8-K


 

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):  May 2, 2016
 
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 May 2, 2016, Piedmont Office Realty Trust, Inc. (the “Registrant”) issued a press release announcing its financial results for the first quarter 2016, and published supplemental information for the first quarter 2016 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 May 2, 2016.
 
 
 
99.2
 
Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the First Quarter 2016.









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: May 2, 2016
 
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 May 2, 2016.
 
 
 
99.2
 
Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the First Quarter 2016.




Exhibit


EXHIBIT 99.1

Piedmont Office Realty Trust Reports First Quarter 2016 Results
ATLANTA, May 2, 2016 --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 March 31, 2016.

Highlights for the Three Months Ended March 31, 2016:

Achieved Core Funds From Operations ("Core FFO") of $0.41 per diluted share as compared with $0.39 per diluted share for the three months ended March 31, 2015;
Achieved Adjusted Funds from Operations ("AFFO") of $0.30 per diluted share;
Completed over 350,000 square feet of leasing, approximately half of which related to new leases, improving the overall leased percentage of the portfolio to 91.7%;
Paid off a $125.0 million maturing mortgage, reducing the amount of secured debt;
Repurchased almost half a million shares of its common stock at an average price of $17.20 per share; and
Marketed three assets for sale that closed subsequent to quarter end.

Donald A. Miller, CFA, President and Chief Executive Officer, said, "During the first quarter, we maintained our focus on many of the same strategies we employed during 2015. We began marketing several non-core assets in the portfolio for sale and capitalized on the volatile equity market by opportunistically investing in our own stock. Improved occupancy levels and the attendant NOI increases, coupled with our repurchase activity, allowed us to deliver increased year over year FFO per share results, despite the sale of almost $1 billion of assets during 2015. Given that we have very few expirations in 2016 and 2017, our leasing activity during the first quarter concentrated on remaining vacancies.”

Results for the Quarter ended March 31, 2016

Piedmont recognized net income applicable to common stockholders for the three months ended March 31, 2016 of $10.4 million, or $0.07 per diluted share, as compared with $19.2 million, or $0.12 per diluted share, for the three months ended March 31, 2015. The first quarter of 2015 included a $10.1 million, or $0.07 per diluted share, gain on sale of real estate asset during the period associated with the sale of 3900 Dallas Parkway, located in Plano, TX.

Revenues for the three months ended March 31, 2016 were $138.0 million as compared to $149.8 million for the same period a year ago, primarily due to the sale of nine assets during 2015, including our largest asset, Aon Center. The decrease was partially offset by acquisitions subsequent to the first quarter of last year and new leases commencing over the last twelve months.






Property operating costs decreased approximately $10.0 million, from $64.2 million for the three months ended March 31, 2015 to $54.2 million for the three months ended March 31, 2016, primarily due to the sale of nine assets during 2015, including Aon Center.

Results for the three months ended March 31, 2016 also reflect a $2.6 million decrease in interest expense and a $1.5 million increase in general and administrative expense as compared to the three months ended March 31, 2015. The decrease in interest expense as compared to the same quarter of the prior year is attributable to the use of disposition proceeds to lower our average outstanding debt balance and lower interest rates due to refinancing activity. The increase in general and administrative expense is primarily a result of increased accruals for potential performance-based stock compensation during the quarter ended March 31, 2016 due to the Company's out performance relative to its peers with regard to total shareholder return during the first quarter of 2016.

Funds From Operations ("FFO") and Core FFO were both $0.41 per diluted share for the three months ended March 31, 2016 as compared to $0.39 for those same metrics for the three months ended March 31, 2015. The per share increase was primarily driven by the commencement of several new leases and increased occupancy over the past twelve months and an almost nine million share reduction in our weighted average shares outstanding as a result of shares repurchased using disposition proceeds over the last twelve months.

AFFO was $43.6 million, or $0.30 per diluted share for the three months ended March 31, 2016, compared to $45.6 million, or $0.30 per diluted share for the three months ended March 31, 2015. The approximately $2.1 million decrease was driven by an increase in the straight line effects of our lease revenue during the quarter ended March 31, 2016 as compared to the first quarter of the previous year due primarily to rental abatements on recently commenced leases. This decrease was offset on a per share basis by an almost nine million share reduction in our weighted average shares outstanding as a result of shares repurchased over the last twelve months.

Leasing Update

The Company's leasing volume for the three months ended March 31, 2016 totaled 353,000 square feet, of which approximately 182,000 related to new tenant leasing. Highlights of new leasing for the quarter included an approximately 29,000 square foot, 3-year lease with Telogis, Inc. at Braker Point III in Austin, TX and an approximately 28,000 square foot lease through June of 2019 with GKN Aerospace at 6031 Connection Drive in Irving, TX. Renewal highlights included Vertex's 5-year renewal of its approximately 26,000 square feet at Sarasota Commerce Center in Sarasota, FL; and McKinsey and Company, Inc.'s 5-year extension of it's approximately 20,000 square feet at 150 West Jefferson, in Detroit, MI. In addition, Bomgar renewed and expanded to 21,000 square feet for approximately 7 years at 11695 John's Creek Parkway, in John's Creek, GA.

The Company's overall portfolio was approximately 91.7% leased as of March 31, 2016, up 290 basis points from 88.8% a year ago. Weighted average lease term remaining was approximately 6.7 years as of March 31, 2016, consistent with December 31, 2015. Cash basis SSNOI was $69.3 million for the three months ended March 31, 2016, up approximately 1% over the same period in the prior year. As of March 31, 2016, the Company had approximately 1.4 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.






Financing Activity

During the three months ended March 31, 2016, we repaid a maturing $125.0 million, 5.5% mortgage loan collateralized by four properties using property sales proceeds and capacity on our $500 million line of credit. Total debt decreased by approximately $27.0 million during the three months ended March 31, 2016.

Transactional Activity Subsequent to Quarter End

On April 21, 2016, Piedmont sold 1055 E. Colorado, an approximately 176,000 square foot 99% leased, office building located in Pasadena, CA, for $61.3 million ($348 per square foot).

On April 28, 2016, Piedmont sold Fairway Center II, an approximately 134,000 square foot, 97% leased, office building located in Brea, CA, for $33.8 million ($252 per square foot).

Additionally, on May 2, 2016, Piedmont sold 1901 Main Street, an approximately 173,000 square foot, 100% leased, office building located in Irvine, CA, for $66.0 million ($382 per square foot).

The above three transactions complete various reverse 1031 exchanges with three office properties acquired by the Company in the fourth quarter of 2015.

Other Events

Second Quarter Dividend Declaration

On April 27, 2016, the board of directors of Piedmont declared dividends for the second quarter of 2016 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on May 27, 2016, payable on June 17, 2016.

Guidance for 2016

Based on management's expectations, the Company affirms its previous guidance for full-year 2016 as follows:
(in millions, except per share data)
 
Low
 
High
Net Income
 
$137
-
$156
Add: Depreciation, Amortization, and Other
 
169

-
176
Less: Gain on Sale of Real Estate Assets
 
(75
)
-
(90)
Core FFO
 
$231
-
$242
Core FFO per diluted share
 
$1.58
-
$1.66

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, Core FFO, AFFO, 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 Tuesday, May 3, 2016 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 May 17, 2016, 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 13634256. 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 first quarter 2016 performance, discuss recent events, and conduct a question-and-answer period.

Supplemental Information

Quarterly supplemental information as of and for the period ended March 31, 2016 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 $5 billion portfolio is comprised of approximately 20 million square feet. The Company is a fully-integrated, self-managed real estate investment trust (REIT) with local management offices in each of its major markets and is investment-grade rated by Standard & Poor’s (BBB) and Moody’s (Baa2). For more information, see www.piedmontreit.com.

Forward Looking Statements

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





such statements in this press release include, but are not limited to 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, 2016.

The following are some of the factors that could cause the Company`s actual results and its expectations to differ materially from those described in the Company`s forward-looking statements: economic, regulatory and socio-economic changes (including accounting standards) that impact the real estate market generally or that could affect the patters of use of commercial office space, may cause our operating results to suffer and decrease the value of our real estate properties; the success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions and divestitures; 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 affecting the office market in general and of the specific markets in which we operate, particularly in Washington, D.C., the New York metropolitan area, and Chicago where we have high concentrations of office properties; the illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties; acquisitions of properties may have unknown risks and other liabilities at the time of acquisition; development and construction delays and resultant increased costs and risks may negatively impact our operating results; our real estate development strategies may not be successful; future terrorist attacks in the major metropolitan areas in which we own properties could significantly impact the demand for, and value of, our properties; additional risks and costs associated with directly managing properties occupied by government tenants; adverse market and economic conditions may negatively affect us and could cause us to recognize impairment charges on both our long-lived assets or goodwill 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; future offerings of debt or equity securities may adversely affect the market price of our common stock; changes in market interest rates may have an effect on the value of our common stock; uncertainties associated with environmental and other regulatory matters; potential changes in political environment and reduction in federal and/or state funding of our governmental tenants; we may be subject to litigation, which could have a material adverse effect on our financial condition; changes in tax laws impacting REITs and real estate in general, as well as our ability to continue to qualify as a REIT under the Internal Revenue Code; and other factors detailed in the Company`s most recent Annual Report on Form 10-K for the period ended December 31, 2015, 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)
 
 
 
 
March 31, 2016
 
December 31, 2015
 
(unaudited)
 
 
Assets:
 
 
 
Real estate assets, at cost:
 
 
 
Land
$
685,850

 
$
685,850

Buildings and improvements
3,844,717

 
3,826,322

Buildings and improvements, accumulated depreciation
(951,484
)
 
(922,019
)
Intangible lease assets
176,436

 
177,675

Intangible lease assets, accumulated amortization
(98,314
)
 
(93,012
)
Construction in progress
25,901

 
20,990

Total real estate assets
3,683,106

 
3,695,806

Investments in and amounts due from unconsolidated joint ventures
7,483

 
7,577

Cash and cash equivalents
4,732

 
5,441

Tenant receivables, net of allowance for doubtful accounts
22,040

 
26,339

Straight line rent receivables
161,087

 
152,122

Notes receivable

 
45,400

Restricted cash and escrows
591

 
5,174

Prepaid expenses and other assets
24,708

 
24,843

Goodwill
180,097

 
180,097

Deferred lease costs, less accumulated amortization
271,173

 
291,736

Total assets
$
4,355,017

 
$
4,434,535

Liabilities:
 
 
 
Unsecured debt, net of discount
$
1,626,799

 
$
1,528,221

Secured debt
376,119

 
501,289

Accounts payable, accrued expenses, and accrued capital expenditures
103,894

 
128,465

Deferred income
28,143

 
27,270

Intangible lease liabilities, less accumulated amortization
40,926

 
42,853

Interest rate swaps
19,473

 
9,993

Total liabilities
2,195,354

 
2,238,091

Stockholders' equity :
 
 
 
Common stock
1,451

 
1,455

Additional paid in capital
3,671,055

 
3,669,977

Cumulative distributions in excess of earnings
(1,505,704
)
 
(1,477,674
)
Other comprehensive income
(8,168
)
 
1,661

Piedmont stockholders' equity
2,158,634

 
2,195,419

Non-controlling interest
1,029

 
1,025

Total stockholders' equity
2,159,663

 
2,196,444

Total liabilities and stockholders' equity
$
4,355,017

 
$
4,434,535

 
 
 
 
Number of shares of common stock outstanding as of end of period
145,093

 
145,512







Piedmont Office Realty Trust, Inc.
 
 
 
Consolidated Statements of Income
 
 
 
Unaudited (in thousands, except for per share data)
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/2016
 
3/31/2015
Revenues:
 
 
 
Rental income
$
114,738

 
$
117,807

Tenant reimbursements
22,751

 
31,390

Property management fee revenue
523

 
562

Total revenues
138,012

 
149,759

Expenses:
 
 
 
Property operating costs
54,188

 
64,236

Depreciation
31,782

 
36,232

Amortization
17,806

 
14,670

General and administrative
7,864

 
6,407

Total operating expenses
111,640

 
121,545

Real estate operating income
26,372

 
28,214

Other income (expense):
 
 
 
Interest expense
(16,385
)
 
(19,016
)
Other income (expense)
294

 
(181
)
Equity in income of unconsolidated joint ventures
115

 
159

Gain (loss) on sales of real estate
(20
)
 
10,073

Net income
10,376

 
19,249

Less: Net income applicable to noncontrolling interest
(4
)
 
(4
)
Net income applicable to Piedmont
$
10,372

 
$
19,245

Weighted average common shares outstanding - diluted*
145,791

 
154,580

Per Share Information -- diluted:
 
 
 
Net income applicable to common stockholders
$
0.07

 
$
0.12

 
 
 
 
*Number of shares of common stock outstanding as of end of period
145,093

 
154,340







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
 
3/31/2016
 
3/31/2015
GAAP net income applicable to common stock
$
10,372

 
$
19,245

Depreciation (1) (2)
31,639

 
36,097

Amortization (1)
17,822

 
14,686

Loss/(gain) on sale of real estate assets (1)
20

 
(10,073
)
NAREIT Funds From Operations applicable to common stock*
59,853

 
59,955

Acquisition costs
12

 
144

Core Funds From Operations applicable to common stock*
59,865

 
60,099

Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on debt
647

 
651

Depreciation of non real estate assets
204

 
196

Straight-line effects of lease revenue (1)
(7,848
)
 
(4,510
)
Stock-based and other non-cash compensation expense
1,928

 
725

Net effect of amortization of above or below-market in-place lease intangibles (1)
(1,238
)
 
(1,122
)
Acquisition costs
(12
)
 
(144
)
Non-incremental capital expenditures (3)
(9,996
)
 
