pdm-20210210
0001042776false00010427762021-02-102021-02-10


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):  February 10, 2021
 
Piedmont Office Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number:  001-34626
 
Maryland58-2328421
(State or other jurisdiction of(IRS Employer
incorporation)Identification No.)

5565 Glenridge Connector Ste. 450
Atlanta, Georgia 30342

(Address of principal executive offices, including zip code)
 
(770) 418-8800
(Registrant's telephone number, including area code)
 
Not applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

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

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

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

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

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

Emerging growth company 

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




Item 2.02    Results of Operations and Financial Condition.

On February 10, 2021, Piedmont Office Realty Trust, Inc. (the "Registrant") issued a press release announcing its financial results for the fourth quarter 2020, as well as the year ended December 31, 2020, ,and published supplemental information for the fourth quarter 2020, as well as the year ended December 31, 2020, 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
99.2
104Cover Page Interactive Data File (embedded within the Inline XBRL document)







SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
 
  Piedmont Office Realty Trust, Inc.
 (Registrant)
Dated:February 10, 2021By:/s/    Robert E. Bowers
  Robert E. Bowers
  Chief Financial Officer and Executive Vice President




Document

EXHIBIT 99.1
https://cdn.kscope.io/37909a132740d9a84abc8ad0d66d2eec-image11a.jpg

Piedmont Office Realty Trust Reports Fourth Quarter and Annual 2020 Results
ATLANTA, February 10, 2021--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in select sub-markets within seven major Eastern U.S. office markets with a majority of its revenue coming from Sunbelt markets, today announced its results for the quarter and year ended December 31, 2020.

Highlights for the Quarter and Year Ended December 31, 2020:

The timing of dispositions over the last two years and the recording of related gains, significantly impacted the results of the quarter and year ended December 31, 2020. The Company reported net income applicable to common stockholders of $22.6 million, or $0.18 per diluted share, and $232.7 million, or $1.85 per diluted share, for the quarter and year ended December 31, 2020, respectively, as compared with $162.5 million, or $1.29 per diluted share, and $229.3 million, or $1.82 per diluted share for the quarter and year ended December 31, 2019, respectively.
Piedmont reported an approximate 6% year over year increase in Core Funds From Operations which eliminates the effect of gains and losses on dispositions, with $0.46 per diluted share and $1.89 per diluted share for the quarter and year ended December 31, 2020, respectively, as compared to $0.46 per diluted share and $1.79 per diluted share for the quarter and year ended December 31, 2019, respectively.
The Company completed 1.1 million square feet of leasing during the year ended December 31, 2020, including approximately 189,000 square feet during the fourth quarter.
Piedmont recognized a 3.5% and 10.2% roll up in cash and accrual rents, respectively, for the year ended December 31, 2020 with a 2.2% roll down and 5.3% roll up in cash and accrual rents, respectively, for the quarter ended December 31, 2020 on executed leases for space vacant one year or less.
The Company collected over 99% of billed tenant receivables for the year ended December 31, 2020.
During the fourth quarter, Piedmont sold a portfolio consisting of its final three assets located in New Jersey: 600 Corporate Drive and 200 and 400 Bridgewater Crossing, for approximately $130 million, or $176 per square foot, resulting in a gain of $14.6 million;
The Company acquired 222 South Orange Avenue during the fourth quarter. The approximately 127,000 square foot office building, which is connected to Piedmont's 200 South Orange Avenue office tower located in downtown Orlando, FL, was acquired for $20 million, or $157 per square foot.
During the fourth quarter, 2.2 million shares of the Company's common stock were repurchased at an average price of $14.00 per share.




Commenting on fourth quarter and annual results, Brent Smith, President and Chief Executive Officer, said, "2020 was an extremely difficult year for everyone, but despite the challenges Piedmont faced, we executed over a million square feet of leasing and achieved approximately 6% growth in Core FFO driven by strong rent collections from our diversified, credit-worthy tenant base. Additionally, we were able to complete several strategic transactions to further our presence in select Sunbelt markets - exchanging 1901 Market, our sole asset in Philadelphia, for the Dallas Galleria Office Towers, exiting the New Jersey market through a portfolio disposition, and bolstering our downtown Orlando campus with the acquisition of 222 South Orange Avenue. Furthermore, we are encouraged by the improved leasing activity witnessed during the latter part of 2020. As we move into 2021, our balance sheet remains strong, our liquidity position is excellent, and leasing activity continues to improve, with Piedmont already completing over 500,000 square feet of leasing year to date. With COVID-19 vaccines entering the distribution phase, we anticipate business and office space usage returning to more normal activity over the course of this year."

Results for the Quarter ended December 31, 2020

Piedmont recognized net income applicable to common stockholders for the three months ended December 31, 2020 of $22.6 million, or $0.18 per diluted share, as compared with $162.5 million, or $1.29 per diluted share, for the three months ended December 31, 2019. The three months ended December 31, 2019 included a $157.6 million gain on sale primarily related to the sale of 500 West Monroe Street located in the West Loop submarket of downtown Chicago, IL, as well as a $7.0 million loss on impairment of real estate assets. The three months ended December 31, 2020 included a $14.6 million gain on sale of real estate assets associated with the sale of a portfolio consisting of our final three assets located in the state of New Jersey during the quarter.
Funds From Operations ("FFO") and Core FFO, which remove the impact of the gains on sale and impairment loss mentioned above (as well as depreciation and amortization), were both $0.46 per diluted share for both the three months ended December 31, 2020 and 2019.
The per share results for the fourth quarter and the year of 2020 include the repurchase of approximately 2.2 million shares of the Company's common stock during the fourth quarter at an average price of $14.00 per share pursuant to the Company's stock repurchase program.
Total revenues were $131.5 million for the three months ended December 31, 2020, compared to $134.2 million for the three months ended December 31, 2019 with the three months ended December 31, 2020 primarily reflecting impacts of net transactional activity, a reduction in revenues during the fourth quarter of 2020 when compared to 2019 due to reduced transient parking revenue as a result of the COVID-19 pandemic, and decreased portfolio occupancy.
Property operating costs were $55.3 million for the three months ended December 31, 2020, as compared with $52.6 million for the three months ended December 31, 2019, reflecting net transactional activity during the two years ended December 31, 2020 and higher property tax expense in certain markets, partially offset by lower utility and janitorial costs as a result of reduced physical utilization across our portfolio as a result of the pandemic.
General and administrative expense was $7.4 million for the fourth quarter of 2020 as compared to $8.2 million for the same period in 2019, with the three months ended December 31, 2020 primarily reflecting decreased accruals for potential performance based compensation.




Results for the Year ended December 31, 2020

Piedmont recognized net income applicable to common stockholders for the year ended December 31, 2020 of $232.7 million, or $1.85 per diluted share, as compared with net income of $229.3 million, or $1.82 per diluted share, for the year ended December 31, 2019. The year ended December 31, 2020 included approximately $205.7 million, or $1.63 per diluted share, of gains on sales of real estate assets, whereas the prior year included approximately $188.1 million, or $1.49 per diluted share, of gains on sales of real estate assets net of impairment losses.

FFO, which removes the impact of the gains on sales of real estate assets and impairment charges mentioned above (as well as depreciation and amortization), was $1.82 per diluted share for the year ended December 31, 2020, as compared with $1.77 per diluted share for the year ended December 31, 2019. The year over year increase primarily reflects accretive capital recycling activities during the two years ended December 31, 2020, and decreased general and administrative and interest expense. These increases were partially offset by the establishment of receivables reserves and decreased parking revenues associated with the pandemic, as well as decreased portfolio occupancy, during the year ended December 31, 2020. Results for the year ended December 31, 2020 also included a non-recurring $9.3 million loss on early extinguishment of debt related to the sale of an asset for a significant gain, as compared to $3.2 million of non-recurring retirement and separation expenses included in the results for the year ended December 31, 2019.

Core FFO per diluted share, which further removes the non-recurring expenses mentioned in the previous paragraph, was $1.89 per diluted share for the year ended December 31, 2020, as compared with $1.79 per diluted share for the year ended December 31, 2019, an approximately 6% increase year over year.

Total revenues were $535.0 million for the year ended December 31, 2020, as compared with $533.2 million for the year ended December 31, 2019, with the current year reflecting rental rate increases associated with recent leasing activity across the portfolio and accretive capital recycling activities during the two years ended December 31, 2020, partially offset by the establishment of receivables reserves and decreased parking revenues associated with the pandemic, along with decreased portfolio occupancy.

Property operating costs were $214.9 million for the year ended December 31, 2020, as compared with $211.4 million for the year ended December 31, 2019. The current year costs reflect net transactional activity during the two years ended December 31, 2020 and higher property tax expense in certain markets, partially offset by lower utility and janitorial costs as a result of reduced physical utilization across our portfolio as a result of the pandemic, along with decreased portfolio occupancy.

Results for the year ended December 31, 2020 also reflect increased amortization expense related to intangible assets associated with the acquisition of the Dallas Galleria Office Towers during the first quarter of 2020 and decreased general and administrative expense primarily associated with lower accruals for potential performance-based equity compensation. General and administrative expense for the year ended December 31, 2019 also included approximately $3.2 million of non-recurring expenses related to the senior management transition that occurred on June 30, 2019.

Leasing Update

During the three months ended December 31, 2020, Piedmont completed approximately 189,000 square feet of leasing across its portfolio, bringing total leasing for the year to 1.1 million square feet.



