pdm-20230720
0001042776false00010427762023-07-202023-07-20

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):  July 20, 2023
 
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 July 20, 2023, Piedmont Office Realty Trust, Inc. (the "Registrant") issued a press release announcing its financial results for the second quarter 2023, and published supplemental information for the second quarter 2023 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:July 20, 2023By:/s/    Robert E. Bowers
  Robert E. Bowers
  Chief Financial Officer and Executive Vice President




Document

EXHIBIT 99.1
https://cdn.kscope.io/d1a8341e15a69ddd2d6dfd560b466149-image1a.jpg

Piedmont Office Realty Trust Announces Closing of Senior Notes Offering and Reports Second Quarter 2023 Results
Moves Up Earnings Call to Provide Update
ATLANTA, July 20, 2023--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in major U.S. Sunbelt markets, announced today that its operating partnership, Piedmont Operating Partnership, LP, has completed the issuance of $400 million aggregate principal amount of 9.25% senior unsecured notes due 2028 (the "2028 Notes"), rated BBB by S&P and Baa2 by Moody's. The net proceeds from the issuance will be used to fund the Company's pending tender offer for its outstanding unsecured senior notes due 2024 (the "2024 Notes").

Additionally, the Company announced its results for the quarter ended June 30, 2023 as set forth below and is rescheduling its second quarter earnings call to this afternoon at 5pm ET in order to provide analysts and investors with a real time update regarding the refinancing activity, quarterly results, and revised guidance.

Commenting on the refinancing activity, Brent Smith, Piedmont's President and Chief Executive Officer, said, "With the completion of our latest unsecured notes offering, we have now addressed all of the Company’s debt previously scheduled to mature in 2023 and 2024. The offering was successful despite the extreme volatility and increased economic uncertainty weighing on the financing markets which has drastically reduced new unsecured offerings and mortgage originations, particularly for the office sector. Raising debt capital at this scale in the most challenging commercial real estate market since the global financial crisis is a testament to the strength and credit worthiness of the Piedmont balance sheet.” Continuing, Smith said "Operationally, quarterly results continued to demonstrate the resiliency of our leasing pipeline with over 580,000 square feet leased with an approximately 70% retention ratio and over 14% higher cash rental rates. Furthermore, 240,000 square feet were leased to new tenants, building on the success of the past several quarters. Our well-capitalized, flexible balance sheet and strategic focus on small to medium enterprises continues to drive leasing success. Today, the pipeline remains robust with approximately 250,000 square feet of leasing already in documentation in the third quarter and we continue to project that we will be approximately 87% leased by the end of 2023."





Highlights for the Three Months Ended June 30, 2023:

Financial Results:
Three Months Ended
(in 000s other than per share amounts )June 30, 2023June 30, 2022
Net income/(loss) applicable to Piedmont$(1,988)$7,966
Net income/(loss) per share applicable to common stockholders - diluted $(0.02)$0.06
Interest expense$23,389$13,775
NAREIT Funds From Operations ("FFO") and Core FFO applicable to common stock$55,535$61,620
NAREIT FFO and Core FFO per diluted share$0.45$0.50
Adjusted Funds From Operations applicable to common stock$44,444$48,900

Net loss applicable to Piedmont for the three months ended June 30, 2023 was $2.0 million, as compared to net income applicable to Piedmont of $8.0 million for the three months ended June 30, 2022.
Core FFO was $0.45 per diluted share for the second quarter of 2023, as compared to $0.50 per diluted share for the second quarter of 2022. The $0.05 per diluted share decrease was almost exclusively attributable to a $9.6 million, or $0.08 per diluted share, increase in interest expense during the second quarter of 2023, partially offset by continued growth in Property Net Operating Income, as compared to the second quarter of 2022.
Leasing:
Three Months Ended June 30, 2023
# of lease transactions49 
Total leasing sf581,031
New tenant leasing sf236,448
Cash rent roll up14.3 %
Accrual rent roll up19.6 %
Quarterly retention ratio69.3 %
Leased Percentage as of period end86.2 %
The Company completed approximately 581,000 square feet of leasing transactions during the second quarter, over 40% of which, or approximately 236,000 square feet, was for new tenant leasing.
The average size lease executed during the second quarter of 2023 was approximately 12,000 square feet and the weighted average lease term was approximately six years.
The two largest leases completed during the quarter were both for new tenants at Galleria Atlanta:
An insurance company leased approximately 70,000 square feet through 2036 at Galleria 300; and
An owner operator of single family residences leased approximately 51,000 square feet through 2035 at Galleria 600.
Cash and accrual basis rents on leases executed during the quarter ended June 30, 2023 for space vacant one year or less increased approximately 14% and 20%, respectively.



The Company's scheduled lease expirations for the remainder of 2023 represent less than 3% of its annualized lease revenue.
During the second quarter of 2023, Same Store NOI - Cash basis increased 0.2% as new leases commencing or with expiring abatements began to outweigh leases that expired during the first six months of 2023. Same Store NOI on an accrual basis decreased 3.7% during the three months ended June 30, 2023 as compared to the same period in the prior year. The decrease was attributable to a combination of a decline in our overall leased percentage during the current period as compared to the prior period; an increase in leases under operating expense abatement due to recent leasing activity; and an increase in leases which are executed but not yet commenced.
As of June 30, 2023, the Company had approximately 1.3 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $37 million of future additional annual cash revenue; consequently, the Company continues to estimate that Same Store NOI, on both a cash and accrual basis, will increase approximately 1-3% on an annual basis in 2023.
The Company's leased percentage as of June 30, 2023 increased slightly to 86.2% from 86.1% at March 31, 2023. The Company projects its estimated year end leased percentage will be approximately 87%.