(10,287
)
Adjusted funds from operations applicable to common stock*
$
43,550

 
$
45,608

Weighted average common shares outstanding - diluted**
145,791

 
154,580

Funds from operations per share (diluted)
$
0.41

 
$
0.39

Core funds from operations per share (diluted)
$
0.41

 
$
0.39

Adjusted funds from operations per share (diluted)
$
0.30

 
$
0.30

 
 
 
 
**Number of shares of common stock outstanding as of end of period
145,093

 
154,340


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






*Definitions

Funds From Operations ("FFO"): 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
 
3/31/2016
 
3/31/2015
 
 
 
 
Net income applicable to Piedmont
$
10,372

 
$
19,245

Net income applicable to noncontrolling interest
4

 
4

Interest expense
16,385

 
19,016

Depreciation (1)
31,843

 
36,292

Amortization (1)
17,822

 
14,686

Acquisition costs
12

 
144

Loss/(gain) on sale of real estate assets (1)
20

 
(10,073
)
Core EBITDA*
76,458

 
79,314

General & administrative expenses (1)
7,869

 
6,416

Management fee revenue
(292
)
 
(330
)
Other (income)/expense (1)
(307
)
 
38

Straight line effects of lease revenue (1)
(7,848
)
 
(4,510
)
Amortization of lease-related intangibles (1)
(1,238
)
 
(1,122
)
Property Net Operating Income (cash basis)*
74,642

 
79,806

Acquisitions
(5,215
)
 
(513
)
Dispositions
29

 
(10,413
)
Other investments
(126
)
 
(270
)
Same Store NOI (cash basis)*
$
69,330

 
$
68,610

Change period over period in Property NOI
(6.5
)%
 
N/A

Change period over period in Same Store NOI
1.0
 %
 
N/A


(1) Includes amounts attributable to consolidated properties 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



EXHIBIT 99.2







Quarterly Supplemental Information
March 31, 2016










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 Ratio Analysis
 
 
 
Operational & Portfolio Information - Office Investments
 
 
 
 
Tenant Diversification
 
 
 
Tenant Credit Rating & Lease Distribution Information
 
 
 
Leased Percentage Information
 
 
 
Rental Rate Roll Up / Roll Down Analysis
 
 
 
Lease Expiration Schedule
 
 
 
Quarterly Lease Expirations
 
 
 
Annual Lease Expirations
 
 
 
Capital Expenditures & Commitments
 
 
 
Contractual Tenant Improvements & Leasing Commissions
 
 
 
Geographic Diversification
 
 
 
Geographic Diversification by Location Type
 
 
 
Industry Diversification
 
 
 
Property Investment Activity
 
 
 
 
 
 
 
 



Notice to Readers:
Please refer to page 47 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 $5 billion portfolio is comprised of nearly 20 million square feet (as of the date of release of this report). 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
 
March 31, 2016
 
December 31, 2015
Number of consolidated office properties (1)
69
 
69
Rentable square footage (in thousands) (1)
18,930
 
18,934
Percent leased (2)
91.7
%
 
91.5
%
Capitalization (in thousands):
 
 
 
Total debt - principal amount outstanding
$2,013,830
 
$2,040,970
Equity market capitalization (3)
$2,946,839
 
$2,747,260
Total market capitalization (3)
$4,960,669
 
$4,788,230
Total debt / Total market capitalization (3)
40.6
%
 
42.6
%
Total debt / Total gross assets
37.3
%
 
37.5
%
Common stock data:
 
 
 
High closing price during quarter
$20.42
 
$19.82
Low closing price during quarter
$17.10
 
$18.05
Closing price of common stock at period end
$20.31
 
$18.88
Weighted average fully diluted shares outstanding during quarter (in thousands)
145,791
 
146,014
Shares of common stock issued and outstanding at period end (in thousands)
145,093
 
145,512
Annual dividend per share (4)
$0.84
 
$0.84
Rating / outlook
 
 
 
Standard & Poor's
BBB / Stable

 
BBB / Stable

Moody's
Baa2 / Stable

 
Baa2 / Stable

Employees
144
 
143




(1)
As of March 31, 2016, our consolidated office portfolio consisted of 69 properties (exclusive of our equity interest in one property owned through an unconsolidated joint venture, two properties under development, and one property that was taken out of service for redevelopment on January 1, 2014, 3100 Clarendon Boulevard in Arlington, VA). There were no acquisitions or dispositions of office properties completed during the first quarter of 2016.
(2)
Calculated as square footage associated with commenced leases plus square footage associated with uncommenced leases for vacant spaces, divided by total rentable square footage, all as of the relevant date, expressed as a percentage. This measure is presented for our consolidated office properties and excludes unconsolidated joint venture properties, two development properties, and one out of service property. Please refer to page 26 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
Chief Investment Officer and Executive Vice
and Director
Vice President
Senior Vice President
President
 
 
 
 
Joseph H. Pangburn
Thomas R. Prescott
Carroll A. Reddic, IV
C. Brent Smith
Executive Vice President,
Executive Vice President,
Executive Vice President,
Executive Vice President,
Southwest Region
Midwest Region
Real Estate Operations and Assistant
New York Region and Strategic
 
 
Secretary
Investments
 
 
 
 
George Wells
Robert K. Wiberg
 
 
Executive Vice President,
Executive Vice President,
 
 
Southeast Region
Mid-Atlantic Region and
 
 
 
Head of Development
 
 
 
 
 
 
Board of Directors
 
 
 
 
Michael R. Buchanan
Kelly H. Barrett
Wesley E. Cantrell
Barbara B. Lang
Director and Chairman of the
Director
Director and Chairman of
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
 
 
 
 
 
 
 
Dale H. Taysom
 
 
 
Director
 
 
 
 
 
 
 

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 March 31, 2016


Financial Results (1) 

Funds from operations (FFO) for the quarter ended March 31, 2016 was $59.9 million, or $0.41 per share (diluted), compared to $60.0 million, or $0.39 per share (diluted), for the same quarter in 2015. The dollar amount of FFO for the three months ended March 31, 2016 was comparable to that from the same period in 2015. Changes in the composition of FFO in 2016 when compared to 2015 were primarily attributable to 1) the loss of operating income contributions from properties sold since the beginning of 2015, including our largest asset, Aon Center, offset to a large degree by properties acquired and the commencement of leases representing net absorption of available space in the portfolio during the same time period, 2) increased general and administrative expense in 2016 due to higher expense accruals for potential performance-based compensation as a result of the Company's stock performance relative to its peers, and 3) decreased interest expense principally as a result of over $300 million less of debt outstanding in 2016 when compared to 2015.

Core funds from operations (Core FFO) for the quarter ended March 31, 2016 was $59.9 million, or $0.41 per share (diluted), compared to $60.1 million, or $0.39 per share (diluted), for the same quarter in 2015. Core FFO is defined as FFO with incremental adjustments for certain non-recurring items such as net insurance recoveries or losses, acquisition-related costs and other significant non-recurring items. The change in Core FFO for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily attributable to the items described above for changes in FFO.

Adjusted funds from operations (AFFO) for the quarter ended March 31, 2016 was $43.6 million, or $0.30 per share (diluted), compared to $45.6 million, or $0.30 per share (diluted), for the same quarter in 2015. The decrease in dollar amount of AFFO for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily related to the items described above for changes in FFO and Core FFO, in addition to the deduction of a greater amount of straight line rent adjustments in 2016 when compared to 2015.

The changes in per share amounts of FFO, Core FFO and AFFO for the three months ended March 31, 2016 as compared to the same period in 2015 were also impacted by reduced weighted average shares outstanding in 2016 as a result of the Company's stock repurchase program. Since the beginning of 2015, Piedmont repurchased 9.4 million shares at an average price of $17.66 per share. Since the program commenced in December 2011, Piedmont has repurchased 28.3 million shares at an average price of $17.17 per share.

Operations & Leasing

On a square footage leased basis, our total office portfolio was 91.7% leased as of March 31, 2016, as compared to 91.5% in the prior quarter and 88.8% a year earlier. Please refer to page 26 for additional leased percentage information.

The weighted average remaining lease term of our portfolio was 6.7 years(2) as of March 31, 2016 as compared to 6.7 years at December 31, 2015.









(1)
FFO, Core FFO and AFFO are supplemental non-GAAP financial measures. See page 38 for definitions of non-GAAP financial measures. See pages 14 and 40 for reconciliations of FFO, Core FFO and AFFO to Net Income.
(2)
Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of March 31, 2016) is weighted based on Annualized Lease Revenue, as defined on page 38.

5




Within its portfolio, Piedmont has two development properties and one re-development property. The Company's two development projects are Enclave Place, a 301,000 square foot office property located in Houston, TX, and 500 TownPark, a 135,000 square foot office property located in Lake Mary, FL; its redevelopment property is 3100 Clarendon Boulevard, a 262,000 square foot office and retail property located in Arlington, VA. For the purposes of statistical reporting throughout this supplemental report, these properties are excluded from Piedmont's operating portfolio. For additional information regarding these development projects, please refer to page 37 of this report.

During the three months ended March 31, 2016, the Company completed 353,000 square feet of total leasing. Of the total leasing activity during the quarter, we signed renewal leases for approximately 171,000 square feet and new tenant leases for approximately 182,000 square feet. 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 three months ended March 31, 2016 was $2.30 and the same measure for new leases was $4.04, resulting in a weighted average of $3.36 for all leasing activity completed during the period (see page 32).

During the three months ended March 31, 2016, we executed four 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
Telogis, Inc.
Braker Pointe III
Austin, TX
29,220
2019
New
GKN Aerospace, Inc.
6031 Connection Drive
Irving, TX
27,938
2027
New
Vertex, Inc.
Sarasota Commerce Center II
Sarasota, FL
25,809
2021
Renewal
Bomgar Corporation
11695 Johns Creek Parkway
Johns Creek, GA
21,171
2023
Renewal / Expansion


As of March 31, 2016, there were three tenants whose leases individually contributed greater than 1% in net Annualized Lease Revenue expiring during the eighteen month period following the end of the first quarter of 2016. 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
Harcourt
Braker Pointe III
Austin, TX
166,010
1.0%
Q2 2016
The primary tenant will vacate upon lease expiration. A lease with a current subtenant was executed during the first quarter of 2016, and discussions with another subtenant are on-going. Additionally, the remaining available space consisting of 166,010 square feet is actively being marketed for lease to new tenant prospects.
Towers Watson
Arlington Gateway
Arlington, VA
123,286
1.1%
Q2 2017
The likelihood of a lease renewal with the existing tenant is low. The space is actively being marketed for lease.
National Park Service
1201 Eye Street
Washington, DC
117,813
1.1%
Q3 2017
Of the 174,274 square feet currently leased to the National Park Service, 56,461 square feet have been leased to the International Food Policy Research Institute under its 101,937 square foot lease executed in 2015, leaving 117,813 square feet to be leased. The remaining available space is actively being marketed for lease.








6



Future Lease Commencements and Abatements

As of March 31, 2016, our overall leased percentage was 91.7% and our economic leased percentage was 83.0%. 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 March 31, 2016, or 3.0% 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 1.4 million square feet of leases as of March 31, 2016, or a 5.7% impact to leased percentage on an economic basis).

Piedmont has leases with many large corporate office space users. The average size of lease in the Company's portfolio is approximately 22,000 square feet. Due to the large size and length of term of new leases, Piedmont typically signs leases many months in advance of their anticipated lease commencement dates. Presented below is a schedule 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
Motorola Solutions, Inc.
500 West Monroe Street
Chicago, IL
150,345
Vacant
Q3 2016
New
District of Columbia
(Department of Disability Services)
One Independence Square
Washington, DC
101,982
Vacant
Q3 2016
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
International Food Policy Research Institute (1)
1201 Eye Street
Washington, DC
101,937
Partially Vacant
Q2 2017 / Q2 2018
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. Due to the large number of new leases in the Company's portfolio, abatements provided under those new leases have temporarily impacted the Company's current cash net operating income and AFFO.

Presented below is a schedule of leases with abatements of greater than 50,000 square feet that are either currently under abatement or will be so within the next twelve months.
Tenant
Property
Property Location
Square Feet
Remaining Abatement Schedule
Lease Expiration
Catamaran
Windy Point II
Schaumburg, IL
50,686
March 2015 through April 2016
Q1 2025
Lockton Companies
500 West Monroe Street
Chicago, IL
52,201
August 2015 through July 2016
Q3 2026
Nestle
800 North Brand Boulevard
Glendale, CA
400,892
December 2015 through March 2016
Q1 2021
United States of America
(Corporation for National and Community Service)
One Independence Square
Washington, DC
84,606
January 2016 through June 2017
Q4 2030
Mitsubishi Hitachi Power Systems
400 TownPark
Lake Mary, FL
75,321
February and March 2016, 2017 and 2018
Q1 2026
Motorola Solutions, Inc.
500 West Monroe Street
Chicago, IL
150,345
July 2016 through June 2017
Q2 2028
District of Columbia
(Department of Disability Services)
One Independence Square
Washington, DC
101,982
August 2016 through March 2017; August 2019; August 2020
Q2 2028
SunTrust Bank
SunTrust Center
Orlando, FL
120,000
October through December 2016 and 2017
Q3 2019
Norris, McLaughlin & Marcus
400 Bridgewater Crossing
Bridgewater, NJ
61,642
November 2016 through February 2017; October through December 2017 and 2018; November and December 2019
Q4 2029
Continental Casualty Company
500 TownPark
Lake Mary, FL
108,000
February through June 2017
Q1 2030


(1)
Approximately 45,000 square feet of space associated with the lease is vacant; the tenant will take the currently vacant space in Q2 2017.

7




Financing and Capital Activity

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 use the sale proceeds to:
invest in real estate assets with higher overall return prospects in selected markets in which we have, or plan to have, a significant operating presence and that otherwise meet our strategic criteria;
reduce leverage levels by repaying outstanding debt; and
repurchase Company stock.
Information on the Company's recent accomplishments in furtherance of its strategic objectives is presented below.

