pdm-20221102
0001042776false00010427762022-11-022022-11-02

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):  November 2, 2022
 
Piedmont Office Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number:  001-34626
 
Maryland58-2328421
(State or other jurisdiction of(IRS Employer
incorporation)Identification No.)

5565 Glenridge Connector Ste. 450
Atlanta, Georgia 30342

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

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

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

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

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

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

Emerging growth company 

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




Item 2.02    Results of Operations and Financial Condition.

On November 2, 2022, Piedmont Office Realty Trust, Inc. (the "Registrant") issued a press release announcing its financial results for the third quarter 2022, and published supplemental information for the third 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
104Cover Page Interactive Data File (embedded within the Inline XBRL document)







SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
 
  Piedmont Office Realty Trust, Inc.
 (Registrant)
Dated:November 2, 2022By:/s/    Robert E. Bowers
  Robert E. Bowers
  Chief Financial Officer and Executive Vice President




Document

EXHIBIT 99.1
https://cdn.kscope.io/7957f2dfa7c5a2a2062090e934311a03-image1.jpg

Piedmont Office Realty Trust Reports Third Quarter 2022 Results
ATLANTA, November 2, 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 September 30, 2022.

Highlights for the Three and Nine Months Ended September 30, 2022:

Financial Results:
Three Months EndedNine Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Net income applicable to Piedmont$3,331$11,306$71,261$30,597
Net income per share applicable to common stockholders - diluted $0.03$0.09$0.58$0.25
Gain on sale of real estate assets— — $50,674— 
Core Funds From Operations ("Core FFO") applicable to common stock$61,352$62,004$185,835$182,413
Core FFO per diluted share$0.50$0.50$1.50$1.47
Increase/ (Decrease) in Same Store Net Operating Income ("Same Store NOI") - Cash Basis(0.3)%2.2 %
Increase in Same Store NOI - Accrual Basis0.3 %1.8 %
Adjusted Funds From Operations applicable to common stock$43,482$41,213$130,958$120,735
Net income applicable to Piedmont for the three months ended September 30, 2022 decreased as compared with the three months ended September 30, 2021 as a result of a $7.3 million increase in depreciation and amortization expense primarily resulting from acquisition activity during the current period as well as a $4.8 million increase in interest expense. The increase in interest expense was driven by additional debt associated with recent acquisition activity as well as rising interest rates. Other income for the quarter also decreased approximately $2.0 million due to the payoff of notes receivable due from the purchaser of the Company's New Jersey Portfolio in March of 2022. The above decreases in net income were partially offset by additional operating income as a result of successful leasing, rental rate roll ups and asset recycling activity over the last twelve months.
Irrespective of the $4.8 million increase in interest expense during the quarter ended September 30, 2022 as compared to the quarter ended September 30, 2021 mentioned above, the Company was able to achieve $0.50 of Core FFO per diluted share, consistent with the third quarter of 2021, primarily due to successful leasing, rental rate roll ups and asset recycling.
As expected, Same Store NOI - Cash Basis decreased marginally during the third quarter due to recent leasing activity resulting in a 60% increase in leased square footage under abatement as of



September 30, 2022 compared to September 30, 2021. Same Store NOI on a cash and accrual basis is anticipated to increase approximately 2-3% for the year.

Leasing:
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
# of transactions54 157 
Total leasing sf444,0001,720,000
New tenant leasing sf124,000595,000
Cash rent roll up33.1 %10.5 %
Accrual rent roll up37.6 %18.5 %
Leased Percentage as of period end86.8 %
The largest new tenant lease completed during the quarter was an approximately 35,000 square feet headquarter relocation for a financial services firm through 2028 at Crescent Ridge II in Minneapolis, MN.
The largest renewal completed during the quarter was Ryan LLC's approximately 178,000 square feet at Three Galleria Tower in Dallas, TX for two to five years. This renewal heavily influenced the large cash and accrual rent roll ups for the quarter; however, excluding this lease, cash and accrual rent roll ups for the quarter were 9.9% and 12.6%, respectively.
The Company's scheduled lease expirations for the remainder of 2022 and 2023 are low, representing less than 10% of its annualized lease revenue.
As of September 30, 2022, the Company had approximately 1.2 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $38 million of future additional annual cash revenue.

Capital Markets:
As previously announced, Piedmont acquired 1180 Peachtree Street, an iconic, 41-story, Class AA office building located at the epicenter of Midtown Atlanta, GA, for a net purchase price of approximately $465 million, which included the assumption of an existing $197 million, 4.1% fixed rate mortgage secured by the property that matures in 2028. The LEED Platinum, 95% leased building has over seven years of weighted-average lease term at roughly 20% below-market rents and provides tenants with a best-in-class amenity set along with unmatched views of the city of Atlanta across its full-glass façade. With this acquisition in Midtown Atlanta, Piedmont now owns 1.3 million square feet in this dynamic submarket and is the largest office owner along Peachtree Street in Midtown. The initial accrual-basis NOI yield for the transaction was in the mid-6% range. The cash portion of the net purchase price was initially funded primarily from the proceeds of a new $200 million bridge loan further described below; however, the Company anticipates using the net sales proceeds from the disposition of non-strategic assets over the next 12 months to fund the acquisition.

Balance Sheet:



September 30, 2022December 31, 2021
Total Real Estate Assets (in millions)
$3,573$3,245
Total Assets (in millions)
$4,185$3,931
Total Debt (in millions)
$2,145$1,878
Weighted Average Cost of Debt3.69 %2.93 %
Debt-to-Gross Assets Ratio39.8 %37.1 %
Average Net Debt-to-Core EBITDA (ttm)5.9 x5.7 x
In addition to assuming the $197 million mortgage in conjunction with the purchase of 1180 Peachtree Street mentioned above, Piedmont also entered into a $200 million, unsecured, floating rate term loan facility initially bearing interest at Adjusted Term SOFR Rate (as defined in the term loan agreement) + 100 bps to fund a majority of the cash portion of the acquisition. Piedmont intends to use the proceeds from subsequent dispositions of assets to pay down outstanding debt and make the acquisition leverage neutral from a balance sheet perspective.

