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
June 30, 2022.
Highlights for the Quarter Ended June 30,
2022:
Financial Results:
- The Company recognized net income
applicable to Piedmont of $8.0 million, or $0.06 per diluted share,
for the quarter ended June 30, 2022, as compared to $9.9
million, or $0.08 per diluted share, for the quarter ended
June 30, 2021.
- Core Funds From Operations ("Core
FFO"), was $0.50 per diluted share for the quarter ended
June 30, 2022, compared to $0.48 per diluted share for the
quarter ended June 30, 2021.
- Same Store Net Operating Income
("Same Store NOI") increased 1.8% and 2.8% on a cash and accrual
basis, respectively, for the quarter ended June 30, 2022 as
compared to the quarter ended June 30, 2021.
Leasing:
- The Company completed approximately
724,000 square feet of leasing during the quarter ended
June 30, 2022, including approximately 233,000 square feet
related to new tenant leasing.
- The largest new tenant lease was
with Kimley-Horn and Associates for approximately 61,000 square
feet through 2034 at 200 South Orange Avenue in Orlando, FL.
- Renewal leasing completed during the
quarter included an intermediate extension of US Bank's
approximately 340,000 square feet at One and Two Meridian Crossings
in Minneapolis through 2024, which is part of Piedmont's
negotiation with US Bank on a longer term extension for the
majority of their space in Minneapolis.
- Cash and accrual basis rents on
leases executed during the quarter ended June 30, 2022 for
space vacant one year or less increased approximately 3% and 12%,
respectively.
- The portfolio increased to 87.0%
leased as of June 30, 2022, from 85.5% as of December 31,
2021.
- The Company's scheduled lease
expirations for the remainder of the year ending December 31, 2022
and the year ending December 31, 2023 are low, representing
approximately 3% and 8%, respectively, of its annualized lease
revenue.
- Excluding the one large renewal for
US Bank mentioned above, the weighted average lease term for the
over 50 leases executed during the second quarter was approximately
6.5 years.
- As of June 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 $36 million of annual revenue.
Capital Markets:
- Piedmont entered into a binding
contract to purchase 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 $465 million, which
includes the assumption of an existing $197 million, 4.1% fixed
rate mortgage maturing in 2028 secured by the property. 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 second skyline defining acquisition in the
Midtown Atlanta submarket in the last twelve months, Piedmont will
own 1.3 million square feet in this dynamic submarket and will be
the largest office owner along Peachtree Street in Midtown. The
transaction is expected to close during the third quarter of 2022
with an initial accrual-basis NOI yield of 6.3%. On an interim
basis, the cash portion of the net purchase price will be funded
primarily from the proceeds of a new $200 million bridge loan
described below; however, the Company anticipates using the net
sales proceeds from the disposition of non-strategic assets over
the next 12 months, including a 1031 Exchange of its Cambridge
assets, to ultimately fund the acquisition.
Balance Sheet (including subsequent event):
- Amended and restated our $500
million line of credit, increasing the capacity to $600 million and
pushing the final extended maturity out to 2027.
- The Company's net debt-to-Core
EBITDA ratio for the second quarter of 2022 was 5.5 x on an
annualized basis and 5.7 x on a trailing twelve month basis.
- The Company has no secured debt and
its Debt-to-Gross Assets ratio was 34.6% as of June 30,
2022.
- On July 22, 2022, Piedmont entered into a $200 million
delayed-draw, unsecured, floating rate term loan facility initially
bearing interest at Adjusted Term SOFR Rate (as defined in the term
loan agreement) + 100 bps. The proceeds will be used to fund, on an
interim basis, a majority of the cash portion of the 1180 Peachtree
Street acquisition mentioned above, pending subsequent dispositions
of assets intended to make the acquisition leverage neutral from a
balance sheet perspective.
ESG and Operations:
- Piedmont was recognized as a 2022
ENERGY STAR® Partner of the Year, marking the second year in a row
that the Company has achieved the designation.
- The Company was selected as a 2022
Green Lease Leader by the Institute for Market Transformation and
the U.S. Department of Energy’s Better Buildings Alliance.
- Piedmont funded need-based
scholarships at Howard University and Morehouse College.