Balance Sheet:
(in 000s except for ratios)June 30, 2023December 31, 2022
Total Real Estate Assets$3,512,128$3,500,624
Total Assets$4,094,349$4,085,525
Total Debt$2,049,236$1,983,681
Weighted Average Cost of Debt4.49 %3.89 %
Debt-to-Gross Assets Ratio38.4 %37.6 %
Average Net Debt-to-Core EBITDA (ttm)6.3 x6.0 x
During the three months ended June 30, 2023, the Company repaid $350 million of maturing unsecured senior notes utilizing $170 million of cash and investments on hand and its $600 million line of credit. The balance outstanding on the line of credit as of June 30, 2023 was $200 million.

ESG and Operations:
The Company published its 2022 ESG report which is available electronically at www.piedmontreit.com/ ESG / Annual ESG Reports.
The Company renewed its WELL Health-Safety Rating for its entire 17 million square foot portfolio spanning 51 managed properties.
US Bancorp Center in Minneapolis, MN won an International The Outstanding Building of the Year ("TOBY") award.
All five Atlanta Galleria properties, as well as 4250 North Fairfax in Arlington, VA, achieved LEED Gold status, bringing the percentage of the portfolio that is LEED certified to 64%.
The Company increased its financial needs-based scholarship program to six students for the 2023-24 academic year at Howard University in Washington, D.C. and Morehouse College in Atlanta, GA.





Guidance for 2023

The Company is updating its previously issued guidance for the year ending December 31, 2023 to reflect the continuing rise in interest rates and to specifically reflect the net impact of additional interest expense associated with the issuance of $400 million in aggregate principal amount of 2028 Notes discussed above and the anticipated extinguishment of $300 million of its outstanding $400 million in aggregate principal amount of 2024 Notes in connection with the Company's pending tender offer as follows:

PreviousRevised
(in millions, except per share data)LowHighLowHigh
Net income/(loss)$(1)$$(19)$(17)
Add:
Depreciation144 151 148 151 
Amortization80 84 87 89 
Core FFO applicable to common stock$223 $236 $216 $223 
Core FFO applicable to common stock per diluted share$1.80$1.90$1.74$1.80

The approximately 5% difference between the stated interest rate on the 2024 Notes and the new 2028 Notes will result in an approximately $20.2 million increase in annual interest expense.

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. This guidance assumes that the Company’s pending tender offer to purchase any and all of the Company’s outstanding 2024 Notes is completed as expected and that the Company repurchases $300 million of the outstanding $400 million in aggregate principal amount of 2024 Notes pursuant to the tender offer. No speculative acquisitions or dispositions are included in the above guidance. The Company will adjust guidance throughout the year as such transactions occur, and if interest rate impacts differ from current assumptions.

Note that actual results could differ materially from these estimates and individual quarters may fluctuate on both a cash basis and an accrual basis due to the timing of any future dispositions, significant 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, one-time revenue or expense events, the actual results of the Company's pending tender offer, and other factors discussed under "Forward Looking Statements" below.

Non-GAAP Financial Measures

To supplement the presentation of the Company’s financial results prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this release and the accompanying quarterly supplemental information as of and for the period ended June 30, 2023 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 rescheduled its second quarter earnings conference call and audio web cast for this afternoon, Thursday, July 20, 2023 at 5:00 P.M. Eastern time. The live, listen-only, audio web cast of the call may be accessed on the Company's website at http://investor.piedmontreit.com/news-and-events/events-calendar. Dial-in numbers for analysts who plan to actively participate in the call are (888) 506-0062 for participants in the United States and Canada and (973) 528-0011 for international participants. Participant Access Code is 442973. A replay of the conference call will be available through August 3, 2023, 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 48684. 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 recent refinancing activity, second quarter 2023 performance, updated guidance, and conduct a question-and-answer period.

Supplemental Information

Quarterly supplemental information as of and for the period ended June 30, 2023 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 major U.S. Sunbelt markets. 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 2023 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 Company's portfolio of office properties will be 87% leased by the end of 2023; and the Company's estimated range of Net Income/(Loss), Depreciation, Amortization, Core FFO and Core FFO per diluted share, leasing activity, leased percentage, and estimated increase in Same Store NOI for the year ending December 31, 2023. 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 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;
Risks associated with incurring mortgage and other indebtedness, including 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;
A downgrade in our credit rating could materially adversely affect our business and financial condition, and would trigger an interest rate increase on the 2028 Notes;
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 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 described in Item 1A. Risk Factors of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, as well as the risk factors discussed under Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2022.

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)
June 30, 2023December 31, 2022
Assets:
Real estate assets, at cost:
Land
$567,244 $567,244 
Buildings and improvements
3,768,456 3,682,000 
Buildings and improvements, accumulated depreciation
(981,052)(915,010)
Intangible lease assets
182,127 205,074 
Intangible lease assets, accumulated amortization
(83,763)(90,694)
Construction in progress
59,116 52,010 
Total real estate assets
3,512,128 3,500,624 
Cash and cash equivalents
5,167 16,536 
Tenant receivables
5,387 4,762 
Straight line rent receivables
180,339 172,019 
Restricted cash and escrows
5,055 3,064 
Prepaid expenses and other assets
23,566 17,152 
Goodwill
82,937 82,937 
Interest rate swaps
5,693 4,183 
Deferred lease costs
482,149 505,979 
Deferred lease costs, accumulated depreciation
(208,072)(221,731)
Total assets$4,094,349 $4,085,525 
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs of $12,764 and $13,319, respectively
$1,852,236 $1,786,681 
        Secured Debt197,000 197,000 
Accounts payable, accrued expenses, and accrued capital expenditures
107,629 110,306 
Dividends payable
— 25,357 
Deferred income
89,815 59,977 
Intangible lease liabilities, less accumulated amortization
50,335 56,949 
Total liabilities2,297,015 2,236,270 
Stockholders' equity:
Common stock (123,691,542 and 123,439,558 shares outstanding as of June 30, 2023 and December 31, 2022, respectively)
1,237 1,234 
Additional paid in capital
3,712,688 3,711,005 
Cumulative distributions in excess of earnings
(1,911,188)(1,855,893)
Other comprehensive income
(6,977)(8,679)
Piedmont stockholders' equity1,795,760 1,847,667 
Noncontrolling interest
1,574 1,588 
Total stockholders' equity1,797,334 1,849,255 
Total liabilities and stockholders' equity$4,094,349 $4,085,525 
Net debt (Unsecured and Secured Debt less Cash and cash equivalents)2,044,069 1,967,145 
Total Principal Amount of Debt Outstanding (Unsecured and Secured Debt plus discounts and unamortized debt issuance costs)2,062,000 1,997,000 