Dispositions
There were no dispositions completed during the quarter ended March 31, 2016. However, we began marketing certain assets for sale during the quarter and were in advanced stages of sales negotiations for several properties as of the end of the quarter. Additional information on asset sales completed after the end of the first quarter of 2016 can be found under the Subsequent Events heading below.

Acquisitions
There were no acquisitions completed during the quarter ended March 31, 2016.

For additional information on acquisitions and dispositions completed over the previous eighteen months, please refer to page 36.

Development
During the second quarter of 2015, Piedmont executed a 108,000 square foot, thirteen-year anchor-tenant lease with Continental Casualty Company at 500 TownPark in Lake Mary, FL. 500 TownPark will be a ground-up development comprised of a 135,000 square foot, four-story office building to be built on a portion of the Company's 25.2 acres of developable land in Lake Mary. With the signing of the Continental Casualty lease, the building is 80% pre-leased. The foundation work is complete and physical construction of the building is underway. The development costs are anticipated to be $28 million to $30 million, inclusive of leasing costs. Approximately $3.5 million had been recorded in work in progress as of March 31, 2016. The site is situated at the intersection of Interstate 4 and Highway 417 and is well located within a mixed-use development consisting of office, retail, residential and hotel uses. After the completion of 500 TownPark, the Company's remaining land holdings in the master planned, multi-use development could accommodate up to 1,200,000 square feet of additional development, including approximately 800,000 square feet of office development.

In addition, the Company has two development projects that are now substantially complete and in lease-up phase:
3100 Clarendon Boulevard, a 262,000 square foot office and retail property located adjacent to the Clarendon Metrorail Station in Arlington, VA, which was upgraded to Class A after being occupied by a U.S. Government agency for over 15 years; and
Enclave Place, a 301,000 square foot office building located within a deed-restricted and architecturally-controlled office park in the Energy Corridor in Houston, TX.

For additional information on Piedmont's development projects, please refer to page 37.

Finance
As of March 31, 2016, our ratio of debt to total gross assets was 37.3%. This debt ratio is based on total principal amount outstanding for our various loans at March 31, 2016.
As of March 31, 2016, our average net debt to Core EBITDA ratio was 6.6x, a decrease from 6.9x at December 31, 2015.
On January 4, 2016, Piedmont repaid a $125 million mortgage loan with a 5.50% interest rate collateralized by 1430 Enclave Parkway located in Houston, TX, Windy Point I and Windy Point
II located in Schaumburg, IL, and 1055 East Colorado Boulevard located in Pasadena, CA. The loan had an April 1, 2016 maturity date, but was open to prepayment without yield
maintenance fees 90 days in advance of the stated maturity date. The Company repaid the loan at the earliest possible date inside of the open prepayment window with funds drawn from its
unsecured revolving line of credit and cash on hand. The Company had $381 million of availability on its $500 million line of credit as of March 31, 2016.

Loan Investments
Piedmont provided seller financing to the purchaser of Copper Ridge Center in Lyndhurst, NJ, in May 2015. The $45.4 million, 8.45% interest-only loan was repaid in full in February 2016 in accordance with the terms of the loan.


8



Stock Repurchase Program
During the first quarter of 2016, the Company repurchased 461,500 shares of common stock under its share repurchase program at an average price of $17.20 per share, or approximately $7.9 million (before the consideration of transaction costs). Since the stock repurchase program began in December 2011, the Company has repurchased a total of 28.3 million shares at an average price of $17.17 per share, or approximately $486.4 million in aggregate (before the consideration of transaction costs). As of quarter end, Board-approved capacity remaining for additional repurchases totaled approximately $70.2 million under the stock repurchase plan. Repurchases of stock under the program will be made at the Company's discretion and will depend on market conditions, other investment opportunities and other factors that the Company deems relevant.

Dividend
On February 4, 2016, the Board of Directors of Piedmont declared a dividend for the first quarter of 2016 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on February 26, 2016. The dividend was paid on March 18, 2016. The Company's dividend payout percentage for the three months ended March 31, 2016 was 51% of Core FFO and 70% of AFFO.

Subsequent Events

Following the end of the first quarter of 2016, the Company completed the dispositions of three properties in metropolitan Los Angeles. The completion of these dispositions allowed the Company to further advance its strategic objective of focusing its operations on select submarkets within its strategic operating footprint. The dispositions were as follows:
On April 21, 2016, Piedmont sold 1055 East Colorado Boulevard, a 176,000 square foot, 99% leased office building located in Pasadena, CA, for $61.3 million, or $348 per square foot;
On April 28, 2016, Piedmont sold Fairway Center II, a 134,000 square foot, 97% leased office building located in Brea, CA, for $33.8 million, or $252 per square foot; and
On May 2, 2016, Piedmont sold 1901 Main Street, a 173,000 square foot, 100% leased office building located in Irvine, CA, for $66.0 million, or $382 per square foot.
Each transaction resulted in a gain on sale. As previously communicated, the Company established reverse 1031 exchanges with several recent acquisitions in order to be prepared to defer any potential tax gains resulting from the Company's prospective portfolio refinement activities. All three California property dispositions were closed as 1031 exchanges, reducing the aggregate gain that must be included in the Company's yearly required dividend calculations. Proceeds from the sales were used to reduce the balance outstanding on the Company's revolving line of credit.

On April 27, 2016, the Board of Directors of Piedmont declared a dividend for the second quarter of 2016 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on May 27, 2016. The dividend is expected to be paid on June 17, 2016.

Guidance for 2016

The following financial guidance for calendar year 2016 remains unchanged and is based upon management's expectations at this time.
 
Low
 
High
Core Funds from Operations
$231 million
 
$242 million
Core Funds from Operations per diluted share
$1.58
 
$1.66

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

9



Piedmont Office Realty Trust, Inc.
Key Performance Indicators
Unaudited (in thousands except for per share data)

This section of our supplemental report includes non-GAAP financial measures, including, but not limited to, Core Earnings Before Interest, Taxes, Depreciation, and Amortization (Core EBITDA), Funds from Operations (FFO), Core Funds from Operations (Core FFO), and Adjusted Funds from Operations (AFFO). Definitions of these non-GAAP measures are provided on page 38 and reconciliations are provided beginning on page 40.
 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Selected Operating Data
 
 
 
 
 
 
 
 
 
Percent leased (1)
91.7
%
 
91.5
%
 
90.6
%
 
88.8
%
 
88.8
%
Percent leased - economic (1) (2)
83.0
%
 
81.8
%
 
83.0
%
 
82.4
%
 
80.6
%
Rental income
$114,738
 
$115,617
 
$117,994
 
$117,454
 
$117,807
Total revenues
$138,012
 
$139,461
 
$148,815
 
$146,734
 
$149,759
Total operating expenses
$111,640
 
$110,523
 
$149,948
(3) 
$125,910

$121,545
Core EBITDA
$76,458

$78,485

$80,062

$77,969

$79,314
Core FFO applicable to common stock
$59,865

$60,184

$61,058

$59,760

$60,099
Core FFO per share - diluted
$0.41

$0.41

$0.41

$0.39

$0.39
AFFO applicable to common stock
$43,550

$42,358

$52,433

$45,734

$45,608
AFFO per share - diluted
$0.30

$0.29

$0.35

$0.30

$0.30
Gross dividends
$30,463
 
$30,557
 
$31,036
 
$32,268
 
$32,411
Dividends per share
$0.210
 
$0.210
 
$0.210
 
$0.210
 
$0.210
Selected Balance Sheet Data
 
 
 
 
 
 
 
 
 
Total real estate assets
$3,683,106

$3,695,806

$3,934,113

$4,005,824

$4,094,942
Total gross real estate assets
$4,732,904
 
$4,710,837
 
$5,153,613
 
$5,215,938
 
$5,297,481
Total assets
$4,355,017

$4,434,535

$4,732,654

$4,773,811

$4,812,471
Net debt (4)
$2,008,507
 
$2,030,355
 
$2,387,840
 
$2,315,934
 
$2,320,504
Total liabilities
$2,195,354

$2,238,091

$2,639,916

$2,517,960

$2,526,548
Ratios
 
 
 
 
 
 
 
 
 
Core EBITDA margin (5)
55.4
%
 
56.3
%
 
53.8
%
 
53.1
%
 
53.0
%
Fixed charge coverage ratio (6)
4.3 x

 
4.1 x

 
4.0 x

 
4.0 x

 
4.0 x

Average net debt to Core EBITDA (7)
6.6 x

 
6.9 x

 
7.3 x

 
7.4 x

 
7.2 x

(1)
Please refer to page 26 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 Future Lease Commencements and Abatements section of Financial Highlights for details on near-term abatements for large leases.
(3)
Amount includes a $34.8 million impairment loss associated with 2 Gatehall Drive located in Parsippany, NJ.
(4)
Net debt is calculated as the total principal amount of debt outstanding minus cash and cash equivalents and escrow deposits and restricted cash. The decrease in net debt in the fourth quarter of 2015 was primarily attributable to the use of a portion of the proceeds from the sale of Aon Center in Chicago, IL, to repay debt.
(5)
Core EBITDA margin is calculated as Core EBITDA divided by total revenues (including revenues associated with discontinued operations).
(6)
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 $1,162,192 for the quarter ended March 31, 2016, $1,102,518 for the quarter ended December 31, 2015, $954,086 for the quarter ended September 30, 2015, $885,576 for the quarter ended June 30, 2015, and $823,770 for the quarter ended March 31, 2015; the Company had principal amortization of $140,539 for the quarter ended March 31, 2016, $277,217 for the quarter ended December 31, 2015, $204,580 for the quarter ended September 30, 2015, $201,768 for the quarter ended June 30, 2015, and $132,969 for the quarter ended March 31, 2015.
(7)
For the purposes of this calculation, we annualize the period's Core EBITDA and 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. The decrease in the net debt to Core EBITDA ratios for the quarters ended December 31, 2015 and March 31, 2016 was primarily attributable to the debt repayment in October 2015 using a majority of the proceeds from the sale of Aon Center in Chicago, IL. For the other quarters presented herein, the average net debt to Core EBITDA ratios are higher than our historical performance on this measure primarily as a result of capital expenditures and stock repurchases in excess of net dispositions, the shortfall of which was largely funded with debt. This measure in previous quarters was also impacted by downtime associated with re-tenanting efforts, and some rent roll downs.

10



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

 
March 31, 2016

December 31, 2015

September 30, 2015

June 30, 2015

March 31, 2015
Assets:

 
 
 
 
 
 
 
 
Real estate, at cost:

 
 
 
 
 
 
 
 
Land assets
$
685,850

 
$
685,850

 
$
671,832

 
$
672,747

 
$
679,094

Buildings and improvements
3,844,717

 
3,826,322

 
3,589,298

 
3,620,647

 
3,671,925

Buildings and improvements, accumulated depreciation
(951,484
)
 
(922,019
)
 
(933,717
)
 
(911,168
)
 
(914,551
)
Intangible lease asset
176,436

 
177,675

 
148,403

 
153,106

 
153,465

Intangible lease asset, accumulated amortization
(98,314
)
 
(93,012
)
 
(87,633
)
 
(88,954
)
 
(84,212
)
Construction in progress
25,901

 
20,990

 
75,083

 
63,211

 
82,246

Real estate assets held for sale, gross

 

 
668,997

 
706,227

 
710,751

Real estate assets held for sale, accumulated depreciation & amortization

 

 
(198,150
)
 
(209,992
)
 
(203,776
)
Total real estate assets
3,683,106

 
3,695,806

 
3,934,113

 
4,005,824

 
4,094,942

Investments in and amounts due from unconsolidated joint ventures
7,483

 
7,577

 
7,652

 
7,714

 
7,820

Cash and cash equivalents
4,732

 
5,441

 
7,702

 
8,997

 
7,479

Tenant receivables, net of allowance for doubtful accounts
22,040

 
26,339

 
26,748

 
25,474

 
30,132

Straight line rent receivable
161,087

 
152,122

 
149,060

 
146,632

 
150,511

Notes receivable

 
45,400

 
45,400

 
45,400

 

Escrow deposits and restricted cash
591

 
5,174

 
37,705

 
521

 
671

Prepaid expenses and other assets
24,708

 
24,843

 
31,764

 
31,070

 
24,941

Goodwill
180,097

 
180,097

 
180,097

 
180,097

 
180,097

Interest rate swap

 

 

 
8,290

 
520

Deferred lease costs, less accumulated amortization
271,173

 
291,736

 
231,379

 
234,127

 
238,085

Other assets held for sale

 

 
81,034

 
79,665

 
77,273

Total assets
$
4,355,017

 
$
4,434,535

 
$
4,732,654

 
$
4,773,811

 
$
4,812,471

Liabilities:
 
 
 
 
 
 
 
 
 
Unsecured debt, net of discount
$
1,626,799

 
$
1,528,221

 
$
1,919,504

 
$
1,810,951

 
$
1,870,295

Secured debt
376,119

 
501,289

 
501,595

 
501,853

 
448,423

Accounts payable, accrued expenses, and accrued capital expenditures
103,894

 
128,465

 
132,741

 
128,898

 
119,466

Deferred income
28,143

 
27,270

 
26,087

 
26,633

 
25,970

Intangible lease liabilities, less accumulated amortization
40,926

 
42,853

 
38,896

 
40,597

 
42,311

Interest rate swaps
19,473

 
9,993

 
20,526

 
8,411

 
19,416

Notes Payable and other liabilities held for sale

 

 
567

 
617

 
667

Total liabilities
$
2,195,354

 
$
2,238,091

 
$
2,639,916

 
$
2,517,960

 
$
2,526,548

Stockholders' equity:
 
