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 27, 2022
(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 27, 2022, Piedmont Office Realty Trust, Inc. (the "Registrant") issued a press release announcing its financial results for the first quarter 2022, and published supplemental information for the first quarter 2022 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 27, 2022 | 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 2022 Results
ATLANTA, April 27, 2022--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in the Sunbelt, today announced its results for the quarter ended March 31, 2022.
Highlights for the Quarter Ended March 31, 2022:
Financial Results:
•Net income applicable to Piedmont was $60.0 million, or $0.49 per diluted share, for the quarter ended March 31, 2022, as compared to $9.3 million, or $0.08 per diluted share, for the quarter ended March 31, 2021. The results for the first quarter of 2022 include a $50.7 million gain on sale of real estate assets primarily associated with the sale of 225/235 Presidential Way during the first quarter of 2022.
•Core Funds From Operations ("Core FFO") was $0.51 per diluted share for the quarter ended March 31, 2022, a 6% increase compared to $0.48 per diluted share for the quarter ended March 31, 2021.
•Same Store Net Operating Income ("Same Store NOI") increased 5.1% and 2.5% on a cash and accrual basis, respectively, for the quarter ended March 31, 2022 as compared to the quarter ended March 31, 2021.
Leasing:
•The Company completed approximately 552,000 square feet of leasing during the quarter ended March 31, 2022, including approximately 243,000 square feet related to new tenant leasing, which is the largest amount of new tenant leasing that the Company has completed during a quarter since 2018.
•Cash and accrual basis rents on leases executed during the quarter ended March 31, 2022 for space vacant one year or less increased approximately 5% and 13%, respectively.
•The portfolio increased to 87% leased as of March 31, 2022, up from 85.5% as of December 31, 2021.
•The weighted average lease term for the nearly 50 leases executed during the first quarter was approximately 6.6 years.
•The Company had approximately 1,000,000 square feet of executed leases for vacant space yet to commence or under rental abatement as of March 31, 2022.
•The largest lease completed during the quarter was an approximately 164,000 square foot renewal at 750 W. John Carpenter Freeway in Irving, Texas. This renewal addressed Piedmont’s largest 2022 lease expiration with a positive cash roll-up of approximately 10% and leaves only 4.6% of the Company's Annualized Lease Revenue scheduled to expire during the remainder of 2022.
Capital Markets:
•The Company completed the previously announced sale of 225 & 235 Presidential Way in Boston for $129 million and recognized a gain of approximately $49 million which is included in its statement of income for the first quarter of 2022.
•Piedmont also sold Two Pierce Place, the Company's last remaining Chicago-area asset, for $24 million.
•As a result of the above dispositions, approximately 63% of the Company's Annualized Lease Revenue is now generated from its properties located in the Sunbelt.
Balance Sheet:
•In March of 2022, Piedmont received approximately $119 million in proceeds from the payoff of two notes receivable that were outstanding as of December 31, 2021. The proceeds from the notes were used to pay down the Company’s $500 million line of credit to $81 million as of March 31, 2022.
•The Company's net debt-to-Core EBITDA ratio for the first quarter of 2022 was 5.9x on an annualized basis and 5.8x on a trailing twelve month basis.
•The Company has no secured debt and its Debt-to-Gross Assets ratio was 34.6% as of March 31, 2022.
ESG and Operations:
•During the three months ended March 31, 2022, the Company earned the WELL Health-Safety Rating for its entire managed portfolio.
Commenting on first quarter results, Brent Smith, Piedmont's President and Chief Executive Officer, said, "We are extremely encouraged by the continued recovery across our markets contributing to a strong first quarter financial result. Despite companies taking longer than anticipated to return to the workplace, leasing activity was the most robust it’s been in three years and marked the third consecutive quarter Piedmont has achieved pre-pandemic new leasing volumes. Furthermore, leasing transactions continued to reflect positive mark-to-market economics, long-term tenant commitments and continued space absorption across our redeveloped properties. During the first quarter, almost 50 leases were executed totaling over half a million square feet, with about half related to new tenant leases, bolstering our expectation for continued space absorption during 2022."
Second Quarter 2022 Dividend Declaration
On April 27, 2022, the board of directors of Piedmont declared a dividend for the second quarter of 2022 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on May 27, 2022, payable on June 17, 2022.
Guidance for 2022
Based on leasing activity to date, the current volume of leasing tours and transaction pipeline, adjusting for a higher interest rate forecast, and management's expectations for the remainder of the year, the Company is increasing the midpoint of its previously provided guidance by $0.01 for the year ending December 31, 2022 as follows:
| Revised | Previous | ||||||||||||||||||||||
| (in millions, except per share data) | Low | High | Low | High | |||||||||||||||||||
| Net income | $80 | $84 | $74 | $81 | |||||||||||||||||||
| Add: | |||||||||||||||||||||||
| Depreciation | 134 | 138 | 136 | 142 | |||||||||||||||||||
| Amortization | 83 | 85 | 82 | 85 | |||||||||||||||||||
| Deduct: | |||||||||||||||||||||||
| Gain on sale of real estate assets | (51) | (51) | (48) | (52) | |||||||||||||||||||
| NAREIT FFO and Core FFO applicable to common stock | $246 | $256 | $244 | $256 | |||||||||||||||||||
| NAREIT FFO and Core FFO per diluted share | $1.99 | $2.07 | $1.97 | $2.07 | |||||||||||||||||||
These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections, including the impacts of completed transactional activity during the first quarter of 2022. The guidance does not include any significant speculative acquisition or disposition activity for the remainder of the year; however, any acquisition and disposition activity is expected to be leverage neutral by year end 2022. Actual results could differ materially from these estimates based on a variety of factors, particularly the timing of any future acquisitions and dispositions, as well as those factors 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 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 expense, and one-time revenue or expense events. In addition, the Company's guidance is based on information available to management as of the date of this release.
Non-GAAP Financial Measures
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, 2022 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 28, 2022 at 9:00 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 (888) 506-0062 for participants in the United States and Canada and (973) 528-0011 for international participants. Participant Access Code is 370843. A replay of the conference call will be available through 9:00 A.M. Eastern daylight time on May 12, 2022, 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 45256. 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 2022 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, 2022 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 the Sunbelt. Its 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," "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 press release include: whether the Company will experience continued space absorption in the portfolio during 2022; 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, 2022. These statements are based on beliefs and assumptions of Piedmont’s management, which in turn are based on information available at the time the statements are made.
