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): April 28, 2021
(Exact name of registrant as specified in its charter)
Commission File Number: 001-34626
| (State or other jurisdiction of | (IRS Employer | |||||||
| incorporation) | Identification No.) | |||||||
(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:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
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 April 28, 2021, Piedmont Office Realty Trust, Inc. (the "Registrant") issued a press release announcing its financial results for the first quarter 2021, and published supplemental information for the first quarter 2021 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 | ||||||||
| 104 | Cover 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: | April 28, 2021 | By: | /s/ Robert E. Bowers | ||||||||||||||
| Robert E. Bowers | |||||||||||||||||
| Chief Financial Officer and Executive Vice President | |||||||||||||||||
EXHIBIT 99.1
Piedmont Office Realty Trust Reports First Quarter 2021 Results
ATLANTA, April 28, 2021--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in seven major Eastern U.S. markets with a majority of its revenue being generated from the Sunbelt, today announced its results for the quarter ended March 31, 2021.
Highlights for the Quarter Ended March 31, 2021:
Financial Results:
•The Company reported net income applicable to common stockholders of $9.3 million, or $0.08 per diluted share, for the quarter ended March 31, 2021, a 7.3% increase as compared to $8.7 million, or $0.07 per diluted share, for the quarter ended March 31, 2020.
•Piedmont reported Core Funds From Operations ("Core FFO") of $0.48 per diluted share for the quarter ended March 31, 2021, as compared to $0.47 per diluted share for the quarter ended March 31, 2020.
•Piedmont reported a 3.9% increase and a 1.2% decrease in Same Store NOI-Cash Basis and Same Store NOI-Accrual Basis, respectively, for the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020;
•The Company collected over 99% of billed tenant receivables near pre-COVID levels for the quarter ended March 31, 2021.
Leasing:
•The Company completed approximately 678,000 square feet of leasing, including approximately 154,000 square feet of new tenant leasing.
•Piedmont reported a 7.0% roll up in accrual rents on leases executed during the quarter ended March 31, 2021 for space vacant one year or less, and a 2.8% roll down on cash rents, a result primarily driven by one large, long-term renewal. Excluding the one large renewal, cash and accrual rents for the remainder of the activity rolled up 8.0% and 10.1%, respectively.
Capital Markets:
•With the completion of the long-term renewal of Raytheon Company's 440,000 square foot lease comprising the entirety of 225 & 235 Presidential Way in Woburn, MA, the Company began marketing these 100% leased, single-tenant assets for sale during the first quarter of 2021.
Balance Sheet:
•The Company's average net debt to Core EBITDA ratio as of March 31, 2021 decreased to 5.6 x.
•The Company's Debt-to-Gross Assets ratio was 34.9% as of March 31, 2021.
ESG:
•Piedmont was named a 2021 ENERGY STAR Partner of the Year.
•Piedmont's five Atlanta Galleria properties were the first in Atlanta to be awarded the WELL Health-Safety Rating by the International WELL Building Institute.
•The Company implemented the Piedmont Scholars Program at Morehouse University in Atlanta and Howard University in Washington, D.C.
Commenting on first quarter results, Brent Smith, President and Chief Executive Officer, said, "We are pleased with both our overall financial and operational results and, in particular, our leasing activity for the first quarter. While the successful long-term lease extension of one of our largest tenants, Raytheon, was certainly the standout in terms of leases executed during the first quarter, we are encouraged by the breadth of activity that we are experiencing across the portfolio. We were able to execute almost as many new leases during the first quarter of 2021 as we did during the last three quarters of 2020 combined. Further, we continue to have good activity in our leasing pipeline and anticipate continued momentum into the second quarter. I'm also very pleased with our continued industry-leading progress towards our environmental and diversity and inclusion goals, including earning the Energy Star Partner of the Year designation for the first time and establishing the Piedmont Scholars Program at Morehouse and Howard Universities."
Results for the Quarter ended March 31, 2021
Piedmont recognized net income applicable to common stockholders for the three months ended March 31, 2021 of $9.3 million, or $0.08 per diluted share, a 7.3% increase as compared to $8.7 million, or $0.07 per diluted share, for the three months ended March 31, 2020.
Funds From Operations ("FFO") and Core FFO, were both $0.48 per diluted share for the three months ended March 31, 2021 as compared to $0.47 for the three months ended March 31, 2020.
Total revenues were $129.3 million for the three months ended March 31, 2021, compared to $137.2 million for the three months ended March 31, 2020 with the first quarter of 2021 primarily reflecting the impact of net 2020 transactional activity, as well as lower overall portfolio occupancy and decreased transient parking revenue as compared to the first quarter of 2020.
Property operating costs were $51.4 million for the three months ended March 31, 2021, as compared with $53.2 million for the three months ended March 31, 2020, reflecting the impact of net 2020 transactional activity and lower janitorial and other property operating costs as a result of reduced physical utilization across our portfolio as a result of the COVID-19 pandemic.
General and administrative expense was $7.3 million for the first quarter of 2021 as compared to $8.6 million for the same period in 2020, with the three months ended March 31, 2021 primarily reflecting reduced accruals for potential performance based compensation.
Leasing Update
During the three months ended March 31, 2021, Piedmont completed approximately 678,000 square feet of leasing across its portfolio, including approximately 154,000 square feet of new tenant leasing, with both total and new leasing square footage exceeding first quarter of 2020's leasing results. The largest lease completed during the first quarter was Raytheon Company's renewal of its 440,000 square foot lease comprising the entirety of 225 & 235 Presidential Way in Woburn, MA through 2031. Because of the long-term renewal of these 100% leased, single-tenant properties, the Company began marketing these assets for sale during the first quarter. Other significant leasing highlights during the quarter included the following:
•In Boston: Ascend Learning, LLC signed a new lease for approximately 53,000 square feet through 2033 at 25 Burlington Mall Road.
•In Washington, D.C.: Industrious signed a new lease for approximately 40,000 square feet through 2031 at 3100 Clarendon Boulevard and the Council for Advancement and Support of Education signed a new lease totaling approximately 15,000 square feet through 2033 at 1201 Eye Street.
Leases executed during the first quarter of 2021 for recently occupied space reflected a 2.8% roll down and 7.0% roll up in cash and accrual rents, respectively. Excluding the large Raytheon renewal, cash and accrual rents for the remainder of the activity rolled up 8.0% and 10.1%, respectively. As of March 31, 2021, the Company's reported leased percentage and weighted average remaining lease term were approximately 86% and 6.0 years, respectively.
Same Store Net Operating Income ("Same Store NOI") increased 3.9% and decreased 1.2% on a cash and accrual basis, respectively, for the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020. The increase in cash basis Same Store NOI was primarily attributable to the burn off of significant abatements at 1155 Perimeter Center West in Atlanta and Arlington Gateway in Washington, D.C., along with a higher amount of termination income in 2021 primarily associated with the WeWork termination in Orlando, partially offset by a reduction in transient parking revenue as a result of the COVID-19 pandemic and decreased portfolio occupancy during the three months ended March 31, 2021 when compared to the same period in 2020. The decrease in accrual basis Same Store NOI was primarily attributable to a reduction in transient parking revenue as a result of the COVID-19 pandemic and decreased portfolio occupancy during the three months ended March 31, 2021 when compared to the same period in 2020. 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 March 31, 2021. After the end of the quarter, the Company signed an interim 5-year lease extension for the renewal of substantially all of the City of New York's leased square footage, which is pending final City approvals; a discussion for a longer, 20-year extension is ongoing. As of March 31, 2021, the Company had almost one million square feet of executed leases for vacant space yet to commence or under rental abatement.
Further 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.
ESG Initiatives
Piedmont was the only office REIT headquartered in the Southeast recently recognized as a 2021 ENERGY STAR Partner of the Year by the U.S. Environmental Protection Agency and the U.S. Department of Energy. Each year, the ENERGY STAR program honors a group of businesses and organizations that have made outstanding contributions to protecting the environment through superior energy achievements. ENERGY STAR Award Winners lead their industries in the production, sale, and adoption of energy-efficient products, services, and strategies. Approximately 74% of the Company's portfolio has earned ENERGY STAR status.
Piedmont's five buildings located in The Atlanta Galleria were the first properties in Atlanta to be awarded the WELL Health-Safety Rating through the International WELL Building Institute (IWBI). The WELL Health-Safety Rating is an evidence-based, third-party verified rating for all new and existing building and space types focusing on operational policies, maintenance protocols, stakeholder
engagement and emergency plans to address a post-COVID-19 environment now and into the future. The Company is actively working to expand the WELL program to a number of its other properties.
Piedmont has recently partnered with Morehouse College in Atlanta, GA and Howard University in Washington, D.C. to introduce the Piedmont Office Realty Trust Scholarship Program. The program provides scholastic support to rising sophomore students seeking a degree in economics, finance, accounting, engineering, or real estate with a renewable scholarship for three years (for the Piedmont Scholars’ Sophomore, Junior and Senior years). Along with access to an executive "shadowing" program, the scholarship also offers each student the opportunity to intern with Piedmont, acquire a firsthand experience in commercial real estate, and participate in a board level mentoring program.
For further details on all of our ESG initiatives, please refer to the ESG tab of our website: www.piedmontreit.com.
Second Quarter 2021 Dividend Declaration
On April 28, 2021, the board of directors of Piedmont declared a dividend for the second 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 May 28, 2021, payable on June 18, 2021.
Guidance for 2021
The following financial guidance for calendar year 2021 remains unchanged and is based upon management's assumptions, estimates and expectations at this time. 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. 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) | Low | High | ||||||||||||
| Net Income | $34 | $38 | ||||||||||||
| Add: | ||||||||||||||
| Depreciation | 115 | 120 | ||||||||||||
| Amortization | 82 | 86 | ||||||||||||
| NAREIT FFO and Core FFO applicable to common stock | $231 | $244 | ||||||||||||
| NAREIT FFO and Core FFO per diluted share | $1.86 | $1.96 | ||||||||||||
The above financial guidance is based on information available to management as of the date of this release and does not include the effects of any potential acquisition or disposition activity that may be completed during the year. 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 materially from these estimates based on a variety of factors as discussed under "Forward-Looking Statements" below.
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.
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 March 31, 2021 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, April 29, 2021 at 10:00 A.M. Eastern daylight 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 (844) 602-0380 for participants in the United States and Canada and (862) 298-0970 for international participants. A replay of the conference call will be available through 10:00 A.M. Eastern daylight time on May 13, 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 40769. A web cast replay will also be available after the conference call in the Investor Relations section of the Company's website. During the audio web cast and conference call, the Company's management team will review first quarter 2021 performance, discuss recent events, and conduct a question-and-answer period.
Supplemental Information
Quarterly supplemental information as of and for the period ended March 31, 2021 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). Piedmont is a 2021 ENERGY STAR Partner of the Year. 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 anticipated continued momentum in the Company's leasing pipeline 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 any of our tenants; risks related to the occurrence of cyber incidents, or a deficiency in our cybersecurity, which could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships; 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 planned phasing out of USD LIBOR after June 2023; high interest 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 the 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, 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 tenants in particular industries, such as oil and gas, hospitality, travel, co-working, etc., 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) | ||||||||||||||
| March 31, 2021 | December 31, 2020 | |||||||||||||
| Assets: | ||||||||||||||
Real estate assets, at cost: | ||||||||||||||
Land | $ | 484,467 | $ | 484,466 | ||||||||||
Buildings and improvements | 3,239,199 | 3,191,767 | ||||||||||||
Buildings and improvements, accumulated depreciation | (793,064) | (767,542) | ||||||||||||
Intangible lease assets | 155,634 | 158,444 | ||||||||||||
Intangible lease assets, accumulated amortization | (72,475) | (67,850) | ||||||||||||
Construction in progress | 47,498 | 56,749 | ||||||||||||
Total real estate assets | 3,061,259 | 3,056,034 | ||||||||||||
Cash and cash equivalents | 10,689 | 7,331 | ||||||||||||
Tenant receivables | 4,545 | 8,448 | ||||||||||||
Straight line rent receivables | 156,257 | 151,153 | ||||||||||||
Notes receivable | 118,500 | 118,500 | ||||||||||||
Restricted cash and escrows | 1,741 | 1,883 | ||||||||||||
Prepaid expenses and other assets | 22,647 | 23,277 | ||||||||||||
Goodwill | 98,918 | 98,918 | ||||||||||||
Deferred lease costs, gross | 445,753 | 446,885 | ||||||||||||
Deferred lease costs, accumulated depreciation | (182,435) | (172,619) | ||||||||||||
| Total assets | $ | 3,737,874 | $ | 3,739,810 | ||||||||||
| Liabilities: | ||||||||||||||
Unsecured debt, net of discount and unamortized debt issuance costs of $10,181 and $10,932, respectively | $ | 1,633,819 | $ | 1,594,068 | ||||||||||
Secured debt, inclusive of premium and unamortized debt issuance costs of $203 and $326, respectively | 27,628 | 27,936 | ||||||||||||
Accounts payable, accrued expenses, and accrued capital expenditures | 92,183 | 111,997 | ||||||||||||
Dividends payable | — | 25,683 | ||||||||||||
Deferred income | 56,638 | 36,891 | ||||||||||||
Intangible lease liabilities, less accumulated amortization | 32,607 | 35,440 | ||||||||||||
Interest rate swaps | 7,654 | 9,834 | ||||||||||||
| Total liabilities | 1,850,529 | 1,841,849 | ||||||||||||
| Stockholders' equity: | ||||||||||||||
Common stock | 1,240 | 1,238 | ||||||||||||
Additional paid in capital | 3,697,801 | 3,693,996 | ||||||||||||
Cumulative distributions in excess of earnings | (1,791,558) | (1,774,856) | ||||||||||||
Other comprehensive income | (21,813) | (24,100) | ||||||||||||
| Piedmont stockholders' equity | 1,885,670 | 1,896,278 | ||||||||||||
Noncontrolling interest | 1,675 | 1,683 | ||||||||||||
| Total stockholders' equity | 1,887,345 | 1,897,961 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 3,737,874 | $ | 3,739,810 | ||||||||||
| Number of shares of common stock outstanding as of end of period | 124,029 | 123,839 | ||||||||||||
| Net debt (Unsecured and Secured debt, less Cash and cash equivalents) | 1,650,758 | 1,614,673 | ||||||||||||
| Total Principal Amount of Debt Outstanding (Unsecured debt plus discount and unamortized debt issuance costs and Secured debt less premium and unamortized debt issuance costs) | 1,671,425 | 1,632,610 | ||||||||||||
| Piedmont Office Realty Trust, Inc. | |||||||||||
| Consolidated Statements of Income | |||||||||||
| Unaudited (in thousands, except for per share data) | |||||||||||
| Three Months Ended | |||||||||||
| 3/31/2021 | 3/31/2020 | ||||||||||
| Revenues: | |||||||||||
| Rental and tenant reimbursement revenue | $ | 125,912 | $ | 132,154 | |||||||
| Property management fee revenue | 758 | 773 | |||||||||
| Other property related income | 2,587 | 4,244 | |||||||||
Total revenues | 129,257 | 137,171 | |||||||||
| Expenses: | |||||||||||
| Property operating costs | 51,424 | 53,190 | |||||||||
| Depreciation | 28,103 | 27,884 | |||||||||
| Amortization | 22,912 | 23,631 | |||||||||
| General and administrative | 7,251 | 8,643 | |||||||||
Total operating expenses | 109,690 | 113,348 | |||||||||
| Other income (expense): | |||||||||||
| Interest expense | (12,580) | (15,264) | |||||||||
| Other income | 2,356 | 149 | |||||||||
| Gain on sale of real estate assets | — | 3 | |||||||||
Total other income (expense) | (10,224) | (15,112) | |||||||||
| Net income | 9,343 | 8,711 | |||||||||
| Net loss/(income) applicable to noncontrolling interest | 1 | (2) | |||||||||
| Net income applicable to Piedmont | $ | 9,344 | $ | 8,709 | |||||||
| Weighted average common shares outstanding - diluted | 124,450 | 126,360 | |||||||||
| Net income per share applicable to common stockholders - diluted | $ | 0.08 | $ | 0.07 | |||||||
| Piedmont Office Realty Trust, Inc. | ||||||||||||||
| Funds From Operations, Core Funds From Operations and Adjusted Funds From Operations | ||||||||||||||
| Unaudited (in thousands, except for per share data) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| 3/31/2021 | 3/31/2020 | |||||||||||||
| GAAP net income applicable to common stock | $ | 9,344 | $ | 8,709 | ||||||||||
Depreciation of real estate assets(1) | 27,812 | 27,551 | ||||||||||||
Amortization of lease-related costs | 22,900 | 23,618 | ||||||||||||
Gain on sale of real estate assets | — | (3) | ||||||||||||
| NAREIT Funds From Operations and Core Funds from Operations applicable to common stock* | 60,056 | 59,875 | ||||||||||||
Amortization of debt issuance costs, fair market adjustments on notes payable, and discounts on debt | 654 | 577 | ||||||||||||
Depreciation of non real estate assets | 282 | 325 | ||||||||||||
Straight-line effects of lease revenue | (4,103) | (6,785) | ||||||||||||
Stock-based compensation adjustments | 1,111 | 2,300 | ||||||||||||
Net effect of amortization of above/below-market in-place lease intangibles | (2,792) | (2,973) | ||||||||||||
Non-incremental capital expenditures(2) | (17,347) | (34,762) | (3) | |||||||||||
| Adjusted Funds From Operations applicable to common stock* | $ | 37,861 | $ | 18,557 | ||||||||||
| Weighted average common shares outstanding - diluted | 124,450 | 126,360 | ||||||||||||
| Funds From Operations and Core Funds From Operations per share (diluted) | $ | 0.48 | $ | 0.47 | ||||||||||
(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 Basis | Accrual Basis | ||||||||||||||||||||||
| Three Months Ended | Three Months Ended | ||||||||||||||||||||||
| 3/31/2021 | 3/31/2020 | 3/31/2021 | 3/31/2020 | ||||||||||||||||||||
| Net income applicable to Piedmont (GAAP) | $ | 9,344 | $ | 8,709 | $ | 9,344 | $ | 8,709 | |||||||||||||||
Net (loss)/income applicable to noncontrolling interest | (1) | 2 | (1) | 2 | |||||||||||||||||||
Interest expense | 12,580 | 15,264 | 12,580 | 15,264 | |||||||||||||||||||
Depreciation | 28,094 | 27,876 | 28,094 | 27,876 | |||||||||||||||||||
Amortization | 22,900 | 23,618 | 22,900 | 23,618 | |||||||||||||||||||
| Depreciation and amortization attributable to noncontrolling interests | 21 | 21 | 21 | 21 | |||||||||||||||||||
Gain on sale of real estate assets | — | (3) | — | (3) | |||||||||||||||||||
EBITDAre and Core EBITDA* | 72,938 | 75,487 | 72,938 | 75,487 | |||||||||||||||||||
General & administrative expenses | 7,251 | 8,643 | 7,251 | 8,643 | |||||||||||||||||||
Management fee revenue | (390) | (395) | (390) | (395) | |||||||||||||||||||
Other income | (2,141) | 67 | (2,141) | 67 | |||||||||||||||||||
| Non-cash general reserve for uncollectible accounts | 412 | — | |||||||||||||||||||||
Straight line effects of lease revenue | (4,103) | (6,785) | |||||||||||||||||||||
| Straight line effects of lease revenue attributable to noncontrolling interests | 1 | (3) | |||||||||||||||||||||
Amortization of lease-related intangibles | (2,792) | (2,973) | |||||||||||||||||||||
| Property NOI* | 71,176 | 74,041 | 77,658 | 83,802 | |||||||||||||||||||
| Net operating income from: | |||||||||||||||||||||||
Acquisitions | (7,440) | (3,539) | (9,211) | (4,729) | |||||||||||||||||||
Dispositions | 413 | (8,700) | 413 | (9,361) | |||||||||||||||||||
Other investments(1) | 144 | 103 | 200 | 158 | |||||||||||||||||||
| Same Store NOI* | $ | 64,293 | $ | 61,905 | $ | 69,060 | $ | 69,870 | |||||||||||||||
| Change period over period in Same Store NOI | 3.9 | % | N/A | (1.2) | % | N/A | |||||||||||||||||
(1)Other investments consist of active redevelopment and development projects, land, and recently completed redevelopment and development projects. The operating results from 222 South Orange Avenue in Orlando, FL 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.