 
 
 
 
 
 
 
 
Common stock
1,451

 
1,455

 
1,456

 
1,518

 
1,543

Additional paid in capital
3,671,055

 
3,669,977

 
3,669,154

 
3,668,378

 
3,667,574

Cumulative distributions in excess of earnings
(1,505,704
)
 
(1,477,674
)
 
(1,570,377
)
 
(1,427,312
)
 
(1,378,786
)
Other comprehensive loss
(8,168
)
 
1,661

 
(8,524
)
 
12,242

 
(5,437
)
Piedmont stockholders' equity
2,158,634

 
2,195,419

 
2,091,709

 
2,254,826

 
2,284,894

Non-controlling interest
1,029

 
1,025

 
1,029

 
1,025

 
1,029

Total stockholders' equity
2,159,663

 
2,196,444

 
2,092,738

 
2,255,851

 
2,285,923

Total liabilities, redeemable common stock and stockholders' equity
$
4,355,017

 
$
4,434,535

 
$
4,732,654

 
$
4,773,811

 
$
4,812,471

Common stock outstanding at end of period
145,093

 
145,512

 
145,634

 
151,833

 
154,340


11



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

 
 
Three Months Ended
 
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Revenues:
 
 
 
 
 
 
 
 
 
 
Rental income
 
$
114,738

 
$
115,617

 
$
117,994

 
$
117,454

 
$
117,807

Tenant reimbursements
 
22,751

 
23,405

 
30,273

 
28,813

 
31,390

Property management fee revenue
 
523

 
439

 
548

 
467

 
562

 
 
138,012

 
139,461

 
148,815

 
146,734

 
149,759

Expenses:
 
 
 
 
 
 
 
 
 
 
Property operating costs
 
54,188

 
54,608

 
61,677

 
61,479

 
64,236

Depreciation
 
31,782

 
31,033

 
31,199

 
36,039

 
36,232

Amortization
 
17,806

 
17,240

 
14,021

 
14,955

 
14,670

Impairment losses on real estate assets
 

 

 
34,815

 
5,354

 

General and administrative
 
7,864

 
7,642

 
8,236

 
8,083

 
6,407

 
 
111,640

 
110,523

 
149,948

 
125,910

 
121,545

Real estate operating income
 
26,372

 
28,938

 
(1,133
)
 
20,824

 
28,214

Other income / (expense):
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(16,385
)
 
(17,978
)
 
(18,832
)
 
(18,172
)
 
(19,016
)
Other income / (expense)
 
294

 
347

 
803

 
596

 
(181
)
Net recoveries / (loss) from casualty events and litigation settlements (1)
 

 
(278
)
 

 

 

Equity in income / (loss) of unconsolidated joint ventures
 
115

 
135

 
135

 
124

 
159

 
 
(15,976
)
 
(17,774
)
 
(17,894
)
 
(17,452
)
 
(19,038
)
Income from continuing operations
 
10,396

 
11,164

 
(19,027
)
 
3,372

 
9,176

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
Operating income, excluding impairment loss
 

 
71

 
16

 
(3
)
 

Gain / (loss) on sale of properties
 

 
1

 
(2
)
 

 

Income / (loss) from discontinued operations
 

 
72

 
14

 
(3
)
 

Gain on sale of real estate (2)
 
(20
)
 
114,411

 
17,142

 
26,611

 
10,073

Net income
 
10,376

 
125,647

 
(1,871
)
 
29,980

 
19,249

Less: Net income attributable to noncontrolling interest
 
(4
)
 
(3
)
 
(4
)
 
(4
)
 
(4
)
Net income attributable to Piedmont
 
$
10,372

 
$
125,644

 
$
(1,875
)
 
$
29,976

 
$
19,245

Weighted average common shares outstanding - diluted
 
145,791

 
146,014

 
149,176

 
153,757

 
154,580

Net income per share available to common stockholders - diluted
 
$
0.07

 
$
0.84

 
$
(0.01
)
 
$
0.20

 
$
0.12

Common stock outstanding at end of period
 
145,093

 
145,512

 
145,634

 
151,833

 
154,340


(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)
The gain on sale of real estate reflected in the fourth quarter of 2015 was primarily related to the sale of Aon Center in Chicago, IL, on which we recorded a $114.3 million gain, that in the third quarter of 2015 was primarily related to the sale of Chandler Forum in Chandler, AZ, on which we recorded a $15.5 million gain, that in the second quarter of 2015 was primarily related to the sale of Copper Ridge Center in Lyndhurst, NJ, on which we recorded a $13.3 million gain, and 5601 Headquarters Drive in Plano, TX, on which we recorded an $8.0 million gain, and that in the first quarter of 2015 was primarily related to the sale of 3900 Dallas Parkway in Plano, TX, on which we recorded a $10.1 million gain.

12



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

 
Three Months Ended
 
3/31/2016
3/31/2015
 
Change ($)
Change (%)
Revenues:
 
 
 
 
 
Rental income
$
114,738

$
117,807

 
$
(3,069
)
(2.6
)%
Tenant reimbursements
22,751

31,390

 
(8,639
)
(27.5
)%
Property management fee revenue
523

562

 
(39
)
(6.9
)%
 
138,012

149,759

 
(11,747
)
(7.8
)%
Expenses:
 
 
 
 
 
Property operating costs
54,188

64,236

 
10,048

15.6
 %
Depreciation
31,782

36,232

 
4,450

12.3
 %
Amortization
17,806

14,670

 
(3,136
)
(21.4
)%
Impairment losses on real estate assets


 

 %
General and administrative
7,864

6,407

 
(1,457
)
(22.7
)%
 
111,640

121,545

 
9,905

8.1
 %
Real estate operating income
26,372

28,214

 
(1,842
)
(6.5
)%
Other income / (expense):
 
 
 
 
 
Interest expense
(16,385
)
(19,016
)
 
2,631

13.8
 %
Other income / (expense)
294

(181
)
 
475

262.4
 %
Net recoveries / (loss) from casualty events and litigation settlements


 

 %
Equity in income / (loss) of unconsolidated joint ventures
115

159

 
(44
)
(27.7
)%
 
(15,976
)
(19,038
)
 
3,062

16.1
 %
Income from continuing operations
10,396

9,176

 
1,220

13.3
 %
Discontinued operations:
 
 
 
 
 
Operating income, excluding impairment loss


 

 %
Gain / (loss) on sale of properties


 

 %
Income / (loss) from discontinued operations


 

 %
Gain on sale of real estate (1)
(20
)
10,073

 
(10,093
)
(100.2
)%
Net income
10,376

19,249

 
(8,873
)
(46.1
)%
Less: Net income attributable to noncontrolling interest
(4
)
(4
)
 

 %
Net income attributable to Piedmont
$
10,372

$
19,245

 
$
(8,873
)
(46.1
)%
Weighted average common shares outstanding - diluted
145,791

154,580

 
 
 
Net income per share available to common stockholders - diluted
$
0.07

$
0.12

 
 
 
Common stock outstanding at end of period
145,093

154,340

 
 
 

(1)
The gain on sale of real estate for the three months ended March 31, 2015 was primarily related to a $10.1 million gain recorded on the sale of 3900 Dallas Parkway in Plano, TX, in January 2015.

13



Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations and Adjusted Funds From Operations
Unaudited (in thousands except for per share data)


 
 
Three Months Ended
 
 
3/31/2016

3/31/2015
 
 
 
 
 
GAAP net income applicable to common stock
 
$
10,372

 
$
19,245

Depreciation (1) (2)
 
31,639

 
36,097

Amortization (1)
 
17,822

 
14,686

Impairment loss (1)
 

 

Loss / (gain) on sale of properties (1)
 
20

 
(10,073
)
NAREIT funds from operations applicable to common stock
 
59,853

 
59,955

Adjustments:
 
 
 
 
Acquisition costs
 
12

 
144

Loss / (gain) on extinguishment of swaps
 

 

Net (recoveries) / loss from casualty events and litigation settlements (1)
 

 

Core funds from operations applicable to common stock
 
59,865

 
60,099

Adjustments:
 
 
 
 
Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on senior notes
 
647

 
651

Depreciation of non real estate assets
 
204

 
196

Straight-line effects of lease revenue (1)
 
(7,848
)
 
(4,510
)
Stock-based and other non-cash compensation expense
 
1,928

 
725

Amortization of lease-related intangibles (1)
 
(1,238
)
 
(1,122
)
Acquisition costs
 
(12
)
 
(144
)
Non-incremental capital expenditures (3)
 
(9,996
)
 
(10,287
)
Adjusted funds from operations applicable to common stock
 
$
43,550

 
$
45,608

 
 
 
 
 
Weighted average common shares outstanding - diluted
 
145,791

 
154,580

 
 
 
 
 
Funds from operations per share (diluted)
 
$
0.41

 
$
0.39

Core funds from operations per share (diluted)
 
$
0.41

 
$
0.39

Adjusted funds from operations per share (diluted)
 
$
0.30

 
$
0.30

 
 
 
 
 
Common stock outstanding at end of period
 
145,093


154,340


(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 38.

14



Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)

 
Three Months Ended
 
3/31/2016
 
3/31/2015
Net income attributable to Piedmont
$
10,372

 
$
19,245

Net income attributable to noncontrolling interest
4

 
4

Interest expense (1)
16,385

 
19,016

Depreciation (1)
31,843

 
36,292

Amortization (1)
17,822

 
14,686

Acquisition costs
12

 
144

Impairment loss (1)

 

Net (recoveries) / loss from casualty events and litigation settlements (1)

 

Loss / (gain) on sale of properties (1)
20

 
(10,073
)
Core EBITDA
76,458

 
79,314

General & administrative expenses (1)
7,869

 
6,416

Management fee revenue (2)
(292
)
 
(330
)
Other (income) / expense (1) (3)
(307
)
 
38

Straight-line effects of lease revenue (1)
(7,848
)
 
(4,510
)
Amortization of lease-related intangibles (1)
(1,238
)
 
(1,122
)
Property net operating income (cash basis)
74,642

 
79,806

Change period over period
(6.5
)%
(4) 
N/A

 
 
 
 
Deduct net operating (income) / loss from:
 
 
 
Acquisitions (5)
(5,215
)
 
(513
)
Dispositions (6)
29

 
(10,413
)
Other investments (7)
(126
)
 
(270
)
Same store net operating income (cash basis)
$
69,330

 
$
68,610

Change period over period
1.0
 %
 
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)
The decrease in property net operating income in 2016 as compared to 2015 was primarily attributable to the sale of Aon Center in Chicago, IL, during the fourth quarter of 2015. Aon Center was the largest individual asset within the Company's portfolio prior to the sale, representing over 10% of the portfolio on a square footage basis. A majority of the sale proceeds were applied to debt reduction.
(5)
Acquisitions consist of Park Place on Turtle Creek in Dallas, TX, purchased on January 16, 2015; 80 Central Street in Boxborough, MA, purchased on July 24, 2015; SunTrust Center in Orlando, FL, purchased on November 4, 2015; Galleria 300 in Atlanta, GA, purchased on November 4, 2015; and Glenridge Highlands One in Atlanta, GA, purchased on November 24, 2015.
(6)
Dispositions consist of 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; Copper Ridge Center in Lyndhurst, NJ, sold on May 1, 2015; Eastpoint I and II in Mayfield Heights, OH, sold on July 28, 2015; 3750 Brookside Parkway in Alpharetta, GA, sold on August 10, 2015; Chandler Forum in Chandler, AZ, sold on September 1, 2015; Aon Center in Chicago, IL, sold on October 29, 2015; and 2 Gatehall Drive in Parsippany, NJ, sold on December 21, 2015.
(7)
Other investments consist of operating results from our investments in unconsolidated joint ventures and redevelopment and development projects. Additional information on our unconsolidated joint ventures and redevelopment and development projects can be found on page 37. The operating results from both the office and retail portions of 3100 Clarendon Boulevard in Arlington, VA, are included in this line item.


15







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
 
3/31/2016
 
3/31/2015
 
$
%
 
$
%
Washington, D.C.
$
12,092

17.5

 
$
12,467

18.2

New York (1)
9,385

13.5

 
8,300

12.1

Boston
7,113

10.3

 
6,856

10.0

Dallas
6,106

8.8

 
5,625

8.2

Minneapolis (2)
5,684

8.2

 
4,635

6.8

Chicago
5,433

7.8

 
5,884

8.5

Los Angeles (3)
1,622

2.3

 
4,149

6.0

Other (4)
21,895

31.6

 
20,694

30.2

Total
$
69,330

100.0

 
$
68,610

100.0

 
 
 
 
 
 













(1)
The increase in New York Same Store Net Operating Income for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily related to increased rental income as a result of recent leasing activity as well as reduced operating expenses in 2016 attributable to milder winter weather than in the prior year at 60 Broad Street in New York, NY.
(2)
The increase in Minneapolis Same Store Net Operating Income for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily attributable to increased rental income as a result of recent leasing activity and the expiration of rental abatements at US Bancorp Center in Minneapolis, MN, as well as recent leasing activity at Crescent Ridge II in Minnetonka, MN.

(3)
The decrease in Los Angeles Same Store Net Operating Income for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily attributable to a four-month rental abatement concession (expiring March 31, 2016) provided to Nestle at the beginning of its 401,000 square foot renewal lease's term at 800 North Brand Boulevard in Glendale, CA.
(4)
The increase in Other Same Store Net Operating Income for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily attributable to increased economic occupancy associated with recent leasing activity at Suwanee Gateway One and The Medici, as well as a one-time true-up of operating expense recovery income at 1155 Perimeter Center West, all in Atlanta, GA.
 