ESG and Operations:
Piedmont published its Annual ESG report, available on its website at www.piedmontreit.com/ESG

Brent Smith, Piedmont's President and Chief Executive Officer, said, "We are pleased with our third quarter operating and financial results including over 440,000 square feet of leasing at meaningfully higher rental rates, continuing to demonstrate tenant preferences for place making, amenity-rich, mixed-use environments. Strategically, we further enhanced our Sunbelt market exposure with the acquisition of 1180 Peachtree Street, a skyline defining asset in the heart of Midtown Atlanta, which will enable us to recycle capital from our two Cambridge, Massachusetts assets in a tax-efficient manner. Notwithstanding our accomplishments in the third quarter, the broader operating environment continues to pose numerous challenges to the commercial real estate sector including the impact of remote work, rising inflation and interest rates as well as the potential for an economic recession. Regardless of these headwinds, our current leasing pipeline remains stable, with over 150,000 square feet of leases already executed thus far in the fourth quarter and another 300,000 square feet in documentation, positioning the Company to close 2022 having completed over two million square feet of leasing and the portfolio approximately 87% leased. While both the public and private markets continue to struggle with the trajectory of the office sector, we believe Piedmont’s focus on high-quality assets in amenity-rich office environments in conjunction with a well-capitalized, low leveraged balance sheet positions us to successfully navigate these challenging waters."

Fourth Quarter 2022 Dividend

As previously announced, on October 25, 2022, the board of directors of Piedmont declared a dividend for the fourth 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 November 25, 2022, payable on January 3, 2023.




Guidance for 2022

After considering year-to-date results and updated annual forecasts, including much higher interest expense resulting from rapidly rising interest rates, the Company is narrowing its guidance for the year ending December 31, 2022 as follows:

RevisedPrevious
(in millions, except per share data)LowHighLowHigh
Net income$73$74$80$83
Add:
Depreciation133 134 133 136 
Amortization91 92 84 86 
Deduct:
Gain on sale of real estate assets(51)(51)(51)(51)
Core FFO applicable to common stock$246$249$246$254
Core FFO per diluted share$1.99$2.01$1.99$2.05


Year-end leased percentage is anticipated to be around 87% and Same Store NOI on a cash and accrual basis is anticipated to increase approximately 2-3% for the year.
This guidance is based on information available to management as of the date of this release and reflects management's view of current market conditions. It incorporates certain economic and operational assumptions and projections, including the impacts of completed transactional activity through September of 2022 and the disposition of the Cambridge assets mentioned above around the end of 2022, but no other speculative transactional activity. Actual results could differ materially from these estimates based on a variety of factors, particularly the timing of any future 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.

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 September 30, 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, November 3, 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 (877) 545-0320 for participants in the United States and Canada and (973) 528-0002 for international participants. Participant Access Code is 136718. A replay of the conference call will be available through 9:00 A.M. Eastern standard time on November 17, 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 46892. 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 third 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 September 30, 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 2022 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 known and unknown risks and uncertainties, which could cause actual results to differ materially from those 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 the Company's use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue" or similar words or phrases that indicate predictions of future events or trends or that do not relate solely to historical matters. Examples of such statements in this press release include: whether the disposition of the Company's Cambridge assets will occur around the end of 2022, if at all; whether Piedmont will end the year with 2



million square feet of leasing completed, the portfolio around 87% leased and Same Store NOI - cash and accrual basis increasing 2-3%; and the Company's estimated range of Net Income, Depreciation, Amortization, Core FFO and 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 (including work from home), technological (e.g. Metaverse, Zoom, etc), and other changes (including accounting standards) that impact the real estate market generally, the office sector or the patterns of use of commercial office space in general, or the markets where we primarily operate or have high concentrations of annualized lease revenue; the impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases; lease terminations, lease defaults, lease contractions, or changes in the financial condition of our tenants, particularly by one of our large lead tenants; impairment charges on our long-lived assets or goodwill resulting therefrom; the success of our real estate strategies and investment objectives, including our ability to implement successful redevelopment and development strategies or identify and consummate suitable acquisitions and divestitures; the illiquidity of real estate investments, including economic changes, such as rising interest rates, which could impact the number of buyers/sellers of our target properties, and regulatory restrictions to which real estate investment trusts ("REITs") are subject and the resulting impediment on our ability to quickly respond to adverse changes in the performance of our properties; the risks and uncertainties associated with our acquisition and disposition of properties, many of which risks and uncertainties may not be known at the time of acquisition or disposition; development and construction delays, including the potential of supply chain disruptions, and resultant increased costs and risks; 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, including environmental standards imposed on office building owners; 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, such as potential changes in the political environment, a reduction in federal or state funding of our governmental tenants, or 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 the method pursuant to which the London Interbank Offered Rate ("LIBOR") and the Secured Overnight Financing Rate (“SOFR”) rates are determined and the planned phasing out of United States dollar ("USD") LIBOR after June 2023; changing capital reserve requirements on our lenders and rapidly rising interest rates in the public bond markets could impact our ability to finance properties or refinance existing debt or significantly increase operating/financing costs; the effect of future offerings of debt or equity securities on the value of our common stock; additional risks and costs associated with inflation and continuing increases in the rate of inflation, including the possibility of a recession that could negatively impact our operations and the operations of our tenants and their ability to pay rent; uncertainties associated with environmental and regulatory matters; 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 (the “Code”), 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 experienced during the 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)
September 30, 2022December 31, 2021
Assets:
Real estate assets, at cost:
Land
$578,722 $529,941 
Buildings and improvements
3,751,722 3,374,903 
Buildings and improvements, accumulated depreciation
(926,357)(861,206)
Intangible lease assets
212,248 178,157 
Intangible lease assets, accumulated amortization
(88,721)(83,777)
Construction in progress
44,977 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
3,572,591 3,245,311 
Cash and cash equivalents
10,653 7,419 
Tenant receivables
7,796 2,995 
Straight line rent receivables
173,122 162,632 
Notes receivable
— 118,500 
Restricted cash and escrows
2,191 1,441 
Prepaid expenses and other assets
23,925 20,485 
Goodwill
98,918 98,918 
Interest rate swaps
3,760 — 
Deferred lease costs, gross
510,936 469,671 
Deferred lease costs, accumulated depreciation
(218,399)(205,100)
Other assets held for sale, gross
— 9,389 
Other assets held for sale, accumulated depreciation
— (996)
Total assets$4,185,493 $3,930,665 
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs of $13,592 and $12,210, respectively
$1,948,408 $1,877,790 
        Secured Debt197,000 — 
Accounts payable, accrued expenses, and accrued capital expenditures
111,262 114,453 
Dividends payable
— 26,048 
Deferred income
70,798 80,686 
Intangible lease liabilities, less accumulated amortization
60,694 39,341 
Interest rate swaps
— 4,924 
Total liabilities2,388,162 2,143,242 
Stockholders' equity:
Common stock
1,234 1,231 
Additional paid in capital
3,709,234 3,701,798 
Cumulative distributions in excess of earnings
(1,905,544)(1,899,081)
Other comprehensive income
(9,194)(18,154)
Piedmont stockholders' equity1,795,730 1,785,794 
Noncontrolling interest
1,601 1,629 
Total stockholders' equity1,797,331 1,787,423 
Total liabilities and stockholders' equity$4,185,493 $3,930,665 