Approximately 28% of the fourth quarter activity related to new tenant leasing. Significant leasing highlights during the quarter include the following:
In Atlanta: Powerplan, Inc. renewed approximately 34,000 square feet at Galleria 300 through 2028.
In Washington, D.C.: CenturyLink Communications, LLC renewed approximately 25,000 square feet at 4250 North Fairfax through 2026.
In Minneapolis: The Moscoe Group, Inc renewed approximately 24,000 square feet at Crescent Ridge Center II through 2026.
In Dallas: C-III Capital Partners, LLC signed a new lease for approximately 10,000 square feet at 6031 Connection Drive.
Leases executed during the fourth quarter for recently occupied space reflected a 2.2% roll down and 5.3% roll up in cash and accrual rents, respectively. For the year, leases executed reflected an overall roll up of 3.5% and 10.2% for cash and accrual basis rents, respectively.
As of December 31, 2020, the Company's reported leased percentage and weighted average remaining lease term were approximately 87% and 6.1 years, respectively, with approximately one million square feet of executed leases for vacant space yet to commence or under rental abatement.
Other than the City of New York's 313,000 square foot lease that is currently in holdover status at 60 Broad Street in New York, the Company has no scheduled lease expirations greater than 1% of annualized lease revenue during the eighteen month period following December 31, 2020. The Company remains in advanced discussions for the renewal of substantially all of the City of New York's leased square footage.
Same Store Net Operating Income ("Same Store NOI") decreased 1.7% and 0.2% on a cash and accrual basis, respectively, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The decrease in cash basis Same Store NOI was primarily attributable to the deferral, net of subsequent collections, of approximately $5.8 million of 2020 rental payments. Additional contributors to the decreases were a reduction in transient parking revenue as a result of the pandemic and decreased portfolio occupancy in 2020 when compared to 2019.

Details outlining Piedmont's largest upcoming lease commencements and expirations, the status of certain major leasing activity and a schedule of the largest lease abatements can be found in the Company's quarterly supplemental information package available at www.piedmontreit.com.

Transactional Update

During the three months ended December 31, 2020, Piedmont sold a portfolio of three assets located in New Jersey: 600 Corporate Drive, located in Lebanon, NJ; and 200 and 400 Bridgewater Crossing, located in Bridgewater, NJ, for approximately $130 million, or $176 per square foot, resulting in a gain of approximately $14.6 million. The sale completed Piedmont's exit from the New Jersey office market.

Also during the three months ended December 31, 2020, Piedmont acquired 222 South Orange Avenue, an approximately 127,000 square foot office building connected to Piedmont's 200 South Orange Avenue asset located in downtown Orlando, FL, for $20 million, or $157 per square foot. 222 South Orange Avenue is located along the Orange Avenue entrance to Piedmont's existing 200 South Orange Avenue property, sharing several physical connection points, including an atrium. Piedmont has begun an immediate redevelopment of the property.




Finally, during the three months ended December 31, 2020, the Company repurchased 2.2 million shares of its common stock at an average price of $14.00 per share. As of December 31, 2020, Board-approved capacity remaining for additional repurchases under the stock repurchase plan totaled approximately $169.3 million.

First Quarter 2021 Dividend Declaration

On February 2, 2021, the board of directors of Piedmont declared a dividend for the first quarter of 2021 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on February 26, 2021, payable on March 19, 2021.

Guidance for 2021

While the longer-term consequences on the economy and our tenants as a result of the COVID-19 pandemic continue to be unknown, the approval and distribution of vaccines create the opportunity for business to return to more normal activity over the course of 2021. Our projections for 2021 include the assumption of a gradual ramping up of business over the year with a return to a more typical state of operations during the second half of 2021, and anticipate Same Store NOI growth in the 3-5% range.

Notwithstanding the uncertain economic backdrop that currently remains, Piedmont has a strong, diversified tenant base, of which a majority is investment grade quality, that resulted in the collection of over 99% of our scheduled rent payments during the year ended December 31, 2020. We believe that this strong tenant base, combined with low lease expirations projected for 2021, limited exposure to transient parking income and retail and co-working tenants, a strong balance sheet, and $4.6 million in general reserves for tenant receivables, will all contribute to stability in our anticipated operating performance in 2021.

The following financial guidance for calendar year 2021 is based upon management's assumptions, estimates and expectations at this time. This financial guidance does not include the effects of any potential acquisition or disposition activity that may be completed during the year.

(in millions, except per share data)LowHigh
Net Income$34$38
Add:
Depreciation115 120
Amortization82 86
NAREIT FFO and Core FFO applicable to common stock$231$244
NAREIT FFO and Core FFO per diluted share$1.86$1.96

These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections, including those related to the pace and strength of the economic recovery from the COVID-19 pandemic. 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 the business recovery from the COVID-19 pandemic, the timing of lease commencements and expirations, abatement periods, repairs and maintenance expenses, capital expenditures, capital markets activities, seasonal general and administrative expenses, accrued potential performance-based compensation expenses, and one-time revenue or expense events or other forward-looking statements. The above guidance is based on information available to management as of the date of this supplemental



report. Actual results could differ materially from these estimates based on a variety of factors as discussed under "Forward-Looking Statements" below.

Non-GAAP Financial Measures

To supplement the presentation of the Company’s financial results prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this release and the accompanying quarterly supplemental information as of and for the period ended December 31, 2020 contain certain financial measures that are not prepared in accordance with GAAP, including FFO, Core FFO, AFFO, Same Store NOI (cash and accrual basis), Property NOI (cash and accrual basis), EBITDAre, and Core EBITDA. Definitions and reconciliations of each of these non-GAAP measures to their most comparable GAAP metrics are included below and in the accompanying quarterly supplemental information.
Each of the non-GAAP measures included in this release and the accompanying quarterly supplemental financial information has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of the Company’s results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release and the accompanying quarterly supplemental information may not be comparable to similarly titled measures disclosed by other companies, including other REITs. The Company may also change the calculation of any of the non-GAAP measures included in this news release and the accompanying supplemental financial information from time to time in light of its then existing operations.

Conference Call Information

Piedmont has scheduled a conference call and an audio web cast for Thursday, February 11, 2021 at 11:00 A.M. Eastern time. The live, listen-only, audio web cast of the call may be accessed on the Company's website at http://investor.piedmontreit.com/news-and-events/events-calendar. Dial-in numbers for analysts who plan to actively participate in the call are (888) 506-0062 for participants in the United States and Canada and (973) 528-0011 for international participants. A replay of the conference call will be available through 11:00 A.M. Eastern time on February 25, 2021, and may be accessed by dialing (877) 481-4010 for participants in the United States and Canada and (919) 882-2331 for international participants, followed by conference identification code 39774. 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 fourth quarter and annual 2020 performance, discuss recent events, and conduct a question-and-answer period.

Supplemental Information

Quarterly supplemental information as of and for the period ended December 31, 2020 can be accessed on the Company`s website under the Investor Relations section at www.piedmontreit.com.




About Piedmont Office Realty Trust

Piedmont Office Realty Trust, Inc. (NYSE: PDM) is an owner, manager, developer, redeveloper, and operator of high-quality, Class A office properties located primarily in select sub-markets within seven major Eastern U.S. office markets, with the majority of its revenue being generated from the Sunbelt. Its geographically-diversified, approximately $5 billion portfolio is currently comprised of approximately 17 million square feet. The Company is a fully-integrated, self-managed real estate investment trust (REIT) with local management offices in each of its markets and is investment-grade rated by S&P Global Ratings (BBB) and Moody’s (Baa2). As of December 31, 2020, approximately 64% of the company’s portfolio was ENERGY STAR certified and approximately 43% was LEED certified. For more information, see www.piedmontreit.com.

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company intends for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of the Company`s performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "believe," "continue" or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters. Examples of such statements in this press release include: the assumption that business will gradually return to a more typical state of operations over the course of 2021; and the Company's estimated range of Net Income, Depreciation, Amortization, NAREIT FFO/Core FFO and NAREIT FFO/Core FFO per diluted share for the year ending December 31, 2021.
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: actual or threatened public health epidemics or outbreaks, such as the COVID-19 pandemic that the world is currently experiencing, and governmental and private measures taken to combat such health crises, which may affect our personnel, tenants, tenants' operations and ability to pay lease obligations, demand for office space, and the costs of operating our assets; the adequacy of our general reserve related to tenant lease-related assets established as a result of the COVID-19 pandemic, as well as the impact of any increase in this reserve or the establishment of any other reserve in the future; economic, regulatory, socioeconomic changes, and/or technology changes (including accounting standards) that impact the real estate market generally, or that could affect patterns of use of commercial office space; the impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases; changes in the economies and other conditions affecting the office sector in general and specifically the seven markets in which we primarily operate where we have high concentrations of our annualized lease revenue; lease terminations, lease defaults, or changes in the financial condition of our tenants, particularly by one of our large lead tenants; adverse market and economic conditions, including any resulting impairment charges on both our long-lived assets or goodwill resulting therefrom; the success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions and divestitures; the illiquidity of real estate investments, including regulatory restrictions to which REITs are subject and the resulting impediment on our ability to quickly respond to adverse changes in the performance of our properties; the risks and uncertainties associated with our