Core EBITDA: The Company calculates Core EBITDA as net income (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and incrementally removing any impairment losses, gains or losses from sales of property and other significant infrequent items that create volatility within our earnings and make it difficult to determine the earnings generated by our core ongoing business. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Core EBITDA is helpful to investors as a supplemental performance measure because it provides a metric for understanding the performance of the Company’s results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization), as well as items that are not part of normal day-to-day operations of the Company’s business. Other REITs may not define Core EBITDA in the same manner as the Company; therefore, the Company’s computation of Core EBITDA may not be comparable to that of other REITs.
Property Net Operating Income ("Property NOI"): The Company calculates Property NOI by starting with Core EBITDA and adjusting for general and administrative expense, income associated with property management performed by Piedmont for other organizations and other income or expense items for the Company, such as interest income from loan investments or costs from the pursuit of non-consummated transactions. The Company may present this measure on an accrual basis or a cash basis. When presented on a cash basis, the effects of straight lined rents and fair value lease revenue are also eliminated. Property NOI is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Property NOI is helpful to investors as a supplemental comparative performance measure of income generated by its properties alone without the administrative overhead of the Company. Other REITs may not define Property NOI in the same manner as the Company; therefore, the Company’s computation of Property NOI may not be comparable to that of other REITs.
Same Store Net Operating Income ("Same Store NOI"): The Company calculates Same Store NOI as Property NOI attributable to the properties for which the following criteria were met during the entire span of the current and prior year reporting periods: (i) they were owned, (ii) they were not under development / redevelopment, and (iii) none of the operating expenses for which were capitalized. Same Store NOI also excludes amounts attributable to 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.
EXHIBIT 99.2
Quarterly Supplemental Information
March 31, 2021
| Corporate Headquarters | Institutional Analyst Contact | Investor Relations | ||||||
| 5565 Glenridge Connector, Suite 450 | Telephone: 770.418.8592 | Telephone: 866.354.3485 | ||||||
| Atlanta, GA 30342 | research.analysts@piedmontreit.com | investor.services@piedmontreit.com | ||||||
| Telephone: 770.418.8800 | www.piedmontreit.com | |||||||
Piedmont Office Realty Trust, Inc.
Quarterly Supplemental Information
Index
| Page | Page | |||||||||||||
| Introduction | Other Investments | |||||||||||||
| Corporate Data | Other Investments Detail | |||||||||||||
| Investor Information | Supporting Information | |||||||||||||
| Financial Highlights | Definitions | |||||||||||||
| Financials | Research Coverage | |||||||||||||
| Balance Sheets | Non-GAAP Reconciliations | |||||||||||||
| Income Statements | Property Detail - In-Service Portfolio | |||||||||||||
| Key Performance Indicators | Risks, 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 42 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 36. 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 submarkets 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 first quarter of 2021, approximately 74% 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 of | As of | ||||||||||
| March 31, 2021 | December 31, 2020 | ||||||||||
Number of consolidated in-service office properties (1) | 54 | 54 | |||||||||
Rentable square footage (in thousands) (1) | 16,434 | 16,428 | |||||||||
Percent leased (2) | 86.0 | % | 86.8 | % | |||||||
| Capitalization (in thousands): | |||||||||||
| Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs) | $1,671,425 | $1,632,610 | |||||||||
Equity market capitalization (3) | $2,154,384 | $2,009,914 | |||||||||
Total market capitalization (3) | $3,825,809 | $3,642,524 | |||||||||
Total debt / Total market capitalization (3) | 43.7 | % | 44.8 | % | |||||||
| Average net debt to Core EBITDA | 5.6 x | 5.8 x | |||||||||
| Total debt / Total gross assets | 34.9 | % | 34.4 | % | |||||||
| Common stock data: | |||||||||||
| High closing price during quarter | $18.56 | $16.95 | |||||||||
| Low closing price during quarter | $15.18 | $11.42 | |||||||||
| Closing price of common stock at period end | $17.37 | $16.23 | |||||||||
| Weighted average fully diluted shares outstanding during quarter (in thousands) | 124,450 | 125,544 | |||||||||
| Shares of common stock issued and outstanding at period end (in thousands) | 124,029 | 123,839 | |||||||||
Annual regular dividend per share (4) | $0.84 | $0.84 | |||||||||
| Rating / Outlook: | |||||||||||
| Standard & Poor's | BBB / Stable | BBB / Stable | |||||||||
| Moody's | Baa2 / Stable | Baa2 / Stable | |||||||||
| Employees | 131 | 137 | |||||||||
| (1) | As of March 31, 2021, 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). | ||||
| (2) | Calculated as square footage associated with commenced leases plus square footage associated with executed but uncommenced leases for vacant spaces at our in-service properties, divided by total rentable in-service square footage, all as of the relevant date, expressed as a percentage. Please refer to page 24 for additional analyses regarding Piedmont's leased percentage. | ||||
| (3) | Reflects common stock closing price, shares outstanding and outstanding debt as of the end of the reporting period, as appropriate. | ||||
| (4) | Total of the regular dividends per share 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 Smith | Robert E. Bowers | Edward H. Guilbert, III | Christopher A. Kollme | ||||||||
| Chief Executive Officer, President | Chief Financial and Administrative Officer | Executive Vice President, Finance, | Executive Vice President, | ||||||||
| and Director | and Executive Vice President | Assistant Secretary and Treasurer | Capital & Strategy | ||||||||
| Investor Relations Contact | |||||||||||
| Laura P. Moon | Joseph H. Pangburn | Thomas R. Prescott | Alex Valente | ||||||||
| Chief Accounting Officer and | Executive Vice President, | Executive Vice President, | Executive Vice President, | ||||||||
| Senior Vice President | Southwest Region | Midwest Region and Co-Head of | Southeast Region | ||||||||
| Development | |||||||||||
| George Wells | Robert K. Wiberg | ||||||||||
| Executive Vice President, | Executive Vice President, | ||||||||||
| Real Estate Operations | Northeast Region and Co-Head of | ||||||||||
| Development | |||||||||||
| Board of Directors | |||||||||||
| Frank C. McDowell | Dale H. Taysom | Kelly H. Barrett | Wesley 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, and | Board of Directors, and Member of the | and Member of the Governance Committee | Committee, and Member of the | ||||||||
| Member of the Governance Committee | Audit and Capital Committees | Compensation Committee | |||||||||
| Glenn G. Cohen | Barbara B. Lang | C. Brent Smith | Jeffery L. Swope | ||||||||
| Director and Member of the Audit and Capital | Director, Chair of the ESG Committee, | Chief Executive Officer, President | Director, Chair of the Capital | ||||||||
| Committees | and Member of the Compensation | and Director | Committee, and Member of the | ||||||||
| and Governance Committees | Compensation Committee | ||||||||||
| Transfer Agent | Corporate Counsel | ||||
| Computershare | King & Spalding | ||||
| P.O. Box 30170 | 1180 Peachtree Street, NE | ||||
| College Station, TX 77842-3170 | Atlanta, GA 30309 | ||||
| Phone: 866.354.3485 | Phone: 404.572.4600 | ||||
4
Piedmont Office Realty Trust, Inc.
Financial Highlights
As of March 31, 2021
Financial Results (1)
Net income applicable to Piedmont for the quarter ended March 31, 2021 was $9.3 million, or $0.08 per share (diluted), compared to $8.7 million, or $0.07 per share (diluted), for the same quarter in 2020. The increase in net income applicable to Piedmont for the three months ended March 31, 2021 when compared to the same period in 2020 was primarily a result of lower interest expense due to the decrease in the Company's overall debt balance outstanding by nearly $300 million since March 2020, lower general and administrative expenses, and higher interest income attributable to the seller financing Piedmont provided to the purchaser of its New Jersey properties during the fourth quarter of 2020. Partially offsetting the increase in net income attributable to Piedmont in 2021 was decreased real estate operating income as a result of the net disposition activity completed by the Company during the prior twelve months, lower portfolio occupancy, and reduced transient parking revenue as a result of the COVID-19 pandemic.
Funds from operations (FFO) and core funds from operations (Core FFO) for the quarter ended March 31, 2021 were $60.1 million, or $0.48 per share (diluted), compared to $59.9 million, or $0.47 per share (diluted), for the same quarter in 2020. The increase in FFO and Core FFO for the three months ended March 31, 2021 when compared to the same period in 2020 was principally due to the items described above for changes in net income.
The per share results for the first quarter of 2021 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) which was completed during the fourth quarter of 2020.
Adjusted funds from operations (AFFO) for the quarter ended March 31, 2021 was $37.9 million, compared to $18.6 million for the same quarter in 2020. The increase in AFFO for the three months ended March 31, 2021 when compared to the same period in 2020 was primarily due to the greater amount of non-incremental capital expenditures incurred during the first quarter of 2020 which was primarily attributable to 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.
Operations and Leasing
As of March 31, 2021, 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 the Sunbelt. On a square footage leased basis, our total in-service office portfolio was 86.0% leased as of March 31, 2021, as compared to 86.8% at December 31, 2020. Please refer to page 24 for additional leased percentage information.
As a result of our diversification, limited exposure to the sectors of the economy most impacted by the pandemic and strong tenant credit profile, our collections have returned to near pre-pandemic levels. To date, of the approximately 1,000 leases in our portfolio, we have entered into rent relief agreements with approximately 70 tenants predominately operating in the retail, hospitality, travel, consulting and co-working sectors. Of the rent deferrals granted to tenants as a result of COVID-19, only approximately $3.3 million in deferred rent remains to be repaid as of March 31, 2021.
The weighted average remaining lease term of our in-service portfolio was 6.0 years(2) as of March 31, 2021 as compared to 6.1 years as of December 31, 2020. Our weighted average adjusted Annualized Lease Revenue(3) per square foot for our in-service portfolio was $37.20 as of March 31, 2021.
| (1) | |||||
| (2) | Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of March 31, 2021) is weighted based on Annualized Lease Revenue, as defined on page 36. | ||||
| (3) | Annualized Lease Revenue is adjusted for buildings at which tenants pay operating expenses directly to include such operating expenses as if they were paid by the Company and reimbursed by the tenants as under a typical net lease structure, thereby incorporating the effective gross rental rate for those buildings. | ||||
5
During the three months ended March 31, 2021, the Company completed approximately 678,000 square feet of leasing activity. Of the total leasing activity completed during the quarter, we signed new tenant leases for approximately 154,000 square feet. 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 three months ended March 31, 2021 (net of commitment expirations during the period) was $3.40 (see page 30).
Of the 678,000 square feet of leases executed during the three months ended March 31, 2021, significant leases greater than 10,000 square feet are as follows.
| Tenant | Property | Market | Square Feet Leased | Expiration Year | Lease Type | ||||||||||||
| Raytheon Company | 225 & 235 Presidential Way | Boston | 440,130 | 2031 | Renewal | ||||||||||||
| Ascend Learning, LLC | 25 Burlington Mall Road | Boston | 52,558 | 2033 | New | ||||||||||||
| Industrious ARL 3100 Clarendon Boulevard LLC | 3100 Clarendon Boulevard | Washington, DC | 39,753 | 2031 | New | ||||||||||||
| Council for Advancement and Support of Education | 1201 Eye Street | Washington, DC | 15,025 | 2033 | New | ||||||||||||
At the end of the first quarter of 2021, there was one tenant whose lease individually contributed greater than 1% in Annualized Lease Revenue expiring during the eighteen month period following March 31, 2021. Information regarding the leasing status of the space associated with this tenant's lease is presented below.
| Tenant | Property | Property Location | Net Square Footage Expiring | Net Percentage of Current Quarter Annualized Lease Revenue Expiring (%) | Expiration | Current Leasing Status | ||||||||||||||
| City of New York | 60 Broad Street | New York, NY | 313,022 | 3.0% | In Holdover | The tenant is currently in holdover. After the end of the quarter, the Company signed an interim 5-year lease renewal that is now in process to receive final City approvals. | ||||||||||||||
Future Lease Commencements and Abatements
As of March 31, 2021, our overall leased percentage was 86.0% and our economic leased percentage was 80.6%. The difference between overall leased percentage and economic leased percentage is attributable to two factors:
1)leases which have been contractually entered into for currently vacant spaces but have not yet commenced (amounting to approximately 174,000 square feet of leases as of March 31, 2021, or 1.0% of the portfolio); and
2)leases which have commenced but are within rental abatement or deferral periods (amounting to approximately 812,000 square feet of leases as of March 31, 2021, or a 4.4% 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 0.2% 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 new leases greater than 50,000 square feet and their anticipated commencement dates. Lease renewals are excluded from this schedule.
| Tenant | Property | Property Location | Square Feet Leased | Space Status | Estimated Commencement Date | New / Expansion | ||||||||||||||
| District of Columbia Department of General Services | 400 Virginia Avenue | Washington, DC | 56,042 | 43,000 SF Vacant | Q1 2022 | New | ||||||||||||||
| Ascend Learning, LLC | 25 Burlington Mall Road | Burlington, MA | 52,558 | Vacant | Q3 2021 | New | ||||||||||||||
| salesforce.com | 5 Wall Street | Burlington, MA | 51,913 | Not Vacant | Q3 2021 | New | ||||||||||||||
6
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 either were under abatement as of March 31, 2021 or will be under abatement within the next twelve months. (1)
| Tenant | Property | Property Location | Abated Square Feet | Lease Commencement Date | Remaining Abatement Schedule | Lease Expiration | ||||||||||||||
| Advanced Micro Devices, Inc. | 90 Central Street | Boxborough, MA | 107,244 | Q1 2021 | January through March 2021 | Q1 2028 | ||||||||||||||
| Transocean Offshore Deepwater Drilling, Inc. | Enclave Place | Houston, TX | 300,906 | Q4 2019 | Commencement through April 2021 | Q2 2036 | ||||||||||||||
| Ascend Learning, LLC | 25 Burlington Mall Road | Burlington, MA | 52,558 | Q3 2021 | July through December 2021 | Q4 2033 | ||||||||||||||
| District of Columbia Department of General Services | 400 Virginia Avenue | Washington, DC | 56,042 | Q1 2022 | January through early July 2022 | Q4 2032 | ||||||||||||||
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 activities in furtherance of its strategic objectives is presented below.