Number of shares of common stock outstanding as of end of period123,395 123,077 
Net debt (Unsecured and Secured Debt less Cash and cash equivalents)2,134,755 1,870,371 
Total Principal Amount of Debt Outstanding (Unsecured and Secured Debt plus discount and unamortized debt issuance costs)2,159,000 1,890,000 



Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands, except for per share data)
Three Months EndedNine Months Ended
9/30/20229/30/20219/30/20229/30/2021
Revenues:
Rental and tenant reimbursement revenue$139,572 $127,427 $403,635 $380,306 
Property management fee revenue303 626 1,280 1,920 
Other property related income4,225 3,018 11,643 8,320 
Total revenues
144,100 131,071 416,558 390,546 
Expenses:
Property operating costs59,039 51,767 166,295 154,849 
Depreciation34,941 30,562 98,828 88,663 
Amortization23,290 20,373 67,022 63,978 
General and administrative6,590 6,955 21,212 22,417 
Total operating expenses
123,860 109,657 353,357 329,907 
Other income (expense):
Interest expense(17,244)(12,450)(44,917)(37,375)
Other income335 2,337 2,302 7,324 
Gain on sale of real estate assets— — 50,674 — 
Total other income (expense)
(16,909)(10,113)8,059 (30,051)
Net income3,331 11,301 71,260 30,588 
Net loss applicable to noncontrolling interest— 
Net income applicable to Piedmont$3,331 $11,306 $71,261 $30,597 
Weighted average common shares outstanding - diluted123,697 124,627 123,631 124,472 
Net income per share applicable to common stockholders - diluted$0.03 $0.09 $0.58 $0.25 



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 EndedNine Months Ended
9/30/20229/30/20219/30/20229/30/2021
GAAP net income applicable to common stock$3,331 $11,306 $71,261 $30,597 
Depreciation of real estate assets(1)
34,743 30,336 98,262 87,873 
Amortization of lease-related costs
23,278 20,362 66,986 63,943 
Gain on sale of real estate assets
— — (50,674)— 
NAREIT Funds From Operations and Core Funds from Operations applicable to common stock*61,352 62,004 185,835 182,413 
Amortization of debt issuance costs, fair market adjustments on notes payable, and discounts on debt
922 849 2,463 2,076 
Depreciation of non real estate assets
189 216 537 762 
Straight-line effects of lease revenue
(3,268)(2,122)(8,874)(8,627)
Stock-based compensation adjustments
1,950 1,637 3,116 5,152 
Net effect of amortization of above/below-market in-place lease intangibles
(3,542)(2,731)(9,713)(8,192)
Non-incremental capital expenditures(2)
(14,121)(18,640)(42,406)(52,849)
Adjusted Funds From Operations applicable to common stock*$43,482 $41,213 $130,958 $120,735 
Weighted average common shares outstanding - diluted123,697 124,627 123,631 124,472 
Funds From Operations and Core Funds From Operations per share (diluted)$0.50 $0.50 $1.50 $1.47 

(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 BasisAccrual Basis
Three Months EndedThree Months Ended
9/30/20229/30/20219/30/20229/30/2021
Net income applicable to Piedmont (GAAP)$3,331$11,306 $3,331$11,306 
Net loss applicable to noncontrolling interest
(5)(5)
Interest expense
17,24412,450 17,24412,450 
Depreciation
34,93130,552 34,93130,552 
Amortization
23,27820,362 23,27820,362 
Depreciation and amortization attributable to noncontrolling interests2121 2121 
EBITDAre* and Core EBITDA*
78,80574,686 78,80574,686 
General & administrative expenses
6,5906,955 6,5906,955 
Management fee revenue
(177)(309)(177)(309)
Other income
(119)(2,121)(119)(2,121)
       Non-cash general reserve\(reversal) for uncollectible accounts(1,000)— 
Straight line effects of lease revenue
(3,268)(2,122)
Straight line effects of lease revenue attributable to noncontrolling interests(4)
Amortization of lease-related intangibles
(3,542)(2,731)
Property NOI*77,28574,359 85,09979,211 
Net operating (income)/loss from:
Acquisitions
(5,423)— (7,895)— 
Dispositions
1(2,308)1(2,427)
Other investments(1)
211267 150324 
Same Store NOI*$72,074$72,318 $77,355$77,108 
Change period over period in Same Store NOI(0.3)%N/A0.3 %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.