acquisition and disposition of properties, many of which risks and uncertainties may not be known at the time of acquisition or disposition; development and construction delays and resultant increased costs and risks; our real estate development strategies may not be successful; future acts of terrorism, civil unrest, or armed hostilities in any of the major metropolitan areas in which we own properties, or future cybersecurity attacks against us or any of our tenants; costs of complying with governmental laws and regulations; uninsured losses or losses in excess of our insurance coverage, and our inability to obtain adequate insurance coverage at a reasonable cost; additional risks and costs associated with directly managing properties occupied by government tenants, including an increased risk of default by government tenants during periods in which state or federal governments are shut down or on furlough; significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock; changes in interest rates and changes in the method pursuant to which the LIBOR rates are determined and the phasing out of LIBOR after 2021; high mortgage rates which could affect our ability to finance or refinance properties; the effect of future offerings of debt or equity securities or changes in market interest rates on the value of our common stock; uncertainties associated with environmental and other regulatory matters; potential changes in political environment and reduction in federal and/or state funding of our governmental tenants; changes in the financial condition of our tenants directly or indirectly resulting from geopolitical developments that could negatively affect international trade, including the uncertainty surrounding the United Kingdom’s withdrawal from the European Union, the termination or threatened termination of existing international trade agreements, or the implementation of tariffs or retaliatory tariffs on imported or exported goods; the effect of any litigation to which we are, or may become, subject; additional risks and costs associated with owning properties occupied by co-working tenants, including risks of default during start-up and during economic downturns; changes in tax laws impacting REITs and real estate in general, as well as our ability to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended, or otherwise adversely affect our stockholders; the future effectiveness of our internal controls and procedures; and other factors, including the risk factors discussed under Item 1A. of Piedmont’s 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 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)
December 31, 2020December 31, 2019
Assets:
Real estate assets, at cost:
Land
$484,466 $485,560 
Buildings and improvements
3,191,767 2,943,685 
Buildings and improvements, accumulated depreciation
(767,542)(730,750)
Intangible lease assets
158,444 125,171 
Intangible lease assets, accumulated amortization
(67,850)(50,766)
Construction in progress
56,749 29,920 
Real estate assets held for sale, gross— 233,951 
Real estate assets held for sale, accumulated depreciation and amortization
— (94,261)
Total real estate assets
3,056,034 2,942,510 
Cash and cash equivalents
7,331 13,545 
Tenant receivables
8,448 8,226 
Straight line rent receivables
151,153 132,342 
Notes receivable
118,500 — 
Restricted cash and escrows
1,883 1,841 
Prepaid expenses and other assets
23,277 25,427 
Goodwill
98,918 98,918 
Deferred lease costs, gross
446,885 413,071 
Deferred lease costs, accumulated depreciation
(172,619)(147,324)
Other assets held for sale, gross
— 63,158 
Other assets held for sale, accumulated depreciation
— (34,957)
Total assets$3,739,810 $3,516,757 
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs
$1,594,068 $1,292,374 
Secured debt, inclusive of premium and unamortized debt issuance costs
27,936 189,030 
Accounts payable, accrued expenses, and accrued capital expenditures
111,997 117,496 
Dividends payable
25,683 26,427 
Deferred income
36,891 34,609 
Intangible lease liabilities, less accumulated amortization
35,440 25,069 
Interest rate swaps
9,834 5,121 
Other liabilities held for sale
— 7,657 
Total liabilities1,841,849 1,697,783 
Stockholders' equity:
Common stock
1,238 1,258 
Additional paid in capital
3,693,996 3,686,398 
Cumulative distributions in excess of earnings
(1,774,856)(1,871,375)
Other comprehensive income
(24,100)967 
Piedmont stockholders' equity1,896,278 1,817,248 
Non-controlling interest
1,683 1,726 
Total stockholders' equity1,897,961 1,818,974 
Total liabilities and stockholders' equity$3,739,810 $3,516,757 
Number of shares of common stock outstanding as of end of period123,839 125,783 




Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands, except for per share data)
Three Months EndedYear Ended
12/31/202012/31/201912/31/202012/31/2019
Revenues:
Rental and tenant reimbursement revenue$128,272 $129,692 $519,953 $511,905 
Property management fee revenue721 579 2,867 3,398 
Other property related income2,536 3,882 12,204 17,875 
Total revenues
131,529 134,153 535,024 533,178 
Expenses:
Property operating costs55,302 52,582 214,933 211,380 
Depreciation27,236 26,011 110,575 106,015 
Amortization22,324 21,000 93,294 76,666 
Impairment loss on real estate assets— 7,000 — 8,953 
General and administrative7,415 8,159 27,464 37,895 
Total operating expenses
112,277 114,752 446,266 440,909 
Other income (expense):
Interest expense(13,048)(14,844)(54,990)(61,594)
Other income1,770 279 2,587 1,571 
Loss on early extinguishment of debt— — (9,336)— 
Gain on sale of real estate assets14,634 157,640 205,666 197,010 
Total other income
3,356 143,075 143,927 136,987 
Net income22,608 162,476 232,685 229,256 
Net loss applicable to noncontrolling interest
Net income applicable to Piedmont$22,609 $162,478 $232,688 $229,261 
Weighted average common shares outstanding - diluted125,544 126,359 126,104 126,182 
Net income per share applicable to common stockholders - diluted$0.18 $1.29 $1.85 $1.82 












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 EndedYear Ended
12/31/202012/31/201912/31/202012/31/2019
GAAP net income applicable to common stock$22,609 $162,478 $232,688 $229,261 
Depreciation of real estate assets(1)
26,942 25,765 109,326 105,111 
Amortization of lease-related costs
22,312 20,988 93,242 76,610 
Impairment loss on real estate assets
— 7,000 — 8,953 
Gain on sale of real estate assets
(14,634)(157,640)(205,666)(197,010)
NAREIT Funds From Operations applicable to common stock*
57,229 58,591 229,590 222,925 
Retirement and separation expenses associated with senior management transition in June 2019
— — — 3,175 
Loss on early extinguishment of debt
— — 9,336 — 
Core Funds From Operations applicable to common stock*57,229 58,591 238,926 226,100 
Amortization of debt issuance costs, fair market adjustments on notes payable, and discounts on debt
653 527 2,833 2,101 
Depreciation of non real estate assets
286 238 1,216 872 
Straight-line effects of lease revenue
(2,223)(2,974)(22,601)(10,411)
Stock-based compensation adjustments
2,733 3,081 7,014 5,030 
Net effect of amortization of above/below-market in-place lease intangibles
(2,767)(2,314)(12,284)(8,323)
Non-incremental capital expenditures(2)
(19,620)(22,243)(77,682)(3)(49,653)
Adjusted Funds From Operations applicable to common stock*$36,291 $34,906 $137,422 $165,716 
Weighted average common shares outstanding - diluted125,544 126,359 126,104 126,182 
Funds From Operations per share (diluted)$0.46 $0.46 $1.82 $1.77 
Core Funds From Operations per share (diluted)$0.46 $0.46 $1.89 $1.79 

(1)Excludes depreciation of non real estate assets.

(2)Capital expenditures of a recurring nature related to tenant improvements and leasing commissions that do not incrementally enhance the underlying assets' income generating capacity. Tenant improvements, leasing commissions, building capital and deferred lease incentives incurred to lease space that was vacant at acquisition, leasing costs for spaces vacant for greater than one year, leasing costs for spaces at newly acquired properties for which in-place leases expire shortly after acquisition, improvements associated with the expansion of a building and renovations that change the underlying classification of a building are excluded from this measure.

(3)Includes the leasing commission for the approximately 20-year, 520,000-square-foot renewal and expansion of the State of New York's lease at our 60 Broad Street building in New York City that was executed during the fourth quarter of 2019.






Piedmont Office Realty Trust, Inc.
EBITDAre, Core EBITDA, Property Net Operating Income (Cash and Accrual), Same Store Net Operating Income (Cash and Accrual)
Unaudited (in thousands)
Cash BasisAccrual Basis
Three Months EndedThree Months Ended
12/31/202012/31/201912/31/202012/31/2019
Net income applicable to Piedmont (GAAP)$22,609 $162,478 $22,609 $162,478 
Net loss applicable to non-controlling interest
(1)(2)(1)(2)
Interest expense
13,048 14,844 13,048 14,844 
Depreciation
27,228 26,003 27,228 26,003 
Amortization
22,312 20,988 22,312 20,988 
Depreciation and amortization attributable to noncontrolling interests20 21 20 21 
Impairment loss on real estate assets
— 7,000 — 7,000 
(Gain)/Loss on sale of real estate assets
(14,634)(157,640)(14,634)(157,640)
EBITDAre and Core EBITDA*
70,582 73,692 70,582 73,692 
General & administrative expenses
7,415 8,159 7,415 8,159 
Management fee revenue
(397)(292)(397)(292)
Other income
(1,554)(64)(1,554)(64)
       Non-cash general reserve for uncollectible accounts(278)— 
Straight line effects of lease revenue
(2,223)(2,974)
Straight line effects of lease revenue attributable to noncontrolling interests(4)(3)
Amortization of lease-related intangibles
(2,767)(2,314)
Property NOI*70,774 76,204 76,046 81,495 
Net operating income from:
Acquisitions
(12,492)(4,538)(14,439)(5,987)
Dispositions
(824)(10,521)(784)(11,493)
Other investments(1)
40 (23)(21)17 
Same Store NOI*$57,498 $61,122 $60,802 $64,032 
Change period over period in Same Store NOI(5.9)%N/A(5.0)%N/A

(1)Other investments consist of our investments in active redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current or prior reporting periods. The operating results from Two Pierce Place in Itasca, IL are included in this line item.




Piedmont Office Realty Trust, Inc.
EBITDAre, Core EBITDA, Property Net Operating Income (Cash and Accrual), Same Store Net Operating Income (Cash and Accrual)
Unaudited (in thousands)
Cash BasisAccrual Basis
Year EndedYear Ended
12/31/202012/31/201912/31/202012/31/2019
Net income applicable to Piedmont (GAAP)$232,688 $229,261 $232,688 $229,261 
Net income applicable to noncontrolling interest(3)(5)(3)(5)
Interest expense54,990 61,594 54,990 61,594 
Depreciation110,542 105,985 110,542 105,985 
Amortization93,242 76,610 93,242 76,610 
Depreciation and amortization attributable to noncontrolling interests85 87 85 87 
 Impairment loss on real estate assets— 8,953 — 8,953 
Gain on sale of real estate assets(205,666)(197,010)(205,666)(197,010)
EBITDAre*285,878 285,475 285,878 285,475 
Loss on early extinguishment of debt9,336 — 9,336 — 
Retirement and separation expenses associated with senior management transition— 3,175 — 3,175 
Core EBITDA*295,214 288,650 295,214 288,650 
General & administrative expenses27,464 34,720 27,464 34,720 
Management fee revenue(1,495)(2,518)(1,495)(2,518)
Other income(1,724)(228)(1,724)(228)
Non-cash general reserve for uncollectible accounts4,553 — 
Straight line effects of lease revenue(22,601)(10,411)
Straight line effects of lease revenue attributable to noncontrolling interests(16)(9)
Amortization of lease-related intangibles(12,284)(8,323)
Property NOI*289,111 301,881 319,459 320,624 
Net operating income from:
Acquisitions(40,696)(8,229)(52,448)(10,769)
Dispositions(21,049)(61,423)(22,113)(63,730)
Other investments(1)
(248)(1,204)(340)(1,142)
Same Store NOI *$227,118 $231,025 $244,558 $244,983 
Change period over period in Same Store NOI(1.7)%N/A(0.2)%N/A


(1)Other investments consist of our investments in active redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current or prior reporting periods. The operating results from Two Pierce Place in Itasca, IL are included in this line item.