Dispositions
There were no dispositions completed during the quarter ended March 31, 2021.
Acquisitions
There were no acquisitions completed during the quarter ended March 31, 2021.
For additional information on acquisitions and dispositions completed over the previous eighteen months, please refer to page 34.
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 March 31, 2021, 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 35.
Finance
As of March 31, 2021, our ratio of total debt to total gross assets was 34.9%, and the same measure at December 31, 2020 was 34.4%. This debt ratio is based on total principal amount outstanding for our various loans as of the relevant measurement date.
As of March 31, 2021, our average net debt to Core EBITDA ratio was 5.6 x, compared to 5.8 x as of December 31, 2020.
| (1) | The State of New York lease at 60 Broad Street in New York, NY, does not contain any rental abatement provisions. The tenant's space will be reconstructed over a period of up to 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. | ||||
7
Stock Repurchase Program
No repurchases of the Company's common stock were completed during the first quarter of 2021. 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 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 was paid on March 19, 2021.
Subsequent Events
On April 28, 2021, the Board of Directors of Piedmont declared a dividend for the second quarter of 2021 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on May 28, 2021. The dividend is expected to be paid on June 18, 2021.
Other
Piedmont has been recognized by the U.S. Environmental Protection Agency and the U.S. Department of Energy as a 2021 Energy Star Partner of the Year. Each year, the Energy Star program honors a group of businesses and organizations that have made outstanding contributions to protecting the environment through superior energy achievements. Energy Star award winners lead their industries in the production, sale, and adoption of energy-efficient products, services, and strategies. Piedmont is honored to have been selected as a leader in real estate sustainability, which benefits our tenants and shareholders by lowering operating expenses as well as reducing our portfolio's (and tenants') carbon footprint.
Guidance for 2021
The following financial guidance for calendar year 2021 remains unchanged and is based upon management's assumptions, estimates and expectations at this time. 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 latter half of 2021. 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) | Low | High | ||||||||||||
| Net Income | $34 | - | $38 | |||||||||||
| Add: | ||||||||||||||
| Depreciation | 115 | - | 120 | |||||||||||
| Amortization | 82 | - | 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 42.
8
Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)
| March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Real estate, at cost: | |||||||||||||||||||||||||||||
| Land assets | $ | 484,467 | $ | 484,466 | $ | 505,228 | $ | 505,228 | $ | 505,234 | |||||||||||||||||||
| Buildings and improvements | 3,239,199 | 3,191,767 | 3,283,980 | 3,258,713 | 3,249,947 | ||||||||||||||||||||||||
| Buildings and improvements, accumulated depreciation | (793,064) | (767,542) | (803,160) | (776,870) | (755,152) | ||||||||||||||||||||||||
| Intangible lease asset | 155,634 | 158,444 | 161,870 | 164,145 | 167,972 | ||||||||||||||||||||||||
| Intangible lease asset, accumulated amortization | (72,475) | (67,850) | (63,353) | (58,148) | (52,538) | ||||||||||||||||||||||||
| Construction in progress | 47,498 | 56,749 | 56,393 | 51,045 | 42,028 | ||||||||||||||||||||||||
| Real estate assets held for sale, gross | — | — | — | — | 233,951 | ||||||||||||||||||||||||
| Real estate assets held for sale, accumulated depreciation & amortization | — | — | — | — | (96,164) | ||||||||||||||||||||||||
| Total real estate assets | 3,061,259 | 3,056,034 | 3,140,958 | 3,144,113 | 3,295,278 | ||||||||||||||||||||||||
| Cash and cash equivalents | 10,689 | 7,331 | 23,958 | 36,469 | 7,920 | ||||||||||||||||||||||||
| Tenant receivables, net of allowance for doubtful accounts | 4,545 | 8,448 | 11,301 | 8,494 | 10,596 | ||||||||||||||||||||||||
| Straight line rent receivable | 156,257 | 151,153 | 154,620 | 147,418 | 139,617 | ||||||||||||||||||||||||
| Notes receivable | 118,500 | 118,500 | — | — | — | ||||||||||||||||||||||||
| Escrow deposits and restricted cash | 1,741 | 1,883 | 1,781 | 1,769 | 1,758 | ||||||||||||||||||||||||
| Prepaid expenses and other assets | 22,647 | 23,277 | 28,074 | 33,017 | 23,933 | ||||||||||||||||||||||||
| Goodwill | 98,918 | 98,918 | 98,918 | 98,918 | 98,918 | ||||||||||||||||||||||||
| Deferred lease costs, gross | 445,753 | 446,885 | 463,447 | 459,398 | 463,760 | ||||||||||||||||||||||||
| Deferred lease costs, accumulated amortization | (182,435) | (172,619) | (169,975) | (159,883) | (148,972) | ||||||||||||||||||||||||
| Other assets held for sale, gross | — | — | — | — | 63,524 | ||||||||||||||||||||||||
| Other assets held for sale, accumulated amortization | — | — | — | — | (35,516) | ||||||||||||||||||||||||
| Total assets | $ | 3,737,874 | $ | 3,739,810 | $ | 3,753,082 | $ | 3,769,713 | $ | 3,920,816 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Unsecured debt, net of discount | $ | 1,633,819 | $ | 1,594,068 | $ | 1,588,411 | $ | 1,592,693 | $ | 1,743,905 | |||||||||||||||||||
| Secured debt | 27,628 | 27,936 | 28,424 | 28,784 | 188,779 | ||||||||||||||||||||||||
| Accounts payable, accrued expenses, and accrued capital expenditures | 92,183 | 137,680 | 120,763 | 95,419 | 90,459 | ||||||||||||||||||||||||
| Deferred income | 56,638 | 36,891 | 36,613 | 35,226 | 35,443 | ||||||||||||||||||||||||
| Intangible lease liabilities, less accumulated amortization | 32,607 | 35,440 | 38,324 | 41,179 | 44,646 | ||||||||||||||||||||||||
| Interest rate swaps | 7,654 | 9,834 | 10,618 | 28,575 | 26,709 | ||||||||||||||||||||||||
| Other liabilities held for sale | — | — | — | — | 7,158 | ||||||||||||||||||||||||
| Total liabilities | $ | 1,850,529 | $ | 1,841,849 | $ | 1,823,153 | $ | 1,821,876 | $ | 2,137,099 | |||||||||||||||||||
| Stockholders' equity: | |||||||||||||||||||||||||||||
| Common stock | 1,240 | 1,238 | 1,260 | 1,260 | 1,259 | ||||||||||||||||||||||||
| Additional paid in capital | 3,697,801 | 3,693,996 | 3,692,634 | 3,691,377 | 3,690,821 | ||||||||||||||||||||||||
| Cumulative distributions in excess of earnings | (1,791,558) | (1,774,856) | (1,740,670) | (1,723,147) | (1,889,109) | ||||||||||||||||||||||||
| Other comprehensive loss | (21,813) | (24,100) | (24,993) | (23,360) | (20,976) | ||||||||||||||||||||||||
| Piedmont stockholders' equity | 1,885,670 | 1,896,278 | 1,928,231 | 1,946,130 | 1,781,995 | ||||||||||||||||||||||||
| Non-controlling interest | 1,675 | 1,683 | 1,698 | 1,707 | 1,722 | ||||||||||||||||||||||||
| Total stockholders' equity | 1,887,345 | 1,897,961 | 1,929,929 | 1,947,837 | 1,783,717 | ||||||||||||||||||||||||
| Total liabilities, redeemable common stock and stockholders' equity | $ | 3,737,874 | $ | 3,739,810 | $ | 3,753,082 | $ | 3,769,713 | $ | 3,920,816 | |||||||||||||||||||
| Common stock outstanding at end of period | 124,029 | 123,839 | 126,029 | 126,025 | 125,921 | ||||||||||||||||||||||||
9
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
| Three Months Ended | ||||||||||||||||||||||||||||||||
| 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
Rental income (1) | $ | 105,170 | $ | 104,560 | $ | 108,071 | $ | 109,714 | $ | 111,496 | ||||||||||||||||||||||
Tenant reimbursements (1) | 20,742 | 23,712 | 20,209 | 21,533 | 20,658 | |||||||||||||||||||||||||||
| Property management fee revenue | 758 | 721 | 751 | 622 | 773 | |||||||||||||||||||||||||||
| Other property related income | 2,587 | 2,536 | 2,662 | 2,762 | 4,244 | |||||||||||||||||||||||||||
| 129,257 | 131,529 | 131,693 | 134,631 | 137,171 | ||||||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||
| Property operating costs | 51,424 | 55,302 | 53,293 | 53,148 | 53,190 | |||||||||||||||||||||||||||
| Depreciation | 28,103 | 27,236 | 28,255 | 27,200 | 27,884 | |||||||||||||||||||||||||||
| Amortization | 22,912 | 22,324 | 22,990 | 24,349 | 23,631 | |||||||||||||||||||||||||||
| General and administrative | 7,251 | 7,415 | 5,469 | 5,937 | 8,643 | |||||||||||||||||||||||||||
| 109,690 | 112,277 | 110,007 | 110,634 | 113,348 | ||||||||||||||||||||||||||||
| Other income / (expense): | ||||||||||||||||||||||||||||||||
| Interest expense | (12,580) | (13,048) | (12,725) | (13,953) | (15,264) | |||||||||||||||||||||||||||
| Other income / (expense) | 2,356 | 1,770 | 319 | 349 | 149 | |||||||||||||||||||||||||||
| Gain / (loss) on extinguishment of debt | — | — | — | (9,336) | — | |||||||||||||||||||||||||||
Gain / (loss) on sale of real estate (2) | — | 14,634 | (340) | 191,369 | 3 | |||||||||||||||||||||||||||
| Net income | 9,343 | 22,608 | 8,940 | 192,426 | 8,711 | |||||||||||||||||||||||||||
| Less: Net (income) / loss applicable to noncontrolling interest | 1 | 1 | 3 | 1 | (2) | |||||||||||||||||||||||||||
| Net income applicable to Piedmont | $ | 9,344 | $ | 22,609 | $ | 8,943 | $ | 192,427 | $ | 8,709 | ||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 124,450 | 125,544 | 126,385 | 126,500 | 126,360 | |||||||||||||||||||||||||||
| Net income per share available to common stockholders - diluted | $ | 0.08 | $ | 0.18 | $ | 0.07 | $ | 1.52 | $ | 0.07 | ||||||||||||||||||||||
| Common stock outstanding at end of period | 124,029 | 123,839 | 126,029 | 126,025 | 125,921 | |||||||||||||||||||||||||||
| (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. | ||||
10
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
| Three Months Ended | ||||||||||||||||||||
| 3/31/2021 | 3/31/2020 | Change ($) | Change (%) | |||||||||||||||||
| Revenues: | ||||||||||||||||||||
Rental income (1) | $ | 105,170 | $ | 111,496 | $ | (6,326) | (5.7) | % | ||||||||||||
Tenant reimbursements (1) | 20,742 | 20,658 | 84 | 0.4 | % | |||||||||||||||
| Property management fee revenue | 758 | 773 | (15) | (1.9) | % | |||||||||||||||
| Other property related income | 2,587 | 4,244 | (1,657) | (39.0) | % | |||||||||||||||
| 129,257 | 137,171 | (7,914) | (5.8) | % | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Property operating costs | 51,424 | 53,190 | 1,766 | 3.3 | % | |||||||||||||||
| Depreciation | 28,103 | 27,884 | (219) | (0.8) | % | |||||||||||||||
| Amortization | 22,912 | 23,631 | 719 | 3.0 | % | |||||||||||||||
| General and administrative | 7,251 | 8,643 | 1,392 | 16.1 | % | |||||||||||||||
| 109,690 | 113,348 | 3,658 | 3.2 | % | ||||||||||||||||
| Other income / (expense): | ||||||||||||||||||||
| Interest expense | (12,580) | (15,264) | 2,684 | 17.6 | % | |||||||||||||||
| Other income / (expense) | 2,356 | 149 | 2,207 | 1,481.2 | % | |||||||||||||||
Gain / (loss) on sale of real estate | — | 3 | (3) | (100.0) | % | |||||||||||||||
| Net income | 9,343 | 8,711 | 632 | 7.3 | % | |||||||||||||||
| Less: Net (income) / loss applicable to noncontrolling interest | 1 | (2) | 3 | 150.0 | % | |||||||||||||||
| Net income applicable to Piedmont | $ | 9,344 | $ | 8,709 | $ | 635 | 7.3 | % | ||||||||||||
| Weighted average common shares outstanding - diluted | 124,450 | 126,360 | ||||||||||||||||||
| Net income per share available to common stockholders - diluted | $ | 0.08 | $ | 0.07 | ||||||||||||||||
| Common stock outstanding at end of period | 124,029 | 125,921 | ||||||||||||||||||
| (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. | ||||
11
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 36 and reconciliations are provided beginning on page 38. 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 Data | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||||||||||||||||||||||
Percent leased (1) | 86.0 | % | 86.8 | % | 86.9 | % | 88.6 | % | 89.6 | % | |||||||||||||||||||||||||
Percent leased - economic (1) (2) | 80.6 | % | 82.0 | % | 80.7 | % | 81.1 | % | 84.0 | % | |||||||||||||||||||||||||
| Total revenues | $129,257 | $131,529 | $131,693 | $134,631 | $137,171 | ||||||||||||||||||||||||||||||
| Net income attributable to Piedmont | $9,344 | $22,609 | $8,943 | $192,427 | $8,709 | ||||||||||||||||||||||||||||||
| Core EBITDA | $72,938 | $70,582 | $73,250 | $75,895 | $75,487 | ||||||||||||||||||||||||||||||
| Core FFO applicable to common stock | $60,056 | $57,229 | $60,219 | $61,603 | $59,875 | ||||||||||||||||||||||||||||||
| Core FFO per share - diluted | $0.48 | $0.46 | $0.48 | $0.49 | $0.47 | ||||||||||||||||||||||||||||||
| AFFO applicable to common stock | $37,861 | $36,291 | $37,606 | $44,968 | $18,557 | ||||||||||||||||||||||||||||||
Gross regular dividends (3) | $26,046 | $26,145 | $26,466 | $26,465 | $26,443 | ||||||||||||||||||||||||||||||
Regular dividends per share (3) | $0.21 | $0.21 | $0.21 | $0.21 | $0.21 | ||||||||||||||||||||||||||||||
| Selected Balance Sheet Data | |||||||||||||||||||||||||||||||||||
| Total real estate assets, net | $3,061,259 | $3,056,034 | $3,140,958 | $3,144,113 | $3,295,278 | ||||||||||||||||||||||||||||||
| Total assets | $3,737,874 | $3,739,810 | $3,753,082 | $3,769,713 | $3,920,816 | ||||||||||||||||||||||||||||||
| Total liabilities | $1,850,529 | $1,841,849 | $1,823,153 | $1,821,876 | $2,137,099 | ||||||||||||||||||||||||||||||
| Ratios & Information for Debt Holders | |||||||||||||||||||||||||||||||||||
Core EBITDA margin (4) | 56.4 | % | 53.7 | % | 55.6 | % | 56.4 | % | 55.0 | % | |||||||||||||||||||||||||
Fixed charge coverage ratio (5) | 5.4 x | 5.1 x | 5.5 x | 5.3 x | 4.8 x | ||||||||||||||||||||||||||||||
Average net debt to Core EBITDA (6) | 5.6 x | 5.8 x | 5.5 x | 6.2 x | 5.7 x | ||||||||||||||||||||||||||||||
| Total gross real estate assets | $3,926,798 | $3,891,426 | $4,007,471 | $3,979,131 | $4,199,132 | ||||||||||||||||||||||||||||||
Net debt (7) | $1,658,995 | $1,623,396 | $1,602,237 | $1,590,007 | $1,930,834 | ||||||||||||||||||||||||||||||
| (1) | Please refer to page 24 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, 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 $812,649 for the quarter ended March 31, 2021, $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, and $176,040 for the quarter ended March 31, 2020; the Company had principal amortization of $185,368 for the quarter ended March 31, 2021, $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, and $175,383 for the quarter ended March 31, 2020. | ||||
| (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. | ||||
12
Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations and Adjusted Funds From Operations
Unaudited (in thousands except for per share data)
| Three Months Ended | ||||||||||||||
