Lease Revenue ("ALR"). Information regarding the leasing status of the spaces associated with these tenants' leases is presented below.
Tenant | Property | Property Location | Net Square Footage Expiring | Net Percentage of Current Quarter Annualized Lease Revenue Expiring (%) | Expiration | Current Leasing Status |
KeyBank | 2 Gatehall Drive | Parsippany, NJ | 200,000 | 1.1% | Q1 2016 | The tenant is not expected to renew its lease. The space is actively being marketed for lease. |
Harcourt | Braker Pointe III | Austin, TX | 195,230 | 1.1% | Q2 2016 | The primary tenant is not expected to renew its lease. Discussions with current subtenants for direct leases are ongoing. The Company is actively marketing the remainder of the space for lease. |
(1) | 500 TownPark is a property that is under development by Piedmont. Please find additional information on 500 TownPark under the Development heading below. |
6
Future Lease Commencements and Abatements
As of June 30, 2015, our overall leased percentage was 88.8% and our economic leased percentage was 82.4%. The difference between overall leased percentage and economic leased percentage is attributable to two factors:
1. | leases which have been contractually entered into for currently vacant spaces but have not yet commenced (amounting to approximately 552,000 square feet of leases as of June 30, 2015, 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 1.1 million square feet of leases as of June 30, 2015, or a 3.7% impact to leased percentage on an economic basis). |
Piedmont focuses much of its marketing efforts on large corporate office space users. The average size of lease in the Company's portfolio is approximately 27,000 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 |
Liberty Mutual Insurance Company | Suwanee Gateway One | Suwanee, GA | 59,579 | Vacant | Q3 2015 | New |
Lockton Companies | 500 West Monroe Street | Chicago, IL | 52,201 | Vacant | Q3 2015 | New |
United States of America (Corporation for National and Community Service) | One Independence Square | Washington, DC | 84,606 | Vacant | Q4 2015 | New |
Norris, McLaughlin & Marcus, P.A. | 400 Bridgewater Crossing | Bridgewater, NJ | 61,642 | Not Vacant | Q4 2016 | New |
Continental Casualty Company | 500 TownPark | Lake Mary, FL | 108,000 | Under Development | Q1 2017 | New |
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 the Company's IPO in 2010, Piedmont has signed approximately 15.9 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 |
GE Capital | 500 West Monroe Street | Chicago, IL | 53,283 | December 2014 through June 2015 (26,317 square feet); March 2015 through March 2016 (26,966 square feet) | Q4 2027 |
Advanced Micro Devices | 90 Central Street | Boxborough, MA | 107,244 | March through November 2015 | Q4 2020 |
Catamaran | Windy Point II | Schaumburg, IL | 50,686 | March 2015 through April 2016 | Q1 2025 |
Integrys | Aon Center | Chicago, IL | 160,423 | May through September 2015 and 2016 | Q2 2029 |
AT&T Illinois | Aon Center | Chicago, IL | 75,113 | July through December 2015; August 2017 through January 2018 | Q3 2029 |
Liberty Mutual Insurance Company | Suwanee Gateway One | Suwanee, GA | 59,579 | July through October 2015 | Q4 2020 |
Lockton Companies | 500 West Monroe Street | Chicago, IL | 52,201 | August 2015 through July 2016 | Q3 2026 |
Americredit | Chandler Forum | Chandler, AZ | 149,863 | September 2015 (78,182 square feet); January 2016 (149,863 square feet); September 2016 and 2017 (99,213 square feet) | Q1 2022 |
Comcast | Windy Point I | Schaumburg, IL | 72,513 | October 2015 through February 2016 | Q1 2023 |
Nestle | 800 North Brand Boulevard | Glendale, CA | 400,892 | December 2015 through March 2016 | Q1 2021 |
Aon | Aon Center | Chicago, IL | 382,076 | January through May 2016 | Q4 2028 |
DDB Needham | Aon Center | Chicago, IL | 187,000 | January 2016 through June 2018 | Q2 2018 |
United States of America (Corporation for National and Community Service) | One Independence Square | Washington, DC | 84,606 | January 2016 through June 2017 | Q4 2030 |
Miller Canfield | 150 West Jefferson | Detroit, MI | 69,974 | January 2016 | Q2 2026 |
Thoughtworks | Aon Center | Chicago, IL | 52,529 | January through March 2016 and 2017 | Q4 2023 |
Mitsubishi Hitachi Power Systems | 400 TownPark | Lake Mary, FL | 75,321 | February and March 2016, 2017 and 2018 | Q1 2026 |
Norris, McLaughlin & Marcus, P.A. | 400 Bridgewater Crossing | Bridgewater, NJ | 61,642 | November 2016 through February 2017; October through December 2017 and 2018; November through December 2019 | Q4 2029 |
7
Financing and Capital Activity
As of June 30, 2015, our ratio of debt to total gross assets was 38.8%. This debt ratio is based on total principal amount outstanding for our various loans at June 30, 2015.
On April 28, 2015, the Board of Directors of Piedmont declared a dividend for the second quarter of 2015 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on May 29, 2015. The dividend was paid on June 19, 2015. The Company's dividend payout percentage for the six months ended June 30, 2015 was 54% of Core FFO and 71% of AFFO.
Dispositions (1)
Among Piedmont's strategic objectives is to harvest capital through the disposition of non-core assets, assets where returns have been maximized, and assets located in non-strategic submarkets and to redeploy the proceeds from those sales into new investment opportunities with higher overall return prospects in selected markets in which we have, or plan to have, a significant presence and that otherwise meet our strategic criteria. During the second quarter of 2015, the Company continued to execute on its strategic plan with the completion of three property sales and the signing of two binding sales contracts. Additional information on this activity is as follows:
• | On April 28, 2015, Piedmont completed the sale of 5601 Headquarters Drive, a 166,000 square foot, single-tenant, 100% leased office building located in Plano, TX, for $33.7 million, or $203 per square foot. Piedmont recorded an $8.0 million gain on the sale of the asset. |
• | On April 29, 2015, Piedmont completed the sale of River Corporate Center, a 133,000 square foot, single-tenant, 100% leased office building located in Tempe, AZ, for $24.6 million, or $185 per square foot. Piedmont recorded a $5.3 million gain on the sale of the asset. |
• | On May 1, 2015, Piedmont completed the sale of Copper Ridge Center, a 268,000 square foot office building located in Lyndhurst, NJ. The sale price was $50.6 million, or $189 per square foot. Piedmont recorded a $13.3 million gain on the sale of the asset. As part of the sale transaction, Piedmont provided seller financing in the amount of $45.4 million at an interest rate of 8.45%. The interest-only loan matures December 31, 2015; however, there are two six-month extension options available to the borrower, the exercise of each of which requires the payment of an extension fee and the giving of proper written notice. |
• | On June 16, 2015, Piedmont entered into a binding contract to sell Eastpoint I and II, sister buildings with a combined approximately 171,000 square feet that are 91% leased, located in Mayfield Heights, OH. The sale price is $18.5 million, or $108 per square foot; the transaction closed on July 28, 2015. The sale of the properties marks Piedmont's exit from the Cleveland, OH, market. |
• | On June 26, 2015, Piedmont entered into a binding contract to sell 3750 Brookside Parkway located in Alpharetta, GA. The property is a two-story, 91% leased, 105,000 square foot office building built in 2001. The sale price is $14.1 million, or $134 per square foot, with an anticipated closing date of August 10, 2015. |
For additional information on dispositions, please refer to page 37.
Acquisitions
On June 2, 2015, Piedmont completed the purchase of 4.7 acres of land adjacent to its Two Pierce Place office building located in Itasca, IL for $3.7 million. The land was purchased to provide additional parking spaces for the Two Pierce Place building. Construction on the parking lot began during the second quarter of 2015 and is anticipated to be completed during the third quarter of 2015. Based on initial parking plans, over 400 additional surface parking stalls can be constructed, increasing the parking ratio from approximately 2.9 per 1,000 rentable square feet to 3.8 per 1,000 rentable square feet.
Finance
On June 18, 2015, Piedmont closed on a new $500 million unsecured line of credit. The new revolver replaced the Company's prior credit facility of equal size at a more favorable interest rate and an extended term. The new revolver has a term of four years, with two six-month extension options, for a total potential term of five years; the final extended maturity date of June 18, 2020, is approximately three years beyond that of the prior facility. The unsecured line of credit has the option to bear interest at varying levels based on (i) the London Interbank Offered Rate (“LIBOR”) or (ii) the Base Rate, defined as the greater of the prime rate, the federal funds rate plus 0.5%, or LIBOR for a one-month period plus one percent. The interest rate for LIBOR-based loans is LIBOR + 100.0 basis points and the annual facility fee is 20.0 basis points. The facility is structured to allow for an increase in size up to a total commitment of $1.0 billion at the election of Piedmont; however, no existing bank has an obligation to participate in any such increase. The loan syndicate consists of a total of 11 major banks. The Company's previous revolver was terminated concurrently with the closing of the new facility.
(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
On April 10, 2015, Piedmont repaid a $105 million mortgage secured by its US Bancorp Center building located in Minneapolis, MN. The loan, which had a May 11, 2015, maturity date, was open to prepayment without yield maintenance requirements.
On June 23, 2015, Piedmont entered into a $160 million mortgage with The Prudential Insurance Company of America, secured by 1901 Market Street located in Philadelphia, PA. The interest-only loan bears interest at 3.48% per year and matures on July 5, 2022. Subject to the terms of the loan agreement, the property may be transferred one time subject to the loan. Additionally, the loan may be prepaid with 30 days written notice, subject to a prepayment penalty in certain circumstances. The proceeds of the mortgage were used to pay down outstanding borrowings on the $500 million unsecured line of credit. Considering the repayment of the $105 million mortgage earlier in the quarter, the amount of secured debt as a percentage of total debt remained low at 22% as of June 30, 2015.
In anticipation of paying off two maturing mortgages and considering the historically-low interest rate environment, Piedmont entered into several ten-year forward-starting swaps during the first quarter of 2015 for a total notional amount of $250 million for a planned 2016 financing. Through the swaps, the Company has effectively locked the treasury interest rate component of the targeted future financing. At current swap spread levels, the treasury component for a possible 2016 debt issuance maturing in 2026 was effectively locked at approximately 2.22%.
Development
During the first quarter of 2014, Piedmont commenced the redevelopment of its 3100 Clarendon Boulevard property, a 262,000 square foot office and retail property located adjacent to the Clarendon Metrorail Station in Arlington, VA. Until the end of 2013, the property had been predominantly leased to the United States of America (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 Metrorail transportation). The project remains on schedule; a majority of the redevelopment relates to the office tower and is complete. The retail portion of the redevelopment is underway and should be completed in 2015. From an accounting standpoint, during the redevelopment, the office component of the building has been out of service and the retail portion of the building, comprised of approximately 28,000 square feet, has remained in service. However, for the purposes of statistical reporting on the Company's assets in this supplemental report, the entire building has been removed from Piedmont's operating portfolio. It is anticipated that the total costs to redevelop the building (exclusive of capitalized implied financing costs) will be approximately $33 million, approximately $25.8 million of which had been recorded in work in progress as of June 30, 2015. 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 eleven-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 $50.0 million had been recorded in work in progress as of June 30, 2015.
During the second quarter of 2015, Piedmont signed a 108,000 square foot, 13-year anchor-tenant lease with Continental Casualty Company at 500 TownPark in Lake Mary, FL. With the signing of this anchor lease for the project, Piedmont will proceed with the development of 500 TownPark on a portion of its 25.2 acres of developable land. Situated at the intersection of Interstate 4 and Highway 417, the site is well located within a mixed-use development consisting of office, retail, residential and a hotel. 500 TownPark will be a four-story building consisting of 135,000 square feet and, with the signing of the Continental Casualty lease, is 80% pre-leased. The development costs are anticipated to be $28 million to $30 million, inclusive of leasing costs. After the completion of 500 TownPark, the Company's remaining land holdings in the urban development could accommodate approximately 400,000 to 500,000 square feet of additional office space.
Stock Repurchase Program
Given that the Company exhausted the prior share repurchase authorization during the quarter, the Board of Directors of Piedmont authorized up to $200 million in additional share repurchases over the next two years on June 23, 2015. Repurchases of stock under the program will be made at the Company's discretion and will depend on market conditions, other investment opportunities and other factors that management deems relevant.
During the second quarter of 2015, the Company repurchased approximately 2.6 million shares of common stock under its share repurchase program at an average price of $17.45 per share. Since the stock repurchase program began in December 2011, the Company has repurchased a total of 21.5 million shares at an average price of $16.99 per share, or approximately $365.9 million in aggregate (before consideration of transaction costs). As of quarter end, Board-approved capacity remaining for additional repurchases totaled approximately $190.8 million under the stock repurchase plan.
9
Subsequent Events
On July 16, 2015, Piedmont entered into a binding contract to sell Aon Center, a 2.7 million square foot office building located in the East Loop of downtown Chicago, IL. Since purchasing the trophy office tower in 2003, Piedmont has implemented best-in-class management operations, helping it to secure Energy Star ratings, LEED accreditation, and the BOMA 360 designation for the property. Located on the north side of Millenium Park, the Chicago landmark affords tenants with unparalleled views of the city and Lake Michigan, as well as immediate access to housing, retail and transportation. The attractiveness of the asset and its amenity base is evidenced in its high-quality tenant roster, including the recently announced addition of Kraft Heinz Foods - with the new 170,000 square foot lease bringing the building's leased percentage to approximately 86%. During its ownership of the building, Piedmont has been able to attract other well-known companies, such as KPMG, Microsoft, United Health Group, Integrys, and Federal Home Loan Bank of Chicago, in addition to securing the renewals of Aon, JLL and Edelman. Since acquiring the property, the Company has successfully positioned it as one of Chicago's most distinguished business addresses, helping it to realize significant value for its shareholders. The sale price is $712 million, or approximately $260 per square foot, with an estimated closing date in the fourth quarter of 2015. Net sales proceeds from the transaction are anticipated to be approximately $640 million after deducting buyer-assumed lease abatements and approximately $48 million in contractual tenant capital improvements and leasing commissions. The sale of the asset, which is the largest individual property in the portfolio, will allow the Company to decrease its exposure to its largest geographic market, enhance its balance sheet through the pay-down of debt, and position it to potentially fund strategic acquisitions and/or selective share repurchases, depending upon the opportunities that arise.
