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, today announced its results for the
quarter ended March 31, 2023.
Highlights for the Three Months Ended March 31,
2023:
Financial Results:
|
Three Months Ended |
(in 000s other than per share
amounts ) |
March 31, 2023 |
March 31, 2022 |
Net income/(loss) applicable
to Piedmont |
$ |
(1,367 |
) |
$ |
59,964 |
Net income/(loss) per share
applicable to common stockholders - diluted |
$ |
(0.01 |
) |
$ |
0.49 |
Gain on sale of real estate
assets |
$ |
0 |
|
$ |
50,673 |
Interest expense |
$ |
22,077 |
|
$ |
13,898 |
Core Funds From Operations
("Core FFO") applicable to common stock |
$ |
56,344 |
|
$ |
62,863 |
Core FFO per diluted
share |
$ |
0.46 |
|
$ |
0.51 |
Adjusted Funds From Operations
applicable to common stock |
$ |
36,792 |
|
$ |
38,576 |
- Net loss applicable
to Piedmont for the three months ended March 31, 2023 was $1.4
million, as compared to net income applicable to Piedmont of $60.0
million for the three months ended March 31, 2022.
- The results for the first quarter of
2023 did not include any gain on sale of real estate assets; the
results for the first quarter of 2022 included an approximate $50.7
million gain on sale of real estate assets.
- Core FFO, which removes the impact
of the gain on sale of real estate assets mentioned above, as well
as depreciation and amortization expense, was $0.46 per diluted
share for the first quarter of 2023, as compared to $0.51 per
diluted share for the first quarter of 2022. The $.05 per diluted
share decrease was primarily attributable to an $8.2 million, or
$.07 per diluted share, increase in interest expense during the
first quarter of 2023, and was partially offset by continued growth
in Property Net Operating Income, as compared to the first quarter
of 2022.
Leasing:
|
Three Months Ended March 31, 2023 |
# of lease transactions |
46 |
|
Total leasing sf |
543,560 |
|
New tenant leasing sf |
269,554 |
|
Cash rent roll up |
5.7 |
% |
Accrual rent roll up |
9.9 |
% |
Leased Percentage as of period
end |
86.1 |
% |
- The Company
completed approximately 544,000 square feet of leasing transactions
during the first quarter, half of which, or 270,000 square feet,
was for new tenant leasing, the largest quarterly amount of new
tenant leasing since 2018.
- The average size lease executed
during the first quarter of 2023 was approximately 12,000 square
feet and the weighted average lease term was approximately eight
years.
- The two largest leases completed
during the quarter were both for new tenants in the Company's
Dallas portfolio:
- An energy company leased
approximately 70,000 square feet through 2035 at Las Colinas
Corporate Center I; and
- A logistics company leased
approximately 58,000 square feet through 2035 at One Galleria
Tower.
- Cash and accrual basis rents on
leases executed during the quarter ended March 31, 2023 for space
vacant one year or less increased approximately 6% and 10%,
respectively.
- The Company's scheduled lease
expirations for the remainder of 2023 represent less than 5% of its
annualized lease revenue.
- During the first quarter of 2023,
Same Store NOI - Cash decreased 1.5% due to timing of leases
representing approximately 2% of the Company's annualized lease
revenue expiring, combined with an approximately 600,000 square
foot increase in executed leases for vacant space yet to commence
or under rental abatement as compared to the first quarter of
2022.
- As of March 31, 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 $40 million of future additional
annual cash revenue. Consequently, the Company estimates 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 March 31, 2023 was 86.1%, down slightly from 86.7% at December
31, 2022 due to expirations during the first quarter of 2023 noted
above; however, the Company affirms its previous estimate of its
year end leased percentage between 87-88%.
- The Company has executed over
200,000 square feet of total leasing thus far in the second quarter
of 2023, including approximately 125,000 square feet of new tenant
leasing.
Balance Sheet:
(in 000s except for
ratios) |
March 31, 2023 |
|
December 31, 2022 |
Cash and Cash Equivalents |
$ |
170,593 |
|
|
$ |
16,536 |
|
Total Real Estate Assets |
$ |
3,486,797 |
|
|
$ |
3,500,624 |
|
Total Assets |
$ |
4,237,460 |
|
|
$ |
4,085,525 |
|
Total Debt |
$ |
2,197,955 |
|
|
$ |
1,983,681 |
|
Weighted Average Cost of
Debt |
|
4.13 |
% |
|
|
3.89 |
% |
Debt-to-Gross Assets
Ratio |
|
40.4 |
% |
|
|
37.6 |
% |
Net Debt-to-Gross Assets less
Cash and Cash Equivalents Ratio |
|
38.5 |
% |
|
|
37.4 |
% |
Average Net Debt-to-Core
EBITDA (ttm) |
6.1 x |
|
6.0 x |
- As previously announced, during the
three months ended March 31, 2023, the Company entered into a new
$215 million term loan facility priced at adjusted SOFR + 105 bps
with a final extended maturity date of January 31, 2025. The
Company plans to use the proceeds from the facility, along with a
combination of other cash on hand, potential proceeds from select
property dispositions, and/or draws on its $600 million line of
credit to repay its $350 million in Unsecured Senior Notes that
mature in June 2023.