Piedmont Office Realty Trust, Inc.
EBITDAre, Core EBITDA, Property Net Operating Income (Cash and Accrual), Same Store Net Operating Income (Cash and Accrual)
Unaudited (in thousands)
Cash BasisAccrual Basis
Nine Months EndedNine Months Ended
9/30/20229/30/20219/30/20229/30/2021
Net income applicable to Piedmont (GAAP)$71,261$30,597 $71,261$30,597 
Net loss applicable to noncontrolling interest
(1)(9)(1)(9)
Interest expense
44,91737,375 44,91737,375 
Depreciation
98,79988,635 98,79988,635 
Amortization
66,98663,943 66,98663,943 
Depreciation and amortization attributable to noncontrolling interests6563 6563 
Gain on sale of real estate assets
(50,674)— (50,674)— 
EBITDAre* and Core EBITDA*231,353220,604 231,353220,604 
General & administrative expenses
21,21222,417 21,21222,417 
Management fee revenue
(743)(946)(743)(946)
Other income
(1,655)(6,423)(1,655)(6,423)
       Non-cash general reserve/(reversal) for uncollectible accounts(2,000)412 
Straight line effects of lease revenue
(8,874)(8,627)
Straight line effects of lease revenue attributable to noncontrolling interests(6)
Amortization of lease-related intangibles
(9,713)(8,192)
Property NOI*229,574219,247 250,167235,652 
Net operating income from:
Acquisitions
(10,791)— (15,692)— 
Dispositions
(567)(5,724)(638)(6,317)
Other investments(1)
539624 528793 
Same Store NOI*$218,755$214,147 $234,365$230,128 
Change period over period in Same Store NOI2.2 %N/A1.8 %N/A

(1)Other investments consist of our investments in active redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current or prior reporting periods. The operating results from 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, if any. 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 infrequent or non-recurring 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, if any. 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.





Document

EXHIBIT 99.2



https://cdn.kscope.io/7957f2dfa7c5a2a2062090e934311a03-q3_2022supplementalcovera.jpg



Piedmont Office Realty Trust, Inc.
Quarterly Supplemental Information
Index
PagePage
IntroductionOther Investments
Corporate DataOther Investments Detail
Investor InformationSupporting Information
Earnings ReleaseDefinitions
Key Performance IndicatorsResearch Coverage
FinancialsNon-GAAP Reconciliations
Balance SheetsIn-Service Portfolio Detail
Income StatementsMajor Leases Not Yet Commenced and Major Abatements
Funds From Operations / Adjusted Funds From OperationsRisks, 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 41 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 34. 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 both 2021 and 2022, and it was the only office REIT headquartered in the Southeast to receive those designations. At the end of the third quarter of 2022, approximately 85% of the Company's square footage was Energy Star certified and approximately 50% was LEED certified. Piedmont is headquartered in Atlanta, GA.

This data supplements the information provided in our reports filed with the Securities and Exchange Commission and should be reviewed in conjunction with such filings.
As ofAs of
September 30, 2022December 31, 2021
Number of consolidated in-service office properties (1)
5355
Rentable square footage (in thousands) (1)
16,83217,051
Percent leased (2)
86.8 %85.5 %
Capitalization (in thousands):
Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs)$2,159,000$1,890,000
Equity market capitalization (3)
$1,303,055$2,262,150
Total market capitalization (3)
$3,462,055$4,152,150
Total debt / Total market capitalization (3)
62.4 %45.5 %
Average net debt to Core EBITDA - quarterly6.2 x6.0 x
Average net debt to Core EBITDA - trailing twelve months5.9 x5.7 x
Total debt / Total gross assets39.8 %37.1 %
Common stock data:
High closing price during quarter$13.76$19.37
Low closing price during quarter$10.30$17.11
Closing price of common stock at period end$10.56$18.38
Weighted average fully diluted shares outstanding during quarter (in thousands)123,697124,412
Shares of common stock issued and outstanding at period end (in thousands)123,395123,077
Annual regular dividend per share (4)
$0.84$0.84
Rating / Outlook:
Standard & Poor'sBBB / StableBBB / Stable
Moody'sBaa2 / StableBaa2 / Stable
Employees142134
(1)As of September 30, 2022, our consolidated office portfolio consisted of 53 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 23 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 SmithRobert E. BowersGeorge Wells
Chief Executive Officer, PresidentChief Financial and Administrative OfficerChief Operating Officer and
and Directorand Executive Vice PresidentExecutive Vice President
Edward H. Guilbert, IIIChristopher A. KollmeLaura P. MoonJoseph H. Pangburn
Executive Vice President, Finance,Executive Vice President,Chief Accounting Officer andExecutive Vice President,
Assistant Secretary and TreasurerInvestmentsSenior Vice PresidentSouthwest Region
Investor Relations Contact
Thomas R. PrescottAlex ValenteRobert K. Wiberg
Executive Vice President,Executive Vice President,Executive Vice President,
Midwest Region and Co-Head ofSoutheast RegionNortheast Region and Co-Head of
DevelopmentDevelopment
Board of Directors
Frank C. McDowellDale H. TaysomKelly H. BarrettGlenn G. Cohen
Director, Chair of the Board of Directors, andDirector, Vice Chair of the Director, Chair of the Audit Committee, Director, Chair of the Compensation
Member of the Compensation and GovernanceBoard of Directors, and Member of theand Member of the Governance CommitteeCommittee, and Member of the Audit
CommitteesAudit and Capital Committeesand Capital Committees
Venkatesh S. DurvasulaBarbara B. LangC. Brent SmithJeffrey L. Swope
Director and Member of the Capital CommitteeDirector, Chair of the Governance CommitteeChief Executive Officer, PresidentDirector, Chair of the Capital
(including ESG), and Member of theand DirectorCommittee, and Member of the
Compensation CommitteeCompensation Committee
Transfer AgentCorporate CounselInstitutional Analyst ContactInvestor Relations
ComputershareKing & SpaldingPhone: 770.418.8592Phone: 866.354.3485
P.O. Box 430061180 Peachtree Street, NEresearch.analysts@piedmontreit.cominvestor.services@piedmontreit.com
Providence, RI 02940-3078Atlanta, GA 30309www.piedmontreit.com
Phone: 866.354.3485Phone: 404.572.4600

4


Piedmont Office Realty Trust, Inc.
Earnings Release
Piedmont Office Realty Trust Reports Third Quarter 2022 Results

ATLANTA, November 2, 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 September 30, 2022.