Piedmont Office Realty Trust, Inc.
Consolidated Statements of Operations
Unaudited (in thousands, except for per share data)
Three Months EndedSix Months Ended
6/30/20236/30/20226/30/20236/30/2022
Revenues:
Rental and tenant reimbursement revenue$137,503 $132,151 $274,332 $264,063 
Property management fee revenue437 326 944 977 
Other property related income5,132 3,832 10,163 7,418 
Total revenues
143,072 136,309 285,439 272,458 
Expenses:
Property operating costs58,368 53,634 116,159 107,256 
Depreciation36,475 32,372 72,272 63,887 
Amortization21,333 21,480 43,364 43,732 
General and administrative7,279 7,027 14,970 14,622 
Total operating expenses
123,455 114,513 246,765 229,497 
Other income (expense):
Interest expense(23,389)(13,775)(45,466)(27,673)
Other income1,787 (57)3,443 1,967 
Gain on sale of real estate assets— — 50,674 
Total other income (expense)
(21,602)(13,831)(42,023)24,968 
Net income/(loss)(1,985)7,965 (3,349)67,929 
Net income/(loss) applicable to noncontrolling interest(3)(6)
Net income/(loss) applicable to Piedmont$(1,988)$7,966 $(3,355)$67,930 
Weighted average common shares outstanding - diluted123,671 123,679 123,611 123,617 
Net income/(loss) per share applicable to common stockholders - diluted$(0.02)$0.06 $(0.03)$0.55 



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 EndedSix Months Ended
6/30/20236/30/20226/30/20236/30/2022
GAAP net income/(loss) applicable to common stock$(1,988)$7,966 $(3,355)$67,930 
Depreciation of real estate assets(1)
36,200 32,187 71,890 63,519 
Amortization of lease-related costs
21,323 21,468 43,344 43,708 
Gain on sale of real estate assets
— (1)— (50,674)
NAREIT Funds From Operations and Core Funds From Operations applicable to common stock*55,535 61,620 111,879 124,483 
Amortization of debt issuance costs and discounts on debt
1,312 763 2,551 1,541 
Depreciation of non real estate assets
264 175 361 348 
Straight-line effects of lease revenue
(2,755)(3,029)(5,942)(5,606)
Stock-based compensation adjustments
2,095 1,718 2,278 1,166 
Amortization of lease-related intangibles
(3,119)(3,009)(6,531)(6,171)
Non-incremental capital expenditures(2)
(8,888)(9,338)(23,360)(28,285)
Adjusted Funds From Operations applicable to common stock*$44,444 $48,900 $81,236 $87,476 
Weighted average common shares outstanding - diluted123,749 
(3)
123,679 123,696 
(3)
123,617 
NAREIT Funds From Operations and Core Funds From Operations per share (diluted)$0.45 $0.50 $0.90 $1.01 

(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.

(3)Includes potential dilution under the treasury stock method that would occur if our remaining unvested and potential stock awards vested and resulted in additional common shares outstanding. Such shares are not included when calculating net loss per diluted share applicable to Piedmont for the three and six months ended June 30, 2023 as they would reduce the loss per share presented.