Commenting on second quarter results, Brent Smith, Piedmont's
President and Chief Executive Officer, said, "Second quarter was
another strong quarter for Piedmont. We delivered our fourth
consecutive quarter of over 200,000 square feet of new tenant
leasing volume, which is above pre-pandemic levels, resulting in
attractive economics and again demonstrating tenant preference for
outstanding, amenity-rich environments offered at cost-conscious
rental rates. We also laid the groundwork for the strategic
acquisition of 1180 Peachtree Street, the most recognizable office
building in Midtown Atlanta and solidifying our Sunbelt position
with an estimated 67% of our annual revenue being generated from
the region after the 1180 Peachtree Street and Cambridge
transactions close. Finally, we were very pleased to be named an
ENERGY STAR Partner of the Year for the second consecutive year, as
well as a 2022 Green Lease Leader, during the second quarter,
demonstrating our continued commitment to maintaining a sustainable
portfolio. "
Third Quarter 2022 Dividend Declaration
On July 27, 2022, the board of directors of Piedmont declared a
dividend for the third 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 August 26, 2022, payable on September 16, 2022.
Guidance for 2022
After considering year-to-date results and updated forecasts,
which particularly include increased interest rate projections and
more conservative lease commencement date assumptions, the Company
is narrowing its previously provided guidance for the year ending
December 31, 2022 as follows:
|
Revised |
|
Previous |
(in millions, except per share
data) |
Low |
|
High |
|
Low |
|
High |
Net income |
$ |
80 |
|
$ |
83 |
|
$ |
80 |
|
$ |
84 |
Add: |
|
|
|
|
|
|
|
Depreciation |
|
133 |
|
|
136 |
|
|
134 |
|
|
138 |
Amortization |
|
84 |
|
|
86 |
|
|
83
|
|
|
85 |
Deduct: |
|
|
|
|
|
|
|
Gain on sale of real estate assets |
|
(51) |
|
|
(51) |
|
|
(51) |
|
|
(51) |
NAREIT FFO and Core FFO applicable to common stock |
$ |
246 |
|
$ |
254 |
|
$ |
246 |
|
$ |
256 |
NAREIT FFO and Core FFO per
diluted share |
$ |
1.99 |
|
$ |
2.05 |
|
$ |
1.99 |
|
$ |
2.07 |
This guidance reflects management's view of current market
conditions and incorporates certain economic and operational
assumptions and projections, including the impacts of completed
transactional activity through July of 2022. In addition, the
Company's guidance is based on information available to management
as of the date of this release. The guidance includes the
acquisition of 1180 Peachtree Street during the third quarter of
2022, the bridge financing of the acquisition, and the subsequent
disposition of non-strategic assets totaling approximately $400
million over the next 12 months. The guidance does not include any
other acquisitions. Actual results could differ materially from
these estimates based on a variety of factors, particularly the
timing of any future acquisitions and dispositions, as well as
those factors discussed under "Forward Looking Statements"
below.
Note that individual quarters may fluctuate on both a cash basis
and an accrual basis due to the timing of lease commencements and
expirations, abatement periods, repairs and maintenance expenses,
capital expenditures, capital markets activities, seasonal general
and administrative expenses, accrued potential performance-based
compensation expense, and one-time revenue or expense events.
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, 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, July 28, 2022 at 9:00 A.M. Eastern daylight time. The
live, listen-only, audio web cast of the call may be accessed on
the Company's website at
http://investor.piedmontreit.com/news-and-events/events-calendar.
Dial-in numbers for analysts who plan to actively participate in
the call are (877) 545-0523 for participants in the United States
and Canada and (973) 528-0016 for international participants.
Participant Access Code is 918676. A replay of the conference call
will be available through 9:00 A.M. Eastern daylight time on August
11, 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 46152. 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 second 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 June 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 16 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 risks and uncertainties, as
well as known and unknown risks, which could cause actual results
to differ materially from those projected or anticipated.
Therefore, such statements are not intended to be a guarantee of
the Company`s performance in future periods. Such forward-looking
statements can generally be identified by our use of
forward-looking terminology such as "may," "will," "expect,"
"intend," "anticipate," "estimate," "believe," "continue" or
similar words or phrases that are predictions of future events or
trends and which do not relate solely to historical matters.