Highlights for the Three and Nine Months Ended September 30, 2022:

Financial Results:
Three Months EndedNine Months Ended
September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Net income applicable to Piedmont$3,331$11,306$71,261$30,597
Net income per share applicable to common stockholders - diluted $0.03$0.09$0.58$0.25
Gain on sale of real estate assets— — $50,674— 
Core Funds From Operations ("Core FFO") applicable to common stock$61,352$62,004$185,835$182,413
Core FFO per diluted share$0.50$0.50$1.50$1.47
Increase/ (Decrease) in Same Store Net Operating Income ("Same Store NOI") - Cash Basis(0.3)%2.2 %
Increase in Same Store NOI - Accrual Basis0.3 %1.8 %
Adjusted Funds From Operations applicable to common stock$43,482$41,213$130,958$120,735
Net income applicable to Piedmont for the three months ended September 30, 2022 decreased as compared with the three months ended September 30, 2021 as a result of a $7.3 million increase in depreciation and amortization expense primarily resulting from acquisition activity during the current period as well as a $4.8 million increase in interest expense. The increase in interest expense was driven by additional debt associated with recent acquisition activity as well as rising interest rates. Other income for the quarter also decreased approximately $2.0 million due to the payoff of notes receivable due from the purchaser of the Company's New Jersey Portfolio in March of 2022. The above decreases in net income were partially offset by additional operating income as a result of successful leasing, rental rate roll ups and asset recycling activity over the last twelve months.
Irrespective of the $4.8 million increase in interest expense during the quarter ended September 30, 2022 as compared to the quarter ended September 30, 2021 mentioned above, the Company was able to achieve $0.50 of Core FFO per diluted share, consistent with the third quarter of 2021, primarily due to successful leasing, rental rate roll ups and asset recycling.
As expected, Same Store NOI - Cash Basis decreased marginally during the third quarter due to recent leasing activity resulting in a 60% increase in leased square footage under abatement as of September 30, 2022 compared to September 30, 2021. Same Store NOI on a cash and accrual basis is anticipated to increase approximately 2-3% for the year.
5


Leasing:
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
# of transactions54 157 
Total leasing sf444,0001,720,000
New tenant leasing sf124,000595,000
Cash rent roll up33.1 %10.5 %
Accrual rent roll up37.6 %18.5 %
Leased Percentage as of period end86.8 %
The largest new tenant lease completed during the quarter was an approximately 35,000 square feet headquarter relocation for a financial services firm through 2028 at Crescent Ridge II in Minneapolis, MN.
The largest renewal completed during the quarter was Ryan LLC's approximately 178,000 square feet at Three Galleria Tower in Dallas, TX for two to five years. This renewal heavily influenced the large cash and accrual rent roll ups for the quarter; however, excluding this lease, cash and accrual rent roll ups for the quarter were 9.9% and 12.6%, respectively.
The Company's scheduled lease expirations for the remainder of 2022 and 2023 are low, representing less than 10% of its annualized lease revenue.
As of September 30, 2022, the Company had approximately 1.2 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $38 million of future additional annual cash revenue.
Capital Markets:
As previously announced, Piedmont acquired 1180 Peachtree Street, an iconic, 41-story, Class AA office building located at the epicenter of Midtown Atlanta, GA, for a net purchase price of approximately $465 million, which included the assumption of an existing $197 million, 4.1% fixed rate mortgage secured by the property that matures in 2028. The LEED Platinum, 95% leased building has over seven years of weighted-average lease term at roughly 20% below-market rents and provides tenants with a best-in-class amenity set along with unmatched views of the city of Atlanta across its full-glass façade. With this acquisition in Midtown Atlanta, Piedmont now owns 1.3 million square feet in this dynamic submarket and is the largest office owner along Peachtree Street in Midtown. The initial accrual-basis NOI yield for the transaction was in the mid-6% range. The cash portion of the net purchase price was initially funded primarily from the proceeds of a new $200 million bridge loan further described below; however, the Company anticipates using the net sales proceeds from the disposition of non-strategic assets over the next 12 months to fund the acquisition.
Balance Sheet:
September 30, 2022December 31, 2021
Total Real Estate Assets (in millions)
$3,573$3,245
Total Assets (in millions)
$4,185$3,931
Total Debt (in millions)
$2,145$1,878
Weighted Average Cost of Debt3.69 %2.93 %
Debt-to-Gross Assets Ratio39.8 %37.1 %
Average Net Debt-to-Core EBITDA (ttm)5.9 x5.7 x
In addition to assuming the $197 million mortgage in conjunction with the purchase of 1180 Peachtree Street mentioned above, Piedmont also entered into a $200 million, unsecured, floating rate term loan facility initially bearing interest at Adjusted Term SOFR Rate (as defined in the term loan agreement) + 100 bps to fund a majority of the cash portion of the acquisition. Piedmont intends to use the proceeds from subsequent dispositions of assets to pay down outstanding debt and make the acquisition leverage neutral from a balance sheet perspective.