 
 


16



Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Accrual Basis)
Unaudited (in thousands)

 
Three Months Ended
 
3/31/2016
 
3/31/2015
Net income attributable to Piedmont
$
10,372

 
$
19,245

Net income attributable to noncontrolling interest
4

 
4

Interest expense (1)
16,385

 
19,016

Depreciation (1)
31,843

 
36,292

Amortization (1)
17,822

 
14,686

Acquisition costs
12

 
144

Impairment loss (1)

 

Net (recoveries) / loss from casualty events and litigation settlements (1)

 

Loss / (gain) on sale of properties (1)
20

 
(10,073
)
Core EBITDA
76,458

 
79,314

General & administrative expenses (1)
7,869

 
6,416

Management fee revenue (2)
(292
)
 
(330
)
Other (income) / expense (1) (3)
(307
)
 
38

Property net operating income (accrual basis)
83,728

 
85,438

Change period over period
(2.0
)%
(4) 
N/A

 
 
 
 
Deduct net operating (income) / loss from:
 
 
 
Acquisitions (5)
(6,482
)
 
(630
)
Dispositions (6)
29

 
(12,085
)
Other investments (7)
(150
)
 
(273
)
Same store net operating income (accrual basis)
$
77,125

 
$
72,450

Change period over period
6.5
 %
 
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)
The decrease in property net operating income in 2016 as compared to 2015 was primarily attributable to the sale of Aon Center in Chicago, IL, during the fourth quarter of 2015. Aon Center was the largest individual asset within the Company's portfolio prior to the sale, representing over 10% of the portfolio on a square footage basis. A majority of the sale proceeds were applied to debt reduction.
(5)
Acquisitions consist of Park Place on Turtle Creek in Dallas, TX, purchased on January 16, 2015; 80 Central Street in Boxborough, MA, purchased on July 24, 2015; SunTrust Center in Orlando, FL, purchased on November 4, 2015; Galleria 300 in Atlanta, GA, purchased on November 4, 2015; and Glenridge Highlands One in Atlanta, GA, purchased on November 24, 2015.
(6)
Dispositions consist of 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; Copper Ridge Center in Lyndhurst, NJ, sold on May 1, 2015; Eastpoint I and II in Mayfield Heights, OH, sold on July 28, 2015; 3750 Brookside Parkway in Alpharetta, GA, sold on August 10, 2015; Chandler Forum in Chandler, AZ, sold on September 1, 2015; Aon Center in Chicago, IL, sold on October 29, 2015; and 2 Gatehall Drive in Parsippany, NJ, sold on December 21, 2015.
(7)
Other investments consist of operating results from our investments in unconsolidated joint ventures and redevelopment and development projects. Additional information on our unconsolidated joint ventures and redevelopment and development projects can be found on page 37. The operating results from both the office and retail portions of 3100 Clarendon Boulevard in Arlington, VA, are included in this line item.


17



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
 
3/31/2016
 
3/31/2015
 
$
%
 
$
%
Washington, D.C. (1)
$
14,438

18.7

 
$
13,151

18.2

New York (2)
9,270

12.0

 
7,990

11.0

Boston
7,152

9.3

 
6,988

9.6

Chicago
6,370

8.3

 
6,291

8.7

Dallas
5,967

7.7

 
5,867

8.1

Minneapolis
5,502

7.1

 
5,088

7.0

Los Angeles
4,587

6.0

 
4,247

5.9

Other (3)
23,839

30.9

 
22,828

31.5

Total
$
77,125

100.0

 
$
72,450

100.0

 
 
 
 
 
 


















(1)
The increase in Washington, D.C. Same Store Net Operating Income for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily attributable to the commencement of new leases at One Independence Square in Washington, D.C., 4250 North Fairfax Drive in Arlington, VA, and 9211 Corporate Boulevard in Rockville, MD, as well as lease termination income from Lockheed Martin at 9221 Corporate Boulevard in Rockville, MD, all of which was partially offset by a 45,000 square foot contraction under the National Park Service lease in 2015 at 1201 Eye Street in Washington, D.C.
(2)
The increase in New York Same Store Net Operating Income for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily related to increased rental income as a result of recent leasing activity as well as reduced operating expenses in 2016 attributable to milder winter weather than in the prior year at 60 Broad Street in New York, NY.
(3)
The increase in Other Same Store Net Operating Income for the three months ended March 31, 2016 as compared to the same period in 2015 was primarily attributable to increased rental income as a result of recent leasing activity at Suwanee Gateway One, The Medici and Glenridge Highlands Two, as well as a one-time true-up of operating expense recovery income at 1155 Perimeter Center West, all in Atlanta, GA.
 
 

18



Piedmont Office Realty Trust, Inc.
Capitalization Analysis
Unaudited (in thousands except for per share data)


 
 
As of
 
As of
 
 
March 31, 2016
 
December 31, 2015
 
 
 
 
 
Common stock price (1)
 
$
20.31

 
$
18.88

Total shares outstanding
 
145,093

 
145,512

Equity market capitalization (1)
 
$
2,946,839

 
$
2,747,260

Total debt - principal amount outstanding
 
$
2,013,830

 
$
2,040,970

Total market capitalization (1)
 
$
4,960,669

 
$
4,788,230

Total debt / Total market capitalization (1)
 
40.6
%
 
42.6
%
Total gross real estate assets (2)
 
$
4,732,904

 
$
4,710,837

Total debt / Total gross real estate assets (2)
 
42.5
%
 
43.3
%
Total debt / Total gross assets (3)
 
37.3
%
 
37.5
%
Average net debt to Core EBITDA (4)
 
6.6 x

 
6.9 x











(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.
(4)
For the purposes of this calculation, we annualize the Core EBITDA for the quarter and use the average daily balance of debt outstanding during the quarter, less cash and cash equivalents and escrow deposits and restricted cash as of the end of the quarter.

19



Piedmont Office Realty Trust, Inc.
Debt Summary
As of March 31, 2016
Unaudited ($ in thousands)

Floating Rate & Fixed Rate Debt
 
 
 
Debt (1)
Principal Amount
Outstanding
Weighted Average Stated
Interest Rate (2)
Weighted Average
Maturity
 
 
 
 
 
Floating Rate
$289,000
(3) 
1.52%
35.8 months
 
 
 
 
 
Fixed Rate
1,724,830

 
3.65%
63.4 months
 
 
 
 
 
Total
$2,013,830
 
3.35%
59.4 months
 
Unsecured & Secured Debt
Debt (1)
Principal Amount
Outstanding
Weighted Average Stated
Interest Rate (2)
Weighted Average
Maturity
 
 
 
 
 
 
Unsecured
$1,639,000
 
3.02%
 
62.6 months
 
 
 
 
 
 
Secured
374,830

 
4.76%
 
45.6 months
 
 
 
 
 
 
Total
$2,013,830
 
3.35%
 
59.4 months
 
Debt Maturities
Maturity Year
Secured Debt - Principal
Amount Outstanding (1)
Unsecured Debt - Principal
Amount Outstanding (1)
 Weighted Average
Stated Interest
Rate (2)
 Percentage of Total
 
 
 
 
 
 
2016
$42,525
$—
 
5.70%
2.1%
2017
140,000
 
5.76%
7.0%
2018
170,000
 
1.57%
8.4%
2019
300,000
 
2.78%
14.9%
2020
419,000
(4) 
2.12%
20.8%
2021 +
192,305
750,000
 
3.93%
46.8%
 
 
 
 
 
 
Total
$374,830
$1,639,000
 
3.35%
100.0%

(1)
All of Piedmont's outstanding debt as of March 31, 2016, was interest-only debt with the exception of the $32.3 million of debt associated with 5 Wall Street located in Burlington, MA.
(2)
Weighted average stated interest rate is calculated based upon the principal amounts outstanding.
(3)
Amount represents the outstanding balance as of March 31, 2016, 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 21 for information on additional swap agreements for this loan that will become effective after November 22, 2016), assuming no credit rating change for the Company, and $300 million in notional amount of interest rate swap agreements which effectively fix the interest rate on the 2013 unsecured term loan at 2.78% through its maturity date of January 31, 2019, assuming no credit rating change for the Company. The 2011 unsecured term loan and the 2013 unsecured term loan, therefore, are reflected as fixed rate debt.
(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.

20



Piedmont Office Realty Trust, Inc.
Debt Detail
Unaudited ($ in thousands)

Facility (1)
Property
Stated Rate
Maturity
Principal Amount Outstanding as of March 31, 2016
 
 
 
 
 
 
Secured
 
 
 
 
 
$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 (2)
5 Wall Street
5.55
%
 
9/1/2021
32,305

$160.0 Million Fixed-Rate Loan
1901 Market Street
3.48
%
(3) 
7/5/2022
160,000

Subtotal / Weighted Average (4)
 
4.76
%
 
 
$
374,830

 
 
 
 
 
 
Unsecured
 
 
 
 
 
$170.0 Million Unsecured 2015 Term Loan
N/A
1.57
%
(5) 
5/15/2018
$
170,000

$300.0 Million Unsecured 2013 Term Loan
N/A
2.78
%
(6) 
1/31/2019
300,000

$300.0 Million Unsecured 2011 Term Loan
N/A
2.39
%
(7) 
1/15/2020
300,000

$500.0 Million Unsecured Line of Credit (8)
N/A
1.45
%
(9) 
6/18/2020
119,000

$350.0 Million Unsecured Senior Notes
N/A
3.40
%
(10) 
6/1/2023
350,000

$400.0 Million Unsecured Senior Notes
N/A
4.45
%
(11) 
3/15/2024
400,000

Subtotal / Weighted Average (4)
 
3.02
%
 
 
$
1,639,000

 
 
 
 
 
 
Total Debt - Principal Amount Outstanding / Weighted Average Stated Rate (4)
3.35
%
 
 
$
2,013,830

GAAP Accounting Adjustments (12)
 
 
 
 
(10,912
)
Total Debt - GAAP Amount Outstanding
 
 
 
$
2,002,918

(1)
All of Piedmont’s outstanding debt as of March 31, 2016, was interest-only debt with the exception of the $32.3 million of debt associated with 5 Wall Street located in Burlington, MA.
(2)
The loan is amortizing based on a 25-year amortization schedule.
(3)
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%.
(4)
Weighted average is based on the principal amount outstanding and interest rate at March 31, 2016.
(5)
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 March 31, 2016) over the selected rate based on Piedmont’s current credit rating.
(6)
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.
(7)
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.
(8)
All of Piedmont’s outstanding debt as of March 31, 2016, was term debt with the exception of $119 million outstanding on our unsecured revolving credit facility. The $500 million unsecured revolving credit 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.
(9)
The interest rate presented for the $500 million unsecured revolving credit facility is the weighted average interest rate for all outstanding draws as of March 31, 2016. 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 March 31, 2016) over the selected rate based on Piedmont’s current credit rating.
(10)
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%.
(11)
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%.
(12)
The GAAP accounting adjustments relate to original issue discounts, third-party fees, and lender fees resulting from the procurement processes for our various debt facilities, 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, are amortized to interest expense over the contractual term of the related debt.

21



Piedmont Office Realty Trust, Inc.
Debt Ratio Analysis
As of March 31, 2016
Unaudited


Bank Debt Covenant Compliance (1)
Required
Actual



Maximum Leverage Ratio
0.60
0.40
Minimum Fixed Charge Coverage Ratio (2)
1.50
3.86
Maximum Secured Indebtedness Ratio
0.40
0.10
Minimum Unencumbered Leverage Ratio
1.60
2.69
Minimum Unencumbered Interest Coverage Ratio (3)
1.75
5.05

Bond Covenant Compliance (4)
Required
Actual
 
 
 
Total Debt to Total Assets
60% or less
42.3%
Secured Debt to Total Assets
40% or less
7.9%
Ratio of Consolidated EBITDA to Interest Expense
1.50 or greater
4.48
Unencumbered Assets to Unsecured Debt
150% or greater
258%


Three Months Ended
Year Ended
Other Debt Coverage Ratios
March 31, 2016
December 31, 2015

 
 
Average net debt to core EBITDA (5)
6.6 x
7.2 x
Fixed charge coverage ratio (6)
4.3 x
4.0 x
Interest coverage ratio (7)
4.4 x
4.1 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 March 31, 2016 and December 31, 2015. The Company had capitalized interest of $1,162,192 for the three months ended March 31, 2016 and $3,765,950 for the twelve months ended December 31, 2015. The Company had principal amortization of $140,539 for the three months ended March 31, 2016 and $816,534 for the twelve months ended December 31, 2015.
(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 $1,162,192 for the three months ended March 31, 2016 and $3,765,950 for the twelve months ended December 31, 2015.

22



Piedmont Office Realty Trust, Inc.
Tenant Diversification (1) 
As of March 31, 2016
(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
6
(4) 

$47,009
8.5
962
5.6
State of New York
AA+ / Aa1
1
2019

24,843
4.5
481
2.8
US Bancorp
A+ / A1
3
2023 / 2024

22,043
4.0
733
4.2
Independence Blue Cross
No rating available
1
2033

18,016
3.2
801
4.6
GE
AA+ / A1
1
2027

15,872
2.9
452
2.6
Nestle
AA / Aa2
1
2021

12,281
2.2
401
2.3
City of New York
AA / Aa2
1
2020

10,844
2.0
313
1.8
Gallagher
No rating available
2
2018

9,631
1.7
315
1.8
Catamaran
A+ / A3
1
2025

8,713
1.6
301
1.7
Caterpillar Financial
A / A2
1
2022

7,968
1.4
312
1.8
Harvard University
AAA / Aaa
2
2017 / 2018

7,262
1.3
110
0.6
Technip
BBB+
1
2018

6,623
1.2
150
0.9
Harcourt
BBB+
1
2016

6,543
1.2
195
1.1
Raytheon
A / A3
2
2019

6,279
1.1
440
2.5
Motorola
BBB- / Baa3
1
2028

5,916
1.1
150
0.9
Goldman Sachs
BBB+ / A3
2
2018

5,899
1.1
235
1.4
Towers Watson
No rating available
1
2017

5,876
1.1
123
0.7
Henry M Jackson
No rating available
2
2022

5,691
1.0
145
0.8
District of Columbia
AA- / A1
2
2028

5,683
1.0
121
0.7
Epsilon Data Management
No rating available
1
2026

5,566
1.0
222
1.3
First Data Corporation
B+ / B2
1
2027

5,517
1.0
195
1.1
Lockheed Martin
BBB+ / Baa1
2
2016 / 2020
 
5,355
1.0
168
1.0
SunTrust Bank
BBB+ / Baa1
3
2019

5,287
1.0
145
0.8
Other


Various
 
299,389
53.9
9,880
57.0
Total



 
$554,106
100.0
17,350
100.0


23



Tenant Diversification
Percentage of Annualized Leased Revenue (%)
March 31, 2016 as compared to December 31, 2015


    
        









(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. The absence of a credit rating for a tenant is no indication of the credit worthiness of the tenant; 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 2016 to 2031.