On July 21, 2015, Piedmont entered into a binding contract to purchase 80 Central Street, a three-story, 93% leased, 150,000 square foot office building located in the Boston submarket of Boxborough, MA. The property is located adjacent to the Company's 90 Central Street property, with which it shares certain building systems and amenities; the acquisition of the asset allows for the realization of marketing and operational synergies. The purchase price is $13.5 million, or $90 per square foot, which is significantly below the estimated replacement cost of $275 per square foot. The transaction closed on July 24, 2015.
On July 28, 2015, Piedmont entered into a binding contract to sell Chandler Forum, a 150,000 square foot, single-tenant, 100% leased office building located in Chandler, AZ for $33.9 million, or $226 per square foot. The sale will allow Piedmont to divest another asset in the Phoenix market, leaving the Company with only one asset in the market after the sale of the property is completed.
On July 29, 2015, the Board of Directors of Piedmont declared a dividend for the third quarter of 2015 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on August 28, 2015. The dividend is to be paid on September 18, 2015.
Guidance for 2015
The Company is increasing the midpoint and narrowing its financial guidance for calendar year 2015 to reflect the revised outlook for the year based upon current operational circumstances, including the impending disposition of Aon Center in Chicago, IL. This guidance is based upon management's expectations at this time.
Low | High | ||
Core Funds from Operations | $240 million | $248 million | |
Core Funds from Operations per diluted share | $1.58 | $1.62 | |
These estimates reflect management’s view of current market conditions and incorporate certain economic and operational assumptions and projections. Actual results could differ from these estimates. Note that individual quarters may fluctuate on both a cash basis and an accrual basis due to the timing of lease commencements and expirations, repairs and maintenance, capital expenditures, capital markets activities, seasonal general and administrative expenses, and one-time revenue or expense events. In addition, the Company’s guidance is based on information available to management as of the date of this supplemental report.
10
Piedmont Office Realty Trust, Inc.
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 39 and reconciliations are provided beginning on page 41. |
Three Months Ended | ||||||||||||||
6/30/2015 | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | ||||||||||
Selected Operating Data | ||||||||||||||
Percent leased (1) | 88.8 | % | 88.8 | % | 87.7 | % | 87.5 | % | 87.0 | % | ||||
Percent leased - economic (1) (2) | 82.4 | % | 80.6 | % | 81.3 | % | 78.7 | % | 78.8 | % | ||||
Rental income | $117,454 | $117,807 | $115,915 | $114,529 | $113,287 | |||||||||
Total revenues | $146,734 | $149,759 | $146,711 | $144,641 | $138,580 | |||||||||
Total operating expenses | $125,910 | $121,545 | $117,922 | $117,442 | $112,024 | |||||||||
Real estate operating income | $20,824 | $28,214 | $28,789 | $27,199 | $26,556 | |||||||||
Core EBITDA | $77,969 | $79,314 | $78,613 | $77,613 | $74,745 | |||||||||
Core FFO applicable to common stock | $59,760 | $60,099 | $59,618 | $58,814 | $56,614 | |||||||||
Core FFO per share - diluted | $0.39 | $0.39 | $0.39 | $0.38 | $0.37 | |||||||||
AFFO applicable to common stock | $45,734 | $45,608 | $41,205 | $21,829 | $23,105 | |||||||||
AFFO per share - diluted | $0.30 | $0.30 | $0.27 | $0.14 | $0.15 | |||||||||
Gross dividends | $32,268 | $32,411 | $32,408 | $30,865 | $30,865 | |||||||||
Dividends per share | $0.210 | $0.210 | $0.210 | $0.200 | $0.200 | |||||||||
Selected Balance Sheet Data | ||||||||||||||
Total real estate assets | $4,005,824 | $4,094,942 | $4,075,092 | $4,058,414 | $3,968,329 | |||||||||
Total gross real estate assets | $5,215,938 | $5,297,481 | $5,253,356 | $5,197,338 | $5,072,559 | |||||||||
Total assets | $4,781,302 | $4,819,862 | $4,795,501 | $4,778,302 | $4,661,826 | |||||||||
Net debt (3) | $2,315,934 | $2,320,504 | $2,261,802 | $2,226,326 | $2,098,704 | |||||||||
Total liabilities | $2,525,451 | $2,533,939 | $2,483,486 | $2,439,456 | $2,304,641 | |||||||||
Ratios | ||||||||||||||
Core EBITDA margin (4) | 53.1 | % | 53.0 | % | 53.6 | % | 53.7 | % | 53.9 | % | ||||
Fixed charge coverage ratio (5) | 4.0 x | 4.0 x | 4.0 x | 4.0 x | 4.0 x | |||||||||
Average net debt to Core EBITDA (6) | 7.4 x | 7.2 x | 7.1 x | 6.9 x | 6.8 x | |||||||||
(1) | Please refer to page 27 for additional leased percentage information. |
(2) | 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). Due to variations in rental abatement structures whereby some abatements are provided for the first few months of each lease year as opposed to being provided entirely at the beginning of the lease, there will be variability to the economic leased percentage over time as abatements commence and expire. Please see the Financial Highlights section for details on near-term abatements for large leases. |
(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 net property acquisitions completed during that time, as well as capital expenditures and stock repurchases, all of which were 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 $885,576 for the quarter ended June 30, 2015, $823,770 for the quarter ended March 31, 2015, $688,177 for the quarter ended December 31, 2014, $541,349 for the quarter ended September 30, 2014, and $460,251 for the quarter ended June 30, 2014; the Company had principal amortization of $201,768 for the quarter ended June 30, 2015, $132,969 for the quarter ended March 31, 2015, $262,284 for the quarter ended December 31, 2014, $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 presented are higher than our historical performance on this measure primarily as a result of increased net debt attributable to net property acquisitions completed over the last year, 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. |
11
Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)
June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | June 30, 2014 | |||||||||||||||
Assets: | |||||||||||||||||||
Real estate, at cost: | |||||||||||||||||||
Land assets | $ | 696,713 | $ | 703,059 | $ | 698,519 | $ | 690,631 | $ | 684,761 | |||||||||
Buildings and improvements | 4,262,377 | 4,313,008 | 4,272,055 | 4,244,180 | 4,138,920 | ||||||||||||||
Buildings and improvements, accumulated depreciation | (1,108,333 | ) | (1,105,808 | ) | (1,075,395 | ) | (1,040,977 | ) | (1,008,111 | ) | |||||||||
Intangible lease asset | 153,106 | 153,465 | 150,037 | 150,336 | 145,179 | ||||||||||||||
Intangible lease asset, accumulated amortization | (88,954 | ) | (84,212 | ) | (79,860 | ) | (75,409 | ) | (74,132 | ) | |||||||||
Construction in progress | 64,804 | 83,802 | 63,382 | 43,003 | 34,674 | ||||||||||||||
Real estate assets held for sale, gross | 38,939 | 44,147 | 69,363 | 69,188 | 69,025 | ||||||||||||||
Real estate assets held for sale, accumulated depreciation & amortization | (12,828 | ) | (12,519 | ) | (23,009 | ) | (22,538 | ) | (21,987 | ) | |||||||||
Total real estate assets | 4,005,824 | 4,094,942 | 4,075,092 | 4,058,414 | 3,968,329 | ||||||||||||||
Investments in and amounts due from unconsolidated joint ventures | 7,714 | 7,820 | 7,798 | 7,638 | 7,549 | ||||||||||||||
Cash and cash equivalents | 8,997 | 7,479 | 12,306 | 8,815 | 8,563 | ||||||||||||||
Tenant receivables, net of allowance for doubtful accounts | 25,474 | 30,132 | 27,711 | 28,403 | 25,024 | ||||||||||||||
Straight line rent receivable | 171,241 | 173,443 | 167,657 | 161,452 | 153,651 | ||||||||||||||
Notes receivable | 45,400 | — | — | — | — | ||||||||||||||
Escrow deposits and restricted cash | 521 | 671 | 5,679 | 908 | 911 | ||||||||||||||
Prepaid expenses and other assets | 32,791 | 26,879 | 27,820 | 36,733 | 32,132 | ||||||||||||||
Goodwill | 180,097 | 180,097 | 180,097 | 180,097 | 180,097 | ||||||||||||||
Interest rate swap | 8,290 | 520 | 430 | 434 | — | ||||||||||||||
Deferred financing costs, less accumulated amortization | 7,491 | 7,391 | 7,667 | 7,969 | 8,386 | ||||||||||||||
Deferred lease costs, less accumulated amortization | 283,756 | 286,773 | 278,461 | 282,802 | 272,636 | ||||||||||||||
Other assets held for sale | 3,706 | 3,715 | 4,783 | 4,637 | 4,548 | ||||||||||||||
Total assets | $ | 4,781,302 | $ | 4,819,862 | $ | 4,795,501 | $ | 4,778,302 | $ | 4,661,826 | |||||||||
Liabilities: | |||||||||||||||||||
Unsecured debt, net of discount | $ | 1,817,538 | $ | 1,877,318 | $ | 1,828,544 | $ | 1,784,412 | $ | 1,657,408 | |||||||||
Secured debt | 502,757 | 448,791 | 449,045 | 449,427 | 449,677 | ||||||||||||||
Accounts payable, accrued expenses, and accrued capital expenditures | 128,898 | 119,466 | 133,988 | 135,320 | 126,273 | ||||||||||||||
Deferred income | 26,633 | 25,970 | 22,215 | 21,958 | 21,923 | ||||||||||||||
Intangible lease liabilities, less accumulated amortization | 41,214 | 42,978 | 43,277 | 44,981 | 43,389 | ||||||||||||||
Interest rate swaps | 8,411 | 19,416 | 6,417 | 3,358 | 5,971 | ||||||||||||||
Total liabilities | 2,525,451 | 2,533,939 | 2,483,486 | 2,439,456 | 2,304,641 | ||||||||||||||
Stockholders' equity: | |||||||||||||||||||
Common stock | 1,518 | 1,543 | 1,543 | 1,543 | 1,543 | ||||||||||||||
Additional paid in capital | 3,668,378 | 3,667,574 | 3,666,182 | 3,669,541 | 3,668,836 | ||||||||||||||
Cumulative distributions in excess of earnings | (1,427,312 | ) | (1,378,786 | ) | (1,365,620 | ) | (1,345,609 | ) | (1,323,907 | ) | |||||||||
Other comprehensive loss | 12,242 | (5,437 | ) | 8,301 | 11,758 | 9,104 | |||||||||||||
Piedmont stockholders' equity | 2,254,826 | 2,284,894 | 2,310,406 | 2,337,233 | 2,355,576 | ||||||||||||||
Non-controlling interest | 1,025 | 1,029 | 1,609 | 1,613 | 1,609 | ||||||||||||||
Total stockholders' equity | 2,255,851 | 2,285,923 | 2,312,015 | 2,338,846 | 2,357,185 | ||||||||||||||
Total liabilities, redeemable common stock and stockholders' equity | $ | 4,781,302 | $ | 4,819,862 | $ | 4,795,501 | $ | 4,778,302 | $ | 4,661,826 | |||||||||
Common stock outstanding at end of period | 151,833 | 154,340 | 154,324 | 154,325 | 154,324 | ||||||||||||||
12
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended | ||||||||||||||||||||
6/30/2015 | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 117,454 | $ | 117,807 | $ | 115,915 | $ | 114,529 | $ | 113,287 | ||||||||||
Tenant reimbursements | 28,813 | 31,390 | 30,295 | 29,579 | 24,745 | |||||||||||||||
Property management fee revenue | 467 | 562 | 501 | 533 | 548 | |||||||||||||||
146,734 | 149,759 | 146,711 | 144,641 | 138,580 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Property operating costs | 61,479 | 64,236 | 62,002 | 62,027 | 57,136 | |||||||||||||||
Depreciation | 36,039 | 36,232 | 35,442 | 35,366 | 34,144 | |||||||||||||||
Amortization | 14,955 | 14,670 | 14,172 | 14,235 | 13,599 | |||||||||||||||
Impairment losses on real estate assets | 5,354 | — | — | — | — | |||||||||||||||
General and administrative | 8,083 | 6,407 | 6,306 | 5,814 | 7,145 | |||||||||||||||
125,910 | 121,545 | 117,922 | 117,442 | 112,024 | ||||||||||||||||
Real estate operating income | 20,824 | 28,214 | 28,789 | 27,199 | 26,556 | |||||||||||||||
Other income / (expense): | ||||||||||||||||||||
Interest expense | (18,172 | ) | (19,016 | ) | (18,854 | ) | (18,654 | ) | (18,012 | ) | ||||||||||
Other income / (expense) | 596 | (181 | ) | (6 | ) | 524 | (366 | ) | ||||||||||||
Net recoveries / (loss) from casualty events and litigation settlements (1) | — | — | 2,478 | (8 | ) | 1,480 | ||||||||||||||
Equity in income / (loss) of unconsolidated joint ventures | 124 | 159 | 160 | 89 | (333 | ) | ||||||||||||||
(17,452 | ) | (19,038 | ) | (16,222 | ) | (18,049 | ) | (17,231 | ) | |||||||||||
Income from continuing operations | 3,372 | 9,176 | 12,567 | 9,150 | 9,325 | |||||||||||||||
Discontinued operations: | ||||||||||||||||||||
Operating income, excluding impairment loss | (3 | ) | — | (42 | ) | 16 | 514 | |||||||||||||
Gain / (loss) on sale of properties | — | — | — | — | 1,304 | |||||||||||||||
Income / (loss) from discontinued operations (2) | (3 | ) | — | (42 | ) | 16 | 1,818 | |||||||||||||
Gain on sale of real estate | 26,611 | 10,073 | (8 | ) | — | 1,140 | ||||||||||||||
Net income | 29,980 | 19,249 | 12,517 | 9,166 | 12,283 | |||||||||||||||
Less: Net income attributable to noncontrolling interest | (4 | ) | (4 | ) | (3 | ) | (4 | ) | (4 | ) | ||||||||||
Net income attributable to Piedmont | $ | 29,976 | $ | 19,245 | $ | 12,514 | $ | 9,162 | $ | 12,279 | ||||||||||
Weighted average common shares outstanding - diluted | 153,757 | 154,580 | 154,520 | 154,561 | 154,445 | |||||||||||||||
Net income per share available to common stockholders - diluted | $ | 0.20 | $ | 0.12 | $ | 0.08 | $ | 0.06 | $ | 0.08 | ||||||||||
(1) | Presented on this line are net expenses and insurance reimbursements related to 1) lawsuits settled in 2013 and 2) damage caused by Hurricane Sandy in October 2012. |
(2) | Reflects operating results for 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 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.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
6/30/2015 | 6/30/2014 | Change ($) | Change (%) | 6/30/2015 | 6/30/2014 | Change ($) | Change (%) | ||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