| 3/31/2021 | 3/31/2020 | |||||||||||||
| GAAP net income applicable to common stock | $ | 9,344 | $ | 8,709 | ||||||||||
Depreciation (1) (2) | 27,812 | 27,551 | ||||||||||||
Amortization (1) | 22,900 | 23,618 | ||||||||||||
Loss / (gain) on sale of properties | — | (3) | ||||||||||||
| NAREIT funds from operations and core funds from operations applicable to common stock | 60,056 | 59,875 | ||||||||||||
| Adjustments: | ||||||||||||||
| Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on senior notes | 654 | 577 | ||||||||||||
| Depreciation of non real estate assets | 282 | 325 | ||||||||||||
Straight-line effects of lease revenue (1) | (4,103) | (6,785) | ||||||||||||
| Stock-based compensation adjustments | 1,111 | 2,300 | ||||||||||||
Amortization of lease-related intangibles (1) | (2,792) | (2,973) | ||||||||||||
Non-incremental capital expenditures (3) | (17,347) | (34,762) | ||||||||||||
| Adjusted funds from operations applicable to common stock | $ | 37,861 | $ | 18,557 | ||||||||||
| Weighted average common shares outstanding - diluted | 124,450 | 126,360 | ||||||||||||
| Funds from operations per share (diluted) | $ | 0.48 | $ | 0.47 | ||||||||||
| Core funds from operations per share (diluted) | $ | 0.48 | $ | 0.47 | ||||||||||
| Common stock outstanding at end of period | 124,029 | 125,921 | ||||||||||||
| (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 36. Non-incremental capital expenditures for the three months ended March 31, 2020 include approximately $18.5 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. | ||||
13
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
| Three Months Ended | ||||||||||||||
| 3/31/2021 | 3/31/2020 | |||||||||||||
| Net income attributable to Piedmont | $ | 9,344 | $ | 8,709 | ||||||||||
| Net income / (loss) attributable to noncontrolling interest | (1) | 2 | ||||||||||||
Interest expense | 12,580 | 15,264 | ||||||||||||
Depreciation (1) | 28,094 | 27,876 | ||||||||||||
Amortization (1) | 22,900 | 23,618 | ||||||||||||
| Depreciation and amortization attributable to noncontrolling interests | 21 | 21 | ||||||||||||
Loss / (gain) on sale of properties | — | (3) | ||||||||||||
EBITDAre and Core EBITDA (2) | 72,938 | 75,487 | ||||||||||||
General & administrative expenses | 7,251 | 8,643 | ||||||||||||
Non-cash general reserve for uncollectible accounts (3) | 412 | — | ||||||||||||
Management fee revenue (4) | (390) | (395) | ||||||||||||
Other (income) / expense (1) (5) | (2,141) | 67 | ||||||||||||
Straight-line effects of lease revenue (1) | (4,103) | (6,785) | ||||||||||||
| Straight-line effects of lease revenue attributable to noncontrolling interests | 1 | (3) | ||||||||||||
Amortization of lease-related intangibles (1) | (2,792) | (2,973) | ||||||||||||
| Property net operating income (cash basis) | 71,176 | 74,041 | ||||||||||||
| Deduct net operating (income) / loss from: | ||||||||||||||
Acquisitions (6) | (7,440) | (3,539) | ||||||||||||
Dispositions (7) | 413 | (8,700) | ||||||||||||
Other investments (8) | 144 | 103 | ||||||||||||
| Same store net operating income (cash basis) | $ | 64,293 | $ | 61,905 | ||||||||||
| Change period over period | 3.9 | % | 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 March 31, 2021, Piedmont recognized $2.7 million in termination income (the majority of which was attributable to the WeWork lease termination in Orlando, FL), as compared with $0.6 million during the same period in 2020 and $0.8 million during the prior quarter. | ||||
| (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 on customer accounts. 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 include One Galleria Tower, Two Galleria Tower and Three Galleria Tower in Dallas, TX, purchased on February 12, 2020. | ||||
| (7) | Dispositions include 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 include active out-of-service redevelopment and development projects, land, and recently completed redevelopment and development projects. Additional information on our land holdings can be found on page 35. The operating results from 222 South Orange Avenue in Orlando, FL, are included in this line item. | ||||
14
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Accrual Basis)
Unaudited (in thousands)
| Three Months Ended | |||||||||||
| 3/31/2021 | 3/31/2020 | ||||||||||
| Net income attributable to Piedmont | $ | 9,344 | $ | 8,709 | |||||||
| Net income / (loss) attributable to noncontrolling interest | (1) | 2 | |||||||||
Interest expense | 12,580 | 15,264 | |||||||||
Depreciation (1) | 28,094 | 27,876 | |||||||||
Amortization (1) | 22,900 | 23,618 | |||||||||
| Depreciation and amortization attributable to noncontrolling interests | 21 | 21 | |||||||||
Loss / (gain) on sale of properties | — | (3) | |||||||||
EBITDAre and Core EBITDA (2) | 72,938 | 75,487 | |||||||||
General & administrative expenses | 7,251 | 8,643 | |||||||||
Management fee revenue (3) | (390) | (395) | |||||||||
Other (income) / expense (1) (4) | (2,141) | 67 | |||||||||
| Property net operating income (accrual basis) | 77,658 | 83,802 | |||||||||
| Deduct net operating (income) / loss from: | |||||||||||
Acquisitions (5) | (9,211) | (4,729) | |||||||||
Dispositions (6) | 413 | (9,361) | |||||||||
Other investments (7) | 200 | 158 | |||||||||
| Same store net operating income (accrual basis) | $ | 69,060 | $ | 69,870 | |||||||
| Change period over period | (1.2) | % | N/A | ||||||||
For informational purposes (8) | |||||||||||
| Add back: Non-cash general reserve for uncollectible accounts | 412 | — | |||||||||
| Adjusted same store net operating income (accrual basis) | $ | 69,472 | $ | 69,870 | |||||||
| Change period over period | (0.6) | % | 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 March 31, 2021, Piedmont recognized $2.7 million in termination income (the majority of which was attributable to the WeWork lease termination in Orlando, FL), as compared with $0.6 million during the same period in 2020 and $0.8 million during the prior quarter. | ||||
| (3) | 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. | ||||
| (4) | 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. | ||||
| (5) | Acquisitions include One Galleria Tower, Two Galleria Tower and Three Galleria Tower in Dallas, TX, purchased on February 12, 2020. | ||||
| (6) | Dispositions include 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). | ||||
| (7) | Other investments include active out-of-service redevelopment and development projects, land, and recently completed redevelopment and development projects. Additional information on our land holdings can be found on page 35. The operating results from 222 South Orange Avenue in Orlando, FL, are included in this line item. | ||||
| (8) | 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 on customer accounts. Because of the unique nature of the reserve and its effect on the Company's financial results, the Company has provided this supplemental disclosure to calculate what the accrual basis same store net operating income growth would have been had there been no activity related to the general reserve for potential future losses. No such reserves were made in any periods prior to the second quarter of 2020. | ||||
15
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Financial Components)
Unaudited (in thousands)
| Three Months Ended | |||||||||||||||||
| 3/31/2021 | 3/31/2020 | Change ($) | Change (%) | ||||||||||||||
| Revenue | |||||||||||||||||
Cash rental income (1) | $ | 90,185 | $ | 87,387 | $ | 2,798 | 3.2 | % | |||||||||
Tenant reimbursements (2) | 17,655 | 19,264 | (1,609) | (8.4) | % | ||||||||||||
Straight line effects of lease revenue (3) | 3,741 | 6,355 | (2,614) | (41.1) | % | ||||||||||||
| Amortization of lease-related intangibles | 1,438 | 1,610 | (172) | (10.7) | % | ||||||||||||
Total rents | 113,019 | 114,616 | (1,597) | (1.4) | % | ||||||||||||
Other property related income (4) | 2,515 | 4,348 | (1,833) | (42.2) | % | ||||||||||||
| Total revenue | 115,534 | 118,964 | (3,430) | (2.9) | % | ||||||||||||
Property operating expense (5) | 46,689 | 49,309 | 2,620 | 5.3 | % | ||||||||||||
| Property other income / (expense) | 215 | 215 | — | — | % | ||||||||||||
| Same store net operating income (accrual) | $ | 69,060 | $ | 69,870 | $ | (810) | (1.2) | % | |||||||||
| Less: | |||||||||||||||||
| Straight line effects of lease revenue | (3,741) | (6,355) | 2,614 | 41.1 | % | ||||||||||||
| Amortization of lease-related intangibles | (1,438) | (1,610) | 172 | 10.7 | % | ||||||||||||
| Non-cash general reserve for uncollectible accounts | 412 | — | 412 | 100.0 | % | ||||||||||||
| Same store net operating income (cash) | $ | 64,293 | $ | 61,905 | $ | 2,388 | 3.9 | % | |||||||||
| (1) | The increase in cash rental income for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily due to the burn off of some significant rental abatements at 1155 Perimeter Center West in Atlanta, GA and Arlington Gateway in Arlington, VA along with a higher amount of termination income in 2021, primarily related to the WeWork termination at 200 South Orange Avenue in Orlando, FL. | ||||
| (2) | The decrease in tenant reimbursements for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily the result of decreased property operating expenses attributable to the reduced physical utilization of our buildings due to the pandemic. | ||||
| (3) | The decrease in straight line effects of lease revenue for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily due to the expiration of the rental abatement periods of several large new and renewal leases in the portfolio. | ||||
| (4) | The decrease in other property related income for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily the result of pandemic-related decreased transient parking activity across the portfolio. | ||||
| (5) | The decrease in property operating expense for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily attributable to the reduced physical utilization of our buildings due to the pandemic, resulting in savings in several key operating expense categories, including janitorial and parking garage operational expenses. | ||||
16
Piedmont Office Realty Trust, Inc.
Capitalization Analysis
Unaudited (in thousands except for per share data)
| As of | As of | ||||||||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Market Capitalization | |||||||||||
| Common stock price | $17.37 | $16.23 | |||||||||
| Total shares outstanding | 124,029 | 123,839 | |||||||||
Equity market capitalization (1) | $2,154,384 | $2,009,914 | |||||||||
| Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs) | $1,671,425 | $1,632,610 | |||||||||
Total market capitalization (1) | $3,825,809 | $3,642,524 | |||||||||
Total debt / Total market capitalization (1) | 43.7 | % | 44.8 | % | |||||||
| Ratios & Information for Debt Holders | |||||||||||
Total gross assets (2) | $4,785,848 | $4,747,821 | |||||||||
Total debt / Total gross assets (2) | 34.9 | % | 34.4 | % | |||||||
Average net debt to Core EBITDA (3) | 5.6 x | 5.8 x | |||||||||
| (1) | Reflects common stock closing price, shares outstanding, and outstanding debt as of the end of the reporting period, as appropriate. | ||||
| (2) | Total gross assets is defined as total assets with the add-back of accumulated depreciation and accumulated amortization related to real estate assets and accumulated amortization related to deferred lease costs. | ||||
| (3) | For the purposes of this calculation, we annualize the Core EBITDA for the quarter and use the average daily balance of debt outstanding during the quarter, less cash and cash equivalents and escrow deposits and restricted cash as of the end of the quarter. | ||||
17
Piedmont Office Realty Trust, Inc.
Debt Summary
As of March 31, 2021
Unaudited ($ in thousands)
| Floating Rate & Fixed Rate Debt |  | ||||||||||||||||
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate (2) | Weighted Average Maturity | ||||||||||||||
| Floating Rate | $494,000 | (3) | 1.09% | 22.1 months | |||||||||||||
| Fixed Rate | 1,177,425 | 3.76% | 52.7 months | ||||||||||||||
| Total | $1,671,425 | 2.97% | 43.7 months | ||||||||||||||
| Unsecured & Secured Debt |  | |||||||||||||||||||
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate (2) | Weighted Average Maturity | |||||||||||||||||
| Unsecured | $1,644,000 | 2.92% | 44.3 months | |||||||||||||||||
| Secured | 27,425 | 5.55% | 5.1 months | |||||||||||||||||
| Total | $1,671,425 | 2.97% | 43.7 months | |||||||||||||||||
Debt Maturities (4) | ||||||||||||||||||||||||||
| Maturity Year | Secured Debt - Principal Amount Outstanding (1) | Unsecured Debt - Principal Amount Outstanding (1) | Weighted Average Stated Interest Rate (2) | Percentage of Total |  | |||||||||||||||||||||
| 2021 | $27,425 | $300,000 | 1.48% | 19.6% | ||||||||||||||||||||||
| 2022 | — | — | N/A | —% | ||||||||||||||||||||||
| 2023 | — | 394,000 | 3.13% | 23.6% | ||||||||||||||||||||||
| 2024 | — | 400,000 | 4.45% | 23.9% | ||||||||||||||||||||||
| 2025 | — | 250,000 | 2.06% | 15.0% | ||||||||||||||||||||||
| 2026 + | — | 300,000 | 3.15% | 17.9% | ||||||||||||||||||||||
| Total | $27,425 | $1,644,000 | 2.97% | 100.0% | ||||||||||||||||||||||
| (1) | All of Piedmont's outstanding debt as of March 31, 2021 was interest-only debt with the exception of the $27.4 million mortgage associated with 5 Wall Street located in Burlington, MA. | ||||
| (2) | Weighted average stated interest rate is calculated based upon the principal amounts outstanding. | ||||
| (3) | The amount of floating rate debt is comprised of the $44 million outstanding balance as of March 31, 2021 on the $500 million unsecured revolving credit facility, $150 million in principal amount of the $250 million unsecured term loan that closed in 2018 that remained unhedged as of March 31, 2021, and the entire principal balance of the $300 million unsecured term loan that closed in 2011. The $250 million unsecured term loan that closed in 2018 has a stated variable rate. However, Piedmont entered into $100 million in notional amount of seven-year interest rate swap agreements resulting in an effectively fixed interest rate for $100 million in principal amount of the term loan (at 3.56% as of March 31, 2021; this rate can change only with a credit rating change for the Company) through the loan's maturity date of March 31, 2025. Additional details regarding the floating rate debt can be found on the following page. | ||||
| (4) | For loans which provide extension options that are conditional solely upon the Company providing proper notice to the loan's administrative agent and the payment of an extension fee, the final extended maturity date is reflected herein. | ||||
18
Piedmont Office Realty Trust, Inc.