*Definitions:

Funds From Operations ("FFO"): The Company calculates FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as net income (computed in accordance with GAAP), excluding gains or losses from sales of property and impairment losses, adding back depreciation and amortization on real estate assets, and after the same adjustments for unconsolidated partnerships and joint ventures. These adjustments can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. FFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that FFO is helpful to investors as a supplemental performance measure because it excludes the effects of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs, which implicitly assumes that the value of real estate diminishes predictably over time. The Company also believes that FFO can help facilitate comparisons of operating performance between periods and with other REITs. However, other REITs may not define FFO in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than the Company; therefore, the Company’s computation of FFO may not be comparable to that of such other REITs.

Core Funds From Operations ("Core FFO"): The Company calculates Core FFO by starting with FFO, as defined by NAREIT, and adjusting for gains or losses on the extinguishment of swaps and/or debt, acquisition-related expenses (that are not capitalized) and any significant non-recurring items. Core FFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Core FFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to the Company’s core business operations. As a result, the Company believes that Core FFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential. Other REITs may not define Core FFO in the same manner as the Company; therefore, the Company’s computation of Core FFO may not be comparable to that of other REITs.

Adjusted Funds From Operations ("AFFO"): The Company calculates AFFO by starting with Core FFO and adjusting for non-incremental capital expenditures and acquisition-related costs (that are not capitalized) and then adding back non-cash items including: non-real estate depreciation, straight-lined rents and fair value lease adjustments, non-cash components of interest expense and compensation expense, and by making similar adjustments for unconsolidated partnerships and joint ventures. AFFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that AFFO is helpful to investors as a meaningful supplemental comparative performance measure of our ability to make incremental capital investments. Other REITs may not define AFFO in the same manner as the Company; therefore, the Company’s computation of AFFO may not be comparable to that of other REITs.

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

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

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


Document


EXHIBIT 99.2




https://cdn.kscope.io/37909a132740d9a84abc8ad0d66d2eec-image11.jpg



Quarterly Supplemental Information
December 31, 2020











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




Piedmont Office Realty Trust, Inc.
Quarterly Supplemental Information
Index


PagePage
IntroductionOther Investments
Corporate DataOther Investments Detail
Investor InformationSupporting Information
Financial HighlightsDefinitions
FinancialsResearch Coverage
Balance SheetsNon-GAAP Reconciliations
Income StatementsProperty Detail - In-Service Portfolio
Key Performance IndicatorsRisks, Uncertainties and Limitations
Funds From Operations / Adjusted Funds From Operations
Same Store Analysis
Capitalization Analysis
Debt Summary
Debt Detail
Debt Covenant & Ratio Analysis
Operational & Portfolio Information - Office Property Investments
Tenant Diversification
Tenant Credit Rating & Lease Distribution Information
Leased Percentage Information
Rental Rate Roll Up / Roll Down Analysis
Lease Expiration Schedule
Quarterly Lease Expirations
Annual Lease Expirations
Capital Expenditures
Contractual Tenant Improvements & Leasing Commissions
Geographic Diversification
Geographic Diversification by Location Type
Industry Diversification
Property Investment Activity
Notice to Readers:
Please refer to page 43 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, acquisitions, dispositions, etc. contained in this quarterly supplemental information report may differ from actual results.
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. In addition, many of the schedules herein contain rounding to the nearest thousands or millions and, therefore, the schedules may not total due to this rounding convention.
To supplement the presentation of the Company’s financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), this report contains certain financial measures that are not prepared in accordance with GAAP, including FFO, Core FFO, AFFO, Same Store NOI, Property NOI, EBITDAre and Core EBITDA. Definitions and reconciliations of these non-GAAP measures to their most comparable GAAP metrics are included beginning on page 37. Each of the non-GAAP measures included in this report has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of the Company’s results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this report may not be comparable to similarly titled measures disclosed by other companies, including other REITs. The Company may also change the calculation of any of the non-GAAP measures included in this report from time to time in light of its then existing operations.




Piedmont Office Realty Trust, Inc.
Corporate Data


Piedmont Office Realty Trust, Inc. (also referred to herein as "Piedmont" or the "Company") (NYSE: PDM) is an owner, manager, developer, redeveloper and operator of high-quality, Class A office properties in select sub-markets located primarily within seven major Eastern U.S. office markets, with over half of its revenue generated from the Sunbelt. Its geographically-diversified, approximately $5 billion portfolio is comprised of approximately 17 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 markets and is investment-grade rated by Standard & Poor’s and Moody’s. At the end of the fourth quarter of 2020, approximately 64% of the Company's portfolio was Energy Star certified and approximately 43% was LEED certified. Piedmont is headquartered in Atlanta, GA.

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

As ofAs of
December 31, 2020December 31, 2019
Number of consolidated in-service office properties (1) (2)
5455
Rentable square footage (in thousands) (1) (2)
16,42816,533
Percent leased (2) (3)
86.8 %89.7 %
Capitalization (in thousands):
Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs)$1,632,610$1,488,687
Equity market capitalization (4)
$2,009,914$2,797,423
Total market capitalization (4)
$3,642,524$4,286,110
Total debt / Total market capitalization (4)
44.8 %34.7 %
Average net debt to Core EBITDA5.8 x5.4 x
Total debt / Total gross assets34.4 %32.5 %
Common stock data:
High closing price during quarter$16.95$22.44
Low closing price during quarter$11.42$20.32
Closing price of common stock at period end$16.23$22.24
Weighted average fully diluted shares outstanding during quarter (in thousands)125,544126,359
Shares of common stock issued and outstanding at period end (in thousands)123,839125,783
Annual regular dividend per share (5)
$0.84$0.84
Rating / Outlook:
Standard & Poor'sBBB / StableBBB / Stable
Moody'sBaa2 / StableBaa2 / Stable
Employees137134

(1)As of December 31, 2020, our consolidated office portfolio consisted of 54 properties (exclusive of one 127,000 square foot property that was out of service for redevelopment, 222 South Orange Avenue in Orlando, FL). During the first quarter of 2020, we acquired One Galleria Tower, Two Galleria Tower and Three Galleria Tower, three office buildings comprised of 1,435,000 square feet in total, along with a 1.9 acre developable land parcel, located in Dallas, TX. During the second quarter of 2020, we sold 1901 Market Street, an 801,000 square foot office building located in Philadelphia, PA. During the fourth quarter of 2020, we sold our final three New Jersey properties, 200 and 400 Bridgewater Crossing located in Bridgewater, NJ, and 600 Corporate Drive, located in Lebanon, NJ, comprised of 739,000 square feet in total, and we acquired 222 South Orange Avenue, a 127,000 square foot office building located in Orlando, FL, which was placed out of service for redevelopment.
(2)
This measure is presented for our consolidated office properties, and the metric for December 31, 2019, has been restated to include one redevelopment property that was placed back into service on January 1, 2020. The redevelopment property is Two Pierce Place, a 485,000 square foot office building located in Itasca, IL.
(3)
Calculated as square footage associated with commenced leases plus square footage associated with executed but uncommenced leases for vacant spaces, divided by total rentable square footage, all as of the relevant date, expressed as a percentage. Please refer to page 25 for additional analyses regarding Piedmont's leased percentage.
(4)Reflects common stock closing price, shares outstanding and outstanding debt as of the end of the reporting period, as appropriate.
(5)Total of the regular dividends per share for which record dates occurred over the prior four quarters.

3


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

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

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

4


Piedmont Office Realty Trust, Inc.
Financial Highlights
As of December 31, 2020

Financial Results (1)

Net income applicable to Piedmont for the quarter ended December 31, 2020 was $22.6 million, or $0.18 per share (diluted), compared to $162.5 million, or $1.29 per share (diluted), for the same quarter in 2019. Net income applicable to Piedmont for the twelve months ended December 31, 2020 was $232.7 million, or $1.85 per share (diluted), compared to $229.3 million, or $1.82 per share (diluted), for the same period in 2019. The decrease in net income applicable to Piedmont for the three months ended December 31, 2020 when compared to the same period in 2019 was principally due to the larger amount of net gains on the sales of assets in the fourth quarter of 2019 when compared to the fourth quarter of 2020 along with lower real estate operating income in 2020 as a result of decreased portfolio occupancy and the revenue effects of COVID-19 (inclusive of decreased parking income and general and specific reserves adjustments recorded during the quarter), partially offset by accretive recycling activities completed over the prior year and an impairment loss recorded in 2019 which was not repeated in 2020. The increase in net income applicable to Piedmont for the twelve months ended December 31, 2020 when compared to the same period in 2019 was principally due to the larger amount of net gains on the sales of assets in 2020 when compared to 2019. In addition, 2020 net income results increased due to: 1) accretive capital recycling activities completed over the prior year; 2) lower general and administrative expenses as a result of lower compensation accruals attributable to pandemic-related effects on the Company's compensation programs in 2020 and one-time retirement expenses incurred in 2019; and 3) lower interest expense as a result of lower prevailing interest rates. Partially offsetting the increase in net income attributable to Piedmont in 2020 were higher amortization and depreciation expenses in 2020 when compared to 2019 attributable to over $740 million of acquisitions completed since the beginning of 2019, along with lower real estate operating income as a result of decreased portfolio occupancy and the revenue effects of COVID-19 (inclusive of decreased parking income and general and specific reserves taken during the year).