The following are some of the factors that could cause the Company's actual results and its expectations to differ materially from those described in the Company's forward-looking statements: economic, regulatory,
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 markets in which we primarily operate where we have high concentrations of our annualized lease revenue; lease terminations, lease defaults, lease contractions, 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, including the potential of supply chain disruptions, and resultant increased costs and risks; our real estate redevelopment and 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 properties or 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 London Interbank Offered Rate (" LIBOR") rates are determined and the planned phasing out of United States dollar ("USD") LIBOR after June 2023; rising interest rates which could affect our return on investments and/or 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; additional risks and costs associated with inflation and continuing increases in the rate of inflation; 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 important supply chains and 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 other tax law changes which may adversely affect our stockholders; the future effectiveness of our internal controls and procedures; actual or threatened public health epidemics or outbreaks, such as the ongoing COVID-19 pandemic, as well as governmental and private measures taken to combat such health crises, could have a material adverse effect on our business operations and financial results; the adequacy of our general reserve related to tenant lease-related assets or the establishment of any other reserve in the future; and other factors, including the risk factors discussed under Item 1A. of Piedmont’s Annual Report on Form 10-K for the year ended December 31, 2021 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, 2022 | December 31, 2021 | |||||||||||||
| Assets: | ||||||||||||||
Real estate assets, at cost: | ||||||||||||||
Land | $ | 521,789 | $ | 529,941 | ||||||||||
Buildings and improvements | 3,351,807 | 3,374,903 | ||||||||||||
Buildings and improvements, accumulated depreciation | (863,306) | (861,206) | ||||||||||||
Intangible lease assets | 173,017 | 178,157 | ||||||||||||
Intangible lease assets, accumulated amortization | (86,664) | (83,777) | ||||||||||||
Construction in progress | 50,719 | 43,406 | ||||||||||||
| Real estate assets held for sale, gross | — | 80,586 | ||||||||||||
Real estate assets held for sale, accumulated depreciation and amortization | — | (16,699) | ||||||||||||
Total real estate assets | 3,147,362 | 3,245,311 | ||||||||||||
Cash and cash equivalents | 7,211 | 7,419 | ||||||||||||
Tenant receivables | 3,095 | 2,995 | ||||||||||||
Straight line rent receivables | 164,776 | 162,632 | ||||||||||||
Notes receivable | — | 118,500 | ||||||||||||
Restricted cash and escrows | 1,457 | 1,441 | ||||||||||||
Prepaid expenses and other assets | 21,318 | 20,485 | ||||||||||||
Goodwill | 98,918 | 98,918 | ||||||||||||
Deferred lease costs, gross | 466,234 | 469,671 | ||||||||||||
Deferred lease costs, accumulated depreciation | (210,731) | (205,100) | ||||||||||||
Other assets held for sale, gross | — | 9,389 | ||||||||||||
Other assets held for sale, accumulated depreciation | — | (996) | ||||||||||||
| Total assets | $ | 3,699,640 | $ | 3,930,665 | ||||||||||
| Liabilities: | ||||||||||||||
Unsecured debt, net of discount and unamortized debt issuance costs of $11,447 and $12,210, respectively | $ | 1,669,553 | $ | 1,877,790 | ||||||||||
Accounts payable, accrued expenses, and accrued capital expenditures | 83,609 | 114,453 | ||||||||||||
Dividends payable | — | 26,048 | ||||||||||||
Deferred income | 79,493 | 80,686 | ||||||||||||
Intangible lease liabilities, less accumulated amortization | 36,077 | 39,341 | ||||||||||||
Interest rate swaps | 434 | 4,924 | ||||||||||||
| Total liabilities | 1,869,166 | 2,143,242 | ||||||||||||
| Stockholders' equity: | ||||||||||||||
Common stock | 1,233 | 1,231 | ||||||||||||
Additional paid in capital | 3,706,207 | 3,701,798 | ||||||||||||
Cumulative distributions in excess of earnings | (1,865,016) | (1,899,081) | ||||||||||||
Other comprehensive income | (13,573) | (18,154) | ||||||||||||
| Piedmont stockholders' equity | 1,828,851 | 1,785,794 | ||||||||||||
Noncontrolling interest | 1,623 | 1,629 | ||||||||||||
| Total stockholders' equity | 1,830,474 | 1,787,423 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 3,699,640 | $ | 3,930,665 | ||||||||||
| Number of shares of common stock outstanding as of end of period | 123,331 | 123,077 | ||||||||||||
| Net debt (Unsecured debt less Cash and cash equivalents) | 1,662,342 | 1,870,371 | ||||||||||||
| Total Principal Amount of Debt Outstanding (Unsecured debt plus discount and unamortized debt issuance costs) | 1,681,000 | 1,890,000 | ||||||||||||
| Piedmont Office Realty Trust, Inc. | |||||||||||
| Consolidated Statements of Income | |||||||||||
| Unaudited (in thousands, except for per share data) | |||||||||||
| Three Months Ended | |||||||||||
| 3/31/2022 | 3/31/2021 | ||||||||||
| Revenues: | |||||||||||
| Rental and tenant reimbursement revenue | $ | 131,912 | $ | 125,912 | |||||||
| Property management fee revenue | 651 | 758 | |||||||||
| Other property related income | 3,586 | 2,587 | |||||||||
Total revenues | 136,149 | 129,257 | |||||||||
| Expenses: | |||||||||||
| Property operating costs | 53,622 | 51,424 | |||||||||
| Depreciation | 31,515 | 28,103 | |||||||||
| Amortization | 22,252 | 22,912 | |||||||||
| General and administrative | 7,595 | 7,251 | |||||||||
Total operating expenses | 114,984 | 109,690 | |||||||||
| Other income (expense): | |||||||||||
| Interest expense | (13,898) | (12,580) | |||||||||
| Other income | 2,024 | 2,356 | |||||||||
| Gain on sale of real estate assets | 50,673 | — | |||||||||
Total other income (expense) | 38,799 | (10,224) | |||||||||
| Net income | 59,964 | 9,343 | |||||||||
| Net loss applicable to noncontrolling interest | — | 1 | |||||||||
| Net income applicable to Piedmont | $ | 59,964 | $ | 9,344 | |||||||
| Weighted average common shares outstanding - diluted | 123,510 | 124,450 | |||||||||
| Net income per share applicable to common stockholders - diluted | $ | 0.49 | $ | 0.08 | |||||||
| 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 | |||||||||||
| 3/31/2022 | 3/31/2021 | ||||||||||
| GAAP net income applicable to common stock | $ | 59,964 | $ | 9,344 | |||||||
Depreciation of real estate assets(1) | 31,332 | 27,812 | |||||||||
Amortization of lease-related costs | 22,240 | 22,900 | |||||||||
Gain on sale of real estate assets | (50,673) | — | |||||||||
| NAREIT Funds From Operations and Core Funds from Operations applicable to common stock* | 62,863 | 60,056 | |||||||||
Amortization of debt issuance costs, fair market adjustments on notes payable, and discounts on debt | 778 | 654 | |||||||||
Depreciation of non real estate assets | 173 | 282 | |||||||||
Straight-line effects of lease revenue | (2,577) | (4,103) | |||||||||
Stock-based compensation adjustments | (552) | 1,111 | |||||||||
Net effect of amortization of above/below-market in-place lease intangibles | (3,162) | (2,792) | |||||||||
Non-incremental capital expenditures(2) | (18,947) | (17,347) | |||||||||
| Adjusted Funds From Operations applicable to common stock* | $ | 38,576 | $ | 37,861 | |||||||
| Weighted average common shares outstanding - diluted | 123,510 | 124,450 | |||||||||
| Funds From Operations and Core Funds From Operations per share (diluted) | $ | 0.51 | $ | 0.48 | |||||||
| Change period over period | 6 | % | |||||||||
(1)Excludes depreciation of non real estate assets.
(2)Capital expenditures of a recurring nature related to tenant improvements, leasing commissions and building capital 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 either enhance the rental rates of a building or change the property’s underlying classification, such as from a Class B to a Class A property, are excluded from this measure.
| 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 | ||||||||||||||||||||||
| 3/31/2022 | 3/31/2021 | 3/31/2022 | 3/31/2021 | ||||||||||||||||||||
| Net income applicable to Piedmont (GAAP) | $ | 59,964 | $ | 9,344 | $ | 59,964 | $ | 9,344 | |||||||||||||||
Net loss applicable to noncontrolling interest | — | (1) | — | (1) | |||||||||||||||||||
Interest expense | 13,898 | 12,580 | 13,898 | 12,580 | |||||||||||||||||||
Depreciation | 31,505 | 28,094 | 31,505 | 28,094 | |||||||||||||||||||
Amortization | 22,240 | 22,900 | 22,240 | 22,900 | |||||||||||||||||||
| Depreciation and amortization attributable to noncontrolling interests | 22 | 21 | 22 | 21 | |||||||||||||||||||
Gain on sale of real estate assets | (50,673) | — | (50,673) | — | |||||||||||||||||||
EBITDAre* and Core EBITDA* | 76,956 | 72,938 | 76,956 | 72,938 | |||||||||||||||||||
General & administrative expenses | 7,595 | 7,251 | 7,595 | 7,251 | |||||||||||||||||||
Management fee revenue | (362) | (390) | (362) | (390) | |||||||||||||||||||
Other income | (1,808) | (2,141) | (1,808) | (2,141) | |||||||||||||||||||
| Non-cash general reserve for uncollectible accounts | — | 412 | |||||||||||||||||||||
Straight line effects of lease revenue | (2,577) | (4,103) | |||||||||||||||||||||
| Straight line effects of lease revenue attributable to noncontrolling interests | (1) | 1 | |||||||||||||||||||||
Amortization of lease-related intangibles | (3,162) | (2,792) | |||||||||||||||||||||
| Property NOI* | 76,641 | 71,176 | 82,381 | 77,658 | |||||||||||||||||||
| Net operating (income)/loss from: | |||||||||||||||||||||||
Acquisitions | (2,697) | — | (3,837) | — | |||||||||||||||||||
Dispositions | (475) | (1,220) | (547) | (1,502) | |||||||||||||||||||
Other investments(1) | 189 | 154 | 247 | 211 | |||||||||||||||||||
| Same Store NOI* | $ | 73,658 | $ | 70,110 | $ | 78,244 | $ | 76,367 | |||||||||||||||
| Change period over period in Same Store NOI | 5.1% | N/A | 2.5 | % | N/A | ||||||||||||||||||
(1)Other investments consist of our investments in active, out-of-service redevelopment and development projects, land, and recently completed redevelopment and development projects. The operating results of 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 (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investment in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, along with appropriate adjustments to those reconciling items for 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 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 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 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 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 non-cash general reserve for uncollectible accounts, 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. 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 | |||||
Piedmont Office Realty Trust, Inc.
