ATLANTA, October 30, 2018
--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company")
(NYSE:PDM), an owner of Class A office properties in select
sub-markets located primarily within eight major Eastern U.S.
office markets, today announced its results for the quarter ended
September 30, 2018.
Highlights for the Three Months
Ended September 30, 2018:
-
Reported Net Income Applicable to Common
Stockholders of $0.13 per diluted share;
-
Achieved Core Funds From Operations ("Core FFO")
of $0.45 per diluted share;
-
Reported an 8.5% increase in Same Store NOI-
Cash Basis as compared to the third quarter of 2017;
-
Completed over 613,000 square feet of leasing,
approximately three-fourths of which related to new leases for
currently vacant space, including a new full building lease in
Houston;
-
Entered into a binding contract to sell the
Company's last remaining West Coast asset, 800 North Brand
Boulevard, for $160.0 million; and
-
Replaced its existing $500 Million Unsecured
2015 Line of Credit with a new, more favorably priced, $500 Million
Unsecured Line of Credit and amended and restated its $300 Million
Unsecured 2011 Term Loan to extend the term and decrease the stated
interest rate spread over LIBOR.
Commenting on the Company's results, Donald A.
Miller, CFA, President and Chief Executive Officer, said, "The
third quarter was one of our best quarters since our IPO. We posted
strong financial results, including increases in occupancy levels,
rental rates, and portfolio-wide leasing activity during the
quarter. Specifically, we completed over 613,000 square feet of
leasing, including a significant inaugural lease in Houston, as
well as 87,000 square feet of new leasing related to vacant space
in our Washington, D.C. portfolio, to end the quarter at 93% leased
for our in-service portfolio. Further, we placed our last West
Coast asset under contract to sell and completed some key financing
activity. Overall, we are very pleased with our third quarter
results from a number of different perspectives and hope to sustain
that momentum during the last quarter of the year."
Results for the Quarter ended
September 30, 2018
Piedmont recognized net income applicable to
common stockholders for the three months ended September 30, 2018
of $16.1 million, or $0.13 per diluted share, as compared with net
income of $126.1 million, or $0.87 per diluted share, for the three
months ended September 30, 2017. The three months ended September
30, 2017 included approximately $113.2 million, or $0.77 per
diluted share, of gains on sales of both a wholly-owned property,
as well as an equity interest in a joint venture, whereas the
current quarter had no sales or related gains. The current
quarter's results reflect increased operating income as a result of
higher overall occupancy in the portfolio in the current period and
the operational results of a property acquired during the first
quarter of 2018.
Funds From Operations ("FFO") and Core FFO, which
remove the impact of the gains on sales mentioned above (as well as
depreciation and amortization), were both $0.45 per diluted share
for the three months ended September 30, 2018, as compared with
$0.42 per diluted share for the three months ended September 30,
2017, an increase of $0.03 per diluted share, despite significant
net disposition activity since July 1, 2017. In addition to higher
occupancy levels and increased rental rates, the increase in both
FFO and Core FFO per diluted share is also attributable to a 16.9
million share decrease in our weighted average shares outstanding
as a result of share repurchase activity pursuant to the Company's
stock repurchase program during the twelve months ended September
30, 2018.
Total revenues and property operating costs were
$129.7 million and $49.7 million, respectively, for the three
months ended September 30, 2018, compared to $137.6 million and
$54.5 million, respectively, for the third quarter of 2017, with
the decrease in both items primarily attributable to the net
property sales mentioned above, partially offset by increases due
to increased rental rates and occupancy in the portfolio.
General and administrative expense was $6.7
million for the third quarter of 2018 compared to $6.2 million for
the same period in 2017, with the $0.5 million increase primarily
attributable to increased accruals for potential performance-based
compensation.
The gain on sale of real estate assets of $109.5
million during the three months ended September 30, 2017 related to
the sale of Two Independence Square, one of the Company's largest
wholly-owned assets at the time of the sale, located in Washington,
D.C.