Debt Detail
Unaudited ($ in thousands)
Facility (1) | Property | Stated Rate | Maturity | Principal Amount Outstanding as of March 31, 2021 | |||||||||||||
| Secured | |||||||||||||||||
$35.0 Million Fixed-Rate Loan (2) | 5 Wall Street | 5.55 | % | (3) | 9/1/2021 | $ | 27,425 | ||||||||||
Subtotal / Weighted Average (4) | 5.55 | % | $ | 27,425 | |||||||||||||
| Unsecured | |||||||||||||||||
| $300.0 Million Unsecured 2011 Term Loan | N/A | 1.11 | % | (5) | 11/30/2021 | $ | 300,000 | ||||||||||
| $350.0 Million Unsecured 2013 Senior Notes | N/A | 3.40 | % | (6) | 6/1/2023 | 350,000 | |||||||||||
$500.0 Million Unsecured Line of Credit (7) | N/A | 1.01 | % | (8) | 9/29/2023 | 44,000 | |||||||||||
| $400.0 Million Unsecured 2014 Senior Notes | N/A | 4.45 | % | (9) | 3/15/2024 | 400,000 | |||||||||||
| $250.0 Million Unsecured 2018 Term Loan | N/A | 2.06 | % | (10) | 3/31/2025 | 250,000 | |||||||||||
| $300.0 Million Unsecured 2020 Senior Notes | N/A | 3.15 | % | (11) | 8/15/2030 | 300,000 | |||||||||||
Subtotal / Weighted Average (4) | 2.92 | % | $ | 1,644,000 | |||||||||||||
Total Debt - Principal Amount Outstanding / Weighted Average Stated Rate (4) | 2.97 | % | $ | 1,671,425 | |||||||||||||
GAAP Accounting Adjustments (12) | (9,978) | ||||||||||||||||
| Total Debt - GAAP Amount Outstanding | $ | 1,661,447 | |||||||||||||||
| (1) | All of Piedmont’s outstanding debt as of March 31, 2021, was interest-only debt with the exception of the $27.4 million mortgage associated with 5 Wall Street located in Burlington, MA. | ||||
| (2) | The loan is amortizing based on a 25-year amortization schedule. | ||||
| (3) | The loan has a stated interest rate of 5.55%; however, upon acquiring 5 Wall Street and assuming the loan, the Company marked the debt to its estimated fair value as of that time, resulting in an effective interest rate of 3.75%. | ||||
| (4) | Weighted average is based on the principal amounts outstanding and interest rates at March 31, 2021. | ||||
| (5) | The $300 million unsecured 2011 term loan has a variable interest rate. Piedmont may select from multiple interest rate options, including the prime rate and various length LIBOR locks. The all-in interest rate associated with each LIBOR interest period selection is comprised of the relevant base LIBOR interest rate plus a credit spread (1.00% as of March 31, 2021) based on Piedmont's then current credit rating. | ||||
| (6) | The $350 million unsecured senior notes were offered for sale at 99.601% of the principal amount. The resulting effective cost of the financing is approximately 3.45% before the consideration of transaction costs and proceeds from interest rate hedges. After the application of proceeds from interest rate hedges, the effective cost of the financing is approximately 3.43%. | ||||
| (7) | All of Piedmont’s outstanding debt as of March 31, 2021, was term debt with the exception of $44 million outstanding on our unsecured revolving credit facility. The $500 million unsecured revolving credit facility has an initial maturity date of September 30, 2022; however, there are two, six-month extension options available under the facility providing for a total extension of up to one year to September 29, 2023. The final extended maturity date is presented on this schedule. | ||||
| (8) | The interest rate presented for the $500 million unsecured revolving credit facility is the weighted average interest rate for all outstanding draws as of March 31, 2021. Piedmont may select from multiple interest rate options with each draw under the facility, including the prime rate and various length LIBOR locks. The all-in interest rate associated with each LIBOR interest period selection is comprised of the relevant base LIBOR interest rate plus a credit spread (0.90% as of March 31, 2021) based on Piedmont's then current credit rating. | ||||
| (9) | The $400 million unsecured senior notes were offered for sale at 99.791% of the principal amount. The resulting effective cost of the financing is approximately 4.48% before the consideration of transaction costs and proceeds from interest rate hedges. After the application of proceeds from interest rate hedges, the effective cost of the financing is approximately 4.10%. | ||||
| (10) | The $250 million unsecured term loan that closed in 2018 has a stated variable interest rate; however, Piedmont entered into $100 million in notional amount of seven-year interest rate swap agreements that effectively fixed the interest rate on $100 million of the term loan (at 3.56% as of March 31, 2021; this rate can change only with a credit rating change for the Company) through the loan's maturity date of March 31, 2025. For the portion of the loan that continues to have a variable interest rate, Piedmont may select from multiple interest rate options, including the prime rate and various length LIBOR locks. The all-in interest rate associated with each LIBOR interest period selection is comprised of the relevant base LIBOR interest rate plus a credit spread (0.95% as of March 31, 2021) based on Piedmont's then current credit rating. | ||||
| (11) | The $300 million unsecured senior notes were offered for sale at 99.236% of the principal amount. The resulting effective cost of the financing is approximately 3.24% before the consideration of transaction costs and the impact of interest rate hedges. After incorporating the results of the related interest rate hedging activity, the effective cost of the financing is approximately 3.90%. | ||||
| (12) | The GAAP accounting adjustments relate to original issue discounts, third-party fees, and lender fees resulting from the procurement processes for our various debt facilities, along with debt fair value adjustments associated with the assumed 5 Wall Street debt. The original issue discounts and fees, along with the debt fair value adjustments, are amortized to interest expense over the contractual term of the related debt. | ||||
19
Piedmont Office Realty Trust, Inc.
Debt Covenant & Ratio Analysis (for Debt Holders)
As of March 31, 2021
Unaudited
| Three Months Ended | ||||||||||||||||||||
Bank Debt Covenant Compliance (1) | Required | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||||||
| Maximum leverage ratio | 0.60 | 0.36 | 0.35 | 0.35 | 0.34 | 0.38 | ||||||||||||||
Minimum fixed charge coverage ratio (2) | 1.50 | 4.96 | 4.71 | 4.54 | 4.32 | 4.14 | ||||||||||||||
| Maximum secured indebtedness ratio | 0.40 | 0.01 | 0.01 | 0.01 | 0.01 | 0.04 | ||||||||||||||
| Minimum unencumbered leverage ratio | 1.60 | 2.72 | 2.77 | 2.85 | 2.91 | 2.71 | ||||||||||||||
Minimum unencumbered interest coverage ratio (3) | 1.75 | 5.44 | 5.26 | 5.13 | 4.92 | 4.74 | ||||||||||||||
| Three Months Ended | ||||||||||||||||||||
Bond Covenant Compliance (4) | Required | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||||||
| Total debt to total assets | 60% or less | 41.1% | 40.6% | 40.3% | 40.5% | 46.0% | ||||||||||||||
| Secured debt to total assets | 40% or less | 0.7% | 0.7% | 0.7% | 0.7% | 4.5% | ||||||||||||||
| Ratio of consolidated EBITDA to interest expense | 1.50 or greater | 5.93 | 5.66 | 5.52 | 5.15 | 4.88 | ||||||||||||||
| Unencumbered assets to unsecured debt | 150% or greater | 243% | 247% | 249% | 248% | 224% | ||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||
| Other Debt Coverage Ratios for Debt Holders | March 31, 2021 | December 31, 2020 | |||||||||
Average net debt to core EBITDA (5) | 5.6 x | 5.8 x | |||||||||
Fixed charge coverage ratio (6) | 5.4 x | 5.2 x | |||||||||
Interest coverage ratio (7) | 5.4 x | 5.3 x | |||||||||
| (1) | Bank debt covenant compliance calculations relate to specific calculations detailed in the relevant credit agreements. | ||||
| (2) | Defined as EBITDA for the trailing four quarters (including the Company's share of EBITDA from unconsolidated interests), excluding one-time or non-recurring gains or losses, less a $0.15 per square foot capital reserve, and excluding the impact of straight line rent leveling adjustments and amortization of intangibles divided by the Company's share of fixed charges, as more particularly described in the credit agreements. This definition of fixed charge coverage ratio as prescribed by our credit agreements is different from the fixed charge coverage ratio definition employed elsewhere within this report. | ||||
| (3) | Defined as net operating income for the trailing four quarters for unencumbered assets (including the Company's share of net operating income from partially-owned entities and subsidiaries that are deemed to be unencumbered) less a $0.15 per square foot capital reserve divided by the Company's share of interest expense associated with unsecured financings only, as more particularly described in the credit agreements. | ||||
| (4) | Bond covenant compliance calculations relate to specific calculations prescribed in the relevant debt agreements. Please refer to the Indenture dated May 9, 2013, the Indenture and the First Supplemental Indenture dated March 6, 2014, and the Second Supplemental Indenture dated August 12, 2020, for detailed information about the calculations. | ||||
| (5) | For the purposes of this calculation, we use the average daily balance of debt outstanding during the period, less cash and cash equivalents and escrow deposits and restricted cash as of the end of the period. | ||||
| (6) | Fixed charge coverage ratio is calculated as Core EBITDA divided by the sum of interest expense, principal amortization, capitalized interest and preferred dividends. The Company had no preferred dividends during the periods ended March 31, 2021 and December 31, 2020. The Company had capitalized interest of $812,649 for the three months ended March 31, 2021 and $965,142 for the twelve months ended December 31, 2020. The Company had principal amortization of $185,368 for the three months ended March 31, 2021 and $1,076,993 for the twelve months ended December 31, 2020. | ||||
| (7) | Interest coverage ratio is calculated as Core EBITDA divided by the sum of interest expense and capitalized interest. The Company had capitalized interest of $812,649 for the three months ended March 31, 2021 and $965,142 for the twelve months ended December 31, 2020. | ||||
20
Piedmont Office Realty Trust, Inc.
Tenant Diversification (1)
As of March 31, 2021
(in thousands except for number of properties)
| Tenant | Credit Rating (2) | Number of Properties | Lease Expiration (3) | Annualized Lease Revenue | Percentage of Annualized Lease Revenue (%) | Leased Square Footage | Percentage of Leased Square Footage (%) | ||||||||||||||||||||||
| US Bancorp | A+ / A1 | 3 | 2023 / 2024 | $27,070 | 5.3 | 787 | 5.6 | ||||||||||||||||||||||
| State of New York | AA+ / Aa2 | 1 | 2024 / 2039 | 25,816 | 5.0 | 502 | 3.6 | ||||||||||||||||||||||
| City of New York | AA / Aa2 | 1 | In Holdover | (4) | 15,580 | 3.0 | 313 | 2.2 | |||||||||||||||||||||
| Amazon | AA- / A2 | 4 | 2024 / 2025 | 14,133 | 2.7 | 337 | 2.4 | ||||||||||||||||||||||
| Transocean | CCC- / Caa3 | 1 | 2036 | 10,752 | 2.1 | 301 | 2.1 | ||||||||||||||||||||||
| Harvard University | AAA / Aaa | 2 | 2032 / 2033 | 8,664 | 1.7 | 129 | 0.9 | ||||||||||||||||||||||
| Raytheon | A- / Baa1 | 2 | 2031 | 7,939 | 1.5 | 440 | 3.1 | ||||||||||||||||||||||
| Schlumberger Technology | A / A2 | 1 | 2028 | 7,819 | 1.5 | 254 | 1.8 | ||||||||||||||||||||||
| Gartner | BB / Ba2 | 2 | 2034 | 7,419 | 1.4 | 207 | 1.5 | ||||||||||||||||||||||
| Fiserv | BBB / Baa2 | 1 | 2027 | 6,980 | 1.4 | 195 | 1.4 | ||||||||||||||||||||||
| VMware, Inc. | BBB- / Baa2 | 1 | 2027 | 6,871 | 1.3 | 215 | 1.5 | ||||||||||||||||||||||
| Nuance Communications | BB- / Ba3 | 1 | 2030 | 6,807 | 1.3 | 201 | 1.4 | ||||||||||||||||||||||
| Epsilon Data Management / subsidiary of Publicis | BBB / Baa2 | 1 | 2026 | 6,557 | 1.3 | 222 | 1.6 | ||||||||||||||||||||||
| WeWork | CCC+ / NR | 3 | 2021 / 2036 | 6,340 | 1.2 | 173 | 1.2 | ||||||||||||||||||||||
| CVS Caremark | BBB / Baa2 | 1 | 2022 | 6,261 | 1.2 | 208 | 1.5 | ||||||||||||||||||||||
| Applied Predictive Technologies / subsidiary of MasterCard | A+ / A1 | 1 | 2028 | 6,165 | 1.2 | 133 | 0.9 | ||||||||||||||||||||||
| International Food Policy Research Institute | No Rating Available | 1 | 2029 | 6,047 | 1.2 | 102 | 0.7 | ||||||||||||||||||||||
| Ryan, Inc. | No Rating Available | 1 | 2023 | 6,001 | 1.2 | 170 | 1.2 | ||||||||||||||||||||||
| Cargill | A / A2 | 1 | 2023 | 5,370 | 1.0 | 268 | 1.9 | ||||||||||||||||||||||
| Bank of America | A- / A2 | 5 | 2024 / 2025 | 5,150 | 1.0 | 100 | 0.7 | ||||||||||||||||||||||
| Salesforce.com | A / A2 | 1 | 2029 | 4,971 | 1.0 | 130 | 0.9 | ||||||||||||||||||||||
| NCS Pearson, Inc. | BBB- / Baa3 | 1 | 2027 | 4,916 | 1.0 | 147 | 1.0 | ||||||||||||||||||||||
| Other | Various | 311,519 | 60.5 | 8,603 | 60.9 | ||||||||||||||||||||||||
| Total | $515,147 | 100.0 | 14,137 | 100.0 | |||||||||||||||||||||||||
| (1) | This schedule presents all tenants contributing 1.0% or more to Annualized Lease Revenue. | ||||
| (2) | Credit rating may reflect the credit rating of the parent or a guarantor. When available, both the Standard & Poor's credit rating and the Moody's credit rating are provided. The absence of a credit rating for a tenant is not an indication of the creditworthiness of the tenant; in most cases, the lack of a credit rating reflects that the tenant has not sought such a rating. | ||||
| (3) | Unless otherwise indicated, Lease Expiration represents the expiration year of the majority of the square footage leased by the tenant. | ||||
| (4) | For additional information on the current leasing status, please refer to page 6 in Financial Highlights. | ||||
21
Piedmont Office Realty Trust, Inc.
Tenant Diversification
As of March 31, 2021
Percentage of Annualized Leased Revenue (%)
March 31, 2021 as compared to December 31, 2020
22
Piedmont Office Realty Trust, Inc.
Tenant Credit Rating & Lease Distribution Information
As of March 31, 2021
Tenant Credit Rating (1)
| Rating Level | Annualized Lease Revenue (in thousands) | Percentage of Annualized Lease Revenue (%) | ||||||
| AAA / Aaa | $20,741 | 4.1 | ||||||
| AA / Aa | 59,797 | 11.6 | ||||||
| A / A | 95,401 | 18.5 | ||||||
| BBB / Baa | 52,639 | 10.2 | ||||||
| BB / Ba | 27,402 | 5.3 | ||||||
| B / B | 12,717 | 2.5 | ||||||
| Below | 22,770 | 4.4 | ||||||
Not rated (2) | 223,680 | 43.4 | ||||||
| Total | $515,147 | 100.0 | ||||||
Lease Distribution
| Lease Size | Number of Leases | Percentage of Leases (%) | Annualized Lease Revenue (in thousands) | Percentage of Annualized Lease Revenue (%) | Leased Square Footage (in thousands) | Percentage of Leased Square Footage (%) | ||||||||||||||
| 2,500 or Less | 339 | 35.9 | $21,019 | 4.1 | 247 | 1.8 | ||||||||||||||
| 2,501 - 10,000 | 342 | 36.3 | 63,487 | 12.3 | 1,743 | 12.3 | ||||||||||||||
| 10,001 - 20,000 | 106 | 11.2 | 52,703 | 10.2 | 1,469 | 10.4 | ||||||||||||||
| 20,001 - 40,000 | 80 | 8.5 | 82,607 | 16.0 | 2,229 | 15.8 | ||||||||||||||
| 40,001 - 100,000 | 45 | 4.8 | 100,855 | 19.6 | 2,703 | 19.1 | ||||||||||||||
| Greater than 100,000 | 31 | 3.3 | 194,476 | 37.8 | 5,746 | 40.6 | ||||||||||||||
| Total | 943 | 100.0 | $515,147 | 100.0 | 14,137 | 100.0 | ||||||||||||||
| (1) | Credit rating may reflect the credit rating of the parent or a guarantor. Where differences exist between the Standard & Poor's credit rating for a tenant and the Moody's credit rating for a tenant, the higher credit rating is selected for this analysis. | ||||
| (2) | The classification of a tenant as "not rated" is not an indication of the creditworthiness of the tenant; in most cases, the lack of a credit rating reflects that the tenant has not sought such a rating. Included in this category are such tenants as Piper Sandler, Ernst & Young, KPMG, BDO, and RaceTrac Petroleum. | ||||
23
Piedmont Office Realty Trust, Inc.
Leased Percentage Information
(in thousands)
| Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||
| March 31, 2021 | March 31, 2020 | ||||||||||||||||||||||||||||
Leased Square Footage | Rentable Square Footage | Percent Leased (1) | Leased Square Footage | Rentable Square Footage | Percent Leased (1) | ||||||||||||||||||||||||
| As of December 31, 20xx | 14,260 | 16,428 | 86.8 | % | 14,633 | 16,046 | 91.2 | % | |||||||||||||||||||||
| Properties placed in service | — | — | 204 | 487 | |||||||||||||||||||||||||
| Restated As of December 31, 20xx | 14,260 | 16,428 | 86.8 | % | 14,837 | 16,533 | 89.7 | % | |||||||||||||||||||||
| Leases signed during the period | 678 | 417 | |||||||||||||||||||||||||||
Less: | |||||||||||||||||||||||||||||
| Lease renewals signed during period | (524) | (297) | |||||||||||||||||||||||||||
| New leases signed during period for currently occupied space | (23) | (33) | |||||||||||||||||||||||||||
| Leases expired during period and other | (254) | 6 | (190) | (3) | |||||||||||||||||||||||||
| Subtotal | 14,137 | 16,434 | 86.0 | % | 14,734 | 16,530 | 89.1 | % | |||||||||||||||||||||
Acquisitions during period (2) | — | — | 1,367 | 1,435 | |||||||||||||||||||||||||
Dispositions during period (2) | — | — | — | — | |||||||||||||||||||||||||
| As of March 31, 20xx | 14,137 | 16,434 | 86.0 | % | 16,101 | 17,965 | 89.6 | % | |||||||||||||||||||||
| Same Store Analysis | |||||||||||||||||||||||||||||
Less acquisitions / dispositions after March 31, 2020 and developments / out-of-service redevelopments (2) (3) | — | — | — | % | (1,512) | (1,540) | 98.2 | % | |||||||||||||||||||||
| Same Store Leased Percentage | 14,137 | 16,434 | 86.0 | % | 14,589 | 16,425 | 88.8 | % | |||||||||||||||||||||
| (1) | Calculated as square footage associated with commenced leases as of period end with the addition of square footage associated with uncommenced leases for spaces vacant as of period end at our in-service properties, divided by total rentable in-service square footage as of period end, expressed as a percentage. | ||||
| (2) | |||||
| (3) | Dispositions completed during the previous twelve months are deducted from the previous period data and acquisitions completed during the previous twelve months are deducted from the current period data. Redevelopments that commenced during the previous twelve months that were taken out of service are deducted from the previous period data and developments and redevelopments placed in service during the previous twelve months are deducted from the current period data. | ||||
24
Piedmont Office Realty Trust, Inc.