Quarterly Supplemental Information
Index
| Page | Page | |||||||||||||
| Introduction | Other Investments | |||||||||||||
| Corporate Data | Other Investments Detail | |||||||||||||
| Investor Information | Supporting Information | |||||||||||||
| Earnings Release | Definitions | |||||||||||||
| Key Performance Indicators | Research Coverage | |||||||||||||
| Financials | Non-GAAP Reconciliations | |||||||||||||
| Balance Sheets | In-Service Portfolio Detail | |||||||||||||
| Income Statements | Major Leases Not Yet Commenced and Major Abatements | |||||||||||||
| Funds From Operations / Adjusted Funds From Operations | Risks, Uncertainties and Limitations | |||||||||||||
| 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 | ||||||||||||||
| Contractual Tenant Improvements & Leasing Commissions | ||||||||||||||
| Geographic Diversification | ||||||||||||||
| Geographic Diversification by Location Type | ||||||||||||||
| Industry Diversification | ||||||||||||||
| Property Investment Activity | ||||||||||||||
| Notice to Readers: | ||
Please refer to page 40 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 33. 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 located primarily in the Sunbelt. 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. The Company was designated an Energy Star Partner of the Year for 2021, and it is the only office REIT headquartered in the Southeast to receive that designation. At the end of the first quarter of 2022, approximately 84% of the Company's portfolio was Energy Star certified and approximately 47% 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, 2022 | December 31, 2021 | ||||||||||
Number of consolidated in-service office properties (1) | 52 | 55 | |||||||||
Rentable square footage (in thousands) (1) | 16,126 | 17,051 | |||||||||
Percent leased (2) | 87.0 | % | 85.5 | % | |||||||
| Capitalization (in thousands): | |||||||||||
| Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs) | $1,681,000 | $1,890,000 | |||||||||
Equity market capitalization (3) | $2,123,757 | $2,262,150 | |||||||||
Total market capitalization (3) | $3,804,757 | $4,152,150 | |||||||||
Total debt / Total market capitalization (3) | 44.2 | % | 45.5 | % | |||||||
| Average net debt to Core EBITDA - quarterly | 5.9 x | 6.0 x | |||||||||
| Average net debt to Core EBITDA - trailing twelve months | 5.8 x | 5.7 x | |||||||||
| Total debt / Total gross assets | 34.6 | % | 37.1 | % | |||||||
| Common stock data: | |||||||||||
| High closing price during quarter | $19.67 | $19.37 | |||||||||
| Low closing price during quarter | $16.16 | $17.11 | |||||||||
| Closing price of common stock at period end | $17.22 | $18.38 | |||||||||
| Weighted average fully diluted shares outstanding during quarter (in thousands) | 123,510 | 124,412 | |||||||||
| Shares of common stock issued and outstanding at period end (in thousands) | 123,331 | 123,077 | |||||||||
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 | 134 | 134 | |||||||||
| (1) | As of March 31, 2022, our consolidated office portfolio consisted of 52 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 22 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 | George Wells | |||||||||
| Chief Executive Officer, President | Chief Financial and Administrative Officer | Chief Operating Officer and | |||||||||
| and Director | and Executive Vice President | Executive Vice President | |||||||||
| Edward H. Guilbert, III | Christopher A. Kollme | Laura P. Moon | Joseph H. Pangburn | ||||||||
| Executive Vice President, Finance, | Executive Vice President, | Chief Accounting Officer and | Executive Vice President, | ||||||||
| Assistant Secretary and Treasurer | Investments | Senior Vice President | Southwest Region | ||||||||
| Investor Relations Contact | |||||||||||
| Thomas R. Prescott | Alex Valente | Robert K. Wiberg | |||||||||
| Executive Vice President, | Executive Vice President, | Executive Vice President, | |||||||||
| Midwest Region and Co-Head of | Southeast Region | Northeast Region and Co-Head of | |||||||||
| Development | Development | ||||||||||
| Board of Directors | |||||||||||
| Frank C. McDowell | Dale H. Taysom | Kelly H. Barrett | Wesley E. Cantrell | ||||||||
| Director, Chair of the Board of Directors, and | Director, Vice Chair of the | Director, Chair of the Audit Committee, | Director and Member of the Governance | ||||||||
| Member of the Compensation and Governance | Board of Directors, and Member of the | and Member of the Governance Committee | and Compensation Committees | ||||||||
| Committees | Audit and Capital Committees | ||||||||||
| Glenn G. Cohen | Barbara B. Lang | C. Brent Smith | Jeffery L. Swope | ||||||||
| Director, Chair of the Compensation Committee, | Director, Chair of the Governance Committee | Chief Executive Officer, President | Director, Chair of the Capital | ||||||||
| and Member of the Audit and Capital | (including ESG), and Member of the | and Director | Committee, and Member of the | ||||||||
| Committees | Compensation Committee | Compensation Committee | |||||||||
| Transfer Agent | Corporate Counsel | Institutional Analyst Contact | Investor Relations | ||||||||
| Computershare | King & Spalding | Phone: 770.418.8592 | Phone: 866.354.3485 | ||||||||
| P.O. Box 30170 | 1180 Peachtree Street, NE | research.analysts@piedmontreit.com | investor.services@piedmontreit.com | ||||||||
| College Station, TX 77842-3170 | Atlanta, GA 30309 | www.piedmontreit.com | |||||||||
| Phone: 866.354.3485 | Phone: 404.572.4600 | ||||||||||
4
Piedmont Office Realty Trust, Inc.
Earnings Release
ATLANTA, April 27, 2022--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in the Sunbelt, today announced its results for the quarter ended March 31, 2022.
Highlights for the Quarter Ended March 31, 2022:
Financial Results:
•Net income applicable to Piedmont was $60.0 million, or $0.49 per diluted share, for the quarter ended March 31, 2022, as compared to $9.3 million, or $0.08 per diluted share, for the quarter ended March 31, 2021. The results for the first quarter of 2022 include a $50.7 million gain on sale of real estate assets primarily associated with the sale of 225/235 Presidential Way during the first quarter of 2022.
•Core Funds From Operations ("Core FFO") was $0.51 per diluted share for the quarter ended March 31, 2022, a 6% increase compared to $0.48 per diluted share for the quarter ended March 31, 2021.
•Same Store Net Operating Income ("Same Store NOI") increased 5.1% and 2.5% on a cash and accrual basis, respectively, for the quarter ended March 31, 2022 as compared to the quarter ended March 31, 2021.
Leasing:
•The Company completed approximately 552,000 square feet of leasing during the quarter ended March 31, 2022, including approximately 243,000 square feet related to new tenant leasing, which is the largest amount of new tenant leasing that the Company has completed during a quarter since 2018.
•Cash and accrual basis rents on leases executed during the quarter ended March 31, 2022 for space vacant one year or less increased approximately 5% and 13%, respectively.
•The portfolio increased to 87% leased as of March 31, 2022, up from 85.5% as of December 31, 2021.
•The weighted average lease term for the nearly 50 leases executed during the first quarter was approximately 6.6 years.
•The Company had approximately 1,000,000 square feet of executed leases for vacant space yet to commence or under rental abatement as of March 31, 2022.
•The largest lease completed during the quarter was an approximately 164,000 square foot renewal at 750 W. John Carpenter Freeway in Irving, Texas. This renewal addressed Piedmont’s largest 2022 lease expiration with a positive cash roll-up of approximately 10% and leaves only 4.6% of the Company's Annualized Lease Revenue scheduled to expire during the remainder of 2022.
Capital Markets:
•The Company completed the previously announced sale of 225 & 235 Presidential Way in Boston for $129 million and recognized a gain of approximately $49 million which is included in its statement of income for the first quarter of 2022.
•Piedmont also sold Two Pierce Place, the Company's last remaining Chicago-area asset, for $24 million.
•As a result of the above dispositions, approximately 63% of the Company's Annualized Lease Revenue is now generated from its properties located in the Sunbelt.
Balance Sheet:
•In March of 2022, Piedmont received approximately $119 million in proceeds from the payoff of two notes receivable that were outstanding as of December 31, 2021. The proceeds from the notes were used to pay down the Company’s $500 million line of credit to $81 million as of March 31, 2022.
•The Company's net debt-to-Core EBITDA ratio for the first quarter of 2022 was 5.9x on an annualized basis and 5.8x on a trailing twelve month basis.
•The Company has no secured debt and its Debt-to-Gross Assets ratio was 34.6% as of March 31, 2022.
5
ESG and Operations:
•During the three months ended March 31, 2022, the Company earned the WELL Health-Safety Rating for its entire managed portfolio.