Rental income | $ | 117,454 | $ | 113,287 | $ | 4,167 | 3.7 | % | $ | 235,261 | $ | 224,191 | $ | 11,070 | 4.9 | % | |||||||||
Tenant reimbursements | 28,813 | 24,745 | 4,068 | 16.4 | % | 60,203 | 49,674 | 10,529 | 21.2 | % | |||||||||||||||
Property management fee revenue | 467 | 548 | (81 | ) | (14.8 | )% | 1,029 | 1,035 | (6 | ) | (0.6 | )% | |||||||||||||
146,734 | 138,580 | 8,154 | 5.9 | % | 296,493 | 274,900 | 21,593 | 7.9 | % | ||||||||||||||||
Expenses: | |||||||||||||||||||||||||
Property operating costs | 61,479 | 57,136 | (4,343 | ) | (7.6 | )% | 125,715 | 115,407 | (10,308 | ) | (8.9 | )% | |||||||||||||
Depreciation | 36,039 | 34,144 | (1,895 | ) | (5.6 | )% | 72,271 | 67,788 | (4,483 | ) | (6.6 | )% | |||||||||||||
Amortization | 14,955 | 13,599 | (1,356 | ) | (10.0 | )% | 29,625 | 28,172 | (1,453 | ) | (5.2 | )% | |||||||||||||
Impairment losses on real estate assets | 5,354 | — | (5,354 | ) | — | % | 5,354 | — | (5,354 | ) | — | % | |||||||||||||
General and administrative | 8,083 | 7,145 | (938 | ) | (13.1 | )% | 14,490 | 11,700 | (2,790 | ) | (23.8 | )% | |||||||||||||
125,910 | 112,024 | (13,886 | ) | (12.4 | )% | 247,455 | 223,067 | (24,388 | ) | (10.9 | )% | ||||||||||||||
Real estate operating income | 20,824 | 26,556 | (5,732 | ) | (21.6 | )% | 49,038 | 51,833 | (2,795 | ) | (5.4 | )% | |||||||||||||
Other income / (expense): | |||||||||||||||||||||||||
Interest expense | (18,172 | ) | (18,012 | ) | (160 | ) | (0.9 | )% | (37,188 | ) | (36,938 | ) | (250 | ) | (0.7 | )% | |||||||||
Other income / (expense) | 596 | (366 | ) | 962 | 262.8 | % | 415 | (456 | ) | 871 | 191.0 | % | |||||||||||||
Net recoveries / (loss) from casualty events and litigation settlements (1) | — | 1,480 | (1,480 | ) | (100.0 | )% | — | 4,522 | (4,522 | ) | (100.0 | )% | |||||||||||||
Equity in income / (loss) of unconsolidated joint ventures | 124 | (333 | ) | 457 | 137.2 | % | 283 | (599 | ) | 882 | 147.2 | % | |||||||||||||
(17,452 | ) | (17,231 | ) | (221 | ) | (1.3 | )% | (36,490 | ) | (33,471 | ) | (3,019 | ) | (9.0 | )% | ||||||||||
Income from continuing operations | 3,372 | 9,325 | (5,953 | ) | (63.8 | )% | 12,548 | 18,362 | (5,814 | ) | (31.7 | )% | |||||||||||||
Discontinued operations: | |||||||||||||||||||||||||
Operating income, excluding impairment loss | (3 | ) | 514 | (517 | ) | (100.6 | )% | (3 | ) | 980 | (983 | ) | (100.3 | )% | |||||||||||
Gain / (loss) on sale of properties | — | 1,304 | (1,304 | ) | (100.0 | )% | — | 1,198 | (1,198 | ) | (100.0 | )% | |||||||||||||
Income / (loss) from discontinued operations (2) | (3 | ) | 1,818 | (1,821 | ) | (100.2 | )% | (3 | ) | 2,178 | (2,181 | ) | (100.1 | )% | |||||||||||
Gain on sale of real estate | 26,611 | 1,140 | 25,471 | 2,234.3 | % | 36,684 | 1,140 | 35,544 | 3,117.9 | % | |||||||||||||||
Net income | 29,980 | 12,283 | 17,697 | 144.1 | % | 49,229 | 21,680 | 27,549 | 127.1 | % | |||||||||||||||
Less: Net income attributable to noncontrolling interest | (4 | ) | (4 | ) | — | — | % | (8 | ) | (8 | ) | — | — | % | |||||||||||
Net income attributable to Piedmont | $ | 29,976 | $ | 12,279 | $ | 17,697 | 144.1 | % | $ | 49,221 | $ | 21,672 | $ | 27,549 | 127.1 | % | |||||||||
Weighted average common shares outstanding - diluted | 153,757 | 154,445 | 154,174 | 154,728 | |||||||||||||||||||||
Net income per share available to common stockholders - diluted | $ | 0.20 | $ | 0.08 | $ | 0.32 | $ | 0.14 | |||||||||||||||||
(1) | Presented on this line are net expenses and insurance reimbursements related to 1) lawsuits settled in 2013 and 2) damage caused by Hurricane Sandy in October 2012. |
(2) | Reflects operating results for 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 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. |
14
Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations and Adjusted Funds From Operations
Unaudited (in thousands except for per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
6/30/2015 | 6/30/2014 | 6/30/2015 | 6/30/2014 | |||||||||||||
GAAP net income applicable to common stock | $ | 29,976 | $ | 12,279 | $ | 49,221 | $ | 21,672 | ||||||||
Depreciation (1) (2) | 35,935 | 34,119 | 72,032 | 67,846 | ||||||||||||
Amortization (1) | 14,971 | 13,608 | 29,657 | 28,412 | ||||||||||||
Impairment loss (1) | 5,354 | — | 5,354 | — | ||||||||||||
Loss / (gain) on sale of properties (1) | (26,611 | ) | (2,275 | ) | (36,684 | ) | (2,169 | ) | ||||||||
NAREIT funds from operations applicable to common stock | 59,625 | 57,731 | 119,580 | 115,761 | ||||||||||||
Adjustments: | ||||||||||||||||
Acquisition costs | 3 | 363 | 147 | 429 | ||||||||||||
Loss / (gain) on extinguishment of swaps | 132 | — | 132 | — | ||||||||||||
Net (recoveries) / loss from casualty events and litigation settlements (1) | — | (1,480 | ) | — | (4,522 | ) | ||||||||||
Core funds from operations applicable to common stock | 59,760 | 56,614 | 119,859 | 111,668 | ||||||||||||
Adjustments: | ||||||||||||||||
Deferred financing cost amortization | 680 | 615 | 1,404 | 1,478 | ||||||||||||
Amortization of note payable step-up | (121 | ) | (6 | ) | (242 | ) | (6 | ) | ||||||||
Amortization of discount on senior notes | 49 | 47 | 97 | 81 | ||||||||||||
Depreciation of non real estate assets | 165 | 115 | 361 | 229 | ||||||||||||
Straight-line effects of lease revenue (1) | (3,745 | ) | (7,758 | ) | (8,255 | ) | (17,170 | ) | ||||||||
Stock-based and other non-cash compensation expense | 1,692 | 1,271 | 2,417 | 1,907 | ||||||||||||
Amortization of lease-related intangibles (1) | (1,102 | ) | (1,279 | ) | (2,224 | ) | (2,643 | ) | ||||||||
Acquisition costs | (3 | ) | (363 | ) | (147 | ) | (429 | ) | ||||||||
Non-incremental capital expenditures (3) | (11,641 | ) | (26,151 | ) | (21,928 | ) | (39,972 | ) | ||||||||
Adjusted funds from operations applicable to common stock | $ | 45,734 | $ | 23,105 | $ | 91,342 | $ | 55,143 | ||||||||
Weighted average common shares outstanding - diluted | 153,757 | 154,445 | 154,174 | 154,728 | ||||||||||||
Funds from operations per share (diluted) | $ | 0.39 | $ | 0.37 | $ | 0.78 | $ | 0.75 | ||||||||
Core funds from operations per share (diluted) | $ | 0.39 | $ | 0.37 | $ | 0.78 | $ | 0.72 | ||||||||
Adjusted funds from operations per share (diluted) | $ | 0.30 | $ | 0.15 | $ | 0.59 | $ | 0.36 | ||||||||
(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 39. |
15
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||
6/30/2015 | 6/30/2014 | 6/30/2015 | 6/30/2014 | ||||||||||||
Net income attributable to Piedmont | $ | 29,976 | $ | 12,279 | $ | 49,221 | $ | 21,672 | |||||||
Net income attributable to noncontrolling interest | 4 | 4 | 8 | 8 | |||||||||||
Interest expense (1) | 18,172 | 18,012 | 37,188 | 36,938 | |||||||||||
Depreciation (1) | 36,100 | 34,234 | 72,393 | 68,075 | |||||||||||
Amortization (1) | 14,971 | 13,608 | 29,657 | 28,412 | |||||||||||
Acquisition costs | 3 | 363 | 147 | 429 | |||||||||||
Impairment loss (1) | 5,354 | — | 5,354 | — | |||||||||||
Net (recoveries) / loss from casualty events and litigation settlements (1) | — | (1,480 | ) | — | (4,522 | ) | |||||||||
Loss / (gain) on sale of properties (1) | (26,611 | ) | (2,275 | ) | (36,684 | ) | (2,169 | ) | |||||||
Core EBITDA | 77,969 | 74,745 | 157,284 | 148,843 | |||||||||||
General & administrative expenses (1) | 8,102 | 7,159 | 14,518 | 11,742 | |||||||||||
Management fee revenue (2) | (232 | ) | (281 | ) | (562 | ) | (540 | ) | |||||||
Other (income) / expense (1) (3) | (599 | ) | 3 | (562 | ) | 32 | |||||||||
Straight-line effects of lease revenue (1) | (3,745 | ) | (7,758 | ) | (8,255 | ) | (17,170 | ) | |||||||
Amortization of lease-related intangibles (1) | (1,102 | ) | (1,279 | ) | (2,224 | ) | (2,643 | ) | |||||||
Property net operating income (cash basis) | 80,393 | 72,589 | 160,199 | 140,264 | |||||||||||
Change period over period | 10.8 | % | N/A | 14.2 | % | N/A | |||||||||
Deduct net operating (income) / loss from: | |||||||||||||||
Acquisitions (4) | (2,842 | ) | (55 | ) | (5,507 | ) | (55 | ) | |||||||
Dispositions (5) | (562 | ) | (3,230 | ) | (2,700 | ) | (6,718 | ) | |||||||
Other investments (6) | (251 | ) | 89 | (546 | ) | 472 | |||||||||
Same store net operating income (cash basis) | $ | 76,738 | $ | 69,393 | $ | 151,446 | $ | 133,963 | |||||||
Change period over period | 10.6 | % | N/A | 13.1 | % | N/A | |||||||||
(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 5 Wall Street in Burlington, MA, purchased on June 27, 2014; 1155 Perimeter Center West in Atlanta, GA, purchased on August 28, 2014; TownPark Land in Lake Mary, FL, purchased on November 21, 2014; and Park Place on Turtle Creek in Dallas, TX, purchased on January 16, 2015. |
(5) | Dispositions consist of 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; 2020 West 89th Street in Leawood, KS, sold on May 19, 2014; 3900 Dallas Parkway in Plano, TX, sold on January 30, 2015; 5601 Headquarters Drive in Plano, TX, sold on April 28, 2015; River Corporate Center in Tempe, AZ, sold on April 29, 2015; and Copper Ridge Center in Lyndhurst, NJ, sold on May 1, 2015. |
(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 38. The operating results from both the office and retail portions of 3100 Clarendon Boulevard in Arlington, VA, are included in this line item. |
16
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Same Store Net Operating Income (Cash Basis) | |||||||||||||||||||||||
Contributions from Seven of the Largest Markets | Three Months Ended | Six Months Ended | |||||||||||||||||||||
6/30/2015 | 6/30/2014 | 6/30/2015 | 6/30/2014 | ||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||
Washington, D.C. (1) | $ | 12,855 | 16.8 | $ | 15,208 | 21.9 | $ | 25,321 | 16.7 | $ | 28,601 | 21.4 | |||||||||||
New York (2) | 11,428 | 14.9 | 10,287 | 14.8 | 22,185 | 14.7 | 21,165 | 15.8 | |||||||||||||||
Chicago (3) (4) | 10,931 | 14.2 | 7,328 | 10.6 | 21,695 | 14.3 | 10,962 | 8.2 | |||||||||||||||
Dallas (5) | 5,750 | 7.5 | 3,725 | 5.4 | 11,375 | 7.5 | 7,562 | 5.6 | |||||||||||||||
Boston | 5,426 | 7.1 | 5,962 | 8.6 | 11,350 | 7.5 | 11,748 | 8.8 | |||||||||||||||
Minneapolis (6) | 4,790 | 6.2 | 5,189 | 7.5 | 9,425 | 6.2 | 10,697 | 8.0 | |||||||||||||||
Los Angeles (7) | 4,192 | 5.5 | 3,293 | 4.7 | 8,341 | 5.5 | 6,876 | 5.1 | |||||||||||||||
Other (8) | 21,366 | 27.8 | 18,401 | 26.5 | 41,754 | 27.6 | 36,352 | 27.1 | |||||||||||||||
Total | $ | 76,738 | 100.0 | $ | 69,393 | 100.0 | $ | 151,446 | 100.0 | $ | 133,963 | 100.0 | |||||||||||
(1) | The decrease in Washington, D.C. Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily attributable to lease expirations at 9200 and 9211 Corporate Boulevard in Rockville, MD, a lease contraction at 4250 North Fairfax Drive in Arlington, VA, as well as a one-time, $1.1 million rental income true-up in 2014 associated with the increased rental rate under the renewed National Park Service lease at 1201 Eye Street in Washington, D.C. |
(2) | The increase in New York Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily attributable to the expiration of the rental abatement period associated with the Gemini Technology lease renewal which became effective at the beginning of 2014 at 2 Gatehall Drive in Parsippany, NJ. |
(3) | The increase in Chicago Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily related to the expiration of rental and operating expense recovery abatement periods associated with several leases at 500 West Monroe Street in Chicago, IL, Aon Center in Chicago, IL, and Windy Point II in Schaumburg, IL. |
(4) | 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 rents for which are included in our ALR calculation). As the gross rent abatements burn off and as the 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. |
(5) | The increase in Dallas Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily related to: 1) the commencement of a new lease with Epsilon Data Management at 6021 Connection Drive in Irving, TX, 2) the expirations of the rental abatement periods associated with several new-tenant leases at Las Colinas Corporate Center II in Irving, TX, and 3) increased economic occupancy associated with recent leasing activity at One Lincoln Park in Dallas, TX. |
(6) | The decrease in Minneapolis Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily due 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. |
(7) | The increase in Los Angeles Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily related to the expiration of rental abatement periods associated with several new leases at 800 North Brand Boulevard in Glendale, CA. |
(8) | The increase in Other Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily attributable to increased rental income as a result of: 1) increased economic occupancy associated with new-tenant leasing activity at 400 TownPark in Lake Mary, FL, The Medici in Atlanta, GA, and Glenridge Highlands II in Atlanta, GA, 2) the restructured lease with Independence Blue Cross at 1901 Market Street in Philadelphia, PA, and 3) a tenant expansion at Chandler Forum in Chandler, AZ. |
17
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Accrual Basis)
Unaudited (in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||
6/30/2015 | 6/30/2014 | 6/30/2015 | 6/30/2014 | ||||||||||||
Net income attributable to Piedmont | $ | 29,976 | $ | 12,279 | $ | 49,221 | $ | 21,672 | |||||||
Net income attributable to noncontrolling interest | 4 | 4 | 8 | 8 | |||||||||||