Rental Rate Roll Up / Roll Down Analysis (1)
(in thousands)
| Three Months Ended | ||||||||||||||||||||
| March 31, 2021 | ||||||||||||||||||||
| Square Feet | % of Total Signed During Period | % of Rentable Square Footage | % Change Cash Rents (2) | % Change Accrual Rents (3) (4) | ||||||||||||||||
| Leases executed for spaces vacant one year or less | 496 | 73.1% | 3.0% | (2.8)% | 7.0% | (5) | ||||||||||||||
Leases executed for spaces excluded from analysis (6) | 182 | 26.9% | ||||||||||||||||||
| (1) | The populations analyzed for this analysis consist of consolidated leases executed during the relevant period with lease terms of greater than one year. Leases associated with storage spaces, management offices, and newly acquired assets for which there is less than one year of operating history, along with percentage rent leases, are excluded from this analysis. | ||||
| (2) | For the purposes of this analysis, the last twelve months of cash paying rents of the previous leases are compared to the first twelve months of cash paying rents of the new leases in order to calculate the percentage change. | ||||
| (3) | For the purposes of this analysis, the accrual basis rents of the previous leases are compared to the accrual basis rents of the new leases in order to calculate the percentage change. For newly signed leases which have variations in accrual basis rents, whether because of known future expansions, contractions, lease expense recovery structure changes, or other similar reasons, the weighted average of such varying accrual basis rents is used for the purposes of this analysis. | ||||
| (4) | For leases under which a tenant may use, at its discretion, a portion of its tenant improvement allowance for expenses other than those related to improvements to its space, an assumption is made that the tenant elects to use any such portion of its tenant improvement allowance for improvements to its space prior to the commencement of its lease, unless the Company is notified otherwise by the tenant. This assumption is made based upon historical usage patterns of tenant improvement allowances by the Company's tenants. | ||||
| (5) | The results for the three months ended March 31, 2021 were heavily influenced by one large lease transaction, the approximately 440,000 square foot lease extension with Raytheon Company at 225 and 235 Presidential Way in Woburn, MA. If the effects of this transaction were to be removed, the percentage change in cash and accrual rents for the remainder of the analysis population for the three months ended March 31, 2021 would be 8.0% and 10.1%, respectively. | ||||
| (6) | Represents leases signed at our consolidated office assets that do not qualify for inclusion in the analysis, primarily because the spaces for which the new leases were signed had been vacant for more than one year. | ||||
25
Piedmont Office Realty Trust, Inc.
Lease Expiration Schedule
As of March 31, 2021
(in thousands)
| Expiration Year | Annualized Lease Revenue (1) | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | |||||||||||||
| Vacant | $— | — | 2,297 | 14.0 | |||||||||||||
2021 (2) | 24,441 | 4.7 | 658 | 4.0 | |||||||||||||
2022 (3) | 56,390 | 11.0 | 1,575 | 9.6 | |||||||||||||
| 2023 | 53,676 | 10.4 | 1,643 | 10.0 | |||||||||||||
| 2024 | 54,241 | 10.5 | 1,682 | 10.2 | |||||||||||||
| 2025 | 58,516 | 11.4 | 1,638 | 10.0 | |||||||||||||
| 2026 | 35,577 | 6.9 | 1,048 | 6.4 | |||||||||||||
| 2027 | 44,503 | 8.6 | 1,182 | 7.2 | |||||||||||||
| 2028 | 45,642 | 8.9 | 1,268 | 7.7 | |||||||||||||
| 2029 | 27,214 | 5.3 | 703 | 4.3 | |||||||||||||
| 2030 | 19,226 | 3.7 | 531 | 3.2 | |||||||||||||
| 2031 | 14,817 | 2.9 | 651 | 3.9 | |||||||||||||
| 2032 | 12,528 | 2.4 | 278 | 1.7 | |||||||||||||
| 2033 | 10,126 | 2.0 | 195 | 1.2 | |||||||||||||
| Thereafter | 58,250 | 11.3 | 1,085 | 6.6 | |||||||||||||
| Total / Weighted Average | $515,147 | 100.0 | 16,434 | 100.0 | |||||||||||||
| Average Lease Term Remaining | |||||
| 3/31/2021 | 6.0 years | ||||
| 12/31/2020 | 6.1 years | ||||
| (1) | Annualized rental income associated with each newly executed lease for currently occupied space is incorporated herein only at the expiration date for the current lease. Annualized rental income associated with each such new lease is removed from the expiry year of the current lease and added to the expiry year of the new lease. These adjustments effectively incorporate known roll ups and roll downs into the expiration schedule. | ||||
| (2) | Includes leases with an expiration date of March 31, 2021, comprised of approximately 79,000 square feet and Annualized Lease Revenue of $4.2 million. | ||||
| (3) | Leases and other revenue-producing agreements on a month-to-month basis, comprised of approximately 331,000 square feet and Annualized Lease Revenue of $16.2 million, are assigned a lease expiration date of a year and a day beyond the period end date. The 313,000 square foot City of New York lease that is in holdover status at 60 Broad Street in New York, NY is included in this classification. | ||||
26
Piedmont Office Realty Trust, Inc.
Lease Expirations by Quarter
As of March 31, 2021
(in thousands)
Q2 2021 (1) | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||||||
| Location | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | ||||||||||||||||||||||||||||||
| Atlanta | 35 | $950 | 102 | $3,171 | 85 | $2,465 | 93 | $2,881 | ||||||||||||||||||||||||||||||
| Boston | — | — | 28 | 1,088 | — | — | 2 | 93 | ||||||||||||||||||||||||||||||
| Dallas | 47 | 1,603 | 60 | 2,170 | 67 | 2,381 | 38 | 1,428 | ||||||||||||||||||||||||||||||
| Minneapolis | 5 | 175 | 24 | 867 | 33 | 1,256 | 16 | 546 | ||||||||||||||||||||||||||||||
| New York | 17 | 1,065 | 6 | 294 | — | 8 | — | 10 | ||||||||||||||||||||||||||||||
| Orlando | 75 | 2,149 | 26 | 840 | 2 | 75 | 15 | 570 | ||||||||||||||||||||||||||||||
| Washington, D.C. | 30 | 3,419 | 1 | 32 | 6 | 305 | 3 | 92 | ||||||||||||||||||||||||||||||
| Other | — | — | — | — | 9 | 255 | — | 24 | ||||||||||||||||||||||||||||||
Total / Weighted Average (3) | 209 | $9,361 | 247 | $8,462 | 202 | $6,745 | 167 | $5,644 | ||||||||||||||||||||||||||||||
| (1) | Includes leases with an expiration date of March 31, 2021, comprised of approximately 79,000 square feet and expiring lease revenue of $4.2 million. No such adjustments are made to other periods presented. | ||||
| (2) | Expiring Lease Revenue is calculated as expiring square footage multiplied by the gross rent per square foot of the tenant currently leasing the space. | ||||
| (3) | Total expiring lease revenue in any given year will not tie to the expiring Annualized Lease Revenue presented on the Lease Expiration Schedule on the previous page as the Lease Expiration Schedule accounts for the revenue effects of newly signed leases. Reflected herein are expiring revenues based on in-place rental rates. | ||||
27
Piedmont Office Realty Trust, Inc.
Lease Expirations by Year
As of March 31, 2021
(in thousands)
12/31/2021 (1) | 12/31/2022 | 12/31/2023 | 12/31/2024 | 12/31/2025 | ||||||||||||||||||||||||||||||||||||||||
| Location | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | Expiring Square Footage | Expiring Lease Revenue (2) | ||||||||||||||||||||||||||||||||||
| Atlanta | 222 | $6,586 | 394 | $12,421 | 205 | $6,848 | 263 | $8,553 | 426 | $12,793 | ||||||||||||||||||||||||||||||||||
| Boston | 28 | 1,088 | 124 | 5,758 | 119 | 4,780 | 39 | 2,710 | 197 | 6,786 | ||||||||||||||||||||||||||||||||||
| Dallas | 175 | 6,154 | 532 | 16,290 | 448 | 15,533 | 214 | 7,688 | 417 | 16,315 | ||||||||||||||||||||||||||||||||||
| Minneapolis | 63 | 2,298 | 60 | 2,188 | 698 | 19,929 | 529 | 18,912 | 256 | 9,927 | ||||||||||||||||||||||||||||||||||
| New York | 22 | 1,367 | 318 | 15,855 | (3) | 2 | 611 | 69 | 3,597 | 7 | 382 | |||||||||||||||||||||||||||||||||
| Orlando | 102 | 3,064 | 94 | 3,323 | 100 | 3,220 | 377 | 8,405 | 243 | 7,287 | ||||||||||||||||||||||||||||||||||
| Washington, D.C. | 37 | 3,756 | 51 | 2,219 | 67 | 3,326 | 178 | 8,263 | 51 | 3,305 | ||||||||||||||||||||||||||||||||||
| Other | 9 | 255 | 2 | 37 | 4 | 135 | 13 | 407 | 41 | 1,092 | ||||||||||||||||||||||||||||||||||
Total / Weighted Average (4) | 658 | $24,568 | 1,575 | $58,091 | 1,643 | $54,382 | 1,682 | $58,535 | 1,638 | $57,887 | ||||||||||||||||||||||||||||||||||
| (1) | Includes leases with an expiration date of March 31, 2021, comprised of approximately 79,000 square feet and expiring lease revenue of $4.2 million. No such adjustments are made to other periods presented. | ||||
| (2) | Expiring Lease Revenue is calculated as expiring square footage multiplied by the gross rent per square foot of the tenant currently leasing the space. | ||||
| (3) | For presentation purposes in this schedule, the City of New York lease, which is currently in holdover, is assigned a lease expiration date of a year and a day beyond the period end date. | ||||
| (4) | Total expiring lease revenue in any given year will not tie to the expiring Annualized Lease Revenue presented on the Lease Expiration Schedule on page 26 as the Lease Expiration Schedule accounts for the revenue effects of newly signed leases. Reflected herein are expiring revenues based on in-place rental rates. | ||||
28
Piedmont Office Realty Trust, Inc.
Capital Expenditures
For the quarter ended March 31, 2021
Unaudited (in thousands)
| For the Three Months Ended | |||||||||||||||||||||||||||||
| 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | |||||||||||||||||||||||||
| Non-incremental | |||||||||||||||||||||||||||||
| Building / construction / development | $ | 12,921 | $ | 9,334 | $ | 6,665 | $ | 3,244 | $ | 7,697 | |||||||||||||||||||
| Tenant improvements | 3,225 | 9,839 | 7,396 | 2,601 | 8,530 | ||||||||||||||||||||||||
| Leasing costs | 1,201 | 447 | 1,550 | 1,844 | 18,535 | ||||||||||||||||||||||||
| Total non-incremental | 17,347 | 19,620 | 15,611 | 7,689 | 34,762 | ||||||||||||||||||||||||
| Incremental | |||||||||||||||||||||||||||||
| Building / construction / development | 7,065 | 9,913 | 9,343 | 12,639 | 13,833 | ||||||||||||||||||||||||
| Tenant improvements | 2,544 | 2,014 | 2,225 | 2,088 | 1,789 | ||||||||||||||||||||||||
| Leasing costs | 618 | 444 | 1,330 | 1,467 | 1,032 | ||||||||||||||||||||||||
| Total incremental | 10,227 | 12,371 | 12,898 | 16,194 | 16,654 | ||||||||||||||||||||||||
| Total capital expenditures | $ | 27,574 | $ | 31,991 | $ | 28,509 | $ | 23,883 | $ | 51,416 | |||||||||||||||||||
| NOTE: | The information presented on this page is for all consolidated assets. | ||||
29
Piedmont Office Realty Trust, Inc.
Contractual Tenant Improvements and Leasing Commission
| Three Months Ended March 31, 2021 | For the Year Ended | 2016 to 2021 (Weighted Average Total) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Renewal Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Square feet | 523,991 | 841,020 | 2,032,452 | 735,969 | 1,198,603 | 880,289 | 6,212,324 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tenant improvements per square foot per year of lease term (1) | $1.59 | $3.15 | $4.28 | $4.15 | $1.84 | $1.35 | $3.15 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leasing commissions per square foot per year of lease term | $1.25 | $1.75 | $1.63 | $1.69 | $1.12 | $1.05 | $1.46 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total per square foot per year of lease term | $2.84 | $4.90 | $5.91 | (2) | $5.84 | (3) | $2.96 | $2.40 | $4.61 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| New Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 154,085 | 262,228 | 697,880 | 864,113 | 855,069 | 1,065,630 | 3,899,005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tenant improvements per square foot per year of lease term (1) | $3.45 | $6.22 | $4.07 | $4.58 | $4.73 | $5.01 | $4.67 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leasing commissions per square foot per year of lease term | $1.39 | $2.13 | $1.85 | $1.73 | $1.83 | $1.86 | $1.81 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total per square foot per year of lease term | $4.84 | $8.35 | (4) | $5.92 | $6.31 | (3) | $6.56 | $6.87 | $6.48 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 678,076 | 1,103,248 | 2,730,332 | 1,600,082 | 2,053,672 | 1,945,919 | 10,111,329 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tenant improvements per square foot per year of lease term (1) | $2.15 | $4.30 | $4.21 | $4.46 | $3.55 | $3.70 | $3.91 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leasing commissions per square foot per year of lease term | $1.29 | $1.89 | $1.70 | $1.72 | $1.54 | $1.57 | $1.64 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total per square foot per year of lease term | $3.44 | $6.19 | (4) | $5.91 | (2) | $6.18 | (3) | $5.09 | $5.27 | $5.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Less Adjustment for Commitment Expirations (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expired tenant improvements (not paid out) per square foot per year of lease term | -$0.04 | -$0.40 | -$0.05 | -$0.54 | -$0.44 | -$0.16 | -$0.27 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted total per square foot per year of lease term | $3.40 | $5.79 | $5.86 | $5.64 | $4.65 | $5.11 | $5.28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE: | This information is presented for our consolidated office assets only and excludes activity associated with storage and license spaces. | ||||
| (1) | For leases under which a tenant may use, at its discretion, a portion of its tenant improvement allowance for expenses other than those related to improvements to its space, an assumption is made that the tenant elects to use any such portion of its tenant improvement allowance for improvements to its space prior to the commencement of its lease, unless the Company is notified otherwise by the tenant. This assumption is made based upon historical usage patterns of tenant improvement allowances by the Company's tenants. | ||||
| (2) | During 2019, we completed three large lease renewals with significant capital commitments: VMware at 1155 Perimeter Center West in Atlanta, GA, Siemens at Crescent Ridge II in Minnetonka, MN, and the State of New York at 60 Broad Street in New York, NY. If the costs associated with those leases were to be removed from the average committed capital cost calculation, the average committed capital cost per square foot per year of lease term for renewal leases and total leases completed during the twelve months ended December 31, 2019 would be $3.41 and $5.04, respectively. | ||||
| (3) | During 2018, we completed two large leasing transactions in the Houston, TX market with large capital commitments: a 254,000 square foot lease renewal and expansion with Schlumberger Technology Corporation at 1430 Enclave Parkway and a 301,000 square foot, full-building lease with Transocean Offshore Deepwater Drilling at Enclave Place. If the costs associated with those leases were to be removed from the average committed capital cost calculation, the average committed capital cost per square foot per year of lease term for renewal leases, new leases and total leases completed during the twelve months ended December 31, 2018 would be $5.27, $6.02, and $5.70, respectively. | ||||
| (4) | During 2020, we completed five new leasing transactions (amounting to 93,000 square feet in total) in the Washington, DC market with large capital commitments. If the costs associated with those leases were to be removed from the average committed capital cost calculation, the average committed capital cost per square foot per year of lease term for new leases and total leases completed during the twelve months ended December 31, 2020 would be $5.62 and $5.06, respectively. | ||||
| (5) | The Company has historically reported the maximum amount of capital to which it committed in leasing transactions as of the signing of the leases with no subsequent updates for variations and/or changes in tenants' uses of tenant improvement allowances. Many times, tenants do not fully use the allowances provided in their leases or let portions of their tenant improvement allowances expire. In an effort to provide additional clarity on the actual costs of completed leasing transactions, tenant improvement allowances that expired or became no longer available to tenants are disclosed in this section and are deducted from the capital commitments per square foot of leased space in the periods in which they expired in an effort to provide a better estimation of leasing transaction costs over time. | ||||
30
Piedmont Office Realty Trust, Inc.