Funds from operations (FFO) for the quarter ended December 31, 2020 was $57.2 million, or $0.46 per share (diluted), compared to $58.6 million, or $0.46 per share (diluted), for the same quarter in 2019. FFO for the twelve months ended December 31, 2020 was $229.6 million, or $1.82 per share (diluted), compared to $222.9 million, or $1.77 per share (diluted), for the same period in 2019. The increase in FFO for the twelve months ended December 31, 2020 when compared to the same period in 2019 was principally the result of accretive capital recycling activities over the prior year, lower general and administrative expenses, and lower interest expense, partially offset by lower real estate operating income as a result of decreased portfolio occupancy and the revenue effects of COVID-19 (inclusive of decreased parking income and $9.4 million in general and specific reserves taken during the year), as well as a loss on the early extinguishment of debt recorded in 2020 as a result of the sale of 1901 Market Street in Philadelphia, PA and the early repayment of the associated mortgage.

Core funds from operations (Core FFO) for the quarter ended December 31, 2020 was $57.2 million, or $0.46 per share (diluted), compared to $58.6 million, or $0.46 per share (diluted), for the same quarter in 2019. Core FFO for the twelve months ended December 31, 2020 was $238.9 million, or $1.89 per share (diluted), compared to $226.1 million, or $1.79 per share (diluted), for the same period in 2019. The increase in Core FFO for the twelve months ended December 31, 2020 when compared to the same period in 2019 was largely the result of the items described above for changes in FFO, with the exception of the non-recurring loss on early extinguishment of debt recorded in 2020 due to the sale of an asset for a significant gain, which is excluded from the Core FFO calculation.

The per share results for the fourth quarter of 2020 were influenced by the repurchase of approximately 2.2 million shares of common stock for a total of approximately $30.6 million (before the consideration of transaction costs) during the quarter.

Adjusted funds from operations (AFFO) for the quarter ended December 31, 2020 was $36.3 million, compared to $34.9 million for the same quarter in 2019. AFFO for the twelve months ended December 31, 2020 was $137.4 million, compared to $165.7 million for the same period in 2019. The decrease in AFFO for the twelve months ended December 31, 2020 when compared to the same period in 2019 was primarily due to a greater amount of non-incremental capital expenditures during the first quarter of 2020 related to the large amount of recently executed new and renewal leases in our portfolio, including the 20-year lease renewal with the State of New York at 60 Broad Street in New York, NY, for which leasing commissions totaling $16.1 million were paid during the first quarter.

Update Related to COVID-19

During the fourth quarter of 2020, our buildings remained open and fully operational for our tenants. The number of tenants' employees working in our buildings remained steady during the fourth quarter when compared with the third quarter; there was a pause in the increasing utilization trend observed during the third quarter as a result of the recent increase in cases of COVID-19. As of December 2020, tenant physical occupancy per building varied greatly among our buildings depending upon the tenancy, ranging from 10% to nearly 100% occupancy. The highest space utilization rate continued to be observed at our properties located in Sunbelt markets and at mission-critical government-related locations.

(1)
FFO, Core FFO and AFFO are supplemental non-GAAP financial measures. See page 37 for definitions of these non-GAAP financial measures, and pages 14 and 39 for reconciliations of FFO, Core FFO and AFFO to Net Income.
5



We feel fortunate to have duration and durability in the cash flow generated by our tenant base. The majority of our tenants are of investment grade quality, and our in place leases have a weighted average lease term remaining of over 6 years. Approximately 1% of our revenues are related to retail tenants and approximately 2% of our 2020 budgeted revenues are associated with the co-working sector, both of which have been particularly hard hit by the economic effects of the pandemic. Additionally, only approximately 1% of our annual revenues comes from transient parking, income which has decreased in 2020 with the decline in our average daily physical utilization.

As a result of our diversification, limited exposure to the sectors of the economy most impacted by the pandemic and strong tenant credit profile, we have collected approximately 99% of the billed rents that were due for October, November and December based on contractual lease terms. However, our tenant base is not immune from the economic effects of the pandemic. During the quarter, we received a few additional new tenant requests for some type of rent relief along with a few requests for extensions of existing rent relief. To date, of the approximately 1,000 leases in our portfolio, we have entered into rent relief agreements with 66 tenants (of which approximately 5 new agreements were entered into during the fourth quarter) predominately with tenants operating in the retail, hospitality, travel, consulting and co-working sectors. These 66 rent relief agreements represent tenants occupying approximately 5% of the square footage in our portfolio. Through the 66 rent relief agreements, a total of approximately $7.1 million of gross rental obligations were primarily deferred ($1.0 million of which was related to billings originally due in the fourth quarter). The typical deferral periods are between 3 and 4 months with repayment occurring late in 2020 or in 2021 with interest. To date, we have received repayments of prior deferrals totaling $1.3 million; the vast majority of tenants in repayment periods for prior deferrals have been performing well.

Similar to last quarter and as a result of COVID-19's impact on our tenants' operations, Piedmont undertook a review of all outstanding tenant receivables, including assessing the collectability risk associated with existing accounts receivable and existing straight line rent receivables. During the fourth quarter of 2020, as a result of the review, there was a small decrease to the general reserve for bad debts, which now stands at $4.6 million, along with write-offs of a small number of straight line rent receivables. The general reserve approximates 1% of the Company's Annualized Lease Revenue; the Company will continue to reassess tenant receivables and the reserve, and make adjustments as it deems appropriate.

Regarding Piedmont’s liquidity and capitalization, management believes the Company has sufficient liquidity and capital capacity to withstand the effects of the economic slowdown associated with COVID-19 and will be able to meet all of its financial obligations, including the servicing of its debt, as well as to meet all of its debt covenants, each with a significant buffer to the relevant threshold. Piedmont is in a strong balance sheet position, with approximately $7 million in cash and $495 million available under its line of credit at the end of the fourth quarter. As of December 31, 2020, our debt to gross assets ratio was approximately 34%, unchanged from the prior quarter end.

The COVID-19 pandemic had only a limited impact on the Company’s overall results for 2020. However, we do expect the coronavirus pandemic will continue to impact our tenants' operations and financial results and their ability to pay their lease obligations during the early part of 2021. The longer-term consequences on the economy and our tenants as a result of the COVID-19 pandemic continue to be unknown; however, the approval and distribution of vaccines create a belief that business will begin to return to normal over the course of 2021. While leasing activity did slow during 2020 and this leasing slowdown did delay some of the expected FFO growth in the portfolio, our projections for 2021 include the assumption that businesses return to a more typical state of operations during the second half of 2021. The Company has provided financial guidance for 2021 under the Guidance for 2021 section below.

Operations and Leasing

As of December 31, 2020, Piedmont had 54 in-service office properties located primarily in select submarkets within seven major office markets in the eastern portion of the United States, with over half of our revenue coming from Sunbelt markets. On a square footage leased basis, our total in-service office portfolio was 86.8% leased as of December 31, 2020, as compared to 89.7% at December 31, 2019 (restated to include one out-of-service asset, Two Pierce Place in Itasca, IL, which was placed back into service on January 1, 2020). Significant contributors to the reduction in leased percentage from December 31, 2019 to December 31, 2020 was the sale of the 100% leased 1901 Market Street in Philadelphia, PA, during the second quarter of 2020, and the slowdown in leasing activity due to COVID-19. Please refer to page 25 for additional leased percentage information.

The weighted average remaining lease term of our in-service portfolio was 6.1 years(1) as of December 31, 2020 as compared to 7.0 years as of December 31, 2019. A meaningful contributor to the reduction in weighted average remaining lease term was the sale of 1901 Market Street in Philadelphia, PA, an 801,000 square foot, fully-leased building with approximately 13 years of lease term remaining. Our weighted average adjusted Annualized Lease Revenue(2) per square foot for our in-service portfolio was $36.87 as of December 31, 2020.

During the three months ended December 31, 2020, the Company completed approximately 189,000 square feet of leasing activity. Of the total leasing activity completed during the quarter, we signed new tenant leases for approximately 52,000 square feet. During the twelve months ended December 31, 2020, the Company completed approximately 1,106,000 square feet of leasing activity, of which approximately 262,000 square feet was related to new tenant leases. The average committed capital for tenant improvements and leasing commissions per square foot per year of lease term for all leasing activity completed during the twelve months ended December 31, 2020 (net of commitment expirations during the period) was $5.79 (see page 31).

(1)
Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of December 31, 2020) is weighted based on Annualized Lease Revenue, as defined on page 37.
(2)Annualized Lease Revenue is adjusted for buildings at which tenants pay operating expenses directly to include such operating expenses as if they were paid by the Company and reimbursed by the tenants as under a typical net lease structure, thereby incorporating the effective gross rental rate for those buildings.
6


Piedmont focuses its leasing efforts on large, credit-worthy corporate tenants, and, therefore, executed leasing activity can vary greatly from quarter to quarter. The effects of COVID-19 have compounded this variability. Overall leasing pipeline activity improved over the last several months of 2020. While the amount of executed leases is still expected to vary, subsequent to year end, Piedmont has already completed over 500,000 square feet of leasing activity, including a long-term lease renewal with a non-governmental top 20 tenant, as of the date of release of this report.

Of the 189,000 square feet of leases executed during the three months ended December 31, 2020, four were significant leases greater than 10,000 square feet. Information on those leases is set forth below.
TenantPropertyMarketSquare Feet
Leased
Expiration
Year
Lease Type
Powerplan, Inc.Galleria 300Atlanta34,4612028Renewal / Contraction
CenturyLink Communications, LLC4250 North Fairfax DriveWashington, DC24,9932026Renewal / Contraction
The Moscoe Group, Inc.Crescent Ridge IIMinneapolis24,4702026Renewal
C-III Capital Partners, LLC6031 Connection DriveDallas10,1972026New

At the end of the fourth quarter of 2020, there was one tenant whose lease individually contributed greater than 1% in Annualized Lease Revenue expiring during the eighteen month period following December 31, 2020. Information regarding the leasing status of the space associated with this tenant's lease is presented below.
TenantPropertyProperty LocationNet
Square
Footage
Expiring
Net Percentage of
Current Quarter
Annualized Lease
Revenue Expiring
(%)
ExpirationCurrent Leasing Status
City of New York60 Broad StreetNew York, NY313,0223.0%In HoldoverThe tenant is currently in holdover. The Company is in advanced discussions with the tenant regarding a lease renewal.