Commenting on first quarter results, Brent Smith, Piedmont's President and Chief Executive Officer, said, "We are extremely encouraged by the continued recovery across our markets contributing to a strong first quarter financial result. Despite companies taking longer than anticipated to return to the workplace, leasing activity was the most robust it’s been in three years and marked the third consecutive quarter Piedmont has achieved pre-pandemic new leasing volumes. Furthermore, leasing transactions continued to reflect positive mark-to-market economics, long-term tenant commitments and continued space absorption across our redeveloped properties. During the first quarter, almost 50 leases were executed totaling over half a million square feet, with about half related to new tenant leases, bolstering our expectation for continued space absorption during 2022."
Second Quarter 2022 Dividend Declaration
On April 27, 2022, the board of directors of Piedmont declared a dividend for the second quarter of 2022 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on May 27, 2022, payable on June 17, 2022.
Guidance for 2022
Based on leasing activity to date, the current volume of leasing tours and transaction pipeline, adjusting for a higher interest rate forecast, and management's expectations for the remainder of the year, the Company is increasing the midpoint of its previously provided guidance by $0.01 for the year ending December 31, 2022 as follows:
| Revised | Previous | |||||||||||||||||||||||||
| (in millions, except per share data) | Low | High | Low | High | ||||||||||||||||||||||
| Net income | $80 | $84 | $74 | $81 | ||||||||||||||||||||||
| Add: | ||||||||||||||||||||||||||
| Depreciation | 134 | 138 | 136 | 142 | ||||||||||||||||||||||
| Amortization | 83 | 85 | 82 | 85 | ||||||||||||||||||||||
| Deduct: | ||||||||||||||||||||||||||
| Gain on sale of real estate assets | (51) | (51) | (48) | (52) | ||||||||||||||||||||||
| NAREIT FFO and Core FFO applicable to common stock | $246 | $256 | $244 | $256 | ||||||||||||||||||||||
| NAREIT FFO and Core FFO per diluted share | $1.99 | $2.07 | $1.97 | $2.07 | ||||||||||||||||||||||
These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections, including the impacts of completed transactional activity during the first quarter of 2022. The guidance does not include any significant speculative acquisition or disposition activity for the remainder of the year; however, any acquisition and disposition activity is expected to be leverage neutral by year end 2022. Actual results could differ materially from these estimates based on a variety of factors, particularly the timing of any future acquisitions and dispositions, as well as those factors discussed on page 40.
Note that individual quarters may fluctuate on both a cash basis and an accrual basis due to 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 expense, and one-time revenue or expense events. In addition, the Company's guidance is based on information available to management as of the date of this release.
6
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 33 and reconciliations are provided beginning on page 35. | ||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| Selected Operating Data | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | ||||||||||||||||||||||||||||||
Percent leased (1) | 87.0 | % | 85.5 | % | 85.9 | % | 85.9 | % | 86.0 | % | |||||||||||||||||||||||||
Percent leased - economic (2) | 81.4 | % | 81.5 | % | 81.6 | % | 82.6 | % | 80.6 | % | |||||||||||||||||||||||||
| Total revenues | $136,149 | $138,164 | $131,071 | $130,218 | $129,257 | ||||||||||||||||||||||||||||||
| Net income / (loss) applicable to Piedmont | $59,964 | -$31,750 | $11,306 | $9,947 | $9,344 | ||||||||||||||||||||||||||||||
| Net income / (loss) per share applicable to common stockholders - diluted | $0.49 | -$0.26 | $0.09 | $0.08 | $0.08 | ||||||||||||||||||||||||||||||
| Core EBITDA | $76,956 | $77,130 | $74,686 | $72,980 | $72,938 | ||||||||||||||||||||||||||||||
| Core FFO applicable to common stock | $62,863 | $63,009 | $62,004 | $60,353 | $60,056 | ||||||||||||||||||||||||||||||
| Core FFO per share - diluted | $0.51 | $0.51 | $0.50 | $0.48 | $0.48 | ||||||||||||||||||||||||||||||
| AFFO applicable to common stock | $38,576 | $39,399 | $41,213 | $41,661 | $37,861 | ||||||||||||||||||||||||||||||
Gross regular dividends (3) | $25,899 | $26,048 | $26,068 | $26,068 | $26,046 | ||||||||||||||||||||||||||||||
Regular dividends per share (3) | $0.21 | $0.21 | $0.21 | $0.21 | $0.21 | ||||||||||||||||||||||||||||||
Same store net operating income - cash basis (4) | 5.1 | % | 5.8 | % | 11.6 | % | 4.8 | % | 3.9 | % | |||||||||||||||||||||||||
Same store net operating income - accrual basis (4) | 2.5 | % | 5.2 | % | 5.0 | % | 4.7 | % | -1.2 | % | |||||||||||||||||||||||||
Rental rate roll up / roll down - cash rents (5) | 4.8 | % | 3.0 | % | 10.5 | % | 18.2 | % | -2.8 | % | |||||||||||||||||||||||||
Rental rate roll up / roll down - accrual rents (5) | 12.9 | % | 6.9 | % | 16.1 | % | 27.4 | % | 7.0 | % | |||||||||||||||||||||||||
| Selected Balance Sheet Data | |||||||||||||||||||||||||||||||||||
| Total real estate assets, net | $3,147,362 | $3,245,311 | $3,085,457 | $3,079,707 | $3,061,259 | ||||||||||||||||||||||||||||||
| Total assets | $3,699,640 | $3,930,665 | $3,760,648 | $3,758,311 | $3,737,874 | ||||||||||||||||||||||||||||||
| Total liabilities | $1,869,166 | $2,143,242 | $1,900,029 | $1,885,803 | $1,850,529 | ||||||||||||||||||||||||||||||
| Ratios & Information for Debt Holders | |||||||||||||||||||||||||||||||||||
Core EBITDA margin (6) | 56.5 | % | 55.8 | % | 57.0 | % | 56.0 | % | 56.4 | % | |||||||||||||||||||||||||
Fixed charge coverage ratio (7) | 5.2 x | 5.2 x | 5.5 x | 5.4 x | 5.4 x | ||||||||||||||||||||||||||||||
Average net debt to Core EBITDA - quarterly (8) | 5.9 x | 6.0 x | 5.5 x | 5.7 x | 5.6 x | ||||||||||||||||||||||||||||||
| Total gross real estate assets | $4,097,332 | $4,206,993 | $4,012,060 | $3,979,955 | $3,926,798 | ||||||||||||||||||||||||||||||
Net debt (9) | $1,672,332 | $1,881,140 | $1,663,718 | $1,666,300 | $1,658,995 | ||||||||||||||||||||||||||||||
| (1) | Please refer to page 22 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. | ||||
| (3) | Dividends are reflected in the quarter in which the record date occurred. | ||||
| (4) | Please refer to the two pages starting with page 12 for additional same store net operating income information. The statistic provided for each of the prior quarters is based on the same store property population applicable at the time that the metric was initially reported. | ||||
| (5) | Please refer to page 23 for additional roll up / roll down analysis information. | ||||
| (6) | Core EBITDA margin is calculated as Core EBITDA divided by total revenues. | ||||
| (7) | 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 $963,350 for the quarter ended March 31, 2022, $994,675 for the quarter ended December 31, 2021, $1,009,904 for the quarter ended September 30, 2021, $875,804 for the quarter ended June 30, 2021, and $812,649 for the quarter ended March 31, 2021; the Company had no principal amortization for the quarters ended March 31, 2022, December 31, 2021 and September 30, 2021, as its last remaining amortizing loan was repaid during the second quarter of 2021; the Company had principal amortization of $187,087 for the quarter ended June 30, 2021, and $185,368 for the quarter ended March 31, 2021. | ||||
| (8) | 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. | ||||
| (9) | 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. | ||||
7
Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)
| March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Real estate, at cost: | |||||||||||||||||||||||||||||
| Land assets | $ | 521,789 | $ | 529,941 | $ | 476,717 | $ | 476,717 | $ | 476,717 | |||||||||||||||||||