Geographic Diversification
As of March 31, 2021
($ and square footage in thousands)
| Location | Number of Properties | Annualized Lease Revenue | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Leased Square Footage | Percent Leased (%) | |||||||||||||||||||
| Dallas | 13 | $102,295 | 19.8 | 3,550 | 21.6 | 2,984 | 84.1 | |||||||||||||||||||
| Atlanta | 9 | 91,745 | 17.8 | 3,393 | 20.6 | 2,871 | 84.6 | |||||||||||||||||||
| Washington, D.C. | 6 | 68,336 | 13.3 | 1,620 | 9.8 | 1,320 | 81.5 | |||||||||||||||||||
| Minneapolis | 6 | 65,849 | 12.8 | 2,104 | 12.8 | 1,947 | 92.5 | |||||||||||||||||||
| Boston | 10 | 59,586 | 11.6 | 1,885 | 11.5 | 1,720 | 91.2 | |||||||||||||||||||
| Orlando | 6 | 54,028 | 10.5 | 1,754 | 10.7 | 1,619 | 92.3 | |||||||||||||||||||
| New York | 1 | 49,802 | 9.7 | 1,029 | 6.3 | 950 | 92.3 | |||||||||||||||||||
| Other | 3 | 23,506 | 4.5 | 1,099 | 6.7 | 726 | 66.1 | |||||||||||||||||||
| Total / Weighted Average | 54 | $515,147 | 100.0 | 16,434 | 100.0 | 14,137 | 86.0 | |||||||||||||||||||
31
Piedmont Office Realty Trust, Inc.
Geographic Diversification by Location Type
As of March 31, 2021
(square footage in thousands)
| CBD | URBAN INFILL / SUBURBAN | TOTAL | ||||||||||||||||||||||||||||||||||||||||||||||||
| Location | State | Number of Properties | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Number of Properties | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Number of Properties | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | |||||||||||||||||||||||||||||||||||||
| Dallas | TX | — | — | — | — | 13 | 19.8 | 3,550 | 21.6 | 13 | 19.8 | 3,550 | 21.6 | |||||||||||||||||||||||||||||||||||||
| Atlanta | GA | — | — | — | — | 9 | 17.8 | 3,393 | 20.6 | 9 | 17.8 | 3,393 | 20.6 | |||||||||||||||||||||||||||||||||||||
| Washington, D.C. | DC, VA | 3 | 5.7 | 722 | 4.3 | 3 | 7.6 | 898 | 5.5 | 6 | 13.3 | 1,620 | 9.8 | |||||||||||||||||||||||||||||||||||||
| Minneapolis | MN | 1 | 6.6 | 937 | 5.7 | 5 | 6.2 | 1,167 | 7.1 | 6 | 12.8 | 2,104 | 12.8 | |||||||||||||||||||||||||||||||||||||
| Boston | MA | — | — | — | — | 10 | 11.6 | 1,885 | 11.5 | 10 | 11.6 | 1,885 | 11.5 | |||||||||||||||||||||||||||||||||||||
| Orlando | FL | 4 | 8.7 | 1,445 | 8.8 | 2 | 1.8 | 309 | 1.9 | 6 | 10.5 | 1,754 | 10.7 | |||||||||||||||||||||||||||||||||||||
| New York | NY | 1 | 9.7 | 1,029 | 6.3 | — | — | — | — | 1 | 9.7 | 1,029 | 6.3 | |||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | 3 | 4.5 | 1,099 | 6.7 | 3 | 4.5 | 1,099 | 6.7 | ||||||||||||||||||||||||||||||||||||||
| Total / Weighted Average | 9 | 30.7 | 4,133 | 25.1 | 45 | 69.3 | 12,301 | 74.9 | 54 | 100.0 | 16,434 | 100.0 | ||||||||||||||||||||||||||||||||||||||
32
Piedmont Office Realty Trust, Inc.
Industry Diversification
As of March 31, 2021
($ and square footage in thousands)
| Percentage of | |||||||||||||||||||||||
| Number of | Percentage of Total | Annualized Lease | Annualized Lease | Leased Square | Percentage of Leased | ||||||||||||||||||
| Industry | Tenants | Tenants (%) | Revenue | Revenue (%) | Footage | Square Footage (%) | |||||||||||||||||
| Business Services | 93 | 13.2 | $80,962 | 15.7 | 2,289 | 16.2 | |||||||||||||||||
| Engineering, Accounting, Research, Management & Related Services | 108 | 15.3 | 65,051 | 12.6 | 1,736 | 12.3 | |||||||||||||||||
| Governmental Entity | 6 | 0.8 | 48,822 | 9.5 | 970 | 6.9 | |||||||||||||||||
| Depository Institutions | 17 | 2.4 | 37,339 | 7.2 | 1,013 | 7.2 | |||||||||||||||||
| Legal Services | 68 | 9.6 | 27,328 | 5.3 | 766 | 5.4 | |||||||||||||||||
| Real Estate | 40 | 5.7 | 26,179 | 5.1 | 763 | 5.4 | |||||||||||||||||
| Miscellaneous Retail | 9 | 1.3 | 21,952 | 4.3 | 590 | 4.2 | |||||||||||||||||
| Oil and Gas Extraction | 5 | 0.7 | 18,850 | 3.7 | 562 | 4.0 | |||||||||||||||||
| Security & Commodity Brokers, Dealers, Exchanges & Services | 50 | 7.1 | 18,160 | 3.5 | 505 | 3.6 | |||||||||||||||||
| Holding and Other Investment Offices | 30 | 4.2 | 15,952 | 3.1 | 430 | 3.0 | |||||||||||||||||
| Health Services | 23 | 3.3 | 14,507 | 2.8 | 386 | 2.7 | |||||||||||||||||
| Educational Services | 6 | 0.8 | 13,543 | 2.6 | 257 | 1.8 | |||||||||||||||||
| Measuring, Analyzing, And Controlling Instruments; Medical and Other Goods | 5 | 0.7 | 12,300 | 2.4 | 587 | 4.2 | |||||||||||||||||
| Communications | 45 | 6.4 | 11,394 | 2.2 | 266 | 1.9 | |||||||||||||||||
| Insurance Carriers | 16 | 2.3 | 9,738 | 1.9 | 288 | 2.0 | |||||||||||||||||
| Other | 185 | 26.2 | 93,070 | 18.1 | 2,729 | 19.2 | |||||||||||||||||
| Total | 706 | 100.0 | $515,147 | 100.0 | 14,137 | 100.0 | |||||||||||||||||
33
Piedmont Office Realty Trust, Inc.
Property Investment Activity
As of March 31, 2021
($ and square footage in thousands)
Acquisitions Over Previous Eighteen Months
| Property | Market / Submarket | Acquisition Date | Percent Ownership (%) | Year Built | Purchase Price | Rentable Square Footage | Percent Leased at Acquisition (%) | |||||||||||||||||||
| One Galleria Tower | Dallas / Lower North Tollway | 2/12/2020 | 100 | 1982 | $123,223 | 470 | 92 | |||||||||||||||||||
| Two Galleria Tower | Dallas / Lower North Tollway | 2/12/2020 | 100 | 1985 | 124,592 | 434 | 99 | |||||||||||||||||||
| Three Galleria Tower | Dallas / Lower North Tollway | 2/12/2020 | 100 | 1991 | 144,343 | 531 | 95 | |||||||||||||||||||
| Galleria Dallas Land | Dallas / Lower North Tollway | 2/12/2020 | 100 | NA | 4,000 | NA | NA | |||||||||||||||||||
| 222 South Orange Avenue | Orlando / CBD | 10/29/2020 | 100 | 1959 | 20,000 | 127 | — | |||||||||||||||||||
| Total / Weighted Average | $416,158 | 1,562 | 87 | |||||||||||||||||||||||
Dispositions Over Previous Eighteen Months
| Property | Market / Submarket | Disposition Date | Percent Ownership (%) | Year Built | Sale Price | Rentable Square Footage | Percent Leased at Disposition (%) | |||||||||||||||||||
| 500 West Monroe Street | Chicago / West Loop | 10/28/2019 | 100 | 1991 | $412,000 | 967 | 100 | |||||||||||||||||||
| 1901 Market Street | Philadelphia / Market Street West | 6/25/2020 | 100 | 1987 | 360,000 | 801 | 100 | |||||||||||||||||||
New Jersey Portfolio (1) | New York / Route 78 | 10/28/2020 | 100 | Various | 130,000 | 739 | 75 | |||||||||||||||||||
| Total / Weighted Average | $902,000 | 2,507 | 93 | |||||||||||||||||||||||
| (1) | The New Jersey Portfolio was comprised of Piedmont's remaining three assets in New Jersey: 200 Bridgewater Crossing and 400 Bridgewater Crossing in Bridgewater, NJ; and 600 Corporate Drive in Lebanon, NJ. | ||||
34
Piedmont Office Realty Trust, Inc.
Other Investments
As of March 31, 2021
($ and square footage in thousands)
Developable Land Parcels
| Property | Market / Submarket | Adjacent Piedmont Property | Acres | Real Estate Book Value | ||||||||||
| Gavitello | Atlanta / Buckhead | The Medici | 2.0 | $2,634 | ||||||||||
| Glenridge Highlands Three | Atlanta / Central Perimeter | Glenridge Highlands One and Two | 3.0 | 2,015 | ||||||||||
| Galleria Atlanta | Atlanta / Northwest | Galleria 100, 200, 300, 400 and 600 | 11.7 | 22,015 | ||||||||||
| State Highway 161 | Dallas / Las Colinas | Las Colinas Corporate Center I and II, 161 Corporate Center | 4.5 | 3,320 | ||||||||||
| Royal Lane | Dallas / Las Colinas | 6011, 6021 and 6031 Connection Drive | 10.6 | 2,834 | ||||||||||
| John Carpenter Freeway | Dallas / Las Colinas | 750 West John Carpenter Freeway | 3.5 | 1,000 | ||||||||||
| Galleria Dallas | Dallas / Lower North Tollway | One Galleria Tower, Two Galleria Tower, Three Galleria Tower | 1.9 | 4,006 | ||||||||||
| TownPark | Orlando / Lake Mary | 400 and 500 TownPark | 18.9 | 7,699 | ||||||||||
| Total | 56.1 | $45,523 | ||||||||||||
Redevelopment
| Property | Market / Submarket | Adjacent Piedmont Property | Construction Type | Percent Leased (%) | Square Feet | Current Asset Basis (Accrual) | ||||||||||||||
222 South Orange Avenue (1) | Orlando / CBD | 200 South Orange Avenue | Redevelopment | — | 127 | $20.8 million | ||||||||||||||
Loan Investments
| Loan Type | Collateral | Location of Collateral | Maturity Date | Book Value ($'s in thousands) | Interest Rate | ||||||||||||
Senior Loan (2) | 200 and 400 Bridgewater Crossing | Bridgewater, NJ | 10/31/2023 | $102,800 | 6.0% | ||||||||||||
Mezzanine Loan (2) | Equity interests in 200 and 400 Bridgewater Crossing | Bridgewater, NJ | 10/31/2023 | $15,700 | 13.6% | ||||||||||||
| Total / Weighted Average | $118,500 | 7.0% | |||||||||||||||
| (1) | The property was acquired on October 29, 2020. The redevelopment will include an enhanced window line, allowing more light and air into tenant spaces, along with renovations to the lobby, common areas and restrooms. | ||||
| (2) | Piedmont provided seller financing with the sale of 200 and 400 Bridgewater Crossing in Bridgewater, NJ, on October 28, 2020. | ||||
35
Piedmont Office Realty Trust, Inc.
Supplemental Definitions
Included below are definitions of various terms used throughout this supplemental report, including definitions of certain non-GAAP financial measures and the reasons why the Company’s management believes these measures provide useful information to investors about the Company’s financial condition and results of operations. Reconciliations of any non-GAAP financial measures defined below are included beginning on page 38. | ||
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. | ||
Annualized Lease Revenue ("ALR"): ALR is calculated by multiplying (i) rental payments (defined as base rent plus operating expense reimbursements, if payable by the tenant on a monthly basis under the terms of a lease that has been executed, but excluding a) rental abatements and b) rental payments related to executed but not commenced leases for space that was covered by an existing lease), by (ii) 12. In instances in which contractual rents or operating expense reimbursements are collected on an annual, semi-annual, or quarterly basis, such amounts are multiplied by a factor of 1, 2, or 4, respectively, to calculate the annualized figure. For leases that have been executed but not commenced relating to un-leased space, ALR is calculated by multiplying (i) the monthly base rental payment (excluding abatements) plus any operating expense reimbursements for the initial month of the lease term, by (ii) 12. Unless stated otherwise, this measure excludes revenues associated with development properties and properties taken out of service for redevelopment, if any. | ||
Core EBITDA: The Company calculates Core EBITDA as net income (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and incrementally removing any impairment losses, gains or losses from sales of property and other significant infrequent items that create volatility within our earnings and make it difficult to determine the earnings generated by our core ongoing business. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Core EBITDA is helpful to investors as a supplemental performance measure because it provides a metric for understanding the performance of the Company’s results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization), as well as items that are not part of normal day-to-day operations of the Company’s business. Other REITs may not define Core EBITDA in the same manner as the Company; therefore, the Company’s computation of Core EBITDA may not be comparable to that of other REITs. | ||
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. | ||
EBITDA: EBITDA is defined as net income before interest, taxes, depreciation and amortization. | ||
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. | ||
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. | ||
Gross Assets: Gross Assets is defined as total assets with the add-back of accumulated depreciation and accumulated amortization related to real estate assets and accumulated amortization related to deferred lease costs. | ||
Gross Real Estate Assets: Gross Real Estate Assets is defined as total real estate assets with the add-back of accumulated depreciation and accumulated amortization related to real estate assets. | ||
Incremental Capital Expenditures: Incremental Capital Expenditures are defined as capital expenditures of a non-recurring nature that incrementally enhance the underlying assets' income generating capacity. Tenant improvements, leasing commissions, building capital and deferred lease incentives ("Leasing Costs") incurred to lease space that was vacant at acquisition, Leasing Costs for spaces vacant for greater than one year, Leasing Costs for spaces at newly acquired properties for which in-place leases expire shortly after acquisition, improvements associated with the expansion of a building, renovations that change the underlying classification of a building, and deferred building maintenance capital identified at and completed shortly after acquisition are included in this measure. | ||
Non-Incremental Capital Expenditures: Non-Incremental Capital Expenditures are defined as capital expenditures of a recurring nature related to tenant improvements and leasing commissions that do not incrementally enhance the underlying assets' income generating capacity. We exclude first generation tenant improvements and leasing commissions from this measure, in addition to other capital expenditures that qualify as Incremental Capital Expenditures, as defined above. | ||
Property Net Operating Income ("Property NOI"): 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. | ||
Same Store Properties: Same Store Properties is defined as those 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 Properties excludes land assets. | ||
36
Piedmont Office Realty Trust, Inc.