Interest expense (1) | 18,172 | 18,012 | 37,188 | 36,938 | |||||||||||
Depreciation (1) | 36,100 | 34,234 | 72,393 | 68,075 | |||||||||||
Amortization (1) | 14,971 | 13,608 | 29,657 | 28,412 | |||||||||||
Acquisition costs | 3 | 363 | 147 | 429 | |||||||||||
Impairment loss (1) | 5,354 | — | 5,354 | — | |||||||||||
Net (recoveries) / loss from casualty events and litigation settlements (1) | — | (1,480 | ) | — | (4,522 | ) | |||||||||
Loss / (gain) on sale of properties (1) | (26,611 | ) | (2,275 | ) | (36,684 | ) | (2,169 | ) | |||||||
Core EBITDA | 77,969 | 74,745 | 157,284 | 148,843 | |||||||||||
General & administrative expenses (1) | 8,102 | 7,159 | 14,518 | 11,742 | |||||||||||
Management fee revenue (2) | (232 | ) | (281 | ) | (562 | ) | (540 | ) | |||||||
Other (income) / expense (1) (3) | (599 | ) | 3 | (562 | ) | 32 | |||||||||
Property net operating income (accrual basis) | 85,240 | 81,626 | 170,678 | 160,077 | |||||||||||
Change period over period | 4.4 | % | N/A | 6.6 | % | N/A | |||||||||
Deduct net operating (income) / loss from: | |||||||||||||||
Acquisitions (4) | (3,034 | ) | (61 | ) | (5,942 | ) | (60 | ) | |||||||
Dispositions (5) | (535 | ) | (3,014 | ) | (2,544 | ) | (6,418 | ) | |||||||
Other investments (6) | (299 | ) | 80 | (599 | ) | 452 | |||||||||
Same store net operating income (accrual basis) | $ | 81,372 | $ | 78,631 | $ | 161,593 | $ | 154,051 | |||||||
Change period over period | 3.5 | % | N/A | 4.9 | % | N/A | |||||||||
(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 5 Wall Street in Burlington, MA, purchased on June 27, 2014; 1155 Perimeter Center West in Atlanta, GA, purchased on August 28, 2014; TownPark Land in Lake Mary, FL, purchased on November 21, 2014; and Park Place on Turtle Creek in Dallas, TX, purchased on January 16, 2015. |
(5) | Dispositions consist of 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; 2020 West 89th Street in Leawood, KS, sold on May 19, 2014; 3900 Dallas Parkway in Plano, TX, sold on January 30, 2015; 5601 Headquarters Drive in Plano, TX, sold on April 28, 2015; River Corporate Center in Tempe, AZ, sold on April 29, 2015; and Copper Ridge Center in Lyndhurst, NJ, sold on May 1, 2015. |
(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 38. The operating results from both the office and retail portions of 3100 Clarendon Boulevard in Arlington, VA, are included in this line item. |
18
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Accrual Basis)
Unaudited (in thousands)
Same Store Net Operating Income (Accrual Basis) | |||||||||||||||||||||||
Contributions from Seven of the Largest Markets | Three Months Ended | Six Months Ended | |||||||||||||||||||||
6/30/2015 | 6/30/2014 | 6/30/2015 | 6/30/2014 | ||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||
Washington, D.C. (1) | $ | 13,547 | 16.6 | $ | 16,317 | 20.8 | $ | 26,698 | 16.5 | $ | 29,911 | 19.4 | |||||||||||
Chicago (2) (3) | 13,317 | 16.4 | 11,764 | 15.0 | 26,434 | 16.4 | 20,520 | 13.3 | |||||||||||||||
New York (4) | 10,825 | 13.3 | 11,155 | 14.2 | 21,090 | 13.1 | 23,413 | 15.2 | |||||||||||||||
Boston | 5,865 | 7.2 | 6,168 | 7.8 | 11,988 | 7.3 | 12,287 | 8.0 | |||||||||||||||
Dallas (5) | 5,900 | 7.3 | 4,033 | 5.1 | 11,766 | 7.3 | 8,402 | 5.5 | |||||||||||||||
Minneapolis (6) | 5,047 | 6.2 | 5,543 | 7.0 | 10,134 | 6.3 | 11,497 | 7.5 | |||||||||||||||
Los Angeles | 4,257 | 5.2 | 3,936 | 5.0 | 8,505 | 5.3 | 8,079 | 5.2 | |||||||||||||||
Other (7) | 22,614 | 27.8 | 19,715 | 25.1 | 44,978 | 27.8 | 39,942 | 25.9 | |||||||||||||||
Total | $ | 81,372 | 100.0 | $ | 78,631 | 100.0 | $ | 161,593 | 100.0 | $ | 154,051 | 100.0 | |||||||||||
(1) | The decrease in Washington, D.C. Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily attributable to lease expirations at 9200 and 9211 Corporate Boulevard in Rockville, MD, a lease contraction at 4250 North Fairfax Drive in Arlington, VA, as well as a one-time, $1.1 million rental income true-up in 2014 associated with the increased rental rate under the renewed National Park Service lease at 1201 Eye Street in Washington, D.C. |
(2) | The increase in Chicago Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily related to increased rental income due to the commencement of several leases and/or the expiration of operating expense recovery abatement periods associated with several leases at 500 West Monroe Street in Chicago, IL, Aon Center in Chicago, IL, and Windy Point II in Schaumburg, IL. |
(3) | 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 the operating expense recovery abatements burn off and as the 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. |
(4) | The decrease in New York Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily attributable to the downtime between the expiration of several leases and the commencement of replacement leases, as well as increased property taxes, at 60 Broad Street in New York, NY, along with lease termination income received in 2014 at 400 Bridgewater Crossing in Bridgewater, NJ. |
(5) | The increase in Dallas Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily related to the commencement of a new lease with Epsilon Data Management at 6021 Connection Drive in Irving, TX, in addition to increased rental income associated with new leasing activity at One Lincoln Park in Dallas, TX. |
(6) | The decrease in Minneapolis Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily due to a renewal-related contraction by US Bancorp and downtime associated with several replacement leases for spaces formerly occupied by US Bancorp at US Bancorp Center in Minneapolis, MN. |
(7) | The increase in Other Same Store Net Operating Income for the three months and the six months ended June 30, 2015 as compared to the same periods in 2014 was primarily attributable to greater rental income as a result of: 1) recent new-tenant leasing activity at The Medici in Atlanta, GA, 400 TownPark in Lake Mary, FL, and 150 West Jefferson in Detroit, MI, 2) the restructured lease with Independence Blue Cross at 1901 Market Street in Philadelphia, PA, and 3) a tenant expansion at Chandler Forum in Chandler, AZ. |
19
Piedmont Office Realty Trust, Inc.
Capitalization Analysis
Unaudited (in thousands except for per share data)
As of | As of | |||||||
June 30, 2015 | December 31, 2014 | |||||||
Common stock price (1) | $ | 17.59 | $ | 18.84 | ||||
Total shares outstanding | 151,833 | 154,324 | ||||||
Equity market capitalization (1) | $ | 2,670,746 | $ | 2,907,466 | ||||
Total debt - principal amount outstanding | $ | 2,325,452 | $ | 2,279,787 | ||||
Total market capitalization (1) | $ | 4,996,198 | $ | 5,187,253 | ||||
Total debt / Total market capitalization (1) | 46.5 | % | 43.9 | % | ||||
Total gross real estate assets | $ | 5,215,938 | $ | 5,253,356 | ||||
Total debt / Total gross real estate assets (2) | 44.6 | % | 43.4 | % | ||||
Total debt / Total gross assets (3) | 38.8 | % | 38.2 | % | ||||
(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. |
20
Piedmont Office Realty Trust, Inc.
Debt Summary
As of June 30, 2015
Unaudited ($ in thousands)
Floating Rate & Fixed Rate Debt
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate | Weighted Average Maturity | ||
Floating Rate | $475,000 | (2) | 1.23% | 50.7 months | |
Fixed Rate | 1,850,452 | 3.78% | 68.1 months | ||
Total | $2,325,452 | 3.26% | 64.6 months | ||
Unsecured & Secured Debt
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate | Weighted Average Maturity | |||
Unsecured | $1,825,000 | 2.80% | (3) | 70.4 months | ||
Secured | 500,452 | 4.95% | 43.2 months | |||
Total | $2,325,452 | 3.26% | 64.6 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 | |
2015 | $— | $— | —% | —% | |
2016 | 167,525 | — | 5.55% | 7.2% | |
2017 | 140,000 | — | 5.76% | 6.0% | |
2018 | — | 170,000 | 1.32% | 7.3% | |
2019 | — | 300,000 | 2.78% | 12.9% | |
2020 + | 192,927 | 1,355,000 | (4) | 3.09% | 66.6% |
Total | $500,452 | $1,825,000 | 3.26% | 100.0% | |
(1) | All of Piedmont's outstanding debt as of June 30, 2015, was interest-only debt with the exception of the $32.9 million of debt associated with 5 Wall Street located in Burlington, MA. |
(2) | Amount represents the outstanding balance as of June 30, 2015, on the $500 million unsecured revolving credit facility and the $170 million unsecured term loan. Two other loans, 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 22 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. Please note that Piedmont currently has $250 million of forward-starting swaps for a 2016 fixed-rate financing. After taking into account these forward-starting swaps and the use of the proceeds from the related planned financings, the Company's effective exposure to floating interest rates is much less than the current amount of floating-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 $500 million unsecured revolving credit facility is June 18, 2019; however, there are two, six-month extension options available under the facility providing for a final extended maturity date of June 18, 2020. For the purposes of this schedule, we reflect the maturity date of the facility as the final extended maturity date of June 2020. |
21
Piedmont Office Realty Trust, Inc.
Debt Detail
Unaudited ($ in thousands)
Facility (1) | Property | Stated Rate | Maturity | Principal Amount Outstanding as of June 30, 2015 | ||||
Secured | ||||||||
$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 | 32,927 | |||
$160.0 Million Fixed-Rate Loan (4) | 1901 Market Street | 3.48 | % | (5) | 7/5/2022 | 160,000 | ||
Subtotal / Weighted Average (6) | 4.95 | % | $ | 500,452 | ||||
Unsecured | ||||||||
$500.0 Million Unsecured Line of Credit (7) | N/A | 1.19 | % | (8) | 6/18/2020 | $ | 305,000 | |
$170.0 Million Unsecured 2015 Term Loan | N/A | 1.32 | % | (9) | 5/15/2018 | 170,000 | ||
$300.0 Million Unsecured 2013 Term Loan | N/A | 2.78 | % | (10) | 1/31/2019 | 300,000 | ||
$300.0 Million Unsecured 2011 Term Loan | N/A | 2.39 | % | (11) | 1/15/2020 | 300,000 | ||
$350.0 Million Unsecured Senior Notes | N/A | 3.40 | % | (12) | 6/1/2023 | 350,000 | ||
$400.0 Million Unsecured Senior Notes | N/A | 4.45 | % | (13) | 3/15/2024 | 400,000 | ||
Subtotal / Weighted Average (6) | 2.80 | % | $ | 1,825,000 | ||||
Total Debt - Principal Amount Outstanding / Weighted Average Stated Rate (6) | 3.26 | % | $ | 2,325,452 | ||||
GAAP Accounting Adjustments (14) | (5,157 | ) | ||||||
Total Debt - GAAP Amount Outstanding | $ | 2,320,295 | ||||||
(1) | All of Piedmont’s outstanding debt as of June 30, 2015, was interest-only debt with the exception of the $32.9 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 on a 25-year amortization schedule. |
(4) | On June 23, 2015, Piedmont closed on a new $160 million, 7-year, fixed-rate mortgage secured by 1901 Market Street located in Philadelphia, PA. The interest-only loan matures on July 5, 2022. |
(5) | The stated interest rate on the $160 million fixed-rate loan is 3.48%. After the application of interest rate hedges, the effective cost of the financing is approximately 3.58%. |
(6) | Weighted average is based on the principal amount outstanding and interest rate at June 30, 2015. |
(7) | All of Piedmont’s outstanding debt as of June 30, 2015, was term debt with the exception of $305 million outstanding on our unsecured revolving credit facility. On June 18, 2015, Piedmont closed on a new $500 million unsecured revolving credit facility that replaced the previous facility that was scheduled to mature on August 19, 2016. The new facility has an initial maturity date of June 18, 2019; however, there are two, six-month extension options available under the facility providing for a total extension of up to one year to June 18, 2020. The final extended maturity date is presented on this schedule. |
(8) | The interest rate presented for the $500 million unsecured revolving credit facility is the weighted average interest rate for all outstanding draws as of June 30, 2015. Piedmont may select from multiple interest rate options with each draw under the facility, including the prime rate and various length LIBOR locks. All LIBOR selections are subject to an additional spread (1.00% as of June 30, 2015) over the selected rate based on Piedmont’s current credit rating. |
(9) | The $170 million unsecured term loan has a variable interest rate. Piedmont may select from multiple interest rate options under the facility, including the prime rate and various length LIBOR locks. All LIBOR selections are subject to an additional spread (1.125% as of June 30, 2015) over the selected rate based on Piedmont’s current credit rating. |
(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 $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. Additionally, for the period from November 22, 2016 to January 15, 2020, Piedmont has entered into interest rate swap agreements which effectively fix the interest rate on this loan at 3.35%, assuming no credit rating change for the Company. |
(12) | 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%. |
(13) | 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%. |
(14) | 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, the $300 million unsecured 2011 term loan, the $170 million unsecured term loan, the $500 million unsecured line of credit and the $160 million mortgage, 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. |
22
Piedmont Office Realty Trust, Inc.