24



Piedmont Office Realty Trust, Inc.
Tenant Credit Rating & Lease Distribution Information
As of March 31, 2016


Tenant Credit Rating (1) 
Rating Level
Annualized
Lease Revenue
(in thousands)
Percentage of
Annualized Lease
Revenue (%)
 
 
 
AAA / Aaa
$59,638
10.8
AA / Aa
98,067
17.7
A / A
81,614
14.7
BBB / Baa
49,390
8.9
BB / Ba
21,649
3.9
B / B
23,756
4.3
Below
2,222

0.4
Not rated (2)
217,770
39.3
Total
$554,106
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
243
31.4
$20,221
3.6
225

1.3
2,501 - 10,000
258
33.4
44,086
8.0
1,363

7.9
10,001 - 20,000
102
13.2
43,799
7.9
1,422

8.2
20,001 - 40,000
70
9.0
64,781
11.7
2,022

11.6
40,001 - 100,000
57
7.4
103,967
18.8
3,298

19.0
Greater than 100,000
43
5.6
277,252
50.0
9,020

52.0
Total
773
100.0
$554,106
100.0
17,350

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; it either indicates that the tenant does not have any debt or, if the tenant does have debt, its debt has not been rated. Included in this category are such tenants as Independence Blue Cross, McKinsey & Company and Towers Watson.

25



Piedmont Office Realty Trust, Inc.
Leased Percentage Information
(in thousands)


 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
 
March 31, 2016
 
March 31, 2015
 
 
 
 Leased
Square Footage
 Rentable
Square Footage
Percent
Leased (1)
 
 Leased
Square Footage
 Rentable
Square Footage
Percent
Leased (1)
 
 
As of December 31, 20xx
17,323

18,934

91.5
%
 
18,828

21,471

87.7
%
 
 
Leases signed during period
353



 
817



 
 
  Less: lease renewals signed during period
(171
)
 
 
 
(442
)
 
 
 
 
New leases signed during period
182




 
375




 
 
Leases expired during period and other
(155
)
(4
)

 
(127
)
2


 
 
Subtotal
17,350

18,930

91.7
%
 
19,076

21,473

88.8
%
 
 
Acquisitions during period





 
156

178


 
 
Dispositions during period





 
(120
)
(120
)

 
 
As of March 31, 20xx (2)
17,350

18,930

91.7
%
 
19,112

21,531

88.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Analysis
 
 
 
 
 
 
 
 
 
Less acquisitions / dispositions after March 31, 2015
and redevelopments (3) (4)
(1,364
)
(1,521
)
89.7
%
 
(3,525
)
(4,135
)
85.2
%
 
 
Same Store Leased Percentage (2)
15,986

17,409

91.8
%
 
15,587

17,396

89.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 












 
 
(1)
Calculated as square footage associated with commenced leases 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)
For additional information on acquisitions and dispositions completed during the last year and redevelopments, please refer to pages 36 and 37, respectively.
(4)
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.

26



Piedmont Office Realty Trust, Inc.
Rental Rate Roll Up / Roll Down Analysis (1) 
(in thousands)


 
Three Months Ended
 
 
March 31, 2016
 
 
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
168
47.7%
0.9%
3.3%
13.1%
 
Leases executed for spaces excluded from analysis (5)
185
52.3%
 
 
 
 

 
 
 
 
 
 
 





















(1)
The population analyzed consists of consolidated office leases executed during the period with lease terms of greater than one year. Retail leases, as well as leases associated with storage spaces, management offices, and unconsolidated joint venture assets, are excluded from this analysis.
(2)
For the purposes of this analysis, the last twelve months of cash rents for the previous leases are 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 are 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 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.

27



Piedmont Office Realty Trust, Inc.
Lease Expiration Schedule
As of March 31, 2016
(in thousands)

 
 
 
Expiration Year
 
Annualized Lease
Revenue (1)
Percentage of
Annualized Lease
Revenue (%)
 Rentable
Square Footage
 Percentage of
Rentable
Square Footage (%)
Vacant
 
$—
1,580
8.3
2016 (2)
 
19,985
3.6
602
3.2
2017 (3)
 
43,082
7.8
1,248
6.6
2018
 
47,503
8.6
1,517
8.0
2019
 
72,140
13.0
2,340
12.4
2020
 
49,040
8.9
1,756
9.3
2021
 
39,338
7.1
1,293
6.8
2022
 
37,844
6.8
1,235
6.5
2023
 
34,736
6.3
1,221
6.5
2024
 
40,583
7.3
1,417
7.5
2025
 
26,336
4.7
855
4.5
2026
 
20,774
3.7
714
3.8
2027
 
33,875
6.1
1,045
5.5
2028
 
43,113
7.8
933
4.9
Thereafter
 
45,757
8.3
1,174
6.2
Total / Weighted Average
 
$554,106
100.0
18,930
100.0
Average Lease Term Remaining
3/31/2016
6.7 years
12/31/2015
6.7 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 March 31, 2016, comprised of 27,000 square feet and Annualized Lease Revenue of $0.7 million.
(3)
Leases and other revenue-producing agreements on a month-to-month basis, comprised of 500 square feet and Annualized Lease Revenue of $0.2 million, are assigned a lease expiration date of a year and a day beyond the period end date.
 
 

28



Piedmont Office Realty Trust, Inc.
Lease Expirations by Quarter
As of March 31, 2016
(in thousands)

 
 
Q2 2016 (1)
 
Q3 2016
 
Q4 2016
 
Q1 2017
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
 
9
$148
 
2
$43
 
9
$234
 
15
$424
Austin
 
166
5,565
 
4
 
 
Boston
 
2
32
 
 
2
169
 
13
243
Central & South Florida
 
18
481
 
8
213
 
28
782
 
11
327
Chicago
 
6
164
 
29
883
 
7
288
 
1
3
Dallas
 
24
619
 
11
352
 
19
511
 
33
1,153
Detroit
 
2
38
 
6
112
 
5
 
43
861
Houston
 
 
 
 
Los Angeles
 
 
16
497
 
21
914
 
19
599
Minneapolis
 
3
80
 
1
48
 
12
395
 
17
567
Nashville
 
850
(3) 
 
 
66
New York
 
14
487
 
19
 
17
888
 
41
1,332
Philadelphia
 
 
 
 
Phoenix
 
7
164
 
 
 
38
887
Washington, D.C.
 
120
3,070
 
39
1,711
 
4
245
 
56
2,855
Total / Weighted Average (4)
 
371
$11,698
 
112
$3,882
 
119
$4,431
 
353
$9,251











(1)
Includes leases with an expiration date of March 31, 2016, comprised of 27,000 square feet and expiring lease revenue of $0.7 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)
As part of Comdata's recent lease renewal at 5301 Maryland Way in Brentwood, TN, the tenant was granted the right to use its give-back space beyond the original expiration date of May 31, 2016 with no base rental charges; therefore, the revenue associated with the space contraction is presented as expiring in Q2 2016 while the square footage is presented as expiring in Q1 2017. The tenant will continue to be directly responsible for operating expenses associated with the space until its rights to use the space have ended.
(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 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.

29



Piedmont Office Realty Trust, Inc.
Lease Expirations by Year
As of March 31, 2016
(in thousands)

 
12/31/2016 (1)
 
12/31/2017
 
12/31/2018
 
12/31/2019
 
12/31/2020
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
20
$425
 
69
$1,743
 
165
$4,215
 
400
$10,567
 
189
$4,125
Austin
166
5,568
 
 
 
29
979
 
Boston
4
201
 
171
7,583
 
150
6,663
 
569
10,494
 
232
5,664
Central & South Florida
54
1,476
 
181
4,924
 
99
2,671
 
203
6,440
 
92
1,960
Chicago
43
1,335
 
15
594
 
401
11,894
 
10
238
 
104
2,601
Dallas
53
1,482
 
160
4,638
 
374
9,678
 
197
5,577
 
112
2,997
Detroit
8
156
 
63
1,337
 
 
230
4,811
 
116
2,976
Houston
 
2
 
150
6,642
 
 
162
4,479
Los Angeles
37
1,412
 
54
1,563
 
22
602
 
8
343
 
85
2,623
Minneapolis
15
523
 
36
1,326
 
35
1,236
 
146
4,401
 
95
3,406
Nashville
850
(3) 
66
 
 
 
New York
31
1,393
 
52
1,822
 
79
2,127
 
489
25,506
 
503
15,622
Philadelphia
 
 
 
 
Phoenix
7
164
 
39
887
 
 
 
Washington, D.C.
164
5,026
 
342
17,018
 
42
1,812
 
59
2,649
 
66
3,103
Total / Weighted Average (4)
602
$20,011
 
1,248
$43,437
 
1,517
$47,540
 
2,340
$72,005
 
1,756
$49,556











(1)
Includes leases with an expiration date of March 31, 2016, comprised of 27,000 square feet and expiring lease revenue of $0.7 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)
As part of Comdata's recent lease renewal at 5301 Maryland Way in Brentwood, TN, the tenant was granted the right to use its give-back space beyond the original expiration date of May 31, 2016 with no base rental charges; therefore, the revenue associated with the space contraction is presented as expiring in 2016 while the square footage is presented as expiring in 2017. The tenant will continue to be directly responsible for operating expenses associated with the space until its rights to use the space have ended.
(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 28 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.
Capital Expenditures & Commitments
For the quarter ended March 31, 2016
Unaudited (in thousands)

 
For the Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Non-incremental
 
 
 
 
 
 
 
 
 
Building / construction / development
$
1,508

 
$
2,294

 
$
1,824

 
$
441

 
$
1,704

Tenant improvements
7,314

 
6,167

 
3,483

 
4,226

 
6,717

Leasing costs
1,174

 
5,478

 
2,962

 
6,974

 
1,866

Total non-incremental
9,996

 
13,939

 
8,269

 
11,641

 
10,287

Incremental
 
 
 
 
 
 
 
 
 
Building / construction / development
9,690

 
16,243

 
11,248

 
14,019

 
19,949

Tenant improvements
9,171

 
11,893

 
2,621

 
3,960

 
11,106

Leasing costs
1,803

 
7,765

 
10,449

 
3,296

 
2,593

Total incremental
20,664

 
35,901

 
24,318

 
21,275

 
33,648

Total capital expenditures
$
30,660

 
$
49,840

 
$
32,587

 
$
32,916

 
$
43,935




 
 
 
 
 
 
Non-incremental tenant improvement commitments (1)
 
 
 
 
Non-incremental tenant improvement commitments outstanding as of December 31, 2015
 
$
40,402

 
 
New non-incremental tenant improvement commitments related to leases executed during period
 
2,352

 
 
Non-incremental tenant improvement expenditures
(7,314
)
 
 
 
Tenant improvement expenditures fulfilled through accrued liabilities already presented on Piedmont's balance sheet, expired commitments or other adjustments
260

 
 
 
Non-incremental tenant improvement commitments fulfilled, expired or other adjustments
 
(7,054
)
 
 
Total as of March 31, 2016
 
$
35,700

 
 
 
 
 
 








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 $19.6 million, or 55% of the total outstanding commitments.
 