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
6/30/20236/30/20226/30/20236/30/2022
Net income/(loss) applicable to Piedmont (GAAP)$(1,988)$7,966 $(1,988)$7,966 
Net income/(loss) applicable to noncontrolling interest
3(1)3(1)
Interest expense
23,38913,775 23,38913,775 
Depreciation
36,46432,362 36,46432,362 
Amortization
21,32321,468 21,32321,468 
Depreciation and amortization attributable to noncontrolling interests2122 2122 
Gain on sale of real estate assets
(1)(1)
EBITDAre* and Core EBITDA*
79,21275,591 79,21275,591 
General and administrative expenses
7,2797,027 7,2797,027 
Management fee revenue
(254)(203)(254)(203)
Other income
(1,571)273 (1,571)273 
       Reversal of non-cash general reserve for uncollectible accounts(1,000)
Straight line effects of lease revenue
(2,755)(3,029)
Straight line effects of lease revenue attributable to noncontrolling interests(1)(1)
Amortization of lease-related intangibles
(3,119)(3,009)
Property NOI*78,79175,649 84,66682,688 
Net operating (income)/loss from:
Acquisitions
(5,770)— (7,612)— 
Dispositions
48(2,704)49(2,697)
Other investments(1)
173138 70130 
Same Store NOI*$73,242$73,083 $77,173$80,121 
Change period over period in Same Store NOI0.2%N/A(3.7)%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
Six Months EndedSix Months Ended
6/30/20236/30/20226/30/20236/30/2022
Net income/(loss) applicable to Piedmont (GAAP)$(3,355)$67,930 $(3,355)$67,930 
Net income/(loss) applicable to noncontrolling interest
6(1)6(1)
Interest expense
45,46627,673 45,46627,673 
Depreciation
72,25163,867 72,25163,867 
Amortization
43,34443,708 43,34443,708 
Depreciation and amortization attributable to noncontrolling interests4144 4144 
Gain on sale of real estate assets
(50,674)(50,674)
EBITDAre* and Core EBITDA*
157,753152,547 157,753152,547 
General and administrative expenses
14,97014,622 14,97014,622 
Management fee revenue
(546)(565)(546)(565)
Other income
(3,012)(1,536)(3,012)(1,536)
Reversal of non-cash general reserve for uncollectible accounts(400)(1,000)
Straight line effects of lease revenue
(5,942)(5,606)
Straight line effects of lease revenue attributable to noncontrolling interests(6)(1)
Amortization of lease-related intangibles
(6,531)(6,171)
Property NOI*156,286152,290 169,165165,068 
Net operating income/(loss) from:
Acquisitions
(10,843)— (14,980)— 
Dispositions
74(5,785)74(5,857)
Other investments(1)
337328 132377 
Same Store NOI*$145,854$146,833 $154,391$159,588 
Change period over period in Same Store NOI(0.7)%N/A(3.3)%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/(loss) (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/(loss) (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/(loss) (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and 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/d1a8341e15a69ddd2d6dfd560b466149-q2_2023supplementalcovera.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 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 major U.S. Sunbelt markets. 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, 2022 and 2023, and it was the only office REIT headquartered in the Southeast to receive those designations. Currently, approximately 87% of the Company's square footage is Energy Star certified and approximately 64% is 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
June 30, 2023December 31, 2022
Number of consolidated in-service office properties (1)
5151
Rentable square footage (in thousands) (1)
16,67216,658
Percent leased (2)
86.2 %86.7 %
Capitalization (in thousands):
Total debt - GAAP$2,049,236$1,983,681
Total principal amount of debt outstanding (excludes premiums, discounts, and deferred financing costs)$2,062,000$1,997,000
Equity market capitalization (3)
$899,238$1,131,941
Total market capitalization (3)
$2,961,238$3,128,941
Total principal amount of debt / Total market capitalization (3)
69.6 %63.8 %
Average net principal amount of debt to Core EBITDA - quarterly (4)
6.4 x6.4 x
Average net principal amount of debt to Core EBITDA - trailing twelve months (5)
6.3 x6.0 x
Total principal amount of debt / Total gross assets (6)
38.4 %37.6 %
Common stock data:
High closing price during quarter$7.39$10.92
Low closing price during quarter$6.10$8.80
Closing price of common stock at period end$7.27$9.17
Weighted average fully diluted shares outstanding during quarter (in thousands)123,749123,633
Shares of common stock issued and outstanding at period end (in thousands)123,692123,440
Annual regular dividend per share (7)
$0.84$0.84
Ratings (Standard & Poor's / Moody's)BBB / Baa2BBB / Baa2
Employees147149
(1)As of June 30, 2023, our consolidated office portfolio consisted of 51 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 principal amount of debt outstanding as of the end of the reporting period, as appropriate.
(4)For the purposes of this calculation, we annualize the Core EBITDA for the quarter and use the average daily principal balance of debt outstanding during the quarter, less cash and cash equivalents and escrow deposits and restricted cash as of the end of each month of the quarter.
(5)For the purposes of this calculation, we use the sum of Core EBITDA for the trailing four quarters and the average daily principal 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 month in the trailing four quarter period.
(6)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.
(7)Total of the regular dividends per share for which record dates occurred over the last 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
Kevin D. FossumEdward H. Guilbert, IIIChristopher A. KollmeDamian J. Miller
Executive Vice President,Executive Vice President, Finance,Executive Vice President,Executive Vice President,
Property ManagementAssistant Secretary and TreasurerInvestmentsDallas
Investor Relations Contact
Laura P. MoonAlex ValenteRobert K. Wiberg
Chief Accounting Officer andExecutive Vice President,Executive Vice President,
Senior Vice PresidentSoutheast RegionNortheast Region and Co-Head of
Development
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. DurvasulaMary HagerBarbara B. LangC. Brent Smith
Director and Member of the Capital CommitteeDirector and Member of the Director, Chair of the Governance CommitteeChief Executive Officer, President
Governance Committee(including ESG), and Member of theand Director
Compensation Committee
Jeffrey L. Swope
Director, Chair of the Capital
Committee, and Member of the
Compensation 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 Second Quarter 2023 Results

ATLANTA, July 20, 2023--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in major U.S. Sunbelt markets, announced today that its operating partnership, Piedmont Operating Partnership, LP, has completed the issuance of $400 million aggregate principal amount of 9.25% senior unsecured notes due 2028 (the "2028 Notes"), rated BBB by S&P and Baa2 by Moody's. The net proceeds from the issuance will be used to fund the Company's pending tender offer for its outstanding unsecured senior notes due 2024 (the "2024 Notes").

Additionally, the Company announced its results for the quarter ended June 30, 2023 as set forth below and is rescheduling its second quarter earnings call to this afternoon at 5pm ET in order to provide analysts and investors with a real time update regarding the refinancing activity, quarterly results, and revised guidance.

Commenting on the refinancing activity, Brent Smith, Piedmont's President and Chief Executive Officer, said, "With the completion of our latest unsecured notes offering, we have now addressed all of the Company’s debt previously scheduled to mature in 2023 and 2024. The offering was successful despite the extreme volatility and increased economic uncertainty weighing on the financing markets which has drastically reduced new unsecured offerings and mortgage originations, particularly for the office sector. Raising debt capital at this scale in the most challenging commercial real estate market since the global financial crisis is a testament to the strength and credit worthiness of the Piedmont balance sheet.” Continuing, Smith said "Operationally, quarterly results continued to demonstrate the resiliency of our leasing pipeline with over 580,000 square feet leased with an approximately 70% retention ratio and over 14% higher cash rental rates. Furthermore, 240,000 square feet were leased to new tenants, building on the success of the past several quarters. Our well-capitalized, flexible balance sheet and strategic focus on small to medium enterprises continues to drive leasing success. Today, the pipeline remains robust with approximately 250,000 square feet of leasing already in documentation in the third quarter and we continue to project that we will be approximately 87% leased by the end of 2023."