Debt Analysis
As of June 30, 2015
Unaudited
Bank Debt Covenant Compliance (1) | Required | Actual |
Maximum Leverage Ratio | 0.60 | 0.46 |
Minimum Fixed Charge Coverage Ratio (2) | 1.50 | 3.72 |
Maximum Secured Indebtedness Ratio | 0.40 | 0.10 |
Minimum Unencumbered Leverage Ratio | 1.60 | 2.26 |
Minimum Unencumbered Interest Coverage Ratio (3) | 1.75 | 4.44 |
Bond Covenant Compliance (4) | Required | Actual |
Total Debt to Total Assets | 60% or less | 43.8% |
Secured Debt to Total Assets | 40% or less | 9.4% |
Ratio of Consolidated EBITDA to Interest Expense | 1.50 or greater | 4.32 |
Unencumbered Assets to Unsecured Debt | 150% or greater | 251% |
Three Months Ended | Six Months Ended | Year Ended | |
Other Debt Coverage Ratios | June 30, 2015 | June 30, 2015 | December 31, 2014 |
Average net debt to core EBITDA (5) | 7.4 x | 7.3 x | 6.9 x |
Fixed charge coverage ratio (6) | 4.0 x | 4.0 x | 4.0 x |
Interest coverage ratio (7) | 4.1 x | 4.0 x | 4.0 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 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 the periods ended June 30, 2015 and December 31, 2014. The Company had capitalized interest of $885,576 for the three months ended June 30, 2015, $1,709,346 for the six months ended June 30, 2015, and $2,074,620 for the twelve months ended December 31, 2014. The Company had principal amortization of $201,768 for the three months ended June 30, 2015, $334,737 for the six months ended June 30, 2015, and $520,067 for the twelve months ended December 31, 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 $885,576 for the three months ended June 30, 2015, $1,709,346 for the six months ended June 30, 2015, and $2,074,620 for the twelve months ended December 31, 2014. |
23
Piedmont Office Realty Trust, Inc.
Tenant Diversification (1)
As of June 30, 2015
(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 | 7 | (4) | $46,705 | 7.9 | 937 | 5.0 | |
State of New York | AA+ / Aa1 | 1 | 2019 | 24,455 | 4.1 | 481 | 2.6 | |
US Bancorp | A+ / A1 | 3 | 2023 / 2024 | 21,775 | 3.7 | 733 | 3.9 | |
Independence Blue Cross | No rating available | 1 | 2033 | 17,671 | 3.0 | 801 | 4.3 | |
GE | AA+ / A1 | 2 | 2027 | 16,354 | 2.8 | 480 | 2.6 | |
Aon | A- / Baa2 | 2 | 2028 | 15,071 | 2.5 | 457 | 2.5 | |
Nestle | AA / Aa2 | 1 | 2021 | 12,117 | 2.0 | 401 | 2.2 | |
City of New York | AA / Aa2 | 1 | 2020 | 10,462 | 1.8 | 313 | 1.7 | |
KPMG | No rating available | 2 | 2020 / 2027 | 9,238 | 1.6 | 279 | 1.5 | |
Gallagher | No rating available | 1 | 2018 | 8,923 | 1.5 | 307 | 1.6 | |
Catamaran | BB+ / Ba2 | 1 | 2025 | 8,252 | 1.4 | 301 | 1.6 | |
Caterpillar Financial | A / A2 | 1 | 2022 | 7,968 | 1.3 | 312 | 1.7 | |
DDB Needham | BBB+ / Baa1 | 1 | 2018 | 7,805 | 1.3 | 212 | 1.1 | |
Harvard University | AAA / Aaa | 2 | 2017 / 2018 | 7,267 | 1.2 | 110 | 0.6 | |
Jones Lang LaSalle | BBB / Baa2 | 1 | 2032 | 7,212 | 1.2 | 199 | 1.1 | |
Gemini | BBB+ / A3 | 1 | 2021 | 6,767 | 1.1 | 205 | 1.1 | |
Edelman | No rating available | 1 | 2024 | 6,660 | 1.1 | 184 | 1.0 | |
Technip | BBB+ | 1 | 2018 | 6,595 | 1.1 | 150 | 0.8 | |
Harcourt | BBB+ | 1 | 2016 | 6,498 | 1.1 | 195 | 1.0 | |
Raytheon | A / A3 | 2 | 2019 | 6,447 | 1.1 | 440 | 2.4 | |
Key Bank | A- / A3 | 1 | 2016 | 6,302 | 1.1 | 200 | 1.1 | |
First Data Corporation | B / B3 | 1 | 2020 | 6,132 | 1.0 | 195 | 1.0 | |
Epsilon Data Management | No rating available | 2 | 2026 | 6,107 | 1.0 | 250 | 1.3 | |
Archon Group | A- / A3 | 2 | 2018 | 5,996 | 1.0 | 235 | 1.3 | |
Integrys | A- / A3 | 1 | 2029 | 5,780 | 1.0 | 174 | 0.9 | |
Henry M Jackson | No rating available | 2 | 2022 | 5,688 | 1.0 | 145 | 0.8 | |
Other | Various | 303,351 | 51.1 | 9,916 | 53.3 | |||
Total | $593,598 | 100.0 | 18,612 | 100.0 | ||||
24
Tenant Diversification
Percentage of Annualized Leased Revenue (%)
June 30, 2015 as compared to December 31, 2014
(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. Tenants without a credit rating are no indication of credit worthiness; in most cases, the lack of a credit rating reflects that a tenant has not sought such a rating. |
(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 2030. |
25
Piedmont Office Realty Trust, Inc.
Tenant Credit Rating & Lease Distribution Information
As of June 30, 2015
Tenant Credit Rating (1)
Rating Level | Annualized Lease Revenue (in thousands) | Percentage of Annualized Lease Revenue (%) | |
AAA / Aaa | $58,052 | 9.8 | |
AA / Aa | 91,845 | 15.5 | |
A / A | 116,736 | 19.7 | |
BBB / Baa | 50,435 | 8.5 | |
BB / Ba | 34,550 | 5.8 | |
B / B | 21,664 | 3.6 | |
Below | — | — | |
Not rated (2) | 220,316 | 37.1 | |
Total | $593,598 | 100.0 | |
Lease Distribution
Lease Size | 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 | 220 | 31.8 | $21,662 | 3.7 | 210 | 1.1 | |
2,501 - 10,000 | 209 | 30.2 | 37,305 | 6.3 | 1,118 | 6.0 | |
10,001 - 20,000 | 87 | 12.6 | 36,570 | 6.2 | 1,218 | 6.5 | |
20,001 - 40,000 | 70 | 10.1 | 63,795 | 10.7 | 2,030 | 10.9 | |
40,001 - 100,000 | 56 | 8.1 | 104,072 | 17.5 | 3,323 | 17.9 | |
Greater than 100,000 | 50 | 7.2 | 330,194 | 55.6 | 10,713 | 57.6 | |
Total | 692 | 100.0 | $593,598 | 100.0 | 18,612 | 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. |
26
Piedmont Office Realty Trust, Inc.
Leased Percentage Information
(in thousands)
Three Months Ended | Three Months Ended | ||||||||||||||
June 30, 2015 | June 30, 2014 | ||||||||||||||
Leased Square Footage | Rentable Square Footage | Percent Leased (1) | Leased Square Footage | Rentable Square Footage | Percent Leased (1) | ||||||||||
As of March 31, 20xx | 19,112 | 21,531 | 88.8 | % | 18,309 | 21,107 | 86.7 | % | |||||||
New leases | 357 | 1,260 | |||||||||||||
Expired leases | (324 | ) | (1,165 | ) | |||||||||||
Other | (1 | ) | 2 | (1 | ) | 50 | |||||||||
Subtotal | 19,144 | 21,533 | 88.9 | % | 18,403 | 21,157 | 87.0 | % | |||||||
Acquisitions during period | — | — | 182 | 182 | |||||||||||
Dispositions during period | (532 | ) | (567 | ) | (233 | ) | (253 | ) | |||||||
As of June 30, 20xx (2) | 18,612 | 20,966 | 88.8 | % | 18,352 | 21,086 | 87.0 | % | |||||||
Six Months Ended | Six Months Ended | ||||||||||||||
June 30, 2015 | June 30, 2014 | ||||||||||||||
Leased Square Footage | Rentable Square Footage | Percent Leased (1) | Leased Square Footage | Rentable Square Footage | Percent Leased (1) | ||||||||||
As of December 31, 20xx | 18,828 | 21,471 | 87.7 | % | 18,737 | 21,490 | 87.2 | % | |||||||
New leases | 1,055 | 2,267 | |||||||||||||
Expired leases | (777 | ) | (2,253 | ) | |||||||||||
Other (3) | 2 | 4 | (247 | ) | (191 | ) | |||||||||
Subtotal | 19,108 | 21,475 | 89.0 | % | 18,504 | 21,299 | 86.9 | % | |||||||
Acquisitions during period | 156 | 178 | 182 | 182 | |||||||||||
Dispositions during period | (652 | ) | (687 | ) | (334 | ) | (395 | ) | |||||||
As of June 30, 20xx (2) | 18,612 | 20,966 | 88.8 | % | 18,352 | 21,086 | 87.0 | % | |||||||
Same Store Analysis | |||||||||||||||
Less acquisitions / dispositions after June 30, 2014 and redevelopments (4) (5) | (533 | ) | (555 | ) | 96.0 | % | (651 | ) | (687 | ) | 94.8 | % | |||
Same Store Leased Percentage (2) | 18,079 | 20,411 | 88.6 | % | 17,701 | 20,399 | 86.8 | % | |||||||
(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. Redevelopments commenced during the previous twelve months are deducted from the previous period data. |
27
Piedmont Office Realty Trust, Inc.