| Buildings and improvements | 3,351,807 | 3,374,903 | 3,259,369 | 3,203,286 | 3,170,152 | ||||||||||||||||||||||||
| Buildings and improvements, accumulated depreciation | (863,306) | (861,206) | (829,832) | (804,400) | (776,577) | ||||||||||||||||||||||||
| Intangible lease asset | 173,017 | 178,157 | 148,945 | 155,002 | 155,634 | ||||||||||||||||||||||||
| Intangible lease asset, accumulated amortization | (86,664) | (83,777) | (80,072) | (79,149) | (72,475) | ||||||||||||||||||||||||
| Construction in progress | 50,719 | 43,406 | 48,226 | 67,033 | 47,498 | ||||||||||||||||||||||||
| Real estate assets held for sale, gross | — | 80,586 | 78,803 | 77,917 | 76,797 | ||||||||||||||||||||||||
| Real estate assets held for sale, accumulated depreciation & amortization | — | (16,699) | (16,699) | (16,699) | (16,487) | ||||||||||||||||||||||||
| Total real estate assets | 3,147,362 | 3,245,311 | 3,085,457 | 3,079,707 | 3,061,259 | ||||||||||||||||||||||||
| Cash and cash equivalents | 7,211 | 7,419 | 8,189 | 8,122 | 10,689 | ||||||||||||||||||||||||
| Tenant receivables, net of allowance for doubtful accounts | 3,095 | 2,995 | 8,678 | 6,530 | 4,545 | ||||||||||||||||||||||||
| Straight line rent receivable | 164,776 | 162,632 | 159,871 | 156,912 | 153,727 | ||||||||||||||||||||||||
| Notes receivable | — | 118,500 | 118,500 | 118,500 | 118,500 | ||||||||||||||||||||||||
| Escrow deposits and restricted cash | 1,457 | 1,441 | 6,093 | 1,578 | 1,741 | ||||||||||||||||||||||||
| Prepaid expenses and other assets | 21,318 | 20,485 | 24,915 | 29,469 | 22,647 | ||||||||||||||||||||||||
| Goodwill | 98,918 | 98,918 | 98,918 | 98,918 | 98,918 | ||||||||||||||||||||||||
| Deferred lease costs, gross | 466,234 | 469,671 | 437,020 | 441,488 | 439,342 | ||||||||||||||||||||||||
| Deferred lease costs, accumulated amortization | (210,731) | (205,100) | (195,255) | (191,045) | (181,499) | ||||||||||||||||||||||||
| Other assets held for sale, gross | — | 9,389 | 9,258 | 9,128 | 8,941 | ||||||||||||||||||||||||
| Other assets held for sale, accumulated amortization | — | (996) | (996) | (996) | (936) | ||||||||||||||||||||||||
| Total assets | $ | 3,699,640 | $ | 3,930,665 | $ | 3,760,648 | $ | 3,758,311 | $ | 3,737,874 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Unsecured debt, net of discount | $ | 1,669,553 | $ | 1,877,790 | $ | 1,665,101 | $ | 1,666,570 | $ | 1,633,819 | |||||||||||||||||||
| Secured debt | — | — | — | — | 27,628 | ||||||||||||||||||||||||
| Accounts payable, accrued expenses, and accrued capital expenditures | 83,609 | 140,501 | 127,675 | 111,562 | 92,183 | ||||||||||||||||||||||||
| Deferred income | 79,493 | 80,686 | 73,614 | 70,594 | 56,638 | ||||||||||||||||||||||||
| Intangible lease liabilities, less accumulated amortization | 36,077 | 39,341 | 26,924 | 29,761 | 32,607 | ||||||||||||||||||||||||
| Interest rate swaps | 434 | 4,924 | 6,715 | 7,316 | 7,654 | ||||||||||||||||||||||||
| Total liabilities | 1,869,166 | 2,143,242 | 1,900,029 | 1,885,803 | 1,850,529 | ||||||||||||||||||||||||
| Stockholders' equity: | |||||||||||||||||||||||||||||
| Common stock | 1,233 | 1,231 | 1,241 | 1,241 | 1,240 | ||||||||||||||||||||||||
| Additional paid in capital | 3,706,207 | 3,701,798 | 3,700,208 | 3,698,656 | 3,697,801 | ||||||||||||||||||||||||
| Cumulative distributions in excess of earnings | (1,865,016) | (1,899,081) | (1,822,441) | (1,807,679) | (1,791,558) | ||||||||||||||||||||||||
| Other comprehensive loss | (13,573) | (18,154) | (20,036) | (21,368) | (21,813) | ||||||||||||||||||||||||
| Piedmont stockholders' equity | 1,828,851 | 1,785,794 | 1,858,972 | 1,870,850 | 1,885,670 | ||||||||||||||||||||||||
| Non-controlling interest | 1,623 | 1,629 | 1,647 | 1,658 | 1,675 | ||||||||||||||||||||||||
| Total stockholders' equity | 1,830,474 | 1,787,423 | 1,860,619 | 1,872,508 | 1,887,345 | ||||||||||||||||||||||||
| Total liabilities, redeemable common stock and stockholders' equity | $ | 3,699,640 | $ | 3,930,665 | $ | 3,760,648 | $ | 3,758,311 | $ | 3,737,874 | |||||||||||||||||||
| Common stock outstanding at end of period | 123,331 | 123,077 | 124,136 | 124,132 | 124,029 | ||||||||||||||||||||||||
8
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
| Three Months Ended | ||||||||||||||||||||||||||||||||
| 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | ||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
Rental income (1) | $ | 109,732 | $ | 111,203 | $ | 105,592 | $ | 105,209 | $ | 105,170 | ||||||||||||||||||||||
Tenant reimbursements (1) | 22,180 | 23,110 | 21,835 | 21,758 | 20,742 | |||||||||||||||||||||||||||
| Property management fee revenue | 651 | 576 | 626 | 536 | 758 | |||||||||||||||||||||||||||
| Other property related income | 3,586 | 3,275 | 3,018 | 2,715 | 2,587 | |||||||||||||||||||||||||||
| 136,149 | 138,164 | 131,071 | 130,218 | 129,257 | ||||||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||
| Property operating costs | 53,622 | 56,083 | 51,767 | 51,658 | 51,424 | |||||||||||||||||||||||||||
| Depreciation | 31,515 | 31,952 | 30,562 | 29,998 | 28,103 | |||||||||||||||||||||||||||
| Amortization | 22,252 | 22,014 | 20,373 | 20,693 | 22,912 | |||||||||||||||||||||||||||
Impairment loss on real estate assets (2) | — | 41,000 | — | — | — | |||||||||||||||||||||||||||
| General and administrative | 7,595 | 7,835 | 6,955 | 8,211 | 7,251 | |||||||||||||||||||||||||||
| 114,984 | 158,884 | 109,657 | 110,560 | 109,690 | ||||||||||||||||||||||||||||
| Other income / (expense): | ||||||||||||||||||||||||||||||||
| Interest expense | (13,898) | (13,917) | (12,450) | (12,345) | (12,580) | |||||||||||||||||||||||||||
| Other income / (expense) | 2,024 | 2,882 | 2,337 | 2,631 | 2,356 | |||||||||||||||||||||||||||
Gain / (loss) on sale of real estate (2) | 50,673 | — | — | — | — | |||||||||||||||||||||||||||
| Net income / (loss) | 59,964 | (31,755) | 11,301 | 9,944 | 9,343 | |||||||||||||||||||||||||||
| Less: Net (income) / loss applicable to noncontrolling interest | — | 5 | 5 | 3 | 1 | |||||||||||||||||||||||||||
| Net income / (loss) applicable to Piedmont | $ | 59,964 | $ | (31,750) | $ | 11,306 | $ | 9,947 | $ | 9,344 | ||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 123,510 | 123,742 | 124,627 | 124,704 | 124,450 | |||||||||||||||||||||||||||
| Net income / (loss) per share applicable to common stockholders - diluted | $ | 0.49 | $ | (0.26) | $ | 0.09 | $ | 0.08 | $ | 0.08 | ||||||||||||||||||||||
| Common stock outstanding at end of period | 123,331 | 123,077 | 124,136 | 124,132 | 124,029 | |||||||||||||||||||||||||||
| (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 first quarter of 2022 was primarily related to the sale of 225 and 235 Presidential Way in Woburn, MA. The impairment loss reflected in the fourth quarter of 2021 was related to a reduction in the holding period assumptions for Two Pierce Place in Itasca, IL. Two Pierce Place was subsequently sold in the first quarter of 2022. | ||||
9
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
| Three Months Ended | ||||||||||||||||||||
| 3/31/2022 | 3/31/2021 | Change ($) | Change (%) | |||||||||||||||||
| Revenues: | ||||||||||||||||||||
Rental income (1) | $ | 109,732 | $ | 105,170 | $ | 4,562 | 4.3 | % | ||||||||||||
Tenant reimbursements (1) | 22,180 | 20,742 | 1,438 | 6.9 | % | |||||||||||||||
| Property management fee revenue | 651 | 758 | (107) | (14.1) | % | |||||||||||||||
| Other property related income | 3,586 | 2,587 | 999 | 38.6 | % | |||||||||||||||
| 136,149 | 129,257 | 6,892 | 5.3 | % | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Property operating costs | 53,622 | 51,424 | (2,198) | (4.3) | % | |||||||||||||||
| Depreciation | 31,515 | 28,103 | (3,412) | (12.1) | % | |||||||||||||||
| Amortization | 22,252 | 22,912 | 660 | 2.9 | % | |||||||||||||||