Future Lease Commencements and Abatements

As of December 31, 2020, our overall leased percentage was 86.8% and our economic leased percentage was 82.0%. 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 124,527 square feet of leases as of December 31, 2020, or 0.7% of the portfolio); and
2)leases which have commenced but are within rental abatement or deferral periods (amounting to 818,128 square feet of leases as of December 31, 2020, or a 4.1% impact to leased percentage on an economic basis).

The gap between reported leased percentage and economic leased percentage will fluctuate over time as (1) new leases are signed for vacant spaces, (2) abatements and deferrals associated with existing or newly executed leases commence and expire, and/or (3) properties are bought and sold. See below for more detail on existing large leases with abatements and deferrals. The abatements and deferrals this quarter included COVID-related rent relief (primarily rent deferrals; with a typical duration of between three and four months) representing an approximately 0.6% impact on the gap between leased percentage and economic leased percentage.

Future Lease Commencements
Piedmont has leases with many large corporate office space users. The average size of lease in the Company's portfolio is between 15,000 to 20,000 square feet. Due to the large size and length of term of new leases, Piedmont typically signs leases at least several months in advance of their anticipated lease commencement dates. Presented below is a schedule of uncommenced leases greater than 50,000 square feet and their anticipated commencement dates. Lease renewals are excluded from this schedule.
TenantPropertyProperty LocationSquare Feet
Leased
Space StatusEstimated
Commencement
Date
New /
Expansion
District of Columbia Department of General Services400 Virginia AvenueWashington, DC56,04243,000 SF VacantQ1 2022New
salesforce.com5 Wall StreetBurlington, MA51,913Not VacantQ3 2021New
Previously disclosed in this section was a lease with WeWork at 200 South Orange Avenue in Orlando, FL. On December 31, 2020, an agreement was reached with WeWork to terminate that lease at the end of the first quarter of 2021. The tenant has paid rent on this lease since August 2020 and has prepaid its rent through the termination date; additionally, it has paid a lease termination fee of $2.6 million (which recovers all costs incurred to date by Piedmont plus additional compensation amounting to approximately $1.1 million). Furthermore, the tenant has prepaid rent for over a year at its other two locations that are open and operational within Piedmont's portfolio.

7


Abatements
New leases frequently provide rental abatement concessions to tenants and these abatements typically occur at the beginning of the leases. The currently reported cash net operating income and AFFO understate the Company's long-term cash generation ability from existing leases due to some leases being in abatement periods. Presented below is a schedule of leases with abatements of 50,000 square feet or greater that are either currently under abatement or will be so within the next twelve months. (1)

TenantPropertyProperty LocationAbated Square FeetLease Commencement DateRemaining Abatement ScheduleLease Expiration
Transocean Offshore Deepwater Drilling, Inc.Enclave PlaceHouston, TX300,906
Q4 2019
Commencement through April 2021
Q2 2036
Advanced Micro Devices, Inc.90 Central StreetBoxborough, MA107,244Q1 2021January through March 2021Q1 2028

COVID-19 - Related Rent Deferrals
There were no leases of 50,000 square feet or greater that were under deferral or will be so within the next twelve months as of December 31, 2020.

Financing and Capital Activity

Among Piedmont's stated strategic objectives is to harvest capital through the disposition of non-core assets and assets in which the Company believes the value potential during its ownership has been reached and to use the sale proceeds to:
continue to invest in accessible, amenity-rich real estate assets with higher overall return prospects and/or strategic merits in one of its identified office markets where it has a significant operating presence with a competitive operating advantage and that otherwise meet its strategic criteria;
reduce leverage levels by repaying outstanding debt; and/or
repurchase Company stock when it is believed to be trading at a significant discount to NAV.
Information on the Company's recent accomplishments in furtherance of its strategic objectives is presented below.

Dispositions
On October 28, 2020, Piedmont completed a portfolio sale consisting of its final three New Jersey properties, 200 and 400 Bridgewater Crossing in Bridgewater, NJ and 600 Corporate Drive in Lebanon, NJ. The portfolio was sold for a total of $130.0 million, or $176 per square foot. The Company recorded a gain of approximately $14.6 million as a result of the sale of the assets. As part of the sale transaction, Piedmont provided seller financing (comprised of a senior loan and a mezzanine loan) on 200 and 400 Bridgewater Crossing in the total amount of $118.5 million, at a weighted average interest rate of 7.0%. Piedmont has no future funding requirements under either loan.

Acquisitions
On October 29, 2020, Piedmont completed the acquisition of 222 South Orange Avenue, a 127,000 square foot, 10-story, vacant office building, located in Orlando, FL, for $20.0 million, or $157 per square foot. The building adjoins Piedmont's 200 South Orange Avenue property, sharing several key connection points and systems, including an atrium, a loading dock, building mechanical systems, several interconnected floor plates and parking. Additionally, the acquisition of 222 South Orange Avenue provides Piedmont's existing office tower with direct frontage on Orange Avenue, the de facto Main Street in Orlando's central business district. Piedmont plans to immediately begin a redevelopment of the property to upgrade and reposition it to a Class A standard consistent with Piedmont's other existing landmark assets in downtown Orlando. Among the highlights of the redevelopment will be an enhanced window line, allowing more light and air into tenant spaces, along with renovations to the lobby, common areas and restrooms. The costs of the redevelopment are expected to total under $10 million. Upon completion of the upgrades at 222 South Orange Avenue, and in combination with the substantial renovations near completion at 200 South Orange Avenue, Piedmont's downtown Orlando portfolio will represent a preeminent destination for the market.

For additional information on acquisitions and dispositions completed over the previous eighteen months, please refer to page 35.

Development / Redevelopment
During the fourth quarter of 2019, Piedmont commenced an approximately $18.5 million redevelopment of 200 South Orange Avenue in Orlando, FL. The project will allow the Company to reposition the property, creating a premier environment for downtown office tenants. The redevelopment plan includes a redesigned lobby and entry experience, an energized outdoor park, the addition of new food and beverage options, an upgraded conference center, a tenant lounge, and a new crown lighting system. As of December 31, 2020, the project is near completion and remains on budget.

Details on the Company's developable land parcels, all of which are located adjacent to existing Piedmont properties, as well as information on its upcoming redevelopment project, can be found on page 36.

(1)The State of New York lease does not contain any rental abatement provisions. The tenant's space will be reconstructed over a period of approximately four years. During the construction period, the tenant will not be required to pay rental charges for certain spaces that are under construction and not usable by the tenant. The amount of space for which the tenant will not be required to pay rent will vary over time and is expected to average approximately 80,000 square feet over the construction time period.

8


Finance
As of December 31, 2020, our ratio of total debt to total gross assets was 34.4%, and the same measure at December 31, 2019 was 32.5%. This debt ratio is based on total principal amount outstanding for our various loans as of the relevant measurement date.

As of December 31, 2020, our average net debt to Core EBITDA ratio was 5.8 x.

Stock Repurchase Program
During the fourth quarter of 2020, the Company repurchased approximately 2.2 million shares of common stock under its share repurchase program at an average price of $14.00 per share,
or approximately $30.6 million (before the consideration of transaction costs). As of quarter end, Board-approved capacity remaining for additional repurchases totaled approximately $170 million under the stock repurchase plan. Repurchases of stock under the program are made at the Company's discretion and are dependent on market conditions, the discount to estimated net asset value, other investment opportunities and other factors that the Company deems relevant.

Dividend
On October 28, 2020, the Board of Directors of Piedmont declared a dividend for the fourth quarter of 2020 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on November 27, 2020. The dividend was paid on January 4, 2021.

Subsequent Events
On February 2, 2021, the Board of Directors of Piedmont declared a dividend for the first quarter of 2021 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on February 26, 2021. The dividend is expected to be paid on March 19, 2021.

Guidance for 2021

While the longer-term consequences on the economy and our tenants as a result of the COVID-19 pandemic continue to be unknown, the approval and distribution of vaccines create the opportunity for business to begin to return to more normal activity over the course of 2021. Our projections for 2021 include the assumption of a gradual ramping up of business over the year with a return to a more typical state of operations during the second half of 2021.

Notwithstanding the uncertain economic backdrop that currently remains, Piedmont has a strong, diversified tenant base, of which a majority is investment grade quality. This strong tenant base, combined with low lease expires projected for 2021, limited exposure to the retail, parking and co-working sectors, a prudent balance sheet, and $4.6 million in general reserves for tenant receivables, we believe, will all contribute to stability in our anticipated operating performance in 2021.

The following financial guidance for calendar year 2021 is based upon management's assumptions, estimates and expectations at this time. This financial guidance does not include the effects of any potential acquisition or disposition activity that may be completed during the year.
(in millions, except per share data)LowHigh
Net Income$34-$38
Add:
Depreciation115 -120
Amortization82 -86
NAREIT Funds from Operations and Core Funds from Operations applicable to common stock$231-$244
NAREIT Funds from Operations and Core Funds from Operations per diluted share$1.86-$1.96
These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections, including those related to the pace and strength of the economic recovery from the COVID-19 pandemic. Actual results could differ from these estimates. Note that individual quarters my fluctuate on both a cash basis and an accrual basis due to the timing of the business recovery from the COVID-19 pandemic, the timing of lease commencements and expirations, abatement periods, repairs and maintenance expenses, capital expenditures, capital markets activities, seasonal general and administrative expenses, accrued potential performance-based compensation expenses, and one-time revenue or expense events. The above guidance is based on information available to management as of the date of this supplemental report. Actual results could differ materially from these estimates based on a variety of factors as discussed on page 43.