Rental Rate Roll Up / Roll Down Analysis (1)
(in thousands)
Three Months Ended | ||||||
June 30, 2015 | ||||||
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 | 370 | 64.6% | 1.8% | 1.4% | 12.4% | |
Leases executed for spaces excluded from analysis (5) | 202 | 35.4% | ||||
Six Months Ended | ||||||
June 30, 2015 | ||||||
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 | 690 | 49.6% | 3.3% | 1.0% | 11.2% | |
Leases executed for spaces excluded from analysis (5) | 699 | 50.4% | ||||
(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 last twelve months of cash rents for the previous leases were compared to the first twelve months of cash rents for 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 usage patterns of tenant improvement allowances by 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 June 30, 2015
(in thousands)
Expiration Year | Annualized Lease Revenue (1) | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | |
Vacant | $— | — | 2,354 | 11.2 | |
2015 (2) | 6,714 | 1.1 | 217 | 1.0 | |
2016 (3) | 38,891 | 6.6 | 1,314 | 6.3 | |
2017 | 49,957 | 8.4 | 1,115 | 5.3 | |
2018 | 53,702 | 9.0 | 1,675 | 8.0 | |
2019 | 65,128 | 11.0 | 2,152 | 10.3 | |
2020 | 56,484 | 9.5 | 2,003 | 9.5 | |
2021 | 37,669 | 6.4 | 1,206 | 5.7 | |
2022 | 39,722 | 6.7 | 1,323 | 6.3 | |
2023 | 34,571 | 5.8 | 1,174 | 5.6 | |
2024 | 47,640 | 8.0 | 1,536 | 7.3 | |
2025 | 22,958 | 3.9 | 772 | 3.7 | |
2026 | 18,482 | 3.1 | 656 | 3.1 | |
2027 | 32,772 | 5.5 | 916 | 4.4 | |
Thereafter | 88,908 | 15.0 | 2,553 | 12.3 | |
Total / Weighted Average | $593,598 | 100.0 | 20,966 | 100.0 | |
Average Lease Term Remaining | |
6/30/2015 | 7.1 years |
12/31/2014 | 7.1 years |
(1) | Annualized rental income associated with each newly executed lease for currently occupied space is incorporated herein only at the expiration date for the current lease. Annualized rental income associated with each such new lease 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 June 30, 2015 aggregating 69,000 square feet and Annualized Lease Revenue of $2.0 million. |
(3) | Leases and other revenue-producing agreements on a month-to-month basis, aggregating 7,000 square feet and Annualized Lease Revenue of $369 thousand, 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 June 30, 2015
(in thousands)
Q3 2015 (1) | Q4 2015 | Q1 2016 | Q2 2016 | |||||||||
Location | 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 | — | $— | — | $— | — | $— | — | $— | ||||
Austin | — | — | — | — | — | — | 194 | 6,499 | ||||
Boston | — | — | — | — | 1 | 23 | — | — | ||||
Central & South Florida | 7 | 162 | — | — | — | — | 17 | 462 | ||||
Chicago | 39 | 1,158 | 34 | 853 | 6 | 243 | 54 | 1,708 | ||||
Dallas | 23 | 667 | 25 | 642 | 20 | 518 | 42 | 1,068 | ||||
Detroit | 20 | 579 | 22 | 450 | 2 | 41 | — | — | ||||
Houston | — | — | — | — | — | — | — | — | ||||
Los Angeles | — | — | — | 6 | 30 | 860 | 22 | 1,376 | ||||
Minneapolis | — | — | 4 | 131 | — | 39 | 7 | 214 | ||||
Nashville | — | — | — | — | — | — | 201 | 2,579 | ||||
New York | 3 | 344 | 6 | 189 | 201 | 6,433 | 14 | 451 | ||||
Philadelphia | — | — | — | — | — | — | — | — | ||||
Phoenix | — | — | — | — | — | — | 46 | 1,056 | ||||
Washington, D.C. | 9 | 298 | 19 | 626 | 59 | 2,682 | 119 | 2,915 | ||||
Other | — | — | 6 | 32 | — | — | ||||||
Total / Weighted Average (3) | 101 | $3,208 | 116 | $2,929 | 319 | $10,839 | 716 | $18,328 | ||||
(1) | Includes leases with an expiration date of June 30, 2015 aggregating 69,000 square feet and expiring lease revenue of $2.0 million. 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 June 30, 2015
(in thousands)
12/31/2015 (1) | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | ||||||||||
Location | 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 | — | $— | 48 | $965 | 41 | $1,002 | 110 | $2,350 | 428 | $10,510 | ||||
Austin | — | — | 195 | 6,503 | — | — | — | — | — | — | ||||
Boston | — | — | 3 | 243 | 116 | 6,714 | 147 | 6,456 | 516 | 9,457 | ||||
Central & South Florida | 7 | 162 | 71 | 1,902 | 158 | 3,999 | 48 | 1,202 | — | — | ||||
Chicago | 73 | 2,010 | 77 | 2,578 | 33 | 8,406 | (3) | 642 | 21,325 | 24 | 625 | |||
Dallas | 48 | 1,309 | 94 | 2,507 | 175 | 4,808 | 385 | 9,881 | 193 | 5,221 | ||||
Detroit | 42 | 1,029 | 28 | 673 | 63 | 1,315 | — | — | 229 | 4,756 | ||||
Houston | — | — | — | — | — | 2 | 150 | 6,613 | — | — | ||||
Los Angeles | — | 6 | 91 | 3,679 | 54 | 1,968 | 25 | 679 | 61 | 1,643 | ||||
Minneapolis | 4 | 131 | 23 | 836 | 36 | 1,251 | 35 | 1,199 | 145 | 4,203 | ||||
Nashville | — | — | 201 | 2,579 | — | — | — | — | — | — | ||||
New York | 9 | 533 | 233 | 7,826 | 50 | 1,642 | 79 | 2,046 | 490 | 25,112 | ||||
Philadelphia | — | — | — | — | — | — | — | — | — | — | ||||
Phoenix | — | — | 46 | 1,056 | — | — | — | — | — | — | ||||
Washington, D.C. | 28 | 924 | 204 | 6,829 | 389 | 20,048 | 38 | 1,608 | 66 | 3,657 | ||||
Other | 6 | 32 | — | — | — | — | 16 | 364 | — | — | ||||
Total / Weighted Average (4) | 217 | $6,136 | 1,314 | $38,176 | 1,115 | $51,155 | 1,675 | $53,723 | 2,152 | $65,184 | ||||
(1) | Includes leases with an expiration date of June 30, 2015 aggregating 69,000 square feet and expiring lease revenue of $2.0 million. 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) | Chicago expirations in 2017 include two parking garage agreements with annualized lease revenue of $7.1 million. The parking garage revenue will continue beyond 2017 despite the expiration of the current parking garage agreements at that time. |
(4) | 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 June 30, 2015
Unaudited (in thousands)
For the Three Months Ended | |||||||||||||||||||
6/30/2015 | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | |||||||||||||||
Non-incremental | |||||||||||||||||||
Building / construction / development | $ | 441 | $ | 1,704 | $ | 1,657 | $ | 6,135 | $ | 3,734 | |||||||||
Tenant improvements | 4,226 | 6,717 | 10,420 | 18,209 | 18,276 | ||||||||||||||
Leasing costs | 6,974 | 1,866 | 1,691 | 6,546 | 4,141 | ||||||||||||||
Total non-incremental | 11,641 | 10,287 | 13,768 | 30,890 | 26,151 | ||||||||||||||
Incremental | |||||||||||||||||||
Building / construction / development | 14,019 | 19,949 | 23,172 | 23,390 | 12,465 | ||||||||||||||
Tenant improvements | 3,960 | 11,106 | 11,455 | 7,802 | 8,394 | ||||||||||||||
Leasing costs | 3,296 | 2,593 | 4,596 | 2,400 | 2,824 | ||||||||||||||
Total incremental | 21,275 | 33,648 | 39,223 | 33,592 | 23,683 | ||||||||||||||
Total capital expenditures | $ | 32,916 | $ | 43,935 | $ | 52,991 | $ | 64,482 | $ | 49,834 | |||||||||
Non-incremental tenant improvement commitments (1) | |||||||
Non-incremental tenant improvement commitments outstanding as of March 31, 2015 | $ | 46,219 | |||||
New non-incremental tenant improvement commitments related to leases executed during period | 12,348 | ||||||
Non-incremental tenant improvement expenditures | (4,226 | ) | |||||
Less: Tenant improvement expenditures fulfilled through accrued liabilities already presented on Piedmont's balance sheet, expired commitments or other adjustments | (5,233 | ) | |||||
Non-incremental tenant improvement commitments fulfilled, expired or other adjustments | (9,459 | ) | |||||
Total as of June 30, 2015 | $ | 49,108 | |||||
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, are due over the next five years, and have not otherwise been presented on Piedmont's financial statements. The four largest commitments total approximately $28.8 million, or 59% of the total outstanding commitments. |
32
Piedmont Office Realty Trust, Inc.
Contractual Tenant Improvements and Leasing Commissions
For the Three Months Ended June 30, 2015 | For the Six Months Ended June 30, 2015 | For the Year Ended | |||||||||
2014 | 2013 | 2012 | |||||||||
Renewal Leases | |||||||||||
Number of leases | 16 | 40 | 56 | 56 | 45 | ||||||
Square feet | 245,668 | 688,176 | 959,424 | 2,376,177 | 1,150,934 | ||||||
Tenant improvements per square foot (1) | $27.08 | $12.95 | $19.02 | $14.24 | $19.12 | ||||||
Leasing commissions per square foot | $16.98 | $8.69 | $8.33 | $4.66 | $6.64 | ||||||
Total per square foot | $44.06 | $21.64 | $27.35 | $18.90 | $25.76 | ||||||
Tenant improvements per square foot per year of lease term | $3.33 | $2.71 | $2.97 | $1.88 | $2.90 | ||||||
Leasing commissions per square foot per year of lease term | $2.09 | $1.82 | $1.30 | $0.62 | $1.01 | ||||||
Total per square foot per year of lease term | $5.42 | (2) | $4.53 | $4.27 | (3) | $2.50 | $3.91 | (4) | |||
New Leases (5) | |||||||||||
Number of leases | 21 | 47 | 98 | 87 | 92 | ||||||
Square feet | 325,238 | 698,518 | 1,142,743 | 1,050,428 | 1,765,510 | ||||||
Tenant improvements per square foot (1) | $39.94 | $44.73 | $34.46 | $35.74 | $47.64 | ||||||
Leasing commissions per square foot | $22.74 | $18.04 | $15.19 | $12.94 | $18.49 | ||||||
Total per square foot | $62.68 | $62.77 | $49.65 | $48.68 | $66.13 | ||||||
Tenant improvements per square foot per year of lease term | $3.37 | $4.26 | $3.78 | $4.17 | $4.30 | ||||||
Leasing commissions per square foot per year of lease term | $1.92 | $1.72 | $1.66 | $1.51 | $1.67 | ||||||
Total per square foot per year of lease term | $5.29 | $5.98 | (6) | $5.44 | $5.68 | $5.97 | |||||
Total | |||||||||||
Number of leases | 37 | 87 | 154 | 143 | 137 | ||||||
Square feet | 570,906 | 1,386,694 | 2,102,167 | 3,426,605 | 2,916,444 | ||||||
Tenant improvements per square foot (1) | $34.41 | $28.96 | $27.41 | $20.83 | $36.39 | ||||||
Leasing commissions per square foot | $20.26 | $13.40 | $12.06 | $7.20 | $13.81 | ||||||
Total per square foot | $54.67 | $42.36 | $39.47 | $28.03 | $50.20 | ||||||
Tenant improvements per square foot per year of lease term | $3.35 | $3.78 | $3.48 | $2.64 | $3.91 | ||||||
Leasing commissions per square foot per year of lease term | $1.97 | $1.75 | $1.53 | $0.91 | $1.48 | ||||||
Total per square foot per year of lease term | $5.32 | $5.53 | (6) | $5.01 | (3) | $3.55 | $5.39 | ||||
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 usage patterns of tenant improvement allowances by the Company's tenants. |
(2) | The average committed capital cost per square foot per year of lease term for renewal leases completed during the second quarter of 2015 was higher than our historical performance on this measure primarily as a result of two long-term lease renewals completed in Washington, D.C. |
(3) | 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 twelve months ended December 31, 2014 would be $2.12 and $4.47, respectively. |
(4) | 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. |
(5) | In prior years, Piedmont opportunistically 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 most of the value-add properties acquired by the Company had large vacancies, many of which had not previously been leased (first generation spaces), the leasing of those vacancies has negatively affected Piedmont’s contractual tenant improvements on a per square foot and a per square foot per year basis for new leases. |
(6) | During 2015, we completed one large, 15-year lease with a significant capital commitment: United States of America (Corporation for National and Community Service) at One Independence Square in Washington, D.C. If the costs associated with this new 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 new leases and total leases completed during the six months ended June 30, 2015 would be $5.45 and $5.12, respectively. |
33
Piedmont Office Realty Trust, Inc.
Geographic Diversification
As of June 30, 2015
($ 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 | $135,481 | 22.8 | 4,832 | 23.1 | 3,929 | 81.3 |
Washington, D.C. | 12 | 98,181 | 16.5 | 3,038 | 14.5 | 2,114 | 69.6 |
New York | 5 | 78,324 | 13.2 | 2,167 | 10.3 | 2,124 | 98.0 |
Minneapolis | 4 | 45,515 | 7.7 | 1,617 | 7.7 | 1,442 | 89.2 |
Dallas | 9 | 45,060 | 7.6 | 1,798 | 8.6 | 1,748 | 97.2 |
Boston | 8 | 42,430 | 7.1 | 1,476 | 7.0 | 1,476 | 100.0 |
Atlanta | 7 | 33,592 | 5.7 | 1,447 | 6.9 | 1,331 | 92.0 |
Los Angeles | 4 | 30,487 | 5.1 | 1,010 | 4.8 | 992 | 98.2 |
Detroit | 3 | 17,954 | 3.0 | 817 | 3.9 | 743 | 90.9 |
Philadelphia | 1 | 17,671 | 3.0 | 801 | 3.8 | 801 | 100.0 |
Houston | 1 | 11,224 | 1.9 | 313 | 1.5 | 313 | 100.0 |
Central & South Florida | 4 | 10,741 | 1.8 | 473 | 2.3 | 437 | 92.4 |
Nashville | 2 | 10,547 | 1.8 | 513 | 2.5 | 513 | 100.0 |
Phoenix | 2 | 6,870 | 1.2 | 299 | 1.4 | 299 | 100.0 |
Austin | 1 | 6,503 | 1.1 | 195 | 0.9 | 195 | 100.0 |
Other | 2 | 3,018 | 0.5 | 170 | 0.8 | 155 | 91.2 |
Total / Weighted Average | 71 | $593,598 | 100.0 | 20,966 | 100.0 | 18,612 | 88.8 |
34
Piedmont Office Realty Trust, Inc.
Geographic Diversification by Location Type
As of June 30, 2015
(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 | 18.0 | 3,705 | 17.7 | 4 | 4.8 | 1,127 | 5.4 | 6 | 22.8 | 4,832 | 23.1 | |||
Washington, D.C. | DC, VA, MD | 9 | 15.9 | 2,699 | 12.9 | 3 | 0.6 | 339 | 1.6 | 12 | 16.5 | 3,038 | 14.5 | |||
New York | NY, NJ | 1 | 7.8 | 1,029 | 4.9 | 4 | 5.4 | 1,138 | 5.4 | 5 | 13.2 | 2,167 | 10.3 | |||
Minneapolis | MN | 1 | 4.5 | 932 | 4.4 | 3 | 3.2 | 685 | 3.3 | 4 | 7.7 | 1,617 | 7.7 | |||
Dallas | TX | 2 | 2.0 | 440 | 2.1 | 7 | 5.6 | 1,358 | 6.5 | 9 | 7.6 | 1,798 | 8.6 | |||
Boston | MA | 2 | 2.1 | 173 | 0.8 | 6 | 5.0 | 1,303 | 6.2 | 8 | 7.1 | 1,476 | 7.0 | |||
Atlanta | GA | 3 | 4.3 | 960 | 4.6 | 4 | 1.4 | 487 | 2.3 | 7 | 5.7 | 1,447 | 6.9 | |||
Los Angeles | CA | 3 | 4.5 | 876 | 4.2 | 1 | 0.6 | 134 | 0.6 | 4 | 5.1 | 1,010 | 4.8 | |||
Detroit | MI | 1 | 1.9 | 487 | 2.3 | 2 | 1.1 | 330 | 1.6 | 3 | 3.0 | 817 | 3.9 | |||
Philadelphia | PA | 1 | 3.0 | 801 | 3.8 | — | — | — | — | 1 | 3.0 | 801 | 3.8 | |||
Houston | TX | — | — | — | — | 1 | 1.9 | 313 | 1.5 | 1 | 1.9 | 313 | 1.5 | |||
Central & South Florida | FL | — | — | — | — | 4 | 1.8 | 473 | 2.3 | 4 | 1.8 | 473 | 2.3 | |||
Nashville | TN | 1 | 1.3 | 312 | 1.5 | 1 | 0.5 | 201 | 1.0 | 2 | 1.8 | 513 | 2.5 | |||
Phoenix | AZ | — | — | — | — | 2 | 1.2 | 299 | 1.4 | 2 | 1.2 | 299 | 1.4 | |||
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 | 26 | 65.3 | 12,414 | 59.2 | 45 | 34.7 | 8,552 | 40.8 | 71 | 100.0 | 20,966 | 100.0 | ||||
35
Piedmont Office Realty Trust, Inc.