Leasing
Update
The Company's completed leasing for the third
quarter totaled 613,200 square feet, with approximately
three-fourths of that activity related to new leases for currently
vacant space. The Company's largest lease completed during the
quarter was in Houston where a major oilfield services provider
signed an almost 17-year, full-building lease for the Company's
newly constructed, 300,000 square foot Enclave Place. Other
activity was robust and well-diversified throughout each of the
Company's markets. Highlights included the following:
·
In Washington, D.C. - Reservoir
International executed a 29,000 square foot new lease through 2023
and Rapid7, Inc. completed an approximately 17,000 square foot new
lease through 2024, both at Arlington Gateway; Global Connections
to Employment, Inc. completed a 15,000 square foot new lease
through 2028 at 3100 Clarendon Boulevard; Applied Predictive
Technologies completed a 12,000 square foot lease expansion through
2028 at 4250 North Fairfax Drive;
·
In Atlanta - Morgan Stanley Smith Barney
Financing, LLC renewed their approximately 18,000 square feet
through 2024; and R-T Specialty, LLC executed a renewal and
expansion totaling over 17,000 square feet through 2026 at
Glenridge Highlands II;
·
In Dallas - Switch Commerce, LLC renewed their
approximately 15,000 square feet at 6565 North MacArthur Blvd.
through 2024;
·
In Boston - TZ Insurance Solutions LLC
executed a new lease for 15,000 square feet at 80 Central Street,
through 2029;
·
In Minneapolis - Health Catalyst, Inc.
completed an almost 13,000 square foot new lease through 2024 at
Crescent Ridge II; and
· In Los Angeles - Children's Hospital Los Angeles
signed an approximately 26,000 square foot lease expansion through
2026 at 800 North Brand Boulevard.
The Company's reported leased percentage and
weighted average lease term were approximately 93.2% and 6.7 years,
respectively, as of September 30, 2018, as compared to 89.2% and
6.5 years, respectively, as of September 30, 2017. The
Company has no significant lease expirations for the remainder of
2018. Same Store NOI increased 8.5% on a cash basis and 6.5%
on an accrual basis for the three months ended September 30, 2018
as compared to the three months ended September 30, 2017.
Same Store NOI on a cash basis was favorably impacted by the
expiration of several large lease abatements and favorable tax
appeals at certain properties. Same Store NOI on an accrual
basis was additionally favorably impacted by the commencement of
several large leases throughout the portfolio. Details
outlining Piedmont's largest upcoming lease expirations, the status
of certain major leasing activity, and a schedule of the largest
lease abatement periods can be found in the Company's quarterly
supplemental information package available at
www.piedmontreit.com.
Transactional and Financing
Update
During the three months ended September 30, 2018,
Piedmont entered into a binding contract to sell 800 North Brand
Boulevard to a third party for approximately $160.0 million. 800
North Brand Boulevard is an approximately 527,000 square foot,
21-story, 90% leased, office building constructed in 1990. The sale
is expected to close during the fourth quarter of 2018 and will
complete Piedmont's exit from the West Coast.
Additionally during the third quarter, Piedmont
replaced its existing $500 Million Unsecured 2015 Line of Credit
with a new $500 million unsecured line of credit facility priced as
of closing at LIBOR plus 90 basis points, a 10 basis point
decrease. Further, Piedmont amended and restated its $300 Million
Unsecured 2011 Term Loan to extend its maturity date by 22 months,
from January 15, 2020 to November 30, 2021. In addition to
extending the Company's next significant upcoming debt maturity,
the primary rationale for the extension was to include the
possibility of five, seven, and ten year debt structures in the
Company's available future refinancing options. Additionally, the
amendment and restatement decreased the stated interest rate spread
as of closing by 15 basis points to 1.0% over LIBOR.
Subsequent to quarter end, Piedmont purchased 9320
Excelsior Boulevard, Hopkins, MN, for $49.4 million, representing a
substantial discount to replacement cost and a 10% cap rate on a
GAAP and cash basis. 9320 Excelsior Boulevard is a 7-story,
approximately 268,000 square foot, Class AA office building
situated on 5.84 acres in close proximity to Piedmont's Norman
Pointe I building acquired in 2017. 9320 Excelsior Boulevard is
100% leased to Cargill, Inc.