Highlights for the Three Months Ended June 30, 2023:

Financial Results:
Three Months Ended
(in 000s other than per share amounts)June 30, 2023June 30, 2022
Net income/(loss) applicable to Piedmont$(1,988)$7,966
Net income/(loss) per share applicable to common stockholders - diluted$(0.02)$0.06
Interest expense$23,389$13,775
Core Funds From Operations ("Core FFO") applicable to common stock$55,535$61,620
Core FFO per diluted share$0.45$0.50
Adjusted Funds From Operations applicable to common stock$44,444$48,900
Net loss applicable to Piedmont for the three months ended June 30, 2023 was $2.0 million, as compared to net income applicable to Piedmont of $8.0 million for the three months ended June 30, 2022.
Core FFO was $0.45 per diluted share for the second quarter of 2023, as compared to $0.50 per diluted share for the second quarter of 2022. The $0.05 per diluted share decrease was almost exclusively attributable to a $9.6 million, or $0.08 per diluted share, increase in interest expense during the second quarter of 2023, partially offset by continued growth in Property Net Operating Income, as compared to the second quarter of 2022.





5


Leasing:
Three Months Ended June 30, 2023
# of lease transactions49 
Total leasing sf581,031
New tenant leasing sf236,448
Cash rent roll up14.3 %
Accrual rent roll up19.6 %
Quarterly retention ratio69.3 %
Leased percentage as of period end86.2 %
The Company completed approximately 581,000 square feet of leasing transactions during the second quarter, over 40% of which, or approximately 236,000 square feet, was for new tenant leasing.
The average size lease executed during the second quarter of 2023 was approximately 12,000 square feet and the weighted average lease term was approximately six years.
The two largest leases completed during the quarter were both for new tenants at Galleria Atlanta:
An insurance company leased approximately 70,000 square feet through 2036 at Galleria 300; and
An owner operator of single family residences leased approximately 51,000 square feet through 2035 at Galleria 600.
Cash and accrual basis rents on leases executed during the quarter ended June 30, 2023 for space vacant one year or less increased approximately 14% and 20%, respectively.
The Company's scheduled lease expirations for the remainder of 2023 represent less than 3% of its annualized lease revenue.
During the second quarter of 2023, Same Store NOI - Cash basis increased 0.2% as new leases commencing or with expiring abatements began to outweigh leases that expired during the first six months of 2023. Same Store NOI on an accrual basis decreased 3.7% during the three months ended June 30, 2023 as compared to the same period in the prior year. The decrease was attributable to a combination of a decline in our overall leased percentage during the current period as compared to the prior period; an increase in leases under operating expense abatement due to recent leasing activity; and an increase in leases which are executed but not yet commenced.
As of June 30, 2023, the Company had approximately 1.3 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $37 million of future additional annual cash revenue; consequently, the Company continues to estimate that Same Store NOI, on both a cash and accrual basis, will increase approximately 1-3% on an annual basis in 2023.
The Company's leased percentage as of June 30, 2023 increased slightly to 86.2% from 86.1% at March 31, 2023. The Company projects its estimated year end leased percentage will be approximately 87%.

Balance Sheet:
(in 000s except for ratios)June 30, 2023December 31, 2022
Total Real Estate Assets$3,512,128$3,500,624
Total Assets$4,094,349$4,085,525
Total Debt$2,049,236$1,983,681
Weighted Average Cost of Debt4.49 %3.89 %
Debt-to-Gross Assets Ratio38.4 %37.6 %
Average Net Debt-to-Core EBITDA (ttm)6.3 x6.0 x
During the three months ended June 30, 2023, the Company repaid $350 million of maturing unsecured senior notes utilizing $170 million of cash and investments on hand and its $600 million line of credit. The balance outstanding on the line of credit as of June 30, 2023 was $200 million.


6


ESG and Operations:
The Company published its 2022 ESG report which is available electronically at www.piedmontreit.com/ ESG / Annual ESG Reports.
The Company renewed its WELL Health-Safety Rating for its entire 17 million square foot portfolio spanning 51 managed properties.
US Bancorp Center in Minneapolis, MN won an International The Outstanding Building of the Year ("TOBY") award.
All five Atlanta Galleria properties, as well as 4250 North Fairfax in Arlington, VA, achieved LEED Gold status, bringing the percentage of the portfolio that is LEED certified to 64%.
The Company increased its financial needs-based scholarship program to six students for the 2023-24 academic year at Howard University in Washington, D.C. and Morehouse College in Atlanta, GA.

Guidance for 2023

The Company is updating its previously issued guidance for the year ending December 31, 2023 to reflect the continuing rise in interest rates and to specifically reflect the net impact of additional interest expense associated with the issuance of $400 million in aggregate principal amount of 2028 Notes discussed above and the anticipated extinguishment of $300 million of its outstanding $400 million in aggregate principal amount of 2024 Notes in connection with the Company's pending tender offer as follows:

PreviousRevised
(in millions, except per share data)LowHighLowHigh
Net income/(loss)$(1)$$(19)$(17)
Add:
Depreciation144 151 148 151 
Amortization80 84 87 89 
Core FFO applicable to common stock$223 $236 $216 $223 
Core FFO applicable to common stock per diluted share$1.80$1.90$1.74$1.80
The approximately 5% difference between the stated interest rate on the 2024 Notes and the new 2028 Notes will result in an approximately $20.2 million increase in annual interest expense.
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. This guidance assumes that the Company’s pending tender offer to purchase any and all of the Company’s outstanding 2024 Notes is completed as expected and that the Company repurchases $300 million of the outstanding $400 million in aggregate principal amount of 2024 Notes pursuant to the tender offer. No speculative acquisitions or dispositions are included in the above guidance. The Company will adjust guidance throughout the year as such transactions occur, and if interest rate impacts differ from current assumptions.
Note that actual results could differ materially from these estimates and individual quarters may fluctuate on both a cash basis and an accrual basis due to the timing of any future dispositions, significant 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, one-time revenue or expense events, the actual results of the Company's pending tender offer, and other factors discussed under "Risks, Uncertainties and Limitations" below.