| General and administrative | 7,595 | 7,251 | (344) | (4.7) | % | |||||||||||||||
| 114,984 | 109,690 | (5,294) | (4.8) | % | ||||||||||||||||
| Other income / (expense): | ||||||||||||||||||||
| Interest expense | (13,898) | (12,580) | (1,318) | (10.5) | % | |||||||||||||||
| Other income / (expense) | 2,024 | 2,356 | (332) | (14.1) | % | |||||||||||||||
Gain / (loss) on sale of real estate (2) | 50,673 | — | 50,673 | 100.0 | % | |||||||||||||||
| Net income / (loss) | 59,964 | 9,343 | 50,621 | 541.8 | % | |||||||||||||||
| Less: Net (income) / loss applicable to noncontrolling interest | — | 1 | (1) | (100.0) | % | |||||||||||||||
| Net income / (loss) applicable to Piedmont | $ | 59,964 | $ | 9,344 | $ | 50,620 | 541.7 | % | ||||||||||||
| Weighted average common shares outstanding - diluted | 123,510 | 124,450 | ||||||||||||||||||
| Net income / (loss) per share applicable to common stockholders - diluted | $ | 0.49 | $ | 0.08 | ||||||||||||||||
| Common stock outstanding at end of period | 123,331 | 124,029 | ||||||||||||||||||
| (1) | The presentation method used for this line is not in conformance with GAAP. To be in conformance with the current GAAP standard, the Company would need to combine amounts presented on the rental income line with amounts presented on the tenant reimbursements line and present that aggregated figure on one line entitled "rental and tenant reimbursement revenue." The amounts presented on this line were determined based upon the Company's interpretation of the rental charges and billing method provisions in each of the Company's lease documents. | ||||
| (2) | The gain on sale of real estate for the three months ended March 31, 2022 was primarily related to the sale of 225 and 235 Presidential Way in Woburn, MA. | ||||
10
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 | |||||||||||||||||
| 3/31/2022 | 3/31/2021 | ||||||||||||||||
| GAAP net income / (loss) applicable to common stock | $ | 59,964 | $ | 9,344 | |||||||||||||
Depreciation (1) (2) | 31,332 | 27,812 | |||||||||||||||
Amortization (1) | 22,240 | 22,900 | |||||||||||||||
Loss / (gain) on sale of properties | (50,673) | — | |||||||||||||||
| NAREIT funds from operations and core funds from operations applicable to common stock | 62,863 | 60,056 | |||||||||||||||
| Adjustments: | |||||||||||||||||
| Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on senior notes | 778 | 654 | |||||||||||||||
| Depreciation of non real estate assets | 173 | 282 | |||||||||||||||
Straight-line effects of lease revenue (1) | (2,577) | (4,103) | |||||||||||||||
| Stock-based compensation adjustments | (552) | 1,111 | |||||||||||||||
Amortization of lease-related intangibles (1) | (3,162) | (2,792) | |||||||||||||||
Non-incremental capital expenditures (3) | |||||||||||||||||
| Building/Construction/Development | (3,506) | (12,921) | |||||||||||||||
| Tenant Improvements | (11,506) | (3,225) | |||||||||||||||
| Leasing Costs | (3,935) | (1,201) | |||||||||||||||
| Adjusted funds from operations applicable to common stock | $ | 38,576 | $ | 37,861 | |||||||||||||
| Weighted average common shares outstanding - diluted | 123,510 | 124,450 | |||||||||||||||
| Funds from operations per share (diluted) | $ | 0.51 | $ | 0.48 | |||||||||||||
| Core funds from operations per share (diluted) | $ | 0.51 | $ | 0.48 | |||||||||||||
| Change period over period | 6.3 | % | |||||||||||||||
| Common stock outstanding at end of period | 123,331 | 124,029 | |||||||||||||||
| (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 33. | ||||
11
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
| Three Months Ended | ||||||||||||||
| 3/31/2022 | 3/31/2021 | |||||||||||||
| Net income / (loss) applicable to Piedmont | $ | 59,964 | $ | 9,344 | ||||||||||
| Net income / (loss) applicable to noncontrolling interest | — | (1) | ||||||||||||
Interest expense | 13,898 | 12,580 | ||||||||||||
Depreciation (1) | 31,505 | 28,094 | ||||||||||||
Amortization (1) | 22,240 | 22,900 | ||||||||||||
| Depreciation and amortization attributable to noncontrolling interests | 22 | 21 | ||||||||||||
(Gain) / loss on sale of properties | (50,673) | — | ||||||||||||
EBITDAre and Core EBITDA (2) | 76,956 | 72,938 | ||||||||||||
General & administrative expenses | 7,595 | 7,251 | ||||||||||||
Non-cash general reserve for uncollectible accounts (3) | — | 412 | ||||||||||||
Management fee revenue (4) | (362) | (390) | ||||||||||||
Other (income) / expense (1) (5) | (1,808) | (2,141) | ||||||||||||
Straight-line effects of lease revenue (1) | (2,577) | (4,103) | ||||||||||||
| Straight-line effects of lease revenue attributable to noncontrolling interests | (1) | 1 | ||||||||||||
Amortization of lease-related intangibles (1) | (3,162) | (2,792) | ||||||||||||
| Property net operating income (cash basis) | 76,641 | 71,176 | ||||||||||||
| Deduct net operating (income) / loss from: | ||||||||||||||
Acquisitions (6) | (2,697) | — | ||||||||||||
Dispositions (7) | (475) | (1,220) | ||||||||||||
Other investments (8) | 189 | 154 | ||||||||||||
| Same store net operating income (cash basis) | $ | 73,658 | $ | 70,110 | ||||||||||
| Change period over period | 5.1 | % | 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. 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, 2022, Piedmont recognized $0.3 million of termination income, as compared with $2.7 million during the same period in 2021 and $3.0 million during the 2021 calendar year. | ||||
| (3) | 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. | ||||
| (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 999 Peachtree Street in Atlanta, GA, purchased on October 22, 2021. | ||||
| (7) | Dispositions include Two Pierce Place in Itasca, IL, sold on January 25, 2022, and 225 and 235 Presidential Way in Woburn, MA, sold on January 28, 2022. | ||||
| (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 32. The operating results from 222 South Orange Avenue in Orlando, FL, are included in this line item. | ||||
12
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Accrual Basis)
Unaudited (in thousands)
| Three Months Ended | ||||||||||||||
| 3/31/2022 | 3/31/2021 | |||||||||||||
| Net income / (loss) applicable to Piedmont | $ | 59,964 | $ | 9,344 | ||||||||||
| Net income / (loss) applicable to noncontrolling interest | — | (1) | ||||||||||||
Interest expense | 13,898 | 12,580 | ||||||||||||
Depreciation (1) | 31,505 | 28,094 | ||||||||||||
Amortization (1) | 22,240 | 22,900 | ||||||||||||
| Depreciation and amortization attributable to noncontrolling interests | 22 | 21 | ||||||||||||
(Gain) / loss on sale of properties | (50,673) | — | ||||||||||||
EBITDAre and Core EBITDA (2) | 76,956 | 72,938 | ||||||||||||
General & administrative expenses | 7,595 | 7,251 | ||||||||||||
Management fee revenue (3) | (362) | (390) | ||||||||||||
Other (income) / expense (1) (4) | (1,808) | (2,141) | ||||||||||||
| Property net operating income (accrual basis) | 82,381 | 77,658 | ||||||||||||
| Deduct net operating (income) / loss from: | ||||||||||||||
Acquisitions (5) | (3,837) | — | ||||||||||||
Dispositions (6) | (547) | (1,502) | ||||||||||||
Other investments (7) | 247 | 211 | ||||||||||||
| Same store net operating income (accrual basis) | $ | 78,244 | $ | 76,367 | ||||||||||
| Change period over period | 2.5 | % | 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. 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, 2022, Piedmont recognized $0.3 million of termination income, as compared with $2.7 million during the same period in 2021 and $3.0 million during the 2021 calendar year. | ||||
| (3) | Presented net of related operating expenses incurred to earn the revenue; therefore, the information presented on this line will not tie to the data presented on the income statements. | ||||