6


ESG and Operations:
Piedmont published its Annual ESG report, available on its website at www.piedmontreit.com/ESG

Brent Smith, Piedmont's President and Chief Executive Officer, said, "We are pleased with our third quarter operating and financial results including over 440,000 square feet of leasing at meaningfully higher rental rates, continuing to demonstrate tenant preferences for place making, amenity-rich, mixed-use environments. Strategically, we further enhanced our Sunbelt market exposure with the acquisition of 1180 Peachtree Street, a skyline defining asset in the heart of Midtown Atlanta, which will enable us to recycle capital from our two Cambridge, Massachusetts assets in a tax-efficient manner. Notwithstanding our accomplishments in the third quarter, the broader operating environment continues to pose numerous challenges to the commercial real estate sector including the impact of remote work, rising inflation and interest rates as well as the potential for an economic recession. Regardless of these headwinds, our current leasing pipeline remains stable, with over 150,000 square feet of leases already executed thus far in the fourth quarter and another 300,000 square feet in documentation, positioning the Company to close 2022 having completed over two million square feet of leasing and the portfolio approximately 87% leased. While both the public and private markets continue to struggle with the trajectory of the office sector, we believe Piedmont’s focus on high-quality assets in amenity-rich office environments in conjunction with a well-capitalized, low leveraged balance sheet positions us to successfully navigate these challenging waters."

Fourth Quarter 2022 Dividend

As previously announced, on October 25, 2022, the board of directors of Piedmont declared a dividend for the fourth 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 November 25, 2022, payable on January 3, 2023.

Guidance for 2022

After considering year-to-date results and updated annual forecasts, including much higher interest expense resulting from rapidly rising interest rates, the Company is narrowing its guidance for the year ending December 31, 2022 as follows:

RevisedPrevious
(in millions, except per share data)LowHighLowHigh
Net income$73$74$80$83
Add:
Depreciation133 134 133 136 
Amortization91 92 84 86 
Deduct:
Gain on sale of real estate assets(51)(51)(51)(51)
Core FFO applicable to common stock$246$249$246$254
Core FFO per diluted share$1.99$2.01$1.99$2.05


Year-end leased percentage is anticipated to be around 87% and Same Store NOI on a cash and accrual basis is anticipated to increase approximately 2-3% for the year.
This guidance is based on information available to management as of the date of this release and reflects management's view of current market conditions. It incorporates certain economic and operational assumptions and projections, including the impacts of completed transactional activity through September of 2022 and the disposition of the Cambridge assets mentioned above around the end of 2022, but no other speculative transactional activity. Actual results could differ materially from these estimates based on a variety of factors, particularly the timing of any future 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.
7


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 34 and reconciliations are provided beginning on page 36.
Three Months Ended
Selected Operating Data9/30/20226/30/20223/31/202212/31/20219/30/2021
Percent leased (1)
86.8 %87.0 %87.0 %85.5 %85.9 %
Percent leased - economic (2)
80.6 %80.7 %81.4 %81.5 %81.6 %
Total revenues$144,100$136,309$136,149$138,164$131,071
Net income / (loss) applicable to Piedmont$3,331$7,966$59,964-$31,750$11,306
Net income / (loss) per share applicable to common stockholders - diluted$0.03$0.06$0.49-$0.26$0.09
Core EBITDA$78,805$75,591$76,956$77,130$74,686
Core FFO applicable to common stock$61,352$61,620$62,863$63,009$62,004
Core FFO per share - diluted$0.50$0.50$0.51$0.51$0.50
AFFO applicable to common stock$43,482$48,900$38,576$39,399$41,213
Gross regular dividends (3)
$25,913$25,912$25,899$26,048$26,068
Regular dividends per share (3)
$0.21$0.21$0.21$0.21$0.21
Same store net operating income - cash basis (4)
-0.3 %1.8 %5.1 %5.8 %11.6 %
Same store net operating income - accrual basis (4)
0.3 %2.8 %2.5 %5.2 %5.0 %
Rental rate roll up / roll down - cash rents (5)
33.1 %2.5 %4.8 %3.0 %10.5 %
Rental rate roll up / roll down - accrual rents (5)
37.6 %12.2 %12.9 %6.9 %16.1 %
Selected Balance Sheet Data
Total real estate assets, net$3,572,591$3,139,587$3,147,362$3,245,311$3,085,457
Total assets$4,185,493$3,695,554$3,699,640$3,930,665$3,760,648
Total liabilities$2,388,162$1,879,891$1,869,166$2,143,242$1,900,029
Ratios & Information for Debt Holders
Core EBITDA margin (6)
54.7 %55.5 %56.5 %55.8 %57.0 %
Fixed charge coverage ratio (7)
4.3 x5.1 x5.2 x5.2 x5.5 x
Average net debt to Core EBITDA - quarterly (8)
6.2 x5.5 x5.9 x6.0 x5.5 x
Total gross real estate assets$4,587,669$4,117,177$4,097,332$4,206,993$4,012,060
Net debt (9)
$2,146,156$1,681,144$1,672,332$1,881,140$1,663,718
(1)
Please refer to page 23 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 three pages starting with page 13 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 24 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 $1,094,713 for the quarter ended September 30, 2022, $1,117,131 for the quarter ended June 30, 2022, $963,350 for the quarter ended March 31, 2022, $994,675 for the quarter ended December 31, 2021, and $1,009,904 for the quarter ended September 30, 2021; the Company had no principal amortization during the periods presented.
(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.