7


Piedmont Office Realty Trust, Inc.
Key Performance Indicators
Unaudited (in thousands except for per share data and ratios)
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), Adjusted Funds from Operations (AFFO), and Same Store Net Operating Income (Same Store NOI). Definitions of these non-GAAP measures are provided on page 33 and reconciliations are provided beginning on page 35.
Three Months Ended
Selected Operating Data6/30/20233/31/202312/31/20229/30/20226/30/2022
Percent leased
86.2 %86.1 %86.7 %86.8 %87.0 %
Percent leased - economic (1)
80.0 %79.6 %81.1 %80.6 %80.7 %
Total revenues$143,072$142,367$147,208$144,100$136,309
Net income / (loss) applicable to Piedmont-$1,988-$1,367$75,569$3,331$7,966
Net income / (loss) per share applicable to common stockholders - diluted-$0.02-$0.01$0.61$0.03$0.06
Core EBITDA$79,212$78,541$82,186$78,805$75,591
Core FFO applicable to common stock$55,535$56,344$61,235$61,352$61,620
Core FFO per share - diluted$0.45$0.46$0.50$0.50$0.50
AFFO applicable to common stock$44,444$36,792$47,082$43,482$48,900
Gross regular dividends (2)
$25,975$25,965$25,918$25,913$25,912
Regular dividends per share (2)
$0.21$0.21$0.21$0.21$0.21
Same store net operating income - accrual basis (3)
-3.7 %-2.8 %-0.7 %0.3 %2.8 %
Same store net operating income - cash basis (3)
0.2 %-1.5 %1.6 %-0.3 %1.8 %
Rental rate roll up / roll down - accrual rents
19.6 %9.9 %11.5 %37.6 %12.2 %
Rental rate roll up / roll down - cash rents
14.3 %5.7 %6.5 %33.1 %2.5 %
Selected Balance Sheet Data
Total real estate assets, net$3,512,128$3,486,797$3,500,624$3,572,591$3,139,587
Total assets$4,094,349$4,237,460$4,085,525$4,185,493$3,695,554
Total liabilities$2,297,015$2,417,363$2,236,270$2,388,162$1,879,891
Ratios & Information for Debt Holders
Core EBITDA to total revenues
55.4 %55.2 %55.8 %54.7 %55.5 %
Fixed charge coverage ratio (4)
3.2 x3.4 x3.8 x4.3 x5.1 x
Average net principal amount of debt to Core EBITDA - quarterly (5)
6.4 x6.3 x6.4 x6.1 x5.5 x
Total gross real estate assets$4,576,943$4,518,003$4,506,328$4,587,669$4,117,177
Total debt - GAAP$2,049,236$2,197,955$1,983,681$2,145,408$1,674,778
Net principal amount of debt (6)
$2,051,778$2,037,224$1,977,400$2,146,156$1,681,144
(1)Economic leased percentage excludes the square footage associated with executed but not commenced leases for currently vacant spaces and the square footage associated with tenants receiving rental abatements (after proportional adjustments for tenants receiving only partial rental abatements). Due to variations in rental abatement structures, there will be variability to the economic leased percentage over time as abatements commence and expire.
(2)Dividends are reflected in the quarter in which the record date occurred.
(3)
Please refer to the three pages starting with page 13 for reconciliations to net income and 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.
(4)The fixed charge coverage ratio is calculated as Core EBITDA divided by the sum of interest expense, principal amortization (none during periods presented), capitalized interest and preferred dividends (none during periods presented). The Company had capitalized interest of $1.4 million for the quarter ending June 30, 2023, $1.2 million for the quarter ending March 31, 2023, $1.0 million for the quarter ended December 31, 2022, $1.1 million for the quarter ended September 30, 2022, and $1.1 million for the quarter ended June 30, 2022.
(5)For the purposes of this calculation, we annualize the Core EBITDA for the quarter and use the average daily principal balance of debt outstanding during the quarter, less cash and cash equivalents and escrow deposits and restricted cash as of the end of each month of the quarter.
(6)Net principal amount of debt is calculated and defined as the total principal amount of debt outstanding minus cash and cash equivalents and escrow deposits and restricted cash all as of the end of the period.

8


Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)
6/30/20233/31/202312/31/20229/30/20226/30/2022
Assets:
Real estate, at cost:
Land assets$567,244 $567,244 $567,244 $578,722 $521,789 
Buildings and improvements3,768,456 3,714,572 3,682,000 3,751,722 3,389,650 
Buildings and improvements, accumulated depreciation(981,052)(947,209)(915,010)(926,357)(892,131)
Intangible lease asset182,127 190,180 205,074 212,248 164,194 
Intangible lease asset, accumulated amortization(83,763)(83,997)(90,694)(88,721)(85,459)
Construction in progress59,116 46,007 52,010 44,977 41,544 
Total real estate assets3,512,128 3,486,797 3,500,624 3,572,591 3,139,587 
Cash and cash equivalents5,167 170,593 16,536 10,653 6,397 
Tenant receivables, net of allowance for doubtful accounts5,387 6,280 4,762 7,796 5,164 
Straight line rent receivable180,339 176,320 172,019 173,122 168,797 
Escrow deposits and restricted cash5,055 4,183 3,064 2,191 1,459 
Prepaid expenses and other assets23,566 26,810 17,152 23,925 26,955 
Goodwill82,937 82,937 82,937 98,918 98,918 
Interest rate swap5,693 2,899 4,183 3,760 996 
Deferred lease costs, gross482,149 486,694 505,979 510,936 459,038 
Deferred lease costs, accumulated amortization(208,072)(206,053)(221,731)(218,399)(211,757)
Total assets$4,094,349 $4,237,460 $4,085,525 $4,185,493 $3,695,554 
Liabilities:
Unsecured debt, net of discount$1,852,236 $2,000,955 $1,786,681 $1,948,408 $1,674,778 
Secured debt197,000 197,000 197,000 197,000 — 
Accounts payable, accrued expenses, and accrued capital expenditures107,629 98,464 135,663 111,262 99,724 
Deferred income89,815 67,056 59,977 70,798 72,422 
Intangible lease liabilities, less accumulated amortization50,335 53,494 56,949 60,694 32,967 
Interest rate swaps— 394 — — — 
Total liabilities2,297,015 2,417,363 2,236,270 2,388,162 1,879,891 
Stockholders' equity:
Common stock1,237 1,236 1,234 1,234 1,234 
Additional paid in capital3,712,688 3,710,767 3,711,005 3,709,234 3,707,833 
Cumulative distributions in excess of earnings(1,911,188)(1,883,225)(1,855,893)(1,905,544)(1,882,962)
Other comprehensive loss(6,977)(10,266)(8,679)(9,194)(12,050)
Piedmont stockholders' equity1,795,760 1,818,512 1,847,667 1,795,730 1,814,055 
Non-controlling interest1,574 1,585 1,588 1,601 1,608 
Total stockholders' equity1,797,334 1,820,097 1,849,255 1,797,331 1,815,663 
Total liabilities, redeemable common stock and stockholders' equity$4,094,349 $4,237,460 $4,085,525 $4,185,493 $3,695,554 
Common stock outstanding at end of period123,692 123,643 123,440 123,395 123,390 