 

31



Piedmont Office Realty Trust, Inc.
Contractual Tenant Improvements and Leasing Commissions

 
 
For the Three Months
Ended March 31, 2016
For the Year Ended
 
 
2015
2014
2013
Renewal Leases
 
 
 
 
 
 
 
 
 
Number of leases
16
 
74
 
56
 
56
 
 
Square feet 
171,192
 
1,334,398
 
959,424
 
2,376,177
 
 
Tenant improvements per square foot (1)
$9.68
 
$16.91
 
$19.02
 
$14.24
 
 
Leasing commissions per square foot
$6.27
 
$8.29
 
$8.33
 
$4.66
 
 
Total per square foot
$15.95
 
$25.20
 
$27.35
 
$18.90
 
 
Tenant improvements per square foot per year of lease term
$2.30
 
$2.90
 
$2.97
 
$1.88
 
 
Leasing commissions per square foot per year of lease term
$1.49
 
$1.42
 
$1.30
 
$0.62
 
 
Total per square foot per year of lease term
$3.79
 
$4.32
(2) 
$4.27
(3) 
$2.50
 
New Leases
 
 
 
 
 
 
 
 
 
Number of leases
24
 
90
 
98
 
87
 
 
Square feet
181,509
 
1,563,866
 
1,142,743
 
1,050,428
 
 
Tenant improvements per square foot (1)
$24.88
 
$60.41
 
$34.46
 
$35.74
 
 
Leasing commissions per square foot
$11.56
 
$20.23
 
$15.19
 
$12.94
 
 
Total per square foot
$36.44
 
$80.64
 
$49.65
 
$48.68
 
 
Tenant improvements per square foot per year of lease term
$4.04
 
$5.68
 
$3.78
 
$4.17
 
 
Leasing commissions per square foot per year of lease term
$1.88
 
$1.90
 
$1.66
 
$1.51
 
 
Total per square foot per year of lease term
$5.92
 
$7.58
(4) 
$5.44
 
$5.68
 
Total
 
 
 
 
 
 
 
 
 
Number of leases
40
 
164
 
154
 
143
 
 
Square feet
352,701
 
2,898,264
 
2,102,167
 
3,426,605
 
 
Tenant improvements per square foot (1)
$17.50
 
$40.38
 
$27.41
 
$20.83
 
 
Leasing commissions per square foot
$9.00
 
$14.73
 
$12.06
 
$7.20
 
 
Total per square foot
$26.50
 
$55.11
 
$39.47
 
$28.03
 
 
Tenant improvements per square foot per year of lease term
$3.36
 
$4.79
 
$3.48
 
$2.64
 
 
Leasing commissions per square foot per year of lease term
$1.73
 
$1.75
 
$1.53
 
$0.91
 
 
Total per square foot per year of lease term
$5.09
 
$6.54
(4) 
$5.01
(3) 
$3.55
 


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 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 2015 was higher than our historical performance on this measure primarily as a result of four large lease renewals, two of which were completed in the Washington, D.C. market, that involved higher capital commitments. If the costs associated with those renewals were to be removed from the average committed capital cost calculation, the average committed capital cost per square foot per year of lease term for renewal leases completed during 2015 would be $3.33. The one-year lease renewal with Comdata at 5301 Maryland Way in Brentwood, TN, executed in the third quarter of 2015 was excluded from this analysis as that renewal was superceded by the long-term renewal completed during the fourth quarter of 2015.
(3)
During 2014, we completed one large, 15-year lease renewal and expansion with a significant capital commitment with 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 2014 would be $2.12 and $4.47, respectively.
(4)
During 2015, we completed seven new leases in Washington, D.C., and Chicago, IL, comprising 680,035 square feet with above-average capital commitments. If the costs associated with those new leases 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 2015 would be $5.42 and $4.88, respectively.

32




Piedmont Office Realty Trust, Inc.
Geographic Diversification
As of March 31, 2016
($ 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 (%)
Washington, D.C.
12
$105,730
19.1
3,039
16.1
2,271
74.7
New York
4
67,945
12.3
1,766
9.3
1,743
98.7
Chicago
5
63,778
11.5
2,094
11.1
1,864
89.0
Atlanta
8
48,747
8.8
2,064
10.9
1,905
92.3
Minneapolis
4
47,291
8.5
1,618
8.6
1,465
90.5
Dallas
9
46,778
8.4
1,798
9.5
1,744
97.0
Boston
9
44,742
8.1
1,627
8.6
1,608
98.8
Los Angeles
4
31,705
5.7
1,010
5.3
1,004
99.4
Central & South Florida
5
29,820
5.4
1,124
5.9
1,030
91.6
Philadelphia
1
18,016
3.3
801
4.2
801
100.0
Detroit
3
17,790
3.2
819
4.3
745
91.0
Other
5
31,764
5.7
1,170
6.2
1,170
100.0
Total / Weighted Average
69
$554,106
100.0
18,930
100.0
17,350
91.7

33



Piedmont Office Realty Trust, Inc.
Geographic Diversification by Location Type
As of March 31, 2016
(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
(%)
Washington, D.C.
DC, VA, MD
 
9
18.4
2,699
14.3
 
3
0.7
340
1.8
 
12
19.1
3,039
16.1
New York
NY, NJ
 
1
8.7
1,033
5.4
 
3
3.6
733
3.9
 
4
12.3
1,766
9.3
Chicago
IL
 
1
6.4
967
5.2
 
4
5.1
1,127
5.9
 
5
11.5
2,094
11.1
Atlanta
GA
 
5
7.5
1,682
8.9
 
3
1.3
382
2.0
 
8
8.8
2,064
10.9
Minneapolis
MN
 
1
5.0
933
5.0
 
3
3.5
685
3.6
 
4
8.5
1,618
8.6
Dallas
TX
 
2
2.3
440
2.3
 
7
6.1
1,358
7.2
 
9
8.4
1,798
9.5
Boston
MA
 
2
2.4
173
0.9
 
7
5.7
1,454
7.7
 
9
8.1
1,627
8.6
Los Angeles
CA
 
3
5.0
876
4.6
 
1
0.7
134
0.7
 
4
5.7
1,010
5.3
Central & South Florida
FL
 
1
3.3
651
3.4
 
4
2.1
473
2.5
 
5
5.4
1,124
5.9
Philadelphia
PA
 
1
3.3
801
4.2
 
 
1
3.3
801
4.2
Detroit
MI
 
1
2.0
489
2.6
 
2
1.2
330
1.7
 
3
3.2
819
4.3
Other

 
1
1.4
312
1.6
 
4
4.3
858
4.6
 
5
5.7
1,170
6.2
Total / Weighted Average
 
28
65.7
11,056
58.4
 
41
34.3
7,874
41.6
 
69
100.0
18,930
100.0


34



Piedmont Office Realty Trust, Inc.
Industry Diversification
As of March 31, 2016
($ 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
0.8
$82,962
15.0
1,699
9.8
Business Services
94
14.9
48,852
8.8
1,838
10.6
Depository Institutions
15
2.4
38,813
7.0
1,328
7.7
Engineering, Accounting, Research, Management & Related Services
67
10.6
35,925
6.5
991
5.7
Nondepository Credit Institutions
18
2.8
34,355
6.2
1,153
6.6
Insurance Carriers
20
3.2
31,293
5.6
1,240
7.2
Insurance Agents, Brokers & Services
21
3.3
29,068
5.2
975
5.6
Security & Commodity Brokers, Dealers, Exchanges & Services
38
6.0
22,931
4.1
763
4.4
Communications
46
7.3
19,950
3.6
625
3.6
Legal Services
49
7.8
18,677
3.4
625
3.6
Electronic & Other Electrical Equipment & Components, Except Computer
14
2.2
18,555
3.4
577
3.3
Educational Services
8
1.3
15,133
2.7
395
2.3
Real Estate
30
4.7
14,749
2.7
485
2.8
Food & Kindred Products
3
0.5
12,522
2.3
408
2.4
Automotive Repair, Services & Parking
6
0.9
11,693
2.1
4
Other
198
31.3
118,628
21.4
4,244
24.4
Total
632
100.0
$554,106
100.0
17,350
100.0

35



Piedmont Office Realty Trust, Inc.
Property Investment Activity
As of March 31, 2016
($ 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 (%)
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
80 Central Street
 
Boxborough, MA
7/24/2015
100
1988
13,500
150
93
SunTrust Center
 
Orlando, FL
11/4/2015
100
1988
170,804
655
89
Galleria 300
 
Atlanta, GA
11/4/2015
100
1987
88,317
433
89
Glenridge Highlands One
 
Atlanta, GA
11/24/2015
100
1998
63,562
290
90
Suwanee Gateway Land
 
Suwanee, GA
12/21/2015
100
N/A
1,350
N/A
N/A
Total / Weighted Average
 
 
 
 
 
$395,542
1,706
89

Dispositions Over Previous Eighteen Months
Property
 
Location
Disposition Date
Percent
Ownership (%)
Year Built
Sale Price
 Rentable Square
Footage
 Percent Leased at
Disposition (%)
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
51,025
268
87
Eastpoint I & Eastpoint II
Mayfield Heights, OH
7/28/2015
100
2000
18,500
170
91
3750 Brookside Parkway
 
Alpharetta, GA
8/10/2015
100
2001
14,086
105
91
Chandler Forum
 
Chandler, AZ
9/1/2015
100
2003
33,900
150
100
Aon Center
 
Chicago, IL
10/29/2015
100
1972
712,000
2,738
87
2 Gatehall Drive
 
Parsippany, NJ
12/21/2015
100
1985
51,000
405
100
Total / Weighted Average
 
 
 
 
 
$964,978
4,255
90

Dispositions Subsequent to Quarter End
Property
 
Location
Disposition Date
Percent
Ownership (%)
Year Built
Sale Price
 Rentable Square
Footage
 Percent Leased at
Disposition (%)
1055 East Colorado Boulevard
 
Pasadena, CA
4/21/2016
100
2001
$61,250
176
99
Fairway Center II
 
Brea, CA
4/28/2016
100
2002
33,800
134
97
1901 Main Street
 
Irvine, CA
5/2/2016
100
2001
66,000
173
100
 
 
 
 
 
 
$161,050
483
99


 
 
 
 

36



Piedmont Office Realty Trust, Inc.
Other Investments
As of March 31, 2016
($ 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
$6,859
$9,541
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 One and Two
3.0
1,725
Suwanee Gateway
Suwanee, GA
Suwanee Gateway One
5.0
1,401
State Highway 161
 Irving, TX
Las Colinas Corporate Center I and II, 161 Corporate Center
4.5
3,320
Royal Lane
Irving, TX
6011, 6021 and 6031 Connection Drive
10.6
2,664
TownPark
Lake Mary, FL
400 and 500 TownPark
18.9
5,741
Total
 
 
44.0
$17,351


Development - Construction
Property
Location
Adjacent Piedmont Property
Construction Type
Actual or Targeted Completion Date
Percent Leased (%)
Square Feet
Current Asset Basis
(Accrual)
Project Capital Expended
(Cash)
Estimated Additional Capital Required (1)
(Cash)
500 TownPark
Lake Mary, FL
400 TownPark
Development
Q1 2017
80
135.0
8,021
2,776
$25 to $27 million


Development - Lease-Up
Property
Location
Adjacent Piedmont Property
Construction Type
Actual or Targeted Completion Date
Percent Leased (%)
Square Feet
Current Asset Basis (4)
(Accrual)
Project Capital Expended (4)
(Cash)
Enclave Place
 Houston, TX
1430 Enclave Parkway
Development
Q3 2015
300.9
$62,272
$60,865
3100 Clarendon Boulevard (2)
Arlington, VA
Not Applicable
Redevelopment
Q4 2015 (3)
28
261.8
86,776
36,680
Total
 
 
 
 
 
562.7
$149,048
$97,545

(1)
Amount includes anticipated development costs as well as estimated lease-up costs.
(2)
The Current Asset Basis presented is that of the office and Metro retail portions of the property only. The street retail portion of the property remained in service and street retail tenants remained in occupancy during the redevelopment.
(3)
The redevelopment of the office tower and the retail facade improvements are complete; the remaining plaza work will be completed during the second quarter of 2016.
(4)
Inclusive of tenant improvement and leasing costs. Predominately tenant improvement and leasing costs for the lease-up of each property remain and will vary by tenant and by market.


37



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 40.
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 revenues associated with our unconsolidated joint venture properties and development / re-development properties, if any.
 
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.

38



Piedmont Office Realty Trust, Inc.
Research Coverage

Equity Research Coverage
Barry Oxford
Jed Reagan
Anthony Paolone, CFA
Steve Manaker, CFA
D.A. Davidson & Company
Green Street Advisors
JP Morgan
Oppenheimer & Co.
260 Madison Avenue, 8th Floor
660 Newport Center Drive, Suite 800
383 Madison Avenue
85 Broad Street
New York, NY 10016
Newport Beach, CA 92660
34th Floor
New York, NY 10004
Phone: (212) 240-9871
Phone: (949) 640-8780
New York, NY 10179
Phone: (212) 667-5950
 
 
Phone: (212) 622-6682
 
 
 
 
 
 
 
 
 
David Rodgers, CFA
John W. Guinee, III
Michael Lewis, CFA
 
Robert W. Baird & Co.
Erin Aslakson
SunTrust Robinson Humphrey
 
200 Public Square
Stifel, Nicolaus & Company
711 Fifth Avenue, 14th Floor
 
Suite 1650
One South Street
New York, NY 10022
 
Cleveland, OH 44139
16th Floor
Phone: (212) 319-5659
 
Phone: (216) 737-7341
Baltimore, MD 21202
 
 
 
Phone: (443) 224-1307
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Fixed Income Research Coverage
Mark S. Streeter, CFA
 
 
JP Morgan
 
 
383 Madison Avenue
 
 
3rd Floor
 
 
New York, NY 10179
 
 
Phone: (212) 834-5086
 
 
 
 
 
 
 
 
 
 
 


39



Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations, and Adjusted Funds From Operations Reconciliations
Unaudited (in thousands)

 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
 
 
 
 
 
 
 
 
 
 
GAAP net income applicable to common stock
$
10,372

 
$
125,644

 
$
(1,875
)
 
$
29,976

 
$
19,245

Depreciation
31,639

 
30,867

 
31,093

 
35,935

 
36,097

Amortization
17,822

 
17,257

 
14,037

 
14,971

 
14,686

Impairment loss

 

 
34,815

 
5,354

 

Loss / (gain) on sale of properties
20

 
(114,412
)
 
(17,140
)
 
(26,611
)
 
(10,073
)
NAREIT funds from operations applicable to common stock
59,853

 
59,356

 
60,930

 
59,625

 
59,955

Adjustments:
 
 
 
 
 
 
 
 
 
Acquisition costs
12

 
644

 
128

 
3

 
144

Loss / (gain) on extinguishment of swaps

 
(94
)
 

 
132

 

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

 
278

 

 

 

Core funds from operations applicable to common stock
59,865

 
60,184

 
61,058

 
59,760

 
60,099

Adjustments:
 
 
 
 
 
 
 
 
 
Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on senior notes
647

 
642

 
646

 
608

 
651

Depreciation of non real estate assets
204

 
226

 
168

 
165

 
196

Straight-line effects of lease revenue
(7,848
)
 
(4,960
)
 
(2,519
)
 