8


Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)
September 30, 2022June 30, 2022March 31, 2022December 31, 2021September 30, 2021
Assets:
Real estate, at cost:
Land assets$578,722 $521,789 $521,789 $529,941 $476,717 
Buildings and improvements3,751,722 3,389,650 3,351,807 3,374,903 3,259,369 
Buildings and improvements, accumulated depreciation(926,357)(892,131)(863,306)(861,206)(829,832)
Intangible lease asset212,248 164,194 173,017 178,157 148,945 
Intangible lease asset, accumulated amortization(88,721)(85,459)(86,664)(83,777)(80,072)
Construction in progress44,977 41,544 50,719 43,406 48,226 
Real estate assets held for sale, gross— — — 80,586 78,803 
Real estate assets held for sale, accumulated depreciation & amortization— — — (16,699)(16,699)
Total real estate assets3,572,591 3,139,587 3,147,362 3,245,311 3,085,457 
Cash and cash equivalents10,653 6,397 7,211 7,419 8,189 
Tenant receivables, net of allowance for doubtful accounts7,796 5,164 3,095 2,995 8,678 
Straight line rent receivable173,122 168,797 164,776 162,632 159,871 
Notes receivable— — — 118,500 118,500 
Escrow deposits and restricted cash2,191 1,459 1,457 1,441 6,093 
Prepaid expenses and other assets23,925 26,955 21,318 20,485 24,915 
Goodwill98,918 98,918 98,918 98,918 98,918 
Interest rate swap3,760 996 — — — 
Deferred lease costs, gross510,936 459,038 466,234 469,671 437,020 
Deferred lease costs, accumulated amortization(218,399)(211,757)(210,731)(205,100)(195,255)
Other assets held for sale, gross— — — 9,389 9,258 
Other assets held for sale, accumulated amortization— — — (996)(996)
Total assets$4,185,493 $3,695,554 $3,699,640 $3,930,665 $3,760,648 
Liabilities:
Unsecured debt, net of discount$1,948,408 $1,674,778 $1,669,553 $1,877,790 $1,665,101 
Secured debt197,000 — — — — 
Accounts payable, accrued expenses, and accrued capital expenditures111,262 99,724 83,609 140,501 127,675 
Deferred income70,798 72,422 79,493 80,686 73,614 
Intangible lease liabilities, less accumulated amortization60,694 32,967 36,077 39,341 26,924 
Interest rate swaps— — 434 4,924 6,715 
Total liabilities2,388,162 1,879,891 1,869,166 2,143,242 1,900,029 
Stockholders' equity:
Common stock1,234 1,234 1,233 1,231 1,241 
Additional paid in capital3,709,234 3,707,833 3,706,207 3,701,798 3,700,208 
Cumulative distributions in excess of earnings(1,905,544)(1,882,962)(1,865,016)(1,899,081)(1,822,441)
Other comprehensive loss(9,194)(12,050)(13,573)(18,154)(20,036)
Piedmont stockholders' equity1,795,730 1,814,055 1,828,851 1,785,794 1,858,972 
Non-controlling interest1,601 1,608 1,623 1,629 1,647 
Total stockholders' equity1,797,331 1,815,663 1,830,474 1,787,423 1,860,619 
Total liabilities, redeemable common stock and stockholders' equity$4,185,493 $3,695,554 $3,699,640 $3,930,665 $3,760,648 
Common stock outstanding at end of period123,395 123,390 123,331 123,077 124,136 

9


Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended
9/30/20226/30/20223/31/202212/31/20219/30/2021
Revenues:
Rental income (1)
$114,280 $110,244 $109,732 $111,203 $105,592 
Tenant reimbursements (1)
25,292 21,907 22,180 23,110 21,835 
Property management fee revenue303 326 651 576 626 
Other property related income4,225 3,832 3,586 3,275 3,018 
144,100 136,309 136,149 138,164 131,071 
Expenses:
Property operating costs59,039 53,634 53,622 56,083 51,767 
Depreciation34,941 32,372 31,515 31,952 30,562 
Amortization23,290 21,480 22,252 22,014 20,373 
Impairment loss on real estate assets (2)
— — — 41,000 — 
General and administrative6,590 7,027 7,595 7,835 6,955 
123,860 114,513 114,984 158,884 109,657 
Other income / (expense):
Interest expense(17,244)(13,775)(13,898)(13,917)(12,450)
Other income / (expense)335 (57)2,024 2,882 2,337 
Gain / (loss) on sale of real estate (2)
— 50,673 — — 
Net income / (loss)3,331 7,965 59,964 (31,755)11,301 
Less: Net (income) / loss applicable to noncontrolling interest— — 
Net income / (loss) applicable to Piedmont$3,331 $7,966 $59,964 $(31,750)$11,306 
Weighted average common shares outstanding - diluted123,697 123,679 123,510 123,742 124,627 
Net income / (loss) per share applicable to common stockholders - diluted$0.03 $0.06 $0.49 $(0.26)$0.09 
Common stock outstanding at end of period123,395 123,390 123,331 123,077 124,136 











(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 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.
10


Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months EndedNine Months Ended
9/30/20229/30/2021Change ($)Change (%)9/30/20229/30/2021Change ($)Change (%)
Revenues:
Rental income (1)
$114,280 $105,592 $8,688 8.2 %$334,256 $315,971 $18,285 5.8 %
Tenant reimbursements (1)
25,292 21,835 3,457 15.8 %69,379 64,335 5,044 7.8 %
Property management fee revenue303 626 (323)(51.6)%1,280 1,920 (640)(33.3)%
Other property related income4,225 3,018 1,207 40.0 %11,643 8,320 3,323 39.9 %
144,100 131,071 13,029 9.9 %416,558 390,546 26,012 6.7 %
Expenses:
Property operating costs59,039 51,767 (7,272)(14.0)%166,295 154,849 (11,446)(7.4)%
Depreciation34,941 30,562 (4,379)(14.3)%98,828 88,663 (10,165)(11.5)%
Amortization23,290 20,373 (2,917)(14.3)%67,022 63,978 (3,044)(4.8)%
General and administrative6,590 6,955 365 5.2 %21,212 22,417 1,205 5.4 %
123,860 109,657 (14,203)(13.0)%353,357 329,907 (23,450)(7.1)%
Other income / (expense):
Interest expense(17,244)(12,450)(4,794)(38.5)%(44,917)(37,375)(7,542)(20.2)%
Other income / (expense)335 2,337 (2,002)(85.7)%2,302 7,324 (5,022)(68.6)%
Gain / (loss) on sale of real estate (2)
— — — 50,674 — 50,674 100.0 %
Net income / (loss)3,331 11,301 (7,970)(70.5)%71,260 30,588 40,672 133.0 %
Less: Net (income) / loss applicable to noncontrolling interest— (5)(100.0)%(8)(88.9)%
Net income / (loss) applicable to Piedmont$3,331 $11,306 $(7,975)(70.5)%$71,261 $30,597 $40,664 132.9 %
Weighted average common shares outstanding - diluted123,697 124,627 123,631 124,472 
Net income / (loss) per share applicable to common stockholders - diluted$0.03 $0.09 $0.58 $0.25 
Common stock outstanding at end of period123,395 124,136 123,395 124,136 