9


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

December 31, 2020September 30, 2020June 30, 2020March 31, 2020December 31, 2019
Assets:
Real estate, at cost:
Land assets$484,466 $505,228 $505,228 $505,234 $485,560 
Buildings and improvements3,191,767 3,283,980 3,258,713 3,249,947 2,943,685 
Buildings and improvements, accumulated depreciation(767,542)(803,160)(776,870)(755,152)(730,750)
Intangible lease asset158,444 161,870 164,145 167,972 125,171 
Intangible lease asset, accumulated amortization(67,850)(63,353)(58,148)(52,538)(50,766)
Construction in progress56,749 56,393 51,045 42,028 29,920 
Real estate assets held for sale, gross— — — 233,951 233,951 
Real estate assets held for sale, accumulated depreciation & amortization— — — (96,164)(94,261)
Total real estate assets3,056,034 3,140,958 3,144,113 3,295,278 2,942,510 
Cash and cash equivalents7,331 23,958 36,469 7,920 13,545 
Tenant receivables, net of allowance for doubtful accounts8,448 11,301 8,494 10,596 8,226 
Straight line rent receivable151,153 154,620 147,418 139,617 132,342 
Notes receivable118,500 — — — — 
Escrow deposits and restricted cash1,883 1,781 1,769 1,758 1,841 
Prepaid expenses and other assets23,277 28,074 33,017 23,933 25,427 
Goodwill98,918 98,918 98,918 98,918 98,918 
Deferred lease costs, gross446,885 463,447 459,398 463,760 413,071 
Deferred lease costs, accumulated amortization(172,619)(169,975)(159,883)(148,972)(147,324)
Other assets held for sale, gross— — — 63,524 63,158 
Other assets held for sale, accumulated amortization— — — (35,516)(34,957)
Total assets$3,739,810 $3,753,082 $3,769,713 $3,920,816 $3,516,757 
Liabilities:
Unsecured debt, net of discount$1,594,068 $1,588,411 $1,592,693 $1,743,905 $1,292,374 
Secured debt27,936 28,424 28,784 188,779 189,030 
Accounts payable, accrued expenses, and accrued capital expenditures137,680 120,763 95,419 90,459 143,923 
Deferred income36,891 36,613 35,226 35,443 34,609 
Intangible lease liabilities, less accumulated amortization35,440 38,324 41,179 44,646 25,069 
Interest rate swaps9,834 10,618 28,575 26,709 5,121 
Other liabilities held for sale— — — 7,158 7,657 
Total liabilities$1,841,849 $1,823,153 $1,821,876 $2,137,099 $1,697,783 
Stockholders' equity:
Common stock1,238 1,260 1,260 1,259 1,258 
Additional paid in capital3,693,996 3,692,634 3,691,377 3,690,821 3,686,398 
Cumulative distributions in excess of earnings(1,774,856)(1,740,670)(1,723,147)(1,889,109)(1,871,375)
Other comprehensive loss(24,100)(24,993)(23,360)(20,976)967 
Piedmont stockholders' equity1,896,278 1,928,231 1,946,130 1,781,995 1,817,248 
Non-controlling interest1,683 1,698 1,707 1,722 1,726 
Total stockholders' equity1,897,961 1,929,929 1,947,837 1,783,717 1,818,974 
Total liabilities, redeemable common stock and stockholders' equity$3,739,810 $3,753,082 $3,769,713 $3,920,816 $3,516,757 
Common stock outstanding at end of period123,839 126,029 126,025 125,921 125,783 

10


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

Three Months Ended
12/31/20209/30/20206/30/20203/31/202012/31/2019
Revenues:
Rental income (1)
$104,560 $108,071 $109,714 $111,496 $106,742 
Tenant reimbursements (1)
23,712 20,209 21,533 20,658 22,950 
Property management fee revenue721 751 622 773 579 
Other property related income2,536 2,662 2,762 4,244 3,882 
131,529 131,693 134,631 137,171 134,153 
Expenses:
Property operating costs55,302 53,293 53,148 53,190 52,582 
Depreciation27,236 28,255 27,200 27,884 26,011 
Amortization22,324 22,990 24,349 23,631 21,000 
Impairment loss on real estate assets— — — — 7,000 
General and administrative7,415 5,469 5,937 8,643 8,159 
112,277 110,007 110,634 113,348 114,752 
Other income / (expense):
Interest expense(13,048)(12,725)(13,953)(15,264)(14,844)
Other income / (expense)1,770 319 349 149 279 
Gain / (loss) on extinguishment of debt— — (9,336)— — 
Gain / (loss) on sale of real estate (2)
14,634 (340)191,369 157,640 
Net income22,608 8,940 192,426 8,711 162,476 
Less: Net (income) / loss applicable to noncontrolling interest(2)
Net income applicable to Piedmont$22,609 $8,943 $192,427 $8,709 $162,478 
Weighted average common shares outstanding - diluted125,544 126,385 126,500 126,360 126,359 
Net income per share available to common stockholders - diluted$0.18 $0.07 $1.52 $0.07 $1.29 
Common stock outstanding at end of period123,839 126,029 126,025 125,921 125,783 






(1)The presentation method used for this line is not in conformance with GAAP. To be in conformance with the current GAAP standard, the Company would need to combine amounts presented on the rental income line with amounts presented on the tenant reimbursements line and present that aggregated figure on one line entitled "rental and tenant reimbursement revenue." The amounts presented on this line were determined based upon the Company's interpretation of the rental charges and billing method provisions in each of the Company's lease documents.
(2)The gain on sale of real estate reflected in the fourth quarter of 2020 was primarily related to the sales of 200 and 400 Bridgewater Crossing in Bridgewater, NJ. The gain on sale of real estate reflected in the second quarter of 2020 was primarily related to the sale of 1901 Market Street in Philadelphia, PA. The gain on sale of real estate reflected in the fourth quarter of 2019 was nearly all related to the sale of 500 West Monroe Street in Chicago, IL.
11


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

Three Months EndedTwelve Months Ended
12/31/202012/31/2019Change ($)Change (%)12/31/202012/31/2019Change ($)Change (%)
Revenues:
Rental income (1)
$104,560 $106,742 $(2,182)(2.0)%$433,841 $418,245 $15,596 3.7 %
Tenant reimbursements (1)
23,712 22,950 762 3.3 %86,112 93,660 (7,548)(8.1)%
Property management fee revenue721 579 142 24.5 %2,867 3,398 (531)(15.6)%
Other property related income2,536 3,882 (1,346)(34.7)%12,204 17,875 (5,671)(31.7)%
131,529 134,153 (2,624)(2.0)%535,024 533,178 1,846 0.3 %
Expenses:
Property operating costs55,302 52,582 (2,720)(5.2)%214,933 211,380 (3,553)(1.7)%
Depreciation27,236 26,011 (1,225)(4.7)%110,575 106,015 (4,560)(4.3)%
Amortization22,324 21,000 (1,324)(6.3)%93,294 76,666 (16,628)(21.7)%
Impairment loss on real estate assets— 7,000 7,000 100.0 %— 8,953 8,953 100.0 %
General and administrative7,415 8,159 744 9.1 %27,464 37,895 10,431 27.5 %
112,277 114,752 2,475 2.2 %446,266 440,909 (5,357)(1.2)%
Other income / (expense):
Interest expense(13,048)(14,844)1,796 12.1 %(54,990)(61,594)6,604 10.7 %
Other income / (expense)1,770 279 1,491 534.4 %2,587 1,571 1,016 64.7 %
Gain / (loss) on extinguishment of debt— — — (9,336)— (9,336)(100.0)%
Gain / (loss) on sale of real estate (2)
14,634 157,640 (143,006)(90.7)%205,666 197,010 8,656 4.4 %
Net income22,608 162,476 (139,868)(86.1)%232,685 229,256 3,429 1.5 %
Less: Net (income) / loss applicable to noncontrolling interest(1)(50.0)%(2)(40.0)%
Net income applicable to Piedmont$22,609 $162,478 $(139,869)(86.1)%$232,688 $229,261 $3,427 1.5 %
Weighted average common shares outstanding - diluted125,544 126,359 126,104 126,182 
Net income per share available to common stockholders - diluted$0.18 $1.29 $1.85 $1.82 
Common stock outstanding at end of period123,839 125,783 123,839 125,783 






(1)The presentation method used for this line is not in conformance with GAAP. To be in conformance with the current GAAP standard, the Company would need to combine amounts presented on the rental income line with amounts presented on the tenant reimbursements line and present that aggregated figure on one line entitled "rental and tenant reimbursement revenue." The amounts presented on this line were determined based upon the Company's interpretation of the rental charges and billing method provisions in each of the Company's lease documents.
(2)The gain on sale of real estate for the three months ended December 31, 2020 was primarily related to the sales of 200 and 400 Bridgewater Crossing in Bridgewater, NJ. The gain on sale of real estate for the twelve months ended December 31, 2020 was primarily related to the sale of 1901 Market Street in Philadelphia, PA. The gain on sale of real estate for the three months ended December 31, 2019 was nearly fully related to the sale of 500 West Monroe Street in Chicago, IL. The gain on sale of real estate for the twelve months ended December 31, 2019 was primarily related to the aforementioned sale of 500 West Monroe Street, along with the sale of One Independence Square in Washington, DC, in the first quarter of 2019.

12


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, Earnings Before Interest, Taxes, Depreciation, and Amortization for real estate (EBITDAre), 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 37 and reconciliations are provided beginning on page 39.