Research Coverage
Equity Research Coverage
| Daniel Ismail | Anthony Paolone, CFA | David Rodgers, CFA | Michael Lewis, CFA | ||||||||
| Green Street Advisors | JP Morgan | Robert W. Baird & Co. | Truist Securities | ||||||||
| 100 Bayview Circle, Suite 400 | 383 Madison Avenue | 200 Public Square | 711 Fifth Avenue, 4th Floor | ||||||||
| Newport Beach, CA 92660 | 32nd Floor | Suite 1650 | New York, NY 10022 | ||||||||
| Phone: (949) 640-8780 | New York, NY 10179 | Cleveland, OH 44139 | Phone: (212) 319-5659 | ||||||||
| Phone: (212) 622-6682 | Phone: (216) 737-7341 | ||||||||||
Fixed Income Research Coverage
| Mark S. Streeter, CFA | ||||||||
| JP Morgan | ||||||||
| 383 Madison Avenue | ||||||||
| 3rd Floor | ||||||||
| New York, NY 10179 | ||||||||
| Phone: (212) 834-5086 | ||||||||
37
Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations, and Adjusted Funds From Operations Reconciliations
Unaudited (in thousands)
| Three Months Ended | |||||||||||||||||||||||||||||
| 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | |||||||||||||||||||||||||
| GAAP net income applicable to common stock | $ | 9,344 | $ | 22,609 | $ | 8,943 | $ | 192,427 | $ | 8,709 | |||||||||||||||||||
Depreciation (1) (2) | 27,812 | 26,942 | 27,960 | 26,873 | 27,551 | ||||||||||||||||||||||||
Amortization (1) | 22,900 | 22,312 | 22,976 | 24,336 | 23,618 | ||||||||||||||||||||||||
Loss / (gain) on sale of properties | — | (14,634) | 340 | (191,369) | (3) | ||||||||||||||||||||||||
| NAREIT funds from operations applicable to common stock | 60,056 | 57,229 | 60,219 | 52,267 | 59,875 | ||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Loss / (gain) on extinguishment of debt | — | — | — | 9,336 | — | ||||||||||||||||||||||||
| Core funds from operations applicable to common stock | 60,056 | 57,229 | 60,219 | 61,603 | 59,875 | ||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on senior notes | 654 | 653 | 931 | 672 | 577 | ||||||||||||||||||||||||
| Depreciation of non real estate assets | 282 | 286 | 286 | 319 | 325 | ||||||||||||||||||||||||
Straight-line effects of lease revenue (1) | (4,103) | (2,223) | (6,315) | (7,278) | (6,785) | ||||||||||||||||||||||||
| Stock-based compensation adjustments | 1,111 | 2,733 | 1,336 | 645 | 2,300 | ||||||||||||||||||||||||
Amortization of lease-related intangibles (1) | (2,792) | (2,767) | (3,240) | (3,304) | (2,973) | ||||||||||||||||||||||||
| Non-incremental capital expenditures | (17,347) | (19,620) | (15,611) | (7,689) | (34,762) | ||||||||||||||||||||||||
| Adjusted funds from operations applicable to common stock | $ | 37,861 | $ | 36,291 | $ | 37,606 | $ | 44,968 | $ | 18,557 | |||||||||||||||||||
| (1) | Includes our proportionate share of amounts attributable to consolidated properties. | ||||
| (2) | Excludes depreciation of non real estate assets. | ||||
38
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
| Three Months Ended | |||||||||||||||||||||||||||||
| 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | |||||||||||||||||||||||||
| Net income attributable to Piedmont | $ | 9,344 | $ | 22,609 | $ | 8,943 | $ | 192,427 | $ | 8,709 | |||||||||||||||||||
| Net income / (loss) attributable to noncontrolling interest | (1) | (1) | (3) | (1) | 2 | ||||||||||||||||||||||||
| Interest expense | 12,580 | 13,048 | 12,725 | 13,953 | 15,264 | ||||||||||||||||||||||||
| Depreciation | 28,094 | 27,228 | 28,247 | 27,192 | 27,876 | ||||||||||||||||||||||||
| Amortization | 22,900 | 22,312 | 22,976 | 24,336 | 23,618 | ||||||||||||||||||||||||
| Depreciation and amortization attributable to noncontrolling interests | 21 | 20 | 22 | 21 | 21 | ||||||||||||||||||||||||
| Loss / (gain) on sale of properties | — | (14,634) | 340 | (191,369) | (3) | ||||||||||||||||||||||||
| EBITDAre | 72,938 | 70,582 | 73,250 | 66,559 | 75,487 | ||||||||||||||||||||||||
| (Gain) / loss on extinguishment of debt | — | — | — | 9,336 | — | ||||||||||||||||||||||||
| Core EBITDA | 72,938 | 70,582 | 73,250 | 75,895 | 75,487 | ||||||||||||||||||||||||
| General & administrative expenses | 7,251 | 7,415 | 5,469 | 5,937 | 8,643 | ||||||||||||||||||||||||
| Non-cash general reserve for uncollectible accounts | 412 | (278) | (33) | 4,865 | — | ||||||||||||||||||||||||
| Management fee revenue | (390) | (397) | (422) | (282) | (395) | ||||||||||||||||||||||||
| Other (income) / expense | (2,141) | (1,554) | (104) | (134) | 67 | ||||||||||||||||||||||||
| Straight-line effects of lease revenue | (4,103) | (2,223) | (6,315) | (7,278) | (6,785) | ||||||||||||||||||||||||
| Straight-line effects of lease revenue attributable to noncontrolling interests | 1 | (4) | (5) | (3) | (3) | ||||||||||||||||||||||||
| Amortization of lease-related intangibles | (2,792) | (2,767) | (3,240) | (3,304) | (2,973) | ||||||||||||||||||||||||
| Property net operating income (cash basis) | 71,176 | 70,774 | 68,600 | 75,696 | 74,041 | ||||||||||||||||||||||||
| Deduct net operating (income) / loss from: | |||||||||||||||||||||||||||||
| Acquisitions | (7,440) | (7,620) | (6,216) | (5,740) | (3,539) | ||||||||||||||||||||||||
| Dispositions | 413 | (829) | (3,333) | (8,186) | (8,700) | ||||||||||||||||||||||||
| Other investments | 144 | 162 | 150 | 134 | 103 | ||||||||||||||||||||||||
| Same store net operating income (cash basis) | $ | 64,293 | $ | 62,487 | $ | 59,201 | $ | 61,904 | $ | 61,905 | |||||||||||||||||||
39
Piedmont Office Realty Trust, Inc.
Property Detail - In-Service Portfolio (1)
As of March 31, 2021
(in thousands)
| Property | City | State | Percent Ownership | Year Built / Major Refurbishment | Rentable Square Footage Owned | Leased Percentage | Commenced Leased Percentage | Economic Leased Percentage (2) | ||||||||||||||||||
| Atlanta | ||||||||||||||||||||||||||
| Glenridge Highlands One | Atlanta | GA | 100.0% | 1998 | 288 | 92.4 | % | 92.4 | % | 91.3 | % | |||||||||||||||
| Glenridge Highlands Two | Atlanta | GA | 100.0% | 2000 | 424 | 97.9 | % | 97.9 | % | 97.9 | % | |||||||||||||||
| 1155 Perimeter Center West | Atlanta | GA | 100.0% | 2000 | 377 | 79.0 | % | 79.0 | % | 79.0 | % | |||||||||||||||
| Galleria 100 | Atlanta | GA | 100.0% | 1982 | 415 | 83.9 | % | 83.9 | % | 81.2 | % | |||||||||||||||
| Galleria 200 | Atlanta | GA | 100.0% | 1984 | 432 | 76.6 | % | 74.5 | % | 70.6 | % | |||||||||||||||
| Galleria 300 | Atlanta | GA | 100.0% | 1987 | 437 | 90.6 | % | 90.6 | % | 87.4 | % | |||||||||||||||
| Galleria 400 | Atlanta | GA | 100.0% | 1999 | 430 | 92.1 | % | 90.9 | % | 90.9 | % | |||||||||||||||
| Galleria 600 | Atlanta | GA | 100.0% | 2002 | 434 | 63.4 | % | 61.1 | % | 61.1 | % | |||||||||||||||
| The Medici | Atlanta | GA | 100.0% | 2008 | 156 | 93.6 | % | 93.6 | % | 93.6 | % | |||||||||||||||
| Metropolitan Area Subtotal / Weighted Average | 3,393 | 84.6 | % | 83.9 | % | 82.6 | % | |||||||||||||||||||
| Boston | ||||||||||||||||||||||||||
| 1414 Massachusetts Avenue | Cambridge | MA | 100.0% | 1873 / 1956 | 78 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| One Brattle Square | Cambridge | MA | 100.0% | 1991 | 96 | 97.9 | % | 97.9 | % | 97.9 | % | |||||||||||||||
| One Wayside Road | Burlington | MA | 100.0% | 1997 | 201 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| 5 & 15 Wayside Road | Burlington | MA | 100.0% | 1999 & 2001 | 272 | 86.4 | % | 86.4 | % | 86.4 | % | |||||||||||||||
| 5 Wall Street | Burlington | MA | 100.0% | 2008 | 182 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| 25 Burlington Mall Road | Burlington | MA | 100.0% | 1987 | 291 | 90.0 | % | 71.8 | % | 71.8 | % | |||||||||||||||
| 225 Presidential Way | Woburn | MA | 100.0% | 2001 | 202 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| 235 Presidential Way | Woburn | MA | 100.0% | 2000 | 238 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| 80 Central Street | Boxborough | MA | 100.0% | 1988 | 150 | 35.3 | % | 35.3 | % | 35.3 | % | |||||||||||||||
| 90 Central Street | Boxborough | MA | 100.0% | 2001 | 175 | 100.0 | % | 100.0 | % | 38.9 | % | |||||||||||||||
| Metropolitan Area Subtotal / Weighted Average | 1,885 | 91.2 | % | 88.4 | % | 82.8 | % | |||||||||||||||||||
| Dallas | ||||||||||||||||||||||||||
| 161 Corporate Center | Irving | TX | 100.0% | 1998 | 105 | 80.0 | % | 80.0 | % | 69.5 | % | |||||||||||||||
| 750 West John Carpenter Freeway | Irving | TX | 100.0% | 1999 | 316 | 91.5 | % | 91.5 | % | 91.5 | % | |||||||||||||||
| 6011 Connection Drive | Irving | TX | 100.0% | 1999 | 152 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| 6021 Connection Drive | Irving | TX | 100.0% | 2000 | 222 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| 6031 Connection Drive | Irving | TX | 100.0% | 1999 | 233 | 55.8 | % | 51.5 | % | 51.5 | % | |||||||||||||||
| 6565 North MacArthur Boulevard | Irving | TX | 100.0% | 1998 | 260 | 71.2 | % | 71.2 | % | 70.8 | % | |||||||||||||||
| Las Colinas Corporate Center I | Irving | TX | 100.0% | 1998 | 161 | 38.5 | % | 38.5 | % | 36.0 | % | |||||||||||||||
| Las Colinas Corporate Center II | Irving | TX | 100.0% | 1998 | 225 | 84.4 | % | 81.3 | % | 80.4 | % | |||||||||||||||
| One Lincoln Park | Dallas | TX | 100.0% | 1999 | 262 | 69.5 | % | 69.5 | % | 68.3 | % | |||||||||||||||
| Park Place on Turtle Creek | Dallas | TX | 100.0% | 1986 | 178 | 87.6 | % | 86.5 | % | 83.7 | % | |||||||||||||||
| One Galleria Tower | Dallas | TX | 100.0% | 1982 | 470 | 87.7 | % | 87.7 | % | 87.2 | % | |||||||||||||||
| Two Galleria Tower | Dallas | TX | 100.0% | 1985 | 434 | 94.9 | % | 94.9 | % | 94.9 | % | |||||||||||||||
| Three Galleria Tower | Dallas | TX | 100.0% | 1991 | 532 | 95.5 | % | 95.5 | % | 95.1 | % | |||||||||||||||
| Metropolitan Area Subtotal / Weighted Average | 3,550 | 84.1 | % | 83.5 | % | 82.7 | % | |||||||||||||||||||
40
| Property | City | State | Percent Ownership | Year Built / Major Refurbishment | Rentable Square Footage Owned | Leased Percentage | Commenced Leased Percentage | Economic Leased Percentage (2) | ||||||||||||||||||
| Minneapolis | ||||||||||||||||||||||||||
| US Bancorp Center | Minneapolis | MN | 100.0% | 2000 | 937 | 93.2 | % | 93.1 | % | 91.7 | % | |||||||||||||||
| Crescent Ridge II | Minnetonka | MN | 100.0% | 2000 | 301 | 80.4 | % | 80.4 | % | 77.4 | % | |||||||||||||||
| Norman Pointe I | Bloomington | MN | 100.0% | 2000 | 214 | 85.0 | % | 85.0 | % | 84.1 | % | |||||||||||||||
| 9320 Excelsior Boulevard | Hopkins | MN | 100.0% | 2010 | 268 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| One Meridian Crossings | Richfield | MN | 100.0% | 1997 | 195 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Two Meridian Crossings | Richfield | MN | 100.0% | 1998 | 189 | 98.9 | % | 98.9 | % | 98.9 | % | |||||||||||||||
| Metropolitan Area Subtotal / Weighted Average | 2,104 | 92.5 | % | 92.5 | % | 91.3 | % | |||||||||||||||||||
| New York | ||||||||||||||||||||||||||
| 60 Broad Street | New York | NY | 100.0% | 1962 | 1,029 | 92.3 | % | 92.3 | % | 79.4 | % | |||||||||||||||
| Metropolitan Area Subtotal / Weighted Average | 1,029 | 92.3 | % | 92.3 | % | 79.4 | % | |||||||||||||||||||
| Orlando | ||||||||||||||||||||||||||
| 400 TownPark | Lake Mary | FL | 100.0% | 2008 | 175 | 94.3 | % | 92.0 | % | 92.0 | % | |||||||||||||||
| 500 TownPark | Lake Mary | FL | 100.0% | 2016 | 134 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| 200 South Orange Avenue | Orlando | FL | 100.0% | 1988 | 646 | 89.0 | % | 88.1 | % | 87.0 | % | |||||||||||||||
| 501 West Church Street | Orlando | FL | 100.0% | 2003 | 182 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| CNL Center I | Orlando | FL | 99.0% | 1999 | 347 | 87.6 | % | 87.6 | % | 87.6 | % | |||||||||||||||
| CNL Center II | Orlando | FL | 99.0% | 2006 | 270 | 95.9 | % | 95.9 | % | 95.9 | % | |||||||||||||||
| Metropolitan Area Subtotal / Weighted Average | 1,754 | 92.3 | % | 91.7 | % | 91.3 | % | |||||||||||||||||||
| Washington, D.C. | ||||||||||||||||||||||||||
| 400 Virginia Avenue | Washington | DC | 100.0% | 1985 | 226 | 85.4 | % | 66.4 | % | 60.2 | % | |||||||||||||||
| 1201 Eye Street | Washington | DC | 98.6% (3) | 2001 | 271 | 57.9 | % | 54.6 | % | 54.2 | % | |||||||||||||||
| 1225 Eye Street | Washington | DC | 98.1% (3) | 1986 | 225 | 85.3 | % | 85.3 | % | 83.6 | % | |||||||||||||||
| 3100 Clarendon Boulevard | Arlington | VA | 100.0% | 1987 / 2015 | 261 | 76.2 | % | 70.5 | % | 65.5 | % | |||||||||||||||
| 4250 North Fairfax Drive | Arlington | VA | 100.0% | 1998 | 308 | 93.8 | % | 93.8 | % | 90.9 | % | |||||||||||||||
| Arlington Gateway | Arlington | VA | 100.0% | 2005 | 329 | 88.1 | % | 88.1 | % | 86.3 | % | |||||||||||||||
| Metropolitan Area Subtotal / Weighted Average | 1,620 | 81.5 | % | 77.3 | % | 74.4 | % | |||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| 1430 Enclave Parkway | Houston | TX | 100.0% | 1994 | 313 | 82.7 | % | 82.7 | % | 82.7 | % | |||||||||||||||
| Enclave Place | Houston | TX | 100.0% | 2015 | 301 | 100.0 | % | 100.0 | % | — | % | |||||||||||||||
| Two Pierce Place | Itasca | IL | 100.0% | 1991 | 485 | 34.2 | % | 34.2 | % | 27.8 | % | |||||||||||||||
| Subtotal/Weighted Average | 1,099 | 66.1 | % | 66.1 | % | 35.9 | % | |||||||||||||||||||
| Grand Total | 16,434 | 86.0 | % | 85.0 | % | 80.6 | % | |||||||||||||||||||
| (1) | This schedule includes information for Piedmont's in-service portfolio of properties only. Information on investments excluded from this schedule can be found on page 35. | ||||
| (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). | ||||
| (3) | Although Piedmont owns 98.6% of 1201 Eye Street and 98.1% of 1225 Eye Street, it is entitled to 100% of the cash flows for each asset pursuant to the terms of each property ownership entity's joint venture agreement. | ||||
41
Piedmont Office Realty Trust, Inc.
Supplemental Operating & Financial Data
Risks, Uncertainties and Limitations
Certain statements contained in this supplemental package constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” "estimate," “believe,” “continue” or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters. Examples of such statements in this supplemental package include: the estimated financial impacts associated with, and the general business and economic recovery from, the COVID-19 pandemic; estimated Core FFO and Core FFO per diluted share for calendar year 2021; expected future capital expenditures; and potential future acquisition, disposition and financing activity.
The following are some of the factors that could cause our actual results and expectations to differ materially from those described in our forward-looking statements: 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, socio-economic 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 real estate investment trusts ("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 any of our tenants; risks related to the occurrence of cyber incidents, or a deficiency in our cybersecurity, which could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships; 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 planned phasing out of USD LIBOR after June 2023; high interest 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, 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 tenants in particular industries, such as oil and gas, hospitality, travel, co-working, etc., 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 supplemental report. We cannot guarantee the accuracy of any such forward-looking statements contained in this supplemental report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
42