(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 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 nine months ended September 30, 2022 was primarily related to the sale of 225 and 235 Presidential Way in Woburn, MA.
11


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 EndedNine Months Ended
9/30/20229/30/20219/30/20229/30/2021
GAAP net income / (loss) applicable to common stock$3,331 $11,306 $71,261 $30,597 
Depreciation (1) (2)
34,743 30,336 98,262 87,873 
Amortization (1)
23,278 20,362 66,986 63,943 
Loss / (gain) on sale of properties
— — (50,674)— 
NAREIT funds from operations and core funds from operations applicable to common stock61,352 62,004 185,835 182,413 
Adjustments:
Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on senior notes922 849 2,463 2,076 
Depreciation of non real estate assets189 216 537 762 
Straight-line effects of lease revenue (1)
(3,268)(2,122)(8,874)(8,627)
Stock-based compensation adjustments1,950 1,637 3,116 5,152 
Amortization of lease-related intangibles (1)
(3,542)(2,731)(9,713)(8,192)
Non-incremental capital expenditures (3)
   Building/Construction/Development(6,897)(8,598)(15,151)(25,750)
   Tenant Improvements(3,146)(5,941)(18,054)(18,670)
   Leasing Costs(4,078)(4,101)(9,201)(8,429)
Adjusted funds from operations applicable to common stock$43,482 $41,213 $130,958 $120,735 
Weighted average common shares outstanding - diluted123,697 124,627 123,631 124,472 
Funds from operations per share (diluted)$0.50 $0.50 $1.50 $1.47 
Core funds from operations per share (diluted)$0.50 $0.50 $1.50 $1.47 
Change period over period— %2.0 %
Common stock outstanding at end of period123,395 124,136 123,395 124,136 






(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 34.

12


Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months EndedNine Months Ended
9/30/20229/30/20219/30/20229/30/2021
Net income / (loss) applicable to Piedmont$3,331 $11,306 $71,261 $30,597 
Net income / (loss) applicable to noncontrolling interest— (5)(1)(9)
Interest expense
17,244 12,450 44,917 37,375 
Depreciation (1)
34,931 30,552 98,799 88,635 
Amortization (1)
23,278 20,362 66,986 63,943 
Depreciation and amortization attributable to noncontrolling interests21 21 65 63 
(Gain) / loss on sale of properties
— — (50,674)— 
EBITDAre and Core EBITDA (2)
78,805 74,686 231,353 220,604 
General & administrative expenses
6,590 6,955 21,212 22,417 
Non-cash general reserve for uncollectible accounts (3)
(1,000)— (2,000)412 
Management fee revenue (4)
(177)(309)(743)(946)
Other (income) / expense (1) (5)
(119)(2,121)(1,655)(6,423)
Straight-line effects of lease revenue (1)
(3,268)(2,122)(8,874)(8,627)
Straight-line effects of lease revenue attributable to noncontrolling interests(4)(6)
Amortization of lease-related intangibles (1)
(3,542)(2,731)(9,713)(8,192)
Property net operating income (cash basis)77,285 74,359 229,574 219,247 
Deduct net operating (income) / loss from:
Acquisitions (6)
(5,423)— (10,791)— 
Dispositions (7)
(2,308)(567)(5,724)
Other investments (8)
211 267 539 624 
Same store net operating income (cash basis)$72,074 $72,318 $218,755 $214,147 
Change period over period(0.3)%N/A2.2 %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 September 30, 2022, Piedmont recognized $0.4 million of termination income, as compared with $0.1 million during the same period in 2021. During the nine months ended September 30, 2022, Piedmont recognized $1.1 million of termination income, as compared with $2.8 million during the same period in 2021.
(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 in the fourth quarter of 2021, and 1180 Peachtree Street in Atlanta, GA, purchased in the third quarter of 2022.
(7)Dispositions include Two Pierce Place in Itasca, IL and 225 and 235 Presidential Way in Woburn, MA, sold in the first quarter of 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 33. 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 (Accrual Basis)
Unaudited (in thousands)
Three Months EndedNine Months Ended
9/30/20229/30/20219/30/20229/30/2021
Net income / (loss) applicable to Piedmont$3,331 $11,306 $71,261 $30,597 
Net income / (loss) applicable to noncontrolling interest— (5)(1)(9)
Interest expense
17,244 12,450 44,917 37,375 
Depreciation (1)
34,931 30,552 98,799 88,635 
Amortization (1)
23,278 20,362 66,986 63,943 
Depreciation and amortization attributable to noncontrolling interests21 21 65 63 
(Gain) / loss on sale of properties
— — (50,674)— 
EBITDAre and Core EBITDA (2)
78,805 74,686 231,353 220,604 
General & administrative expenses
6,590 6,955 21,212 22,417 
Management fee revenue (3)
(177)(309)(743)(946)
Other (income) / expense (1) (4)
(119)(2,121)(1,655)(6,423)
Property net operating income (accrual basis)85,099 79,211 250,167 235,652 
Deduct net operating (income) / loss from:
Acquisitions (5)
(7,895)— (15,692)— 
Dispositions (6)
(2,427)(638)(6,317)
Other investments (7)
150 324 528 793 
Same store net operating income (accrual basis)$77,355 $77,108 $234,365 $230,128 
Change period over period0.3 %N/A