ESG and Operations:
- During the first quarter, Piedmont was named a 2023 ENERGY STAR
Partner of the Year, marking the third consecutive year that
Piedmont has attained this designation. The Company's most recent
annual ESG Report, which includes Sustainability Accounting
Standards Board (SASB) metrics and information that aligns with the
Task Force on Climate-related Financial Disclosures (TCFD)
framework, is available on the Company's website at
www.piedmontreit.com/ESG.
- Two of the Company's Minneapolis properties, Norman Pointe I
and US Bancorp Center, and one of the Company's Boston properties,
25 Burlington Mall Road, won regional The Outstanding Building of
the Year ("TOBY") awards. The award is presented by the Building
Owners and Managers Association ("BOMA") and recognizes excellence
in building management.
Commenting on first quarter results, Brent Smith, Piedmont's
President and Chief Executive Officer, said, "Last year’s leasing
momentum has continued into 2023 with over 500,000 square feet of
leasing during the first quarter, including the most quarterly new
tenant leasing Piedmont has achieved since 2018. While the office
sector is undoubtedly facing headwinds, the demand for
well-amenitized, well-located space owned by financially stable
landlords remains strong, particularly in our Sunbelt markets.
Top-tier office properties in their respective submarkets continue
to garner outsized demand and the “flight-to-quality” we’re
witnessing in the marketplace now encompasses a landlord’s
financial stability along with the building’s physical
characteristics. Piedmont continues to differentiate its workplace
offering to drive leasing velocity and actively gain market share.
Additionally, in the first quarter we increased financial liquidity
ahead of our near-term bond maturity with the issuance of a new
unsecured term loan, a testament to the strength of our balance
sheet and the depth of our banking relationships. Last, I’m proud
to share that Piedmont was honored as an ENERGY STAR Partner of the
Year, making this our third consecutive year for the achievement
and recognizing our commitment to maintaining sustainable,
wellness-oriented, working environments."
Second Quarter 2023 Dividend
On May 1, 2023, the board of directors of Piedmont declared a
dividend for the second quarter of 2023 in the amount of $0.21 per
share on its common stock to stockholders of record as of the close
of business on May 26, 2023, payable on June 16, 2023.
Guidance for 2023
After considering year to date results and updated projections,
the Company affirms its previously issued guidance for the year
ending December 31, 2023 as follows:
|
|
(in millions, except per share
data) |
Low |
|
High |
Net income/(loss) |
$ |
(1 |
) |
|
$ |
1 |
Add: |
|
|
|
Depreciation |
|
144 |
|
|
|
151 |
Amortization |
|
80 |
|
|
|
84 |
Core FFO applicable to common
stock |
$ |
223 |
|
|
$ |
236 |
Core FFO applicable to common
stock per diluted share |
$ |
1.80 |
|
|
$ |
1.90 |
Executed leasing activity for 2023 is estimated to be in the
range of 1.6 to 2.0 million square feet with year-end leased
percentage anticipated to be between 87-88%, before the impacts of
acquisition and disposition activity.
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. No speculative acquisitions or
dispositions are included in the above guidance. The Company will
adjust guidance throughout the year as such transactions occur, and
as new debt agreements are completed, if interest rates 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, 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
March 31, 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 scheduled a conference call and an audio web cast
for Tuesday, May 2, 2023 at 9:00 A.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 348299. A replay of the conference call
will be available through May 16, 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 48117. A web cast replay will
also be available after the conference call in the Investor
Relations section of the Company's website. During the audio web
cast and conference call, the Company's management team will review
first quarter 2023 performance, discuss recent events, and conduct
a question-and-answer period.
Supplemental Information
Quarterly supplemental information as of and for the period
ended March 31, 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 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;
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, 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 discussed under Item 1A. of Piedmont’s Annual
Report on Form 10-K for the year ended December 31, 2022 and
Quarterly Report on Form 10-Q for the three months ended March 31,
2023.
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
- PDM 3 31 23 EARNINGS RELEASE Financials
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