9


Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended
6/30/20233/31/202312/31/20229/30/20226/30/2022
Revenues:
Rental income (1)
$112,238 $112,560 $117,148 $114,280 $110,244 
Tenant reimbursements (1)
25,265 24,269 24,958 25,292 21,907 
Property management fee revenue437 507 395 303 326 
Other property related income5,132 5,031 4,707 4,225 3,832 
143,072 142,367 147,208 144,100 136,309 
Expenses:
Property operating costs58,368 57,791 59,763 59,039 53,634 
Depreciation36,475 35,797 34,788 34,941 32,372 
Amortization21,333 22,031 23,915 23,290 21,480 
Impairment loss (2)
— — 25,981 — — 
General and administrative7,279 7,691 7,915 6,590 7,027 
123,455 123,310 152,362 123,860 114,513 
Other income / (expense):
Interest expense(23,389)(22,077)(20,739)(17,244)(13,775)
Other income / (expense)1,787 1,656 408 335 (57)
Gain / (loss) on sale of real estate (2)
— — 101,055 — 
Net income / (loss)(1,985)(1,364)75,570 3,331 7,965 
Less: Net (income) / loss applicable to noncontrolling interest(3)(3)(1)— 
Net income / (loss) applicable to Piedmont$(1,988)$(1,367)$75,569 $3,331 $7,966 
Weighted average common shares outstanding - diluted123,671 123,550 123,633 123,697 123,679 
Net income / (loss) per share applicable to common stockholders - diluted$(0.02)$(0.01)$0.61 $0.03 $0.06 
Common stock outstanding at end of period123,692 123,643 123,440 123,395 123,390 









(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."
(2)
The gain on sale of real estate reflected in the fourth quarter of 2022 was primarily related to the sales of One Brattle Square and 1414 Massachusetts Avenue, both in Cambridge, MA. The impairment loss reflected in the fourth quarter of 2022 was related to (a) a partial write down of the Company's goodwill balance; and (b) the write down of one property.

10


Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months EndedSix Months Ended
6/30/20236/30/2022Change ($)Change (%)6/30/20236/30/2022Change ($)Change (%)
Revenues:
Rental income (1)
$112,238 $110,244 $1,994 1.8 %$224,798 $219,976 $4,822 2.2 %
Tenant reimbursements (1)
25,265 21,907 3,358 15.3 %49,534 44,087 5,447 12.4 %
Property management fee revenue437 326 111 34.0 %944 977 (33)(3.4)%
Other property related income5,132 3,832 1,300 33.9 %10,163 7,418 2,745 37.0 %
143,072 136,309 6,763 5.0 %285,439 272,458 12,981 4.8 %
Expenses:
Property operating costs58,368 53,634 (4,734)(8.8)%116,159 107,256 (8,903)(8.3)%
Depreciation36,475 32,372 (4,103)(12.7)%72,272 63,887 (8,385)(13.1)%
Amortization21,333 21,480 147 0.7 %43,364 43,732 368 0.8 %
General and administrative7,279 7,027 (252)(3.6)%14,970 14,622 (348)(2.4)%
123,455 114,513 (8,942)(7.8)%246,765 229,497 (17,268)(7.5)%
Other income / (expense):
Interest expense(23,389)(13,775)(9,614)(69.8)%(45,466)(27,673)(17,793)(64.3)%
Other income / (expense)1,787 (57)1,844 3,235.1 %3,443 1,967 1,476 75.0 %
Gain / (loss) on sale of real estate (2)
— (1)(100.0)%— 50,674 (50,674)(100.0)%
Net income / (loss)(1,985)7,965 (9,950)(124.9)%(3,349)67,929 (71,278)(104.9)%
Less: Net (income) / loss applicable to noncontrolling interest(3)(4)(400.0)%(6)(7)(700.0)%
Net income / (loss) applicable to Piedmont$(1,988)$7,966 $(9,954)(125.0)%$(3,355)$67,930 $(71,285)(104.9)%
Weighted average common shares outstanding - diluted123,671 123,679 123,611 123,617 
Net income / (loss) per share applicable to common stockholders - diluted$(0.02)$0.06 $(0.03)$0.55 
Common stock outstanding at end of period123,692 123,390 123,692 123,390 