| (4) | Figures presented on this line may not tie back to the relevant sources as some activity is attributable to property operations and is, therefore, presented in property net operating income. | ||||
| (5) | Acquisitions include 999 Peachtree Street in Atlanta, GA, purchased on October 22, 2021. | ||||
| (6) | Dispositions include Two Pierce Place in Itasca, IL, sold on January 25, 2022, and 225 and 235 Presidential Way in Woburn, MA, sold on January 28, 2022. | ||||
| (7) | Other investments include active out-of-service redevelopment and development projects, land, and recently completed redevelopment and development projects. Additional information on our land holdings can be found on page 32. The operating results from 222 South Orange Avenue in Orlando, FL, are included in this line item. | ||||
13
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Financial Components)
Unaudited (in thousands)
| Three Months Ended | ||||||||||||||||||||
| 3/31/2022 | 3/31/2021 | Change ($) | Change (%) | |||||||||||||||||
| Revenue | ||||||||||||||||||||
Cash rental income (1) | $ | 99,221 | $ | 96,145 | $ | 3,076 | 3.2 | % | ||||||||||||
Tenant reimbursements (2) | 21,727 | 20,140 | 1,587 | 7.9 | % | |||||||||||||||
Straight line effects of lease revenue (3) | 2,277 | 3,821 | (1,544) | (40.4) | % | |||||||||||||||
| Amortization of lease-related intangibles | 2,309 | 2,848 | (539) | (18.9) | % | |||||||||||||||
Total rents | 125,534 | 122,954 | 2,580 | 2.1 | % | |||||||||||||||
Other property related income (4) | 3,488 | 2,906 | 582 | 20.0 | % | |||||||||||||||
| Total revenue | 129,022 | 125,860 | 3,162 | 2.5 | % | |||||||||||||||
Property operating expense (5) | 50,993 | 49,709 | (1,284) | (2.6) | % | |||||||||||||||
| Property other income / (expense) | 215 | 216 | (1.0) | (0.5) | % | |||||||||||||||
| Same store net operating income (accrual) | $ | 78,244 | $ | 76,367 | $ | 1,877 | 2.5 | % | ||||||||||||
| Less: | ||||||||||||||||||||
| Straight line effects of lease revenue | (2,277) | (3,821) | 1,544 | 40.4 | % | |||||||||||||||
| Amortization of lease-related intangibles | (2,309) | (2,848) | 539 | 18.9 | % | |||||||||||||||
| Non-cash general reserve for uncollectible accounts | — | 412 | (412) | (100.0) | % | |||||||||||||||
| Same store net operating income (cash) | $ | 73,658 | $ | 70,110 | $ | 3,548 | 5.1 | % | ||||||||||||
| (1) | The increase in cash rental income for the three months ended March 31, 2022 as compared to the same period in 2021 was principally due to the burn off of significant rental abatements at several properties in the portfolio, including Enclave Place in Houston, TX, and rental increases on two large leases at 60 Broad Street in New York, NY. | ||||
| (2) | The increase in tenant reimbursements for the three months ended March 31, 2022 as compared to the same period in 2021 was primarily the result of the expiration of operating expense recovery abatements at Enclave Place in Houston, TX, and 90 Central Street in Boxborough, MA. | ||||
| (3) | The decrease in straight line effects of lease revenue for the three months ended March 31, 2022 as compared to the same period in 2021 was primarily due to the expiration of the rental abatement periods of several large new and renewal leases in the portfolio. | ||||
| (4) | The increase in other property related income for the three months ended March 31, 2022 as compared to the same period in 2021 was primarily related to increased transient parking demand across the portfolio as a result of post-pandemic increased business activity. | ||||
| (5) | The increase in property operating expense for the three months ended March 31, 2022 as compared to the same period in 2021 was primarily associated with increased utility costs as a result of colder than anticipated winter temperatures along with increased janitorial costs as a result of increasing physical office space utilization by tenants across our portfolio. | ||||
14
Piedmont Office Realty Trust, Inc.
Capitalization Analysis
Unaudited (in thousands except for per share data)
| As of | As of | ||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||
| Market Capitalization | |||||||||||
| Common stock price | $17.22 | $18.38 | |||||||||
| Total shares outstanding | 123,331 | 123,077 | |||||||||
Equity market capitalization (1) | $2,123,757 | $2,262,150 | |||||||||
| Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs) | $1,681,000 | $1,890,000 | |||||||||
Total market capitalization (1) | $3,804,757 | $4,152,150 | |||||||||
Total debt / Total market capitalization (1) | 44.2 | % | 45.5 | % | |||||||
| Ratios & Information for Debt Holders | |||||||||||
Total gross assets (2) | $4,860,341 | $5,098,443 | |||||||||
Total debt / Total gross assets (2) | 34.6 | % | 37.1 | % | |||||||
Average net debt to Core EBITDA - quarterly (3) | 5.9 x | 6.0 x | |||||||||
Average net debt to Core EBITDA - trailing twelve months (4) | 5.8 x | 5.7 x | |||||||||
| (1) | Reflects common stock closing price, shares outstanding, and outstanding debt as of the end of the reporting period, as appropriate. | ||||
| (2) | Total gross assets is defined as total assets with the add-back of accumulated depreciation and accumulated amortization related to real estate assets and accumulated amortization related to deferred lease costs. | ||||
| (3) | For the purposes of this calculation, we annualize the Core EBITDA for the quarter and use the average daily balance of debt outstanding during the quarter, less cash and cash equivalents and escrow deposits and restricted cash as of the end of the quarter. | ||||
| (4) | For the purposes of this calculation, we use the sum of Core EBITDA for the trailing four quarters and the average daily balance of debt outstanding for the trailing four quarters, less the average of cash and cash equivalents and escrow deposits and restricted cash as of the end of each quarter in the trailing four quarter period. | ||||
15
Piedmont Office Realty Trust, Inc.
Debt Summary
As of March 31, 2022
Unaudited ($ in thousands)
| Floating Rate & Fixed Rate Debt |  | ||||||||||||||||
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate (2) | Weighted Average Maturity | ||||||||||||||
| Floating Rate | $231,000 | (3) | 1.38% | 29.7 months | |||||||||||||
| Fixed Rate | 1,450,000 | 3.51% | 58.0 months | ||||||||||||||
| Total | $1,681,000 | 3.22% | 54.1 months | ||||||||||||||
| Unsecured & Secured Debt |  | ||||||||||||||||
Debt (1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate (2) | Weighted Average Maturity | ||||||||||||||
| Unsecured | $1,681,000 | 3.22% | 54.1 months | ||||||||||||||
| Secured | — | —% | N/A | ||||||||||||||
| Total | $1,681,000 | 3.22% | 54.1 months | ||||||||||||||
Debt Maturities (4) | ||||||||||||||||||||
| Maturity Year | Unsecured Debt - Principal Amount Outstanding (1) | Weighted Average Stated Interest Rate (2) | Percentage of Total |  | ||||||||||||||||
| 2022 | — | N/A | —% | |||||||||||||||||
| 2023 | 431,000 | 3.02% | 25.6% | |||||||||||||||||
| 2024 | 400,000 | 4.45% | 23.8% | |||||||||||||||||
| 2025 | 250,000 | 2.26% | 14.9% | |||||||||||||||||
| 2026 | — | N/A | —% | |||||||||||||||||
| 2027 + | 600,000 | 2.95% | 35.7% | |||||||||||||||||
| Total | $1,681,000 | 3.22% | 100.0% | |||||||||||||||||
| (1) | All of Piedmont's outstanding debt as of March 31, 2022, was unsecured, interest-only debt. | ||||
| (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 $81 million outstanding balance as of March 31, 2022 on the $500 million unsecured revolving credit facility and $150 million in principal amount of the $250 million unsecured term loan that closed in 2018 that remained unhedged as of March 31, 2022. | ||||
| (4) | For loans which provide extension options that are conditional solely upon the Company providing proper notice to the loan's administrative agent and the payment of an extension fee, the final extended maturity date is reflected herein. | ||||
16
Piedmont Office Realty Trust, Inc.