For comparison purposes, on January 1, 2020, Piedmont placed back into service one redevelopment property, Two Pierce Place in Itasca, IL. The building was approximately 42% leased at the time it was placed back into service. No other properties were placed back into service during any of the periods presented.
Three Months Ended
Selected Operating Data12/31/20209/30/20206/30/20203/31/202012/31/2019
Percent leased (1)
86.8 %86.9 %88.6 %89.6 %91.2 %
Percent leased - economic (1) (2)
82.0 %80.7 %81.1 %84.0 %85.5 %
Total revenues$131,529$131,693$134,631$137,171$134,153
Net income attributable to Piedmont$22,609$8,943$192,427$8,709$162,478
Core EBITDA$70,582$73,250$75,895$75,487$73,692
Core FFO applicable to common stock$57,229$60,219$61,603$59,875$58,591
Core FFO per share - diluted$0.46$0.48$0.49$0.47$0.46
AFFO applicable to common stock$36,291$37,606$44,968$18,557$34,906
Gross regular dividends (3)
$26,145$26,466$26,465$26,443$26,415
Regular dividends per share (3)
$0.21$0.21$0.21$0.21$0.21
Selected Balance Sheet Data
Total real estate assets, net$3,056,034$3,140,958$3,144,113$3,295,278$2,942,510
Total assets$3,739,810$3,753,082$3,769,713$3,920,816$3,516,757
Total liabilities$1,841,849$1,823,153$1,821,876$2,137,099$1,697,783
Ratios & Information for Debt Holders
Core EBITDA margin (4)
53.7 %55.6 %56.4 %55.0 %54.9 %
Fixed charge coverage ratio (5)
5.1 x5.5 x5.3 x4.8 x4.7 x
Average net debt to Core EBITDA (6)
5.8 x5.5 x6.2 x5.7 x5.4 x
Total gross real estate assets$3,891,426$4,007,471$3,979,131$4,199,132$3,818,287
Net debt (7)
$1,623,396$1,602,237$1,590,007$1,930,834$1,473,301

(1)
Please refer to page 25 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)Dividends are reflected in the quarter in which the record date occurred.
(4)Core EBITDA margin is calculated as Core EBITDA divided by total revenues.
(5)The fixed charge coverage ratio is calculated as Core EBITDA divided by the sum of interest expense, principal amortization, capitalized interest and preferred dividends. The Company had no preferred dividends during any of the periods presented; the Company had capitalized interest of $368,965 for the quarter ended December 31, 2020, $236,290 for the quarter ended September 30, 2020, $183,846 for the quarter ended June 30, 2020, $176,040 for the quarter ended March 31, 2020, and $502,646 for the quarter ended December 31, 2019; the Company had principal amortization of $365,644 for the quarter ended December 31, 2020, $269,838 for the quarter ended September 30, 2020, $266,128 for the quarter ended June 30, 2020, $175,383 for the quarter ended March 31, 2020, and $345,948 for the quarter ended December 31, 2019.
(6)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.
(7)Net debt is calculated as the total principal amount of debt outstanding minus cash and cash equivalents and escrow deposits and restricted cash as of the end of the period.

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 EndedTwelve Months Ended
12/31/202012/31/201912/31/202012/31/2019
GAAP net income applicable to common stock$22,609 $162,478 $232,688 $229,261 
Depreciation (1) (2)
26,942 25,765 109,326 105,111 
Amortization (1)
22,312 20,988 93,242 76,610 
Impairment loss
— 7,000 — 8,953 
Loss / (gain) on sale of properties
(14,634)(157,640)(205,666)(197,010)
NAREIT funds from operations applicable to common stock57,229 58,591 229,590 222,925 
Adjustments:
Retirement and separation expenses associated with senior management transition— — — 3,175 
Loss / (gain) on extinguishment of debt— — 9,336 — 
Core funds from operations applicable to common stock57,229 58,591 238,926 226,100 
Adjustments:
Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on senior notes653 527 2,833 2,101 
Depreciation of non real estate assets286 238 1,216 872 
Straight-line effects of lease revenue (1)
(2,223)(2,974)(22,601)(10,411)
Stock-based compensation adjustments2,733 3,081 7,014 5,030 
Amortization of lease-related intangibles (1)
(2,767)(2,314)(12,284)(8,323)
Non-incremental capital expenditures (3)
(19,620)(22,243)(77,682)(49,653)
Adjusted funds from operations applicable to common stock$36,291 $34,906 $137,422 $165,716 
Weighted average common shares outstanding - diluted125,544 126,359 126,104 126,182 
Funds from operations per share (diluted)$0.46 $0.46 $1.82 $1.77 
Core funds from operations per share (diluted)$0.46 $0.46 $1.89 $1.79 
Common stock outstanding at end of period123,839 125,783 123,839 125,783 





(1)Includes our proportionate share of amounts attributable to consolidated properties.
(2)Excludes depreciation of non real estate assets.
(3)
Non-incremental capital expenditures are defined on page 37. Non-incremental capital expenditures for the twelve months ended December 31, 2020 include approximately $22.4 million of leasing commissions, with the largest contributor to that amount being the leasing commissions related to the 20-year, approximately 500,000 square foot lease renewal with the State of New York at 60 Broad Street in New York, NY.

14


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

Three Months EndedTwelve Months Ended
12/31/202012/31/201912/31/202012/31/2019
Net income attributable to Piedmont$22,609 $162,478 $232,688 $229,261 
Net income / (loss) attributable to noncontrolling interest(1)(2)(3)(5)
Interest expense
13,048 14,844 54,990 61,594 
Depreciation (1)
27,228 26,003 110,542 105,985 
Amortization (1)
22,312 20,988 93,242 76,610 
Depreciation and Amortization attributable to noncontrolling interests20 21 85 87 
Impairment loss
— 7,000 — 8,953 
Loss / (gain) on sale of properties
(14,634)(157,640)(205,666)(197,010)
EBITDAre70,582 73,692 285,878 285,475 
Retirement and separation expenses associated with senior management transition— — — 3,175 
(Gain) / loss on extinguishment of debt— — 9,336 — 
Core EBITDA (2)
70,582 73,692 295,214 288,650 
General & administrative expenses
7,415 8,159 27,464 34,720 
Non-cash general reserve for uncollectible accounts (3)
(278)— 4,553 — 
Management fee revenue (4)
(397)(292)(1,495)(2,518)
Other (income) / expense (1) (5)
(1,554)(64)(1,724)(228)
Straight-line effects of lease revenue (1)
(2,223)(2,974)(22,601)(10,411)
Straight-line effects of lease revenue attributable to noncontrolling interests(4)(3)(16)(9)
Amortization of lease-related intangibles (1)
(2,767)(2,314)(12,284)(8,323)
Property net operating income (cash basis)70,774 76,204 289,111 301,881 
Deduct net operating (income) / loss from:
Acquisitions (6)
(12,492)(4,538)(40,696)(8,229)
Dispositions (7)
(824)(10,521)(21,049)(61,423)
Other investments (8)
40 (23)(248)(1,204)
Same store net operating income (cash basis) (9)
$57,498 $61,122 $227,118 $231,025 
Change period over period(5.9)%N/A(1.7)%N/A

(1)Includes our proportionate share of amounts attributable to consolidated properties.
(2)The Company has historically recognized approximately $2 to $3 million of termination income on an annual basis (over the last 5 years). Given the size of its asset base and the number of tenants with which it conducts business, Piedmont considers termination income of that magnitude to be a normal part of its operations and a recurring part of its revenue stream; however, the recognition of termination income is typically variable between quarters and throughout any given year and is dependent upon when during the year the Company receives termination notices from tenants. During the three months ended December 31, 2020, Piedmont recognized $0.9 million in termination income, as compared with $0.6 million during the same period in 2019. During the twelve months ended December 31, 2020, Piedmont recognized $2.8 million in termination income, as compared with $2.8 million during the same period in 2019.
(3)As a result of COVID-19 and as a precautionary measure, during the second quarter of 2020, the Company established a general reserve for potential future losses amounting to $4.9 million. A reduction to the general reserve of $33,000 was made during the third quarter of 2020 and a reduction of $278,000 was made during the fourth quarter of 2020. The general reserve is non-cash in nature and, therefore, any changes in the reserve are removed from the calculation of cash basis same store net operating income. No such reserves were made in any periods prior to the second quarter of 2020.
(4)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.
(5)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.
(6)Acquisitions consist of Galleria 100 in Atlanta, GA, purchased on May 6, 2019; Galleria 400 and Galleria 600 in Atlanta, GA, purchased on August 23, 2019; One Galleria Tower, Two Galleria Tower and Three Galleria Tower in Dallas, TX, purchased on February 12, 2020; and 222 South Orange Avenue in Orlando, FL, purchased on October 29, 2020.
(7)Dispositions consist of One Independence Square in Washington, D.C., sold on February 28, 2019; The Dupree in Atlanta, GA, sold on September 4, 2019; 500 West Monroe Street in Chicago, IL, sold on October 28, 2019; 1901 Market Street in Philadelphia, PA, sold on June 25, 2020; and the New Jersey property portfolio sold on October 28, 2020 (consisting of the Company's final remaining assets in the state, 200 and 400 Bridgewater Crossing in Bridgewater, NJ, and 600 Corporate Drive in Lebanon, NJ).
(8)
Other investments consist of active out-of-service redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current and/or prior year reporting periods. Additional information on our land holdings can be found on page 36. The operating results from Two Pierce Place in Itasca, IL, and 222 South Orange Avenue in Orlando, FL, are included in this line item.
(9)For the twelve months ended December 31, 2020, amount reflects a decrease in cash collections of approximately $5.8 million of primarily rent deferrals as a result of COVID-19 rent relief agreements. For the three months ended December 31, 2020, we recorded $0.3 million of net rent deferral repayments (amount represents prior rent deferral repayments collected during the quarter less rent relief provided during the quarter).
15


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

Three Months EndedTwelve Months Ended
12/31/202012/31/201912/31/202012/31/2019
Net income attributable to Piedmont$22,609 $162,478 $232,688 $229,261 
Net income / (loss) attributable to noncontrolling interest(1)(2)(3)(5)
Interest expense
13,048 14,844 54,990 61,594 
Depreciation (1)
27,228 26,003 110,542 105,985 
Amortization (1)
22,312 20,988 93,242 76,610 
Depreciation and Amortization attributable to noncontrolling interests20 21 85 87 
Impairment loss
— 7,000 — 8,953 
Loss / (gain) on sale of properties
(14,634)(157,640)(205,666)(197,010)
EBITDAre70,582 73,692 285,878 285,475 
Retirement and separation expenses associated with senior management transition— — — 3,175 
(Gain) / loss on extinguishment of debt— — 9,336 — 
Core EBITDA (2)
70,582 73,692 295,214 288,650 
General & administrative expenses
7,415 8,159 27,464 34,720 
Management fee revenue (3)
(397)(292)(1,495)(2,518)
Other (income) / expense (1) (4)
(1,554)(64)(1,724)(228)
Property net operating income (accrual basis)