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, 2024 which included significant
leasing activity, strong Same Store NOI growth, as well as
previously announced refinancing and disposition activity.
Highlights for the Three Months Ended March 31,
2024:
Financial Results:
|
Three Months Ended |
(in 000s other than per share
amounts ) |
March 31, 2024 |
March 31, 2023 |
Net loss applicable to
Piedmont |
$ |
(27,763 |
) |
$ |
(1,367 |
) |
Net loss per share applicable
to common stockholders - diluted |
$ |
(0.22 |
) |
$ |
(0.01 |
) |
Interest expense |
$ |
29,714 |
|
$ |
22,077 |
|
Impairment charges |
$ |
18,432 |
|
$ |
0 |
|
Core FFO applicable to common
stock |
$ |
47,753 |
|
$ |
56,344 |
|
NAREIT FFO per diluted
share |
$ |
0.38 |
|
$ |
0.46 |
|
Core FFO per diluted
share |
$ |
0.39 |
|
$ |
0.46 |
|
Adjusted FFO applicable to
common stock |
$ |
24,741 |
|
$ |
36,792 |
|
Same Store NOI - cash
basis |
|
5.1 |
% |
|
Same Store NOI - accrual
basis |
|
2.1 |
% |
|
|
|
|
|
|
- Piedmont recognized a net loss of
$27.8 million, or $0.22 per diluted share, for the first quarter of
2024, as compared to a net loss of $1.4 million, or $0.01 per
diluted share, for the first quarter of 2023, with the first
quarter of 2024 including $18.4 million, or $0.15 per diluted
share, in impairment charges primarily related to shortening the
projected hold period for one property during the quarter, as well
as approximately $7.6 million, or $0.06 per diluted share, of
increased interest expense as compared to first quarter of
2023.
- Core FFO, which removes the impact
of the impairment charges noted above, as well as loss on early
extinguishment of debt, and depreciation and amortization expense,
was $0.39 per diluted share for the first quarter of 2024, as
compared to $0.46 per diluted share for the first quarter of 2023,
with the decrease primarily attributable to the $0.06 per diluted
share increase in interest expense noted above.
- Same Store NOI - Cash basis and Same
Store NOI - Accrual basis increased 5.1% and 2.1%, respectively,
for the three months ended March 31, 2024, as compared to the
same period in the prior year, as newly commenced leases or those
with expiring abatements outweighed expiring leases.
Leasing:
|
Three Months Ended March 31, 2024 |
# of lease transactions |
54 |
|
Total leasing sf (in
000s) |
500 |
|
New tenant leasing sf (in
000s) |
328 |
|
Cash rent roll up |
8.0 |
% |
Accrual rent roll up |
18.6 |
% |
Leased Percentage as of period
end |
87.8 |
% |
|
|
|
- The Company
completed approximately 500,000 square feet of leasing during the
first quarter, including approximately 328,000 square feet of new
tenant leasing.
- The weighted average size lease
executed during the quarter was approximately 13,000 square feet
and the weighted average lease term was approximately eight
years.
- Rents on leases executed during the
three months ended March 31, 2024 for space vacant one year or less
increased approximately 8.0% and 18.6% on a cash and accrual basis,
respectively.
- The Company's leased percentage for
its in-service portfolio as of March 31, 2024 increased to
87.8%, up from 87.1% as of December 31, 2023, reflecting the
leasing activity above, the disposition mentioned below, and one
asset moved to redevelopment.
- As of March 31, 2024, the
Company had approximately 1.3 million square feet of executed
leases for vacant space yet to commence or under rental abatement,
representing approximately $42 million of future additional annual
cash rents.
- Thus far during the second quarter
of 2024, the Company has executed approximately 170,000 square feet
of total leasing.
Transactional Activity:
- During the first quarter, the
Company sold One Lincoln Park, located at 8401 North Central
Expressway in Dallas, TX for $54 million, or $210 per square foot,
in an all-cash transaction. The building is a 10-story,
approximately 257,000-square foot, office building which was 59%
leased as of December 31, 2023.
Balance Sheet:
(in 000s except for
ratios) |
March 31, 2024 |
|
December 31, 2023 |
Total Real Estate Assets |
$ |
3,452,475 |
|
|
$ |
3,512,527 |
|
Total Assets |
$ |
3,993,996 |
|
|
$ |
4,057,082 |
|
Total Debt |
$ |
2,070,070 |
|
|
$ |
2,054,596 |
|
Weighted Average Cost of
Debt |
|
5.81 |
% |
|
|
5.82 |
% |
Principal Amount of
Debt-to-Gross Assets Ratio |
|
38.9 |
% |
|
|
38.2 |
% |
Average Net Debt-to-Core
EBITDA (ttm*) |
|
6.5x |
|
|
|
6.4x |
|
|
|
|
|
|
|
|
|
- During the three months ended
March 31, 2024, the Company entered into a new, three year,
$200 million unsecured syndicated bank term loan. The Company used
the net proceeds and its revolving line of credit to pay off a $100
million bank term loan that was scheduled to mature in December of
2024, and to repay $190 million of a $215 million unsecured term
loan that was scheduled to mature on January 31, 2024. The
remaining $25 million of the $215 million unsecured term loan was
extended to January 31, 2025.