Debt Detail
Unaudited ($ in thousands)
Facility (1) | Stated Rate | Maturity | Principal Amount Outstanding as of March 31, 2022 | ||||||||||||||
| $350.0 Million Unsecured 2013 Senior Notes | 3.40 | % | (2) | 6/1/2023 | $ | 350,000 | |||||||||||
$500.0 Million Unsecured Line of Credit (3) | 1.36 | % | (4) | 9/29/2023 | 81,000 | ||||||||||||
| $400.0 Million Unsecured 2014 Senior Notes | 4.45 | % | (5) | 3/15/2024 | 400,000 | ||||||||||||
| $250.0 Million Unsecured 2018 Term Loan | 2.26 | % | (6) | 3/31/2025 | 250,000 | ||||||||||||
| $300.0 Million Unsecured 2020 Senior Notes | 3.15 | % | (7) | 8/15/2030 | 300,000 | ||||||||||||
| $300.0 Million Unsecured 2021 Senior Notes | 2.75 | % | (8) | 4/1/2032 | 300,000 | ||||||||||||
Total Debt - Principal Amount Outstanding / Weighted Average Stated Rate (9) | 3.22 | % | $ | 1,681,000 | |||||||||||||
GAAP Accounting Adjustments (10) | (11,447) | ||||||||||||||||
| Total Debt - GAAP Amount Outstanding | $ | 1,669,553 | |||||||||||||||
| (1) | All of Piedmont’s outstanding debt as of March 31, 2022, was unsecured, interest-only debt. | ||||
| (2) | 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%. | ||||
| (3) | All of Piedmont’s outstanding debt as of March 31, 2022, was term debt with the exception of $81 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. | ||||
| (4) | 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, 2022. 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, 2022) based on Piedmont's then current credit rating. | ||||
| (5) | 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%. | ||||
| (6) | 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, 2022; 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, 2022) based on Piedmont's then current credit rating. | ||||
| (7) | 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%. | ||||
| (8) | The $300 million unsecured senior notes were offered for sale at 99.510% of the principal amount. The resulting effective cost of the financing is approximately 2.80% 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 2.78%. | ||||
| (9) | Weighted average is based on the principal amounts outstanding and interest rates at March 31, 2022. | ||||
| (10) | 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. The original issue discounts and fees are amortized to interest expense over the contractual term of the related debt. | ||||
17
Piedmont Office Realty Trust, Inc.
Debt Covenant & Ratio Analysis (for Debt Holders)
As of March 31, 2022
Unaudited
| Three Months Ended | ||||||||||||||||||||
Bank Debt Covenant Compliance (1) | Required | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | ||||||||||||||
| Maximum leverage ratio | 0.60 | 0.34 | 0.38 | 0.35 | 0.35 | 0.36 | ||||||||||||||
Minimum fixed charge coverage ratio (2) | 1.50 | 5.30 | 5.32 | 5.28 | 5.15 | 4.96 | ||||||||||||||
| Maximum secured indebtedness ratio | 0.40 | — | — | — | — | 0.01 | ||||||||||||||
| Minimum unencumbered leverage ratio | 1.60 | 2.84 | 2.49 | 2.74 | 2.74 | 2.72 | ||||||||||||||
Minimum unencumbered interest coverage ratio (3) | 1.75 | 5.28 | 5.36 | 5.49 | 5.48 | 5.44 | ||||||||||||||
| Three Months Ended | ||||||||||||||||||||
Bond Covenant Compliance (4) | Required | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | ||||||||||||||
| Total debt to total assets | 60% or less | 40.9% | 43.5% | 40.4% | 40.8% | 41.1% | ||||||||||||||
| Secured debt to total assets | 40% or less | —% | —% | —% | —% | 0.7% | ||||||||||||||
| Ratio of consolidated EBITDA to interest expense | 1.50 or greater | 6.04 | 6.13 | 6.11 | 6.06 | 5.93 | ||||||||||||||
| Unencumbered assets to unsecured debt | 150% or greater | 244% | 230% | 248% | 245% | 243% | ||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||
| Other Debt Coverage Ratios for Debt Holders | March 31, 2022 | December 31, 2021 | ||||||
Average net debt to core EBITDA (5) | 5.9 x | 5.7 x | ||||||
Fixed charge coverage ratio (6) | 5.2 x | 5.4 x | ||||||
Interest coverage ratio (7) | 5.2 x | 5.4 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, the Second Supplemental Indenture dated August 12, 2020, and the Third Supplemental Indenture dated September 20, 2021 for detailed information about the calculations. | ||||
| (5) | For the purposes of this calculation, we use the average daily balance of debt outstanding during the identified period, less the average of cash and cash equivalents and escrow deposits and restricted cash as of the end of each quarter in the relevant 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, 2022 and December 31, 2021. The Company had capitalized interest of $963,350 for the three months ended March 31, 2022 and $3,693,032 for the twelve months ended December 31, 2021. The Company had no principal amortization for the three months ended March 31, 2022, as it repaid its last remaining amortizing loan during the second quarter of 2021; the Company had principal amortization of $372,455 for the twelve months ended December 31, 2021. | ||||
| (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 $963,350 for the three months ended March 31, 2022 and $3,693,032 for the twelve months ended December 31, 2021. | ||||
18
Piedmont Office Realty Trust, Inc.
Tenant Diversification (1)
As of March 31, 2022
(in thousands except for number of properties)
| Tenant | Credit Rating (2) | Number of Properties | Lease Term Remaining (3) | Annualized Lease Revenue | Percentage of Annualized Lease Revenue (%) | Leased Square Footage | Percentage of Leased Square Footage (%) | |||||||||||||||||||
| US Bancorp | A+ / A2 | 3 | 1.6 | $27,447 | 5.2 | 787 | 5.6 | |||||||||||||||||||
| State of New York | AA+ / Aa1 | 1 | 15.1 | 26,863 | 5.1 | 502 | 3.6 | |||||||||||||||||||
| Amazon | AA / A1 | 4 | 2.7 | 14,709 | 2.8 | 337 | 2.4 | |||||||||||||||||||
| City of New York | AA / Aa2 | 1 | 4.2 | 14,602 | 2.8 | 313 | 2.2 | |||||||||||||||||||
| Microsoft | AAA / Aaa | 2 | 9.1 | 11,759 | 2.2 | 322 | 2.3 | |||||||||||||||||||
| Transocean | CCC / Caa3 | 1 | 14.1 | 10,974 | 2.1 | 301 | 2.2 | |||||||||||||||||||
| Harvard University | AAA / Aaa | 2 | 10.1 | 8,867 | 1.7 | 129 | 0.9 | |||||||||||||||||||
| VMware, Inc. | BBB- / Baa3 | 1 | 5.3 | 8,115 | 1.5 | 215 | 1.5 | |||||||||||||||||||
| Schlumberger Technology | A / A2 | 1 | 6.8 | 7,926 | 1.5 | 254 | 1.8 | |||||||||||||||||||
| Gartner | BB+ / Ba2 | 2 | 12.3 | 7,489 | 1.4 | 207 | 1.5 | |||||||||||||||||||
| Fiserv | BBB / Baa2 | 1 | 5.3 | 7,211 | 1.4 | 195 | 1.4 | |||||||||||||||||||
| Salesforce.com | A+ / A2 | 1 | 7.3 | 7,069 | 1.3 | 182 | 1.3 | |||||||||||||||||||
| Epsilon Data Management / subsidiary of Publicis | BBB / Baa2 | 1 | 4.3 | 6,556 | 1.2 | 222 | 1.6 | |||||||||||||||||||
| Eversheds Sutherland | No Rating Available | 1 | 4.1 | 6,473 | 1.2 | 180 | 1.3 | |||||||||||||||||||
| Applied Predictive Technologies / subsidiary of MasterCard | A+ / A1 | 1 | 6.2 | 6,370 | 1.2 | 133 | 1.0 | |||||||||||||||||||
| International Food Policy Research Institute | No Rating Available | 1 | 7.1 | 6,154 | 1.2 | 102 | 0.7 | |||||||||||||||||||
| Ryan | No Rating Available | 1 | 0.9 | 6,026 | 1.1 | 170 | 1.2 | |||||||||||||||||||
| Cargill | A / A2 | 1 | 1.8 | 5,476 | 1.0 | 268 | 1.9 | |||||||||||||||||||
| Bank of America | A- / A2 | 5 | 2.3 | 5,288 | 1.0 | 100 | 0.7 | |||||||||||||||||||
| Other | Various | 334,112 | 63.1 | 9,107 | 64.9 | |||||||||||||||||||||
| Total | $529,486 | 100.0 | 14,026 | 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) | Weighted average lease term remaining in years weighted by Annualized Lease Revenue. | ||||
19
Piedmont Office Realty Trust, Inc.
Tenant Diversification
As of March 31, 2022
Percentage of Annualized Leased Revenue (%)
March 31, 2022 as compared to December 31, 2021
20
Piedmont Office Realty Trust, Inc.
Tenant Credit Rating & Lease Distribution Information
As of March 31, 2022
Tenant Credit Rating (1)
| Rating Level | Annualized Lease Revenue (in thousands) | Percentage of Annualized Lease Revenue (%) | ||||||
| AAA / Aaa | $30,093 | 5.7 | ||||||
| AA / Aa | 60,933 | 11.5 | ||||||
| A / A | 88,851 | 16.8 | ||||||
| BBB / Baa | 51,762 | 9.8 | ||||||