Examples of such statements in this press release include: whether
the acquisition of 1180 Peachtree Street will close; whether the
subsequent disposition of non-strategic assets totaling
approximately $400 million over the next 12 months will occur; and
the Company's estimated range of Net Income, Depreciation,
Amortization, NAREIT FFO/Core FFO and NAREIT FFO/Core FFO per
diluted share for the year ending December 31, 2022. These
statements are based on beliefs and assumptions of Piedmont’s
management, which in turn are based on information available at the
time the statements are made.
The following are some of the factors that could cause the
Company's actual results and its expectations to differ materially
from those described in the Company's forward-looking statements:
economic, regulatory, socio-economic changes, and/or technology
changes (including accounting standards) that impact the real
estate market generally, or that could affect patterns of use of
commercial office space; the impact of competition on our efforts
to renew existing leases or re-let space on terms similar to
existing leases; changes in the economies and other conditions
affecting the office sector in general and specifically the markets
in which we primarily operate where we have high concentrations of
our annualized lease revenue; lease terminations, lease defaults,
lease contractions, or changes in the financial condition of our
tenants, particularly by one of our large lead tenants; adverse
market and economic conditions, including any resulting impairment
charges on both our long-lived assets or goodwill resulting
therefrom; the success of our real estate strategies and investment
objectives, including our ability to identify and consummate
suitable acquisitions and divestitures; the illiquidity of real
estate investments, including regulatory restrictions to which
REITs are subject and the resulting impediment on our ability to
quickly respond to adverse changes in the performance of our
properties; the risks and uncertainties associated with our
acquisition and disposition of properties, many of which risks and
uncertainties may not be known at the time of acquisition or
disposition; development and construction delays, including the
potential of supply chain disruptions, and resultant increased
costs and risks; our real estate redevelopment and development
strategies may not be successful; future acts of terrorism, civil
unrest, or armed hostilities in any of the major metropolitan areas
in which we own properties, or future cybersecurity attacks against
any of our properties or our tenants; risks related to the
occurrence of cyber incidents, or a deficiency in our
cybersecurity, which could negatively impact our business by
causing a disruption to our operations, a compromise or corruption
of our confidential information, and/or damage to our business
relationships; costs of complying with governmental laws and
regulations; uninsured losses or losses in excess of our insurance
coverage, and our inability to obtain adequate insurance coverage
at a reasonable cost; additional risks and costs associated with
directly managing properties occupied by government tenants,
including an increased risk of default by government tenants during
periods in which state or federal governments are shut down or on
furlough; significant price and volume fluctuations in the public
markets, including on the exchange which we listed our common
stock; changes in interest rates and changes in the method pursuant
to which the London Interbank Offered Rate ("LIBOR") rates are
determined and the planned phasing out of United States dollar
("USD") LIBOR after June 2023; rising interest rates which could
affect our return on investments and/or our ability to finance or
refinance properties; the effect of future offerings of debt or
equity securities or changes in market interest rates on the value
of our common stock; additional risks and costs associated with
inflation and continuing increases in the rate of inflation,
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; potential changes in the political
environment and reduction in federal and/or state funding of our
governmental tenants; changes in the financial condition of our
tenants directly or indirectly resulting from geopolitical
developments that could negatively affect important supply chains
and international trade, the termination or threatened termination
of existing international trade agreements, or the implementation
of tariffs or retaliatory tariffs on imported or exported goods;
the effect of any litigation to which we are, or may become,
subject; additional risks and costs associated with owning
properties occupied by tenants in particular industries, such as
oil and gas, hospitality, travel, co-working, etc., including risks
of default during start-up and during economic downturns; changes
in tax laws impacting REITs and real estate in general, as well as
our ability to continue to qualify as a REIT under the Internal
Revenue Code of 1986, as amended, or other tax law changes which
may adversely affect our stockholders; the future effectiveness of
our internal controls and procedures; actual or threatened public
health epidemics or outbreaks, such as 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
Guilbert770-418-8592research.analysts@piedmontreit.com
Shareholder Services/Transfer Agent Services
Contact:Computershare,
Inc.866-354-3485investor.services@piedmontreit.com
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