- Also during the three months ended
March 31, 2024, the Company repaid the remaining approximately $50
million balance of its Senior Unsecured Notes Due 2024 using
proceeds from the sale of One Lincoln Park mentioned above.
- As of March 31, 2024, the Company's
only debt with a final maturity prior to 2027 is $275 million in
unsecured bank term loans that mature during the first quarter of
2025.
ESG and Operations:
- During the first quarter, the U.S.
Environmental Protection Agency and the U.S. Department of Energy
recognized the Company with its highest level of recognition - 2024
ENERGY STAR Partner of the Year – Sustained Excellence. The
sustained excellence recognition is awarded to organizations who
have earned Partner of the Year for several consecutive years and
have gone beyond the criteria needed to qualify for
recognition.
- Three buildings, CNL Center I &
II in Orlando, FL and Glenridge Highlands II, in Atlanta, GA earned
LEED Gold certification during the quarter.
- As of March 31, 2024, approximately
84% and 72% of the Company's portfolio was ENERGY STAR rated and
LEED certified, respectively.
Commenting on first quarter results, Brent Smith, Piedmont's
President and Chief Executive Officer, said, "We are pleased with
our quarterly results. First and foremost, we continued to
experience the strong leasing volume that we have seen over the
last several quarters, executing approximately half a million
square feet, with over half a point of occupancy absorption driven
by small and medium enterprises in the flight-to-quality trend. In
addition, we harvested the value in one of our high-quality Dallas
assets through the disposition of One Lincoln Park to a financial
services tenant, using the proceeds to pay off the remaining
balance of our 2024 Senior Notes on an earnings-neutral basis.
During the first quarter, we also addressed all of our 2024 debt
maturities, meaningfully extending our maturity profile and leaving
only $275 million of debt maturing prior to 2027. Finally, we were
named an ENERGY STAR Partner of the Year for the fourth consecutive
year, adding the prestigious 'Sustained Excellence' designation for
the first time."
Second Quarter 2024 Dividend
As previously announced, on April 24, 2024, the board of
directors of Piedmont declared a dividend for the second quarter of
2024 in the amount of $0.125 per share on its common stock to
stockholders of record as of the close of business on May 24, 2024,
payable on June 14, 2024.
Guidance for 2024
The Company is affirming its previous guidance for the year
ending December 31, 2024 as follows:
(in millions, except per share
data) |
Low |
|
High |
Net loss |
$ |
(47 |
) |
|
$ |
(41 |
) |
Add: |
|
|
|
Depreciation |
|
148 |
|
|
|
151 |
|
Amortization |
|
81 |
|
|
|
84 |
|
Core FFO applicable to common
stock |
$ |
182 |
|
|
$ |
194 |
|
Core FFO applicable to common
stock per diluted share |
$ |
1.46 |
|
|
$ |
1.56 |
|
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, including the following specific
assumptions and projections:
- Executed leasing in the range of 1.5 - 2 million square feet
with year-end leased percentage for the Company's in-service
portfolio anticipated to be approximately 87-88%, before the
impacts of any acquisition or disposition activity;
- Same Store NOI flat to 2% increase on both a cash and accrual
basis, as the Company will experience some downtime between certain
lease expirations and new lease commencements during 2024;
- Interest expense of approximately $119-121 million, reflecting
a full year of higher interest rates as a result of refinancing
activity completed by the Company during the latter half of 2023
and early 2024; and,
- General and administrative expense will remain relatively flat
at approximately $29-30 million.
No speculative acquisitions, dispositions, or refinancing are
included in the above guidance. The Company will adjust guidance if
such transactions occur.
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, 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, 2024 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
release and the accompanying quarterly 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 Wednesday, May 1, 2024, 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 467991. A replay of the conference call
will be available through May 15, 2024, 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 50330. 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 2024 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, 2024 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 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
(Baa3). Piedmont is a 2024 ENERGY STAR Partner of the Year -
Sustained Excellence. 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
for the year ending December 31, 2024. 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. artificial intelligence and machine
learning, 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 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 and available financing,
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;
- Risks related to the occurrence of cybersecurity incidents,
including cybersecurity incidents against us or any of our
properties or tenants, or a deficiency in our identification,
assessment or management of cybersecurity threats impacting our
operations and the public's reaction to reported cybersecurity
incidents;
- 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 for new debt
financings;
- A downgrade in our credit ratings, the credit ratings of
Piedmont Operating Partnership, L.P. (the "Operating Partnership")
or the credit ratings of our or the Operating Partnership's
unsecured debt securities, which could, among other effects,
trigger an increase in the stated rate of one or more of our
unsecured debt instruments;
- 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 impact
of a possible recession;
- 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; and
- Other factors, including the risk factors described in Item 1A.
of our Annual Report on Form 10-K for the year ended December 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:770-418-8592research.analysts@piedmontreit.com
Shareholder Services/Transfer Agent Services
Contact:Computershare,
Inc.866-354-3485investor.services@piedmontreit.com
- PDM 3 31 24 Q1 2024 EARNINGS RELEASE Financials
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