(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."
(2)The gain on sale of real estate for the six months ended June 30, 2022 was primarily related to the sales 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 EndedSix Months Ended
6/30/20236/30/20226/30/20236/30/2022
GAAP net income / (loss) applicable to common stock$(1,988)$7,966 $(3,355)$67,930 
Depreciation for real estate assets (1)
36,200 32,187 71,890 63,519 
Amortization (1)
21,323 21,468 43,344 43,708 
Loss / (gain) on sale of properties
— (1)— (50,674)
NAREIT funds from operations and core funds from operations applicable to common stock55,535 61,620 111,879 124,483 
Adjustments:
Amortization of debt issuance costs and discounts on debt
1,312 763 2,551 1,541 
Depreciation of non real estate assets264 175 361 348 
Straight-line effects of lease revenue (1)
(2,755)(3,029)(5,942)(5,606)
Stock-based compensation adjustments2,095 1,718 2,278 1,166 
Amortization of lease-related intangibles (1)
(3,119)(3,009)(6,531)(6,171)
Non-incremental capital expenditures (2)
   Building/Construction/Development(2,914)(4,748)(7,666)(8,254)
   Tenant Improvements(2,228)(3,402)(7,927)(14,908)
   Leasing Costs(3,746)(1,188)(7,767)(5,123)
Adjusted funds from operations applicable to common stock$44,444 $48,900 $81,236 $87,476 
Weighted average common shares outstanding - diluted123,749 123,679 123,696 123,617 
Funds from operations per share (diluted)$0.45 $0.50 $0.90 $1.01 
Core funds from operations per share (diluted)$0.45 $0.50 $0.90 $1.01 
Common stock outstanding at end of period123,692 123,390 123,692 123,390 

(1)Includes our proportionate share of amounts attributable to consolidated properties.
(2)
Non-incremental capital expenditures are defined on page 33.


12


Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months EndedSix Months Ended
6/30/20236/30/20226/30/20236/30/2022
Net income / (loss) applicable to Piedmont$(1,988)$7,966 $(3,355)$67,930 
Net income / (loss) applicable to noncontrolling interest(1)(1)
Interest expense
23,389 13,775 45,466 27,673 
Depreciation (1)
36,464 32,362 72,251 63,867 
Amortization (1)
21,323 21,468 43,344 43,708 
Depreciation and amortization attributable to noncontrolling interests21 22 41 44 
(Gain) / loss on sale of properties
— (1)— (50,674)
EBITDAre and Core EBITDA (2)
79,212 75,591 157,753 152,547 
General & administrative expenses
7,279 7,027 14,970 14,622 
Non-cash general reserve for uncollectible accounts— (1,000)(400)(1,000)
Management fee revenue (3)
(254)(203)(546)(565)
Other (income) / expense (1) (4)
(1,571)273 (3,012)(1,536)
Straight-line effects of lease revenue (1)
(2,755)(3,029)(5,942)(5,606)
Straight-line effects of lease revenue attributable to noncontrolling interests(1)(1)(6)(1)
Amortization of lease-related intangibles (1)
(3,119)(3,009)(6,531)(6,171)
Property net operating income (cash basis)78,791 75,649 156,286 152,290 
Deduct net operating (income) / loss from:
Acquisitions (5)
(5,770)— (10,843)— 
Dispositions (6)
48 (2,704)74 (5,785)
Other investments (7)
173 138 337 328 
Same store net operating income (cash basis)$73,242 $73,083 $145,854 $146,833 
Change period over period0.2 %N/A(0.7)%N/A
(1)Includes our proportionate share of amounts attributable to consolidated properties.
(2)The Company has historically recognized approximately $2 to $3 million of termination income on an annual basis. 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 June 30 2023, Piedmont recognized $0.2 million of termination income, as compared with $0.4 million during the same period in 2022. During the six months ended June 30, 2023, Piedmont recognized $0.4 million of termination income, as compared with $0.6 million during the same period in 2022.
(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 includes 1180 Peachtree Street in Atlanta, GA, purchased in the third quarter of 2022.
(6)Dispositions include Two Pierce Place in Itasca, IL and 225 and 235 Presidential Way in Woburn, MA, sold in the first quarter of 2022, and One Brattle Square and 1414 Massachusetts Avenue in Cambridge, MA, sold in the fourth quarter of 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 (Accrual Basis)
Unaudited (in thousands)
Three Months EndedSix Months Ended
6/30/20236/30/20226/30/20236/30/2022
Net income / (loss) applicable to Piedmont$(1,988)$7,966 $(3,355)$67,930 
Net income / (loss) applicable to noncontrolling interest(1)(1)
Interest expense
23,389 13,775 45,466 27,673 
Depreciation (1)
36,464 32,362 72,251 63,867 
Amortization (1)
21,323 21,468 43,344 43,708 
Depreciation and amortization attributable to noncontrolling interests21 22 41 44 
(Gain) / loss on sale of properties
— (1)— (50,674)
EBITDAre and Core EBITDA (2)
79,212 75,591 157,753 152,547 
General & administrative expenses
7,279 7,027 14,970 14,622 
Management fee revenue (3)
(254)(203)(546)(565)
Other (income) / expense (1) (4)
(1,571)273 (3,012)(1,536)
Property net operating income (accrual basis)84,666 82,688 169,165 165,068 
Deduct net operating (income) / loss from:
Acquisitions (5)
(7,612)— (14,980)— 
Dispositions (6)
49 (2,697)74 (5,857)
Other investments (7)
70 130 132 377 
Same store net operating income (accrual basis)$77,173 $80,121 $154,391 $159,588 
Change period over period(3.7)%N/A(3.3)%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 June 30 2023, Piedmont recognized $0.2 million of termination income, as compared with $0.4 million during the same period in 2022. During the six months ended June 30, 2023, Piedmont recognized $0.4 million of termination income, as compared with $0.6 million during the same period in 2022.
(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 includes 1180 Peachtree Street in Atlanta, GA, purchased in the third quarter of 2022.
(6)Dispositions include Two Pierce Place in Itasca, IL and 225 and 235 Presidential Way in Woburn, MA, sold in the first quarter of 2022, and One Brattle Square and 1414 Massachusetts Avenue in Cambridge, MA, sold in the fourth quarter of 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.





14


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

Three Months EndedSix Months Ended
6/30/20236/30/2022Change ($)Change (%)6/30/20236/30/2022Change ($)Change (%)
Revenue
Cash rental income$100,259 $101,158 $(899)(0.9)%$200,562 $201,460 $(898)(0.4)%
Tenant reimbursements (1)
23,841 21,341 2,500 11.7 %46,779 42,818 3,961