Industry Diversification
As of June 30, 2015
($ 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 | 0.9 | $81,971 | 13.8 | 1,674 | 9.0 |
Business Services | 89 | 16.0 | 62,430 | 10.5 | 2,241 | 12.0 |
Depository Institutions | 20 | 3.6 | 47,838 | 8.1 | 1,651 | 8.9 |
Engineering, Accounting, Research, Management & Related Services | 48 | 8.7 | 45,270 | 7.6 | 1,228 | 6.6 |
Nondepository Credit Institutions | 18 | 3.2 | 40,943 | 6.9 | 1,385 | 7.4 |
Insurance Agents, Brokers & Services | 18 | 3.2 | 40,287 | 6.8 | 1,337 | 7.2 |
Insurance Carriers | 21 | 3.8 | 32,790 | 5.5 | 1,315 | 7.1 |
Security & Commodity Brokers, Dealers, Exchanges & Services | 33 | 6.0 | 23,473 | 4.0 | 798 | 4.3 |
Communications | 36 | 6.5 | 21,958 | 3.7 | 667 | 3.6 |
Real Estate | 20 | 3.6 | 18,006 | 3.0 | 529 | 2.8 |
Educational Services | 8 | 1.4 | 14,961 | 2.5 | 395 | 2.1 |
Automotive Repair, Services & Parking | 6 | 1.1 | 13,857 | 2.3 | 54 | 0.3 |
Electronic & Other Electrical Equipment & Components, Except Computer | 11 | 2.0 | 12,509 | 2.1 | 432 | 2.3 |
Food & Kindred Products | 3 | 0.5 | 12,347 | 2.1 | 408 | 2.2 |
Legal Services | 27 | 4.9 | 11,954 | 2.0 | 371 | 2.0 |
Other | 192 | 34.6 | 113,004 | 19.1 | 4,127 | 22.2 |
Total | 555 | 100.0 | $593,598 | 100.0 | 18,612 | 100.0 |
36
Piedmont Office Realty Trust, Inc.
Property Investment Activity
As of June 30, 2015
($ 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 (%) | |
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 | |
TownPark Land | Lake Mary, FL | 11/21/2014 | 100 | N/A | 7,700 | N/A | N/A | |
Park Place on Turtle Creek | Dallas, TX | 1/16/2015 | 100 | 1986 | 46,600 | 178 | 88 | |
Two Pierce Place Land | Itasca, IL | 6/2/2015 | 100 | N/A | 3,709 | N/A | N/A | |
$201,257 | 737 | 97 | ||||||
Dispositions Over Previous Eighteen Months
Property | Location | Disposition Date | Percent Ownership (%) | Year Built | Sale Price | Rentable Square Footage | Percent Leased at Disposition (%) | |
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 | (1) | Hoffman Estates, IL | 5/29/2014 | 72 | 1999 | 8,825 | 194 | — |
3900 Dallas Parkway | Plano, TX | 1/30/2015 | 100 | 1999 | 26,167 | 120 | 100 | |
5601 Headquarters Drive | Plano, TX | 4/28/2015 | 100 | 2001 | 33,700 | 166 | 100 | |
River Corporate Center | Tempe, AZ | 4/29/2015 | 100 | 1998 | 24,600 | 133 | 100 | |
Copper Ridge Center | Lyndhurst, NJ | 5/1/2015 | 100 | 1989 | 50,620 | 268 | 87 | |
$191,662 | 1,276 | 81 | ||||||
Acquisitions Subsequent to Quarter End
Property | Location | Acquisition Date | Percent Ownership (%) | Year Built | Purchase Price | Rentable Square Footage | Percent Leased at Acquisition (%) | |
80 Central Street | Boxborough, MA | 7/24/2015 | 100 | 1988 | $13,500 | 150 | 93 | |
Dispositions Subsequent to Quarter End
Property | Location | Disposition Date | Percent Ownership (%) | Year Built | Sale Price | Rentable Square Footage | Percent Leased at Disposition (%) | |
Eastpoint I & Eastpoint II | Mayfield Heights, OH | 7/28/2015 | 100 | 2000 | $18,500 | 170 | 91 | |
(1) | The sale price and rentable square footage presented are gross figures and have not been adjusted for Piedmont's ownership percentage. Total Percent Leased at Disposition for dispositions completed during the previous eighteen months includes this property at Piedmont's pro rata share of ownership. |
37
Piedmont Office Realty Trust, Inc.
Other Investments
As of June 30, 2015
($ 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 | $7,043 | $9,796 | 148.6 | 100 |
$7,043 | $9,796 | 148.6 | 100 | ||||
Land Parcels
Property | Location | Adjacent Piedmont Property | Acres | Real Estate Book Value |
Gavitello | Atlanta, GA | The Medici | 2.0 | $2,500 |
Glenridge Highlands Three | Atlanta, GA | Glenridge Highlands Two | 3.0 | 1,725 |
State Highway 161 | Irving, TX | Las Colinas Corporate Center II | 4.5 | 3,320 |
Royal Lane | Irving, TX | 6011, 6021 and 6031 Connection Drive | 10.6 | 2,628 |
TownPark | Lake Mary, FL | 400 TownPark | 18.9 | 5,741 |
39.0 | $15,914 | |||
Development and Redevelopment
Property | Location | Adjacent Piedmont Property | Construction Type | Targeted Completion Date | Anticipated Stabilization Date | Percent Leased (%) | Square Feet | Current Asset Basis (Accrual) | Project Capital Expended (Cash) | Estimated Additional Capital Required (1) (Cash) |
Enclave Place | Houston, TX | 1430 Enclave Parkway | Development | Q3 2015 | Q2 2017 | N/A | 300.9 | $51,906 | $46,322 | $39 to $44 million |
3100 Clarendon Boulevard (2) | Arlington, VA | Not Applicable | Redevelopment | Q3 2015 (3) | Q4 2016 | 10 | 261.8 | 78,225 | 25,094 | $29 to $31 million |
500 TownPark | Lake Mary, FL | 400 TownPark | Development | Q1 2017 | Q4 2017 | 80 | 135.0 | 2,180 | 45 | $28 to $30 million |
697.7 | $132,311 | $71,461 | $96 to $105 million | |||||||
(1) | Amount includes anticipated development costs as well as estimated lease-up costs. |
(2) | 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. |
(3) | The redevelopment of the office tower is complete; the retail portion of the redevelopment is anticipated to be completed during the third quarter of 2015. |
38
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 41. |
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 extinguishment of swaps, 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. |
39
Piedmont Office Realty Trust, Inc.
Research Coverage
Equity Research Coverage
Paul E. Adornato, CFA | Barry Oxford | Jed Reagan | Anthony Paolone, CFA |
BMO Capital Markets | D.A. Davidson & Company | Green Street Advisors | JP Morgan |
3 Times Square, 26th Floor | 260 Madison Avenue, 8th Floor | 660 Newport Center Drive, Suite 800 | 383 Madison Avenue |
New York, NY 10036 | New York, NY 10016 | Newport Beach, CA 92660 | 34th Floor |
Phone: (212) 885-4170 | Phone: (212) 240-9871 | Phone: (949) 640-8780 | New York, NY 10179 |
Phone: (212) 622-6682 | |||
Vance H. Edelson | Steve Manaker, CFA | David Rodgers, CFA | John W. Guinee, III |
Morgan Stanley | Oppenheimer & Co. | Robert W. Baird & Co. | Erin Aslakson |
1585 Broadway, 38th Floor | 85 Broad Street | 200 Public Square | Stifel, Nicolaus & Company |
New York, NY 10036 | New York, NY 10004 | Suite 1650 | One South Street |
Phone: (212) 761-0078 | Phone: (212) 667-5950 | Cleveland, OH 44139 | 16th Floor |
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 | ||
40
Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations, and Adjusted Funds From Operations Reconciliations
Unaudited (in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
6/30/2015 | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | 6/30/2015 | 6/30/2014 | |||||||||||||||||||||
GAAP net income applicable to common stock | $ | 29,976 | $ | 19,245 | $ | 12,514 | $ | 9,162 | $ | 12,279 | $ | 49,221 | $ | 21,672 | |||||||||||||
Depreciation | 35,935 | 36,097 | 35,365 | 35,286 | 34,119 | 72,032 | 67,846 | ||||||||||||||||||||
Amortization | 14,971 | 14,686 | 14,188 | 14,248 | 13,608 | 29,657 | 28,412 | ||||||||||||||||||||
Impairment loss | 5,354 | — | — | — | — | 5,354 | — | ||||||||||||||||||||
Loss / (gain) on sale of properties | (26,611 | ) | (10,073 | ) | 8 | — | (2,275 | ) | (36,684 | ) | (2,169 | ) | |||||||||||||||
NAREIT funds from operations applicable to common stock | 59,625 | 59,955 | 62,075 | 58,696 | 57,731 | 119,580 | 115,761 | ||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||
Acquisition costs | 3 | 144 | 21 | 110 | 363 | 147 | 429 | ||||||||||||||||||||
Loss / (gain) on extinguishment of swaps | 132 | — | — | — | — | 132 | — | ||||||||||||||||||||
Net (recoveries) / loss from casualty events and litigation settlements | — | — | (2,478 | ) | 8 | (1,480 | ) | — | (4,522 | ) | |||||||||||||||||
Core funds from operations applicable to common stock | 59,760 | 60,099 | 59,618 | 58,814 | 56,614 | 119,859 | 111,668 | ||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||
Deferred financing cost amortization | 680 | 724 | 627 | 598 | 615 | 1,404 | 1,478 | ||||||||||||||||||||
Amortization of note payable step-up | (121 | ) | (121 | ) | (120 | ) | (120 | ) | (6 | ) | (242 | ) | (6 | ) | |||||||||||||
Amortization of discount on senior notes | 49 | 48 | 47 | 47 | 47 | 97 | 81 | ||||||||||||||||||||
Depreciation of non real estate assets | 165 | 196 | 138 | 141 | 115 | 361 | 229 | ||||||||||||||||||||
Straight-line effects of lease revenue | (3,745 | ) | (4,510 | ) | (5,171 | ) | (6,780 | ) | (7,758 | ) | (8,255 | ) | (17,170 | ) | |||||||||||||
Stock-based and other non-cash compensation expense | 1,692 | 725 | 929 | 1,139 | 1,271 | 2,417 | 1,907 | ||||||||||||||||||||
Amortization of lease-related intangibles | (1,102 | ) | (1,122 | ) | (1,074 | ) | (1,010 | ) | (1,279 | ) | (2,224 | ) | (2,643 | ) | |||||||||||||
Acquisition costs | (3 | ) | (144 | ) | (21 | ) | (110 | ) | (363 | ) | (147 | ) | (429 | ) | |||||||||||||
Non-incremental capital expenditures | (11,641 | ) | (10,287 | ) | (13,768 | ) | (30,890 | ) | (26,151 | ) | (21,928 | ) | (39,972 | ) | |||||||||||||
Adjusted funds from operations applicable to common stock | $ | 45,734 | $ | 45,608 | $ | 41,205 | $ | 21,829 | $ | 23,105 | $ | 91,342 | $ | 55,143 | |||||||||||||
41
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
6/30/2015 | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | 6/30/2015 | 6/30/2014 | |||||||||||||||||||||
Net income attributable to Piedmont | $ | 29,976 | $ | 19,245 | $ | 12,514 | $ | 9,162 | $ | 12,279 | $ | 49,221 | $ | 21,672 | |||||||||||||
Net income attributable to noncontrolling interest | 4 | 4 | 3 | 4 | 4 | 8 | 8 | ||||||||||||||||||||
Interest expense | 18,172 | 19,016 | 18,854 | 18,654 | 18,012 | 37,188 | 36,938 | ||||||||||||||||||||
Depreciation | 36,100 | 36,292 | 35,503 | 35,427 | 34,234 | 72,393 | 68,075 | ||||||||||||||||||||
Amortization | 14,971 | 14,686 | 14,188 | 14,248 | 13,608 | 29,657 | 28,412 | ||||||||||||||||||||
Acquisition costs | 3 | 144 | 21 | 110 | 363 | 147 | 429 | ||||||||||||||||||||
Impairment loss | 5,354 | — | — | — | — | 5,354 | — | ||||||||||||||||||||
Net (recoveries) / loss from casualty events and litigation settlements | — | — | (2,478 | ) | 8 | (1,480 | ) | — | (4,522 | ) | |||||||||||||||||
Loss / (gain) on sale of properties | (26,611 | ) | (10,073 | ) | 8 | — | (2,275 | ) | (36,684 | ) | (2,169 | ) | |||||||||||||||
Core EBITDA | 77,969 | 79,314 | 78,613 | 77,613 | 74,745 | 157,284 | 148,843 | ||||||||||||||||||||
General & administrative expenses | 8,102 | 6,416 | 6,313 | 5,808 | 7,159 | 14,518 | 11,742 | ||||||||||||||||||||
Management fee revenue | (232 | ) | (330 | ) | (272 | ) | (299 | ) | (281 | ) | (562 | ) | (540 | ) | |||||||||||||
Other (income) / expense | (599 | ) | 38 | (15 | ) | 21 | 3 | (562 | ) | 32 | |||||||||||||||||
Straight-line effects of lease revenue | (3,745 | ) | (4,510 | ) | (5,171 | ) | (6,780 | ) | (7,758 | ) | (8,255 | ) | (17,170 | ) | |||||||||||||
Amortization of lease-related intangibles | (1,102 | ) | (1,122 | ) | (1,074 | ) | (1,010 | ) | (1,279 | ) | (2,224 | ) | (2,643 | ) | |||||||||||||
Property net operating income (cash basis) | 80,393 | 79,806 | 78,394 | 75,353 | 72,589 | 160,199 | 140,264 | ||||||||||||||||||||
Deduct net operating (income) / loss from: | |||||||||||||||||||||||||||
Acquisitions | (2,842 | ) | (2,665 | ) | (2,314 | ) | (1,387 | ) | (55 | ) | (5,507 | ) | (55 | ) | |||||||||||||
Dispositions | (562 | ) | (2,137 | ) | (2,459 | ) | (2,563 | ) | (3,230 | ) | (2,700 | ) | (6,718 | ) | |||||||||||||
Other investments | (251 | ) | (296 | ) | (277 | ) | (214 | ) | 89 | (546 | ) | 472 | |||||||||||||||
Same store net operating income (cash basis) | $ | 76,738 | $ | 74,708 | $ | 73,344 | $ | 71,189 | $ | 69,393 | $ | 151,446 | $ | 133,963 | |||||||||||||
42
Piedmont Office Realty Trust, Inc.