(3,745
)
 
(4,510
)
Stock-based and other non-cash compensation expense
1,928

 
2,051

 
2,622

 
1,692

 
725

Amortization of lease-related intangibles
(1,238
)
 
(1,202
)
 
(1,145
)
 
(1,102
)
 
(1,122
)
Acquisition costs
(12
)
 
(644
)
 
(128
)
 
(3
)
 
(144
)
Non-incremental capital expenditures
(9,996
)
 
(13,939
)
 
(8,269
)
 
(11,641
)
 
(10,287
)
Adjusted funds from operations applicable to common stock
$
43,550

 
$
42,358

 
$
52,433

 
$
45,734

 
$
45,608


40



Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)


 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
 
 
 
 
 
 
 
 
 
 
Net income attributable to Piedmont
$
10,372

 
$
125,644

 
$
(1,875
)
 
$
29,976

 
$
19,245

Net income attributable to noncontrolling interest
4

 
3

 
4

 
4

 
4

Interest expense
16,385

 
17,978

 
18,832

 
18,172

 
19,016

Depreciation
31,843

 
31,093

 
31,261

 
36,100

 
36,292

Amortization
17,822

 
17,257

 
14,037

 
14,971

 
14,686

Acquisition costs
12

 
644

 
128

 
3

 
144

Impairment loss

 

 
34,815

 
5,354

 

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

 
278

 

 

 

Loss / (gain) on sale of properties
20

 
(114,412
)
 
(17,140
)
 
(26,611
)
 
(10,073
)
Core EBITDA
76,458

 
78,485

 
80,062

 
77,969

 
79,314

General & administrative expenses
7,869

 
7,646

 
8,246

 
8,102

 
6,416

Management fee revenue
(292
)
 
(224
)
 
(329
)
 
(232
)
 
(330
)
Other (income) / expense
(307
)
 
(992
)
 
(931
)
 
(599
)
 
38

Straight-line effects of lease revenue
(7,848
)
 
(4,960
)
 
(2,519
)
 
(3,745
)
 
(4,510
)
Amortization of lease-related intangibles
(1,238
)
 
(1,202
)
 
(1,145
)
 
(1,102
)
 
(1,122
)
Property net operating income (cash basis)
74,642

 
78,753

 
83,384

 
80,393

 
79,806

Deduct net operating (income) / loss from:
 
 
 
 
 
 
 
 
 
Acquisitions
(5,215
)
 
(2,997
)
 
(893
)
 
(667
)
 
(513
)
Dispositions
29

 
(5,519
)
 
(11,002
)
 
(9,216
)
 
(10,413
)
Other investments
(126
)
 
(168
)
 
(284
)
 
(248
)
 
(270
)
Same store net operating income (cash basis)
$
69,330

 
$
70,069

 
$
71,205

 
$
70,262

 
$
68,610


41



Piedmont Office Realty Trust, Inc.
Unconsolidated Joint Venture Net Operating Income Reconciliations
Pro rata and unaudited (in thousands)


 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
 
 
 
 
 
 
 
 
 
 
Equity in income of unconsolidated joint ventures
$
115

 
$
135

 
$
135

 
$
124

 
$
159

 
 
 
 
 
 
 
 
 
 
Interest expense

 

 

 

 

 
 
 
 
 
 
 
 
 
 
Depreciation
61

 
60

 
61

 
62

 
62

 
 
 
 
 
 
 
 
 
 
Amortization
16

 
16

 
16

 
16

 
16

 
 
 
 
 
 
 
 
 
 
Impairment loss

 

 

 

 

 
 
 
 
 
 
 
 
 
 
Loss / (gain) on sale of properties

 

 

 

 

 
 
 
 
 
 
 
 
 
 
Core EBITDA
192

 
211

 
212

 
202

 
237

 
 
 
 
 
 
 
 
 
 
General and administrative expenses
4

 
6

 
10

 
18

 
8

 
 
 
 
 
 
 
 
 
 
Other (income) / expense

 

 

 

 

 
 
 
 
 
 
 
 
 
 
Property net operating income (accrual basis)
196

 
217

 
222

 
220

 
245

 
 
 
 
 
 
 
 
 
 
Straight-line effects of lease revenue
1

 
(3
)
 
(3
)
 
(5
)
 
(5
)
 
 
 
 
 
 
 
 
 
 
Amortization of lease-related intangibles

 

 

 

 

 
 
 
 
 
 
 
 
 
 
Property net operating income (cash basis)
$
197

 
$
214

 
$
219

 
$
215

 
$
240


42



Piedmont Office Realty Trust, Inc.
Discontinued Operations
Unaudited (in thousands)


 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Revenues:
 
 
 
 
 
 
 
 
 
Rental income
$

 
$

 
$
19

 
$

 
$

Tenant reimbursements

 
67

 

 
(3
)
 

Property management fee revenue

 

 

 

 

Other rental income

 

 

 

 

 

 
67

 
19

 
(3
)
 

Expenses:
 
 
 
 
 
 
 
 
 
Property operating costs

 
(3
)
 
3

 
(1
)
 

Depreciation

 

 

 

 

Amortization

 

 

 

 

General and administrative

 
(1
)
 

 
1

 

 

 
(4
)
 
3

 

 

Other income / (expense):
 
 
 
 
 
 
 
 
 
Interest expense

 

 

 

 

Other income / (expense)

 

 

 

 

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

 

 

 

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
Operating income, excluding impairment loss and gain / (loss) on sale

 
71

 
16

 
(3
)
 

 
 
 
 
 
 
 
 
 
 
Impairment loss

 

 

 

 

Gain / (loss) on sale of properties

 
1

 
(2
)
 

 

 
 
 
 
 
 
 
 
 
 
Income from discontinued operations
$

 
$
72

 
$
14

 
$
(3
)
 
$




43



Piedmont Office Realty Trust, Inc.
Property Detail
As of March 31, 2016
(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
%
88.1
%
88.1
%
Glenridge Highlands Two
 Atlanta
 GA
100.0%
2000
427
98.4
%
98.4
%
89.2
%
Suwanee Gateway One
 Suwanee
 GA
100.0%
2008
143
46.9
%
42.0
%
42.0
%
The Dupree
 Atlanta
 GA
100.0%
1997
138
100.0
%
100.0
%
100.0
%
The Medici
 Atlanta
 GA
100.0%
2008
158
96.8
%
93.7
%
86.1
%
1155 Perimeter Center West
 Atlanta
 GA
100.0%
2000
377
100.0
%
100.0
%
100.0
%
Galleria 300
 Atlanta
 GA
100.0%
1987
432
91.0
%
88.7
%
88.0
%
Glenridge Highlands One
 Atlanta
 GA
100.0%
1998
288
91.7
%
86.5
%
71.2
%
Metropolitan Area Subtotal / Weighted Average




2,064
92.3
%
90.3
%
85.6
%
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
%
80 Central Street
 Boxborough
 MA
100.0%
1988
150
87.3
%
87.3
%
87.3
%
90 Central Street
 Boxborough
 MA
100.0%
2001
175
100.0
%
100.0
%
100.0
%
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
272
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




1,627
98.8
%
98.8
%
98.8
%
Chicago








Windy Point I
 Schaumburg
 IL
100.0%
1999
187
66.3
%
66.3
%
66.3
%
Windy Point II
 Schaumburg
 IL
100.0%
2001
301
100.0
%
100.0
%
83.1
%
Two Pierce Place
 Itasca
 IL
100.0%
1991
486
96.7
%
96.7
%
88.5
%
2300 Cabot Drive
 Lisle
 IL
100.0%
1998
153
74.5
%
74.5
%
74.5
%
500 West Monroe Street
 Chicago
 IL
100.0%
1991
967
88.4
%
71.8
%
63.3
%
Metropolitan Area Subtotal / Weighted Average




2,094
89.0
%
81.3
%
73.1
%

44






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
%
87.9
%
87.9
%
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
91.8
%
91.8
%
91.8
%
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
96.2
%
95.4
%
93.8
%
One Lincoln Park
 Dallas
 TX
100.0%
1999
262
93.9
%
92.0
%
90.5
%
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
92.7
%
82.0
%
67.4
%
Metropolitan Area Subtotal / Weighted Average




1,798
97.0
%
94.0
%
92.0
%
Detroit








150 West Jefferson
 Detroit
 MI
100.0%
1989
489
88.3
%
84.3
%
83.4
%
Auburn Hills Corporate Center
 Auburn Hills
 MI
100.0%
2001
120
85.8
%
85.8
%
85.8
%
1075 West Entrance Drive
 Auburn Hills
 MI
100.0%
2001
210
100.0
%
100.0
%
100.0
%
Metropolitan Area Subtotal / Weighted Average




819
91.0
%
88.5
%
88.0
%
Central & South Florida








Sarasota Commerce Center II
Sarasota
FL
100.0%
1999
149
93.3
%
93.3
%
85.9
%
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
94.9
%
94.9
%
50.6
%
SunTrust Center
Orlando
FL
100.0%
1988
651
88.5
%
88.5
%
86.3
%
Metropolitan Area Subtotal / Weighted Average




1,124
91.6
%
91.6
%
82.5
%
Houston








1430 Enclave Parkway
Houston
TX
100.0%
1994
313
100.0
%
100.0
%
100.0
%
Metropolitan Area Subtotal / Weighted Average




313
100.0
%
100.0
%
100.0
%
Los Angeles








800 North Brand Boulevard
Glendale
CA
100.0%
1990
527
100.0
%
99.2
%
22.8
%
1055 East Colorado Boulevard
Pasadena
CA
100.0%
2001
176
98.9
%
96.6
%
94.9
%
Fairway Center II
Brea
CA
100.0%
2002
134
97.0
%
97.0
%
91.0
%
1901 Main Street
Irvine
CA
100.0%
2001
173
100.0
%
91.3
%
89.6
%
Metropolitan Area Subtotal / Weighted Average




1,010
99.4
%
97.1
%
55.8
%
Minneapolis








Crescent Ridge II
Minnetonka
MN
100.0%
2000
301
83.4
%
83.4
%
83.4
%
US Bancorp Center
Minneapolis
MN
100.0%
2000
933
89.2
%
87.2
%
87.2
%
One Meridian Crossings
Richfield
MN
100.0%
1997
195
100.0
%
100.0
%
100.0
%
Two Meridian Crossings
Richfield
MN
100.0%
1998
189
98.9
%
98.9
%
98.9
%
Metropolitan Area Subtotal / Weighted Average




1,618
90.5
%
89.4
%
89.4
%


45







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








200 Bridgewater Crossing
Bridgewater
NJ
100.0%
2002
309
97.4
%
93.9
%
93.9
%
60 Broad Street
New York
NY
100.0%
1962
1,033
100.0
%
100.0
%
96.1
%
600 Corporate Drive
Lebanon
NJ
100.0%
2005
125
100.0
%
100.0
%
100.0
%
400 Bridgewater Crossing
Bridgewater
NJ
100.0%
2002
299
95.0
%
90.3
%
90.3
%
Metropolitan Area Subtotal / Weighted Average




1,766
98.7
%
97.3
%
95.0
%
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
%
Metropolitan Area Subtotal / Weighted Average




149
100.0
%
100.0
%
100.0
%
Washington, D.C.








1201 Eye Street
Washington
DC
49.5% (2)
2001
269
82.9
%
66.2
%
66.2
%
1225 Eye Street
Washington
DC
49.5% (2)
1986
225
88.4
%
77.8
%
65.3
%
400 Virginia Avenue
Washington
DC
100.0%
1985
224
82.1
%
82.1
%
78.1
%
4250 North Fairfax Drive
Arlington
VA
100.0%
1998
306
46.7
%
46.7
%
38.6
%
9211 Corporate Boulevard
Rockville
MD
100.0%
1989
116
36.2
%
36.2
%
%
9221 Corporate Boulevard
Rockville
MD
100.0%
1989
115
100.0
%
100.0
%
100.0
%
One Independence Square
Washington
DC
100.0%
1991
334
70.7
%
29.9
%
4.5
%
9200 Corporate Boulevard
Rockville
MD
100.0%
1982
109
%
%
%
Two Independence Square
Washington
DC
100.0%
1991
606
100.0
%
100.0
%
99.8
%
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
%
60.5
%
57.0
%
Arlington Gateway
Arlington
VA
100.0%
2005
326
79.8
%
78.5
%
71.2
%
Metropolitan Area Subtotal / Weighted Average




3,039
74.7
%
67.9
%
60.5
%









Grand Total




18,930
91.7
%
88.7
%
83.0
%









(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.

46



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 2016 and certain expected future financing requirements and expenditures.
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: economic, regulatory and socio-economic changes (including accounting standards) that impact the real estate market generally or that could affect the patterns of use of commercial office space, may cause our operating results to suffer and decrease the value of our real estate properties; the success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions and divestitures; 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 affecting 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, where we have high concentrations of office properties; the illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties; acquisitions of properties may have unknown risks and other liabilities at the time of acquisition; development and construction delays and resultant increased costs and risks may negatively impact our operating results; our real estate development strategies may not be successful; future terrorist attacks in the major metropolitan areas in which we own properties could significantly impact the demand for, and value of, our properties; additional risks and costs associated with directly managing properties occupied by government tenants; adverse market and economic conditions may negatively affect us and could cause us to recognize impairment charges on our long-lived assets or goodwill 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; future offerings of debt or equity securities may adversely affect the market price of our common stock; changes in market interest rates may have an effect on the value of our common stock; uncertainties associated with environmental and other regulatory matters; potential changes in political environment and reduction in federal and/or state funding of our governmental tenants; we may be subject to litigation, which could have a material adverse effect on our financial condition; changes in tax laws impacting REITs and real estate in general, as well as our ability to continue to qualify as a REIT under the Internal Revenue Code; 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.




47