Unconsolidated Joint Venture Net Operating Income Reconciliations
Pro rata and unaudited (in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
6/30/2015 | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | 6/30/2015 | 6/30/2014 | |||||||||||||||||||||
Equity in income of unconsolidated joint ventures | $ | 124 | $ | 159 | $ | 160 | $ | 89 | $ | (333 | ) | $ | 283 | $ | (599 | ) | |||||||||||
Interest expense | — | — | — | — | — | — | — | ||||||||||||||||||||
Depreciation | 62 | 62 | 61 | 61 | 90 | 123 | 203 | ||||||||||||||||||||
Amortization | 16 | 16 | 16 | 13 | 8 | 32 | 17 | ||||||||||||||||||||
Impairment loss | — | — | — | — | — | — | — | ||||||||||||||||||||
Loss / (gain) on sale of properties | — | — | — | — | 169 | — | 169 | ||||||||||||||||||||
Core EBITDA | 202 | 237 | 237 | 163 | (66 | ) | 438 | (210 | ) | ||||||||||||||||||
General and administrative expenses | 18 | 8 | 6 | 2 | 12 | 27 | 36 | ||||||||||||||||||||
Other (income) / expense | — | — | — | — | — | — | — | ||||||||||||||||||||
Property net operating income (accrual basis) | 220 | 245 | 243 | 165 | (54 | ) | 465 | (174 | ) | ||||||||||||||||||
Straight-line effects of lease revenue | (5 | ) | (5 | ) | (8 | ) | (7 | ) | (6 | ) | (10 | ) | (13 | ) | |||||||||||||
Amortization of lease-related intangibles | — | — | — | — | — | — | — | ||||||||||||||||||||
Property net operating income (cash basis) | $ | 215 | $ | 240 | $ | 235 | $ | 158 | $ | (60 | ) | $ | 455 | $ | (187 | ) | |||||||||||
43
Piedmont Office Realty Trust, Inc.
Discontinued Operations
Unaudited (in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
6/30/2015 | 3/31/2015 | 12/31/2014 | 9/30/2014 | 6/30/2014 | 6/30/2015 | 6/30/2014 | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||
Rental income | $ | — | $ | — | $ | — | $ | — | $ | 191 | $ | — | $ | 1,365 | |||||||||||||
Tenant reimbursements | (3 | ) | — | (1 | ) | 12 | 2 | (3 | ) | 114 | |||||||||||||||||
Property management fee revenue | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||
Other rental income | — | — | — | — | — | — | — | ||||||||||||||||||||
(3 | ) | — | (1 | ) | 12 | 194 | (3 | ) | 1,480 | ||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||
Property operating costs | (1 | ) | — | 40 | 3 | (323 | ) | (1 | ) | 182 | |||||||||||||||||
Depreciation | — | — | — | — | — | — | 83 | ||||||||||||||||||||
Amortization | — | — | — | — | — | — | 223 | ||||||||||||||||||||
General and administrative | 1 | — | 1 | (7 | ) | 3 | 1 | 6 | |||||||||||||||||||
— | — | 41 | (4 | ) | (320 | ) | — | 494 | |||||||||||||||||||
Other income / (expense): | |||||||||||||||||||||||||||
Interest expense | — | — | — | — | — | — | — | ||||||||||||||||||||
Other income / (expense) | — | — | — | — | — | — | (6 | ) | |||||||||||||||||||
Net recoveries / (loss) from casualty events and litigation settlements | — | — | — | — | — | — | — | ||||||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | — | — | ||||||||||||||||||||
— | — | — | — | — | — | (6 | ) | ||||||||||||||||||||
Operating income, excluding impairment loss and gain / (loss) on sale | (3 | ) | — | (42 | ) | 16 | 514 | (3 | ) | 980 | |||||||||||||||||
Impairment loss | — | — | — | — | — | — | — | ||||||||||||||||||||
Gain / (loss) on sale of properties | — | — | — | — | 1,304 | — | 1,198 | ||||||||||||||||||||
Income from discontinued operations | $ | (3 | ) | $ | — | $ | (42 | ) | $ | 16 | $ | 1,818 | $ | (3 | ) | $ | 2,178 | ||||||||||
44
Piedmont Office Realty Trust, Inc.
Property Detail
As of June 30, 2015
(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 | 92.1 | % | 87.1 | % | 87.1 | % |
3750 Brookside Parkway | Alpharetta | GA | 100.0% | 2001 | 105 | 91.4 | % | 91.4 | % | 91.4 | % |
Glenridge Highlands Two | Atlanta | GA | 100.0% | 2000 | 427 | 100.0 | % | 90.6 | % | 87.4 | % |
Suwanee Gateway One | Suwanee | GA | 100.0% | 2008 | 143 | 42.0 | % | — | % | — | % |
The Dupree | Atlanta | GA | 100.0% | 1997 | 138 | 100.0 | % | 100.0 | % | 91.3 | % |
The Medici | Atlanta | GA | 100.0% | 2008 | 156 | 89.7 | % | 86.5 | % | 59.0 | % |
1155 Perimeter Center West | Atlanta | GA | 100.0% | 2000 | 377 | 100.0 | % | 100.0 | % | 100.0 | % |
Metropolitan Area Subtotal / Weighted Average | 1,447 | 92.0 | % | 84.4 | % | 79.6 | % | ||||
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 | % | 89.7 | % | 28.6 | % |
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 | % | 98.8 | % | 91.5 | % | ||||
Chicago | |||||||||||
Windy Point I | Schaumburg | IL | 100.0% | 1999 | 187 | 81.3 | % | 81.3 | % | 81.3 | % |
Windy Point II | Schaumburg | IL | 100.0% | 2001 | 301 | 100.0 | % | 100.0 | % | 83.1 | % |
Aon Center | Chicago | IL | 100.0% | 1972 | 2,738 | 79.9 | % | 78.7 | % | 71.7 | % |
Two Pierce Place | Itasca | IL | 100.0% | 1991 | 486 | 96.7 | % | 88.5 | % | 81.1 | % |
2300 Cabot Drive | Lisle | IL | 100.0% | 1998 | 153 | 77.1 | % | 77.1 | % | 69.3 | % |
500 West Monroe Street | Chicago | IL | 100.0% | 1991 | 967 | 72.5 | % | 67.1 | % | 58.7 | % |
Metropolitan Area Subtotal / Weighted Average | 4,832 | 81.3 | % | 78.7 | % | 71.1 | % | ||||
Cleveland | |||||||||||
Eastpoint I | Mayfield Heights | OH | 100.0% | 2000 | 85 | 87.1 | % | 70.6 | % | 70.6 | % |
Eastpoint II | Mayfield Heights | OH | 100.0% | 2000 | 85 | 95.3 | % | 95.3 | % | 95.3 | % |
Metropolitan Area Subtotal / Weighted Average | 170 | 91.2 | % | 82.9 | % | 82.9 | % | ||||
45
Property | City | State | Percent Ownership | Year Built | Rentable Square Footage Owned | Leased Percentage | Commenced Leased Percentage | Economic Leased Percentage (1) | |||
Dallas | |||||||||||
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 | % | 100.0 | % |
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 | 100.0 | % | 99.4 | % | 99.4 | % |
Las Colinas Corporate Center II | Irving | TX | 100.0% | 1998 | 228 | 99.1 | % | 99.1 | % | 98.7 | % |
6565 North MacArthur Boulevard | Irving | TX | 100.0% | 1998 | 260 | 98.5 | % | 97.7 | % | 94.2 | % |
One Lincoln Park | Dallas | TX | 100.0% | 1999 | 262 | 91.6 | % | 91.6 | % | 84.0 | % |
161 Corporate Center | Irving | TX | 100.0% | 1998 | 105 | 100.0 | % | 100.0 | % | 100.0 | % |
Park Place on Turtle Creek | Dallas | TX | 100.0% | 1986 | 178 | 87.6 | % | 87.6 | % | 87.6 | % |
Metropolitan Area Subtotal / Weighted Average | 1,798 | 97.2 | % | 97.1 | % | 95.4 | % | ||||
Detroit | |||||||||||
150 West Jefferson | Detroit | MI | 100.0% | 1989 | 487 | 84.8 | % | 84.2 | % | 75.2 | % |
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 | 90.9 | % | 90.6 | % | 85.2 | % | ||||
Central & South Florida | |||||||||||
Sarasota Commerce Center II | Sarasota | FL | 100.0% | 1999 | 149 | 89.9 | % | 89.9 | % | 89.9 | % |
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 | 88.1 | % | 88.1 | % | 83.5 | % |
Metropolitan Area Subtotal / Weighted Average | 473 | 92.4 | % | 92.4 | % | 90.7 | % | ||||
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 | % | 99.2 | % | 98.7 | % |
1055 East Colorado Boulevard | Pasadena | CA | 100.0% | 2001 | 176 | 98.9 | % | 97.2 | % | 91.5 | % |
Fairway Center II | Brea | CA | 100.0% | 2002 | 134 | 100.0 | % | 100.0 | % | 100.0 | % |
1901 Main Street | Irvine | CA | 100.0% | 2001 | 173 | 93.1 | % | 93.1 | % | 93.1 | % |
Metropolitan Area Subtotal / Weighted Average | 1,010 | 98.2 | % | 97.9 | % | 96.6 | % | ||||
Minneapolis | |||||||||||
Crescent Ridge II | Minnetonka | MN | 100.0% | 2000 | 301 | 83.4 | % | 81.7 | % | 76.4 | % |
US Bancorp Center | Minneapolis | MN | 100.0% | 2000 | 932 | 87.0 | % | 86.2 | % | 84.9 | % |
One Meridian Crossings | Richfield | MN | 100.0% | 1997 | 195 | 100.0 | % | 100.0 | % | 100.0 | % |
Two Meridian Crossings | Richfield | MN | 100.0% | 1998 | 189 | 97.9 | % | 94.7 | % | 94.7 | % |
Metropolitan Area Subtotal / Weighted Average | 1,617 | 89.2 | % | 88.0 | % | 86.3 | % | ||||
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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 | % | 91.9 | % |
60 Broad Street | New York | NY | 100.0% | 1962 | 1,029 | 99.9 | % | 94.3 | % | 94.3 | % |
600 Corporate Drive | Lebanon | NJ | 100.0% | 2005 | 125 | 100.0 | % | 100.0 | % | 100.0 | % |
400 Bridgewater Crossing | Bridgewater | NJ | 100.0% | 2002 | 299 | 92.3 | % | 92.3 | % | 80.9 | % |
Metropolitan Area Subtotal / Weighted Average | 2,167 | 98.0 | % | 95.3 | % | 93.5 | % | ||||
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 | |||||||||||
Desert Canyon 300 | Phoenix | AZ | 100.0% | 2001 | 149 | 100.0 | % | 100.0 | % | 100.0 | % |
Chandler Forum | Chandler | AZ | 100.0% | 2003 | 150 | 100.0 | % | 86.0 | % | 86.0 | % |
Metropolitan Area Subtotal / Weighted Average | 299 | 100.0 | % | 93.0 | % | 93.0 | % | ||||
Washington, D.C. | |||||||||||
1201 Eye Street | Washington | DC | 49.5% (2) | 2001 | 269 | 65.4 | % | 65.4 | % | 65.4 | % |
1225 Eye Street | Washington | DC | 49.5% (2) | 1986 | 225 | 88.9 | % | 77.8 | % | 65.8 | % |
400 Virginia Avenue | Washington | DC | 100.0% | 1985 | 224 | 80.8 | % | 80.8 | % | 80.8 | % |
4250 North Fairfax Drive | Arlington | VA | 100.0% | 1998 | 306 | 46.7 | % | 38.6 | % | 30.7 | % |
9211 Corporate Boulevard | Rockville | MD | 100.0% | 1989 | 115 | 27.8 | % | — | % | — | % |
9221 Corporate Boulevard | Rockville | MD | 100.0% | 1989 | 115 | 100.0 | % | 100.0 | % | 100.0 | % |
One Independence Square | Washington | DC | 100.0% | 1991 | 334 | 25.4 | % | — | % | — | % |
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 | 60.5 | % | 59.2 | % | 54.3 | % |
Arlington Gateway (3) | Arlington | VA | 100.0% | 2005 | 326 | 96.0 | % | 94.2 | % | 92.0 | % |
Metropolitan Area Subtotal / Weighted Average | 3,038 | 69.6 | % | 63.8 | % | 61.5 | % | ||||
Grand Total | 20,966 | 88.8 | % | 86.1 | % | 82.4 | % | ||||
(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 326,000 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. Examples of such statements in this supplemental package include our estimated Core FFO and Core FFO per diluted share for calendar year 2015, whether our disposition of assets will close and our anticipated use of net sales proceeds of Aon Center.
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; 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, 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 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; 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; 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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