Fourth Quarter 2018 Dividend
Declaration
On October 30, 2018, the board of
directors of Piedmont declared dividends for the fourth quarter of
2018 in the amount of $0.21 per share on its common stock to
stockholders of record as of the close of business on November 30,
2018, payable on January 3, 2019.
Promotion of C.
Brent Smith to President & Chief Investment Officer
On October 30, 2018, the board of
directors of Piedmont promoted Chief Investment Officer, C. Brent
Smith, to President and Chief Investment Officer of the Company.
Mr. Smith has served Piedmont as Chief Investment Officer since
2016. Mr. Donald A. Miller, Chief Executive Officer, will continue
to serve in that capacity. Mr. Smith will report to Mr. Miller and
work with him on corporate strategy and take a broader role across
the Company's platform.
Guidance for
2018
The Company has narrowed its
previously announced guidance for full-year 2018 based upon
year-to-date results, the acquisition of 9320 Excelsior Boulevard,
and the anticipated sale of 800 North Brand in the fourth quarter
of 2018. Management's current expectations are as follows:
(in millions, except per share data) |
|
Low |
|
High |
Net
Income |
|
$95 |
- |
$97 |
Add: |
|
|
|
|
Depreciation |
|
109 |
|
- |
111 |
Amortization |
|
61 |
|
- |
62 |
Less: Gain on Sale of Real Estate Assets |
|
(45 |
) |
- |
(46) |
NAREIT
FFO applicable to Common Stock |
|
$ |
220 |
|
- |
$224 |
NAREIT
FFO per diluted share |
|
$1.68 |
- |
$1.71 |
|
|
|
|
|
Less: Loss on Extinguishment of Debt |
|
$2 |
- |
$2 |
Core
FFO applicable to Common Stock |
|
$ |
222 |
|
- |
$226 |
Core
FFO per diluted share |
|
$1.70 |
- |
$1.73 |
These estimates reflect management's view of
current market conditions and incorporate certain economic and
operational assumptions and projections. 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 lease commencements
and expirations, abatement periods, the timing of repairs and
maintenance, capital expenditures, capital markets activities,
seasonal general and administrative expenses, accrued potential
performance-based compensation expenses, and one-time revenue or
expense events. In addition, the Company's guidance is based on
information available to management as of the date of this
release.
Non-GAAP Financial
Measures
To supplement the presentation of the Company's
financial results prepared in accordance with U.S. generally
accepted accounting principles ("GAAP"), this release and the
accompanying quarterly supplemental information as of and for the
period ended September 30, 2018 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 Wednesday, October 31, 2018 at 11:00 A.M.
Eastern daylight time. The live audio web cast of the call may be
accessed on the Company's website at www.piedmontreit.com in the
Investor Relations section. Dial-in numbers are (877) 407-0778 for
participants in the United States and Canada and (201) 689-8565 for
international participants. A replay of the conference call will be
available through 11 A.M. Eastern time on November 14, 2018, 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 38095. A
web cast replay will also be available after the conference call in
the Investor Relations section of the Company's website. During the
audio web cast and conference call, the Company's management team
will review third quarter 2018 performance, discuss recent events,
and conduct a question-and-answer period.
Supplemental Information
Quarterly supplemental information as of and for
the period ended September 30, 2018 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, and operator of high-quality, Class A
office properties in select sub-markets located primarily within
eight major U.S. office markets. Its geographically-diversified,
almost $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 major markets and is
investment-grade rated by Standard & Poor's (BBB) and Moody's
(Baa2). 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," "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 the expected sale of 800
North Brand Boulevard, and whether the Company will be able to
sustain leasing and transactional momentum through the fourth
quarter of 2018, the Company's estimated range of Net Income,
Depreciation, Amortization, Gain on Sale of Real Estate Assets,
NAREIT FFO/Core FFO and NAREIT FFO/Core FFO per diluted share for
the year ending December 31, 2018.
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 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 the specific markets in
which we operate; lease terminations or lease defaults,
particularly by one of our large lead tenants; the effect on us of
adverse market and economic conditions, including any resulting
impairment charges on both our long-lived assets or goodwill; 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 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 of properties, many of which risks and uncertainties
may not be known at the time of acquisition; development and
construction delays and resultant increased costs and risks; our
real estate development strategies may not be successful; future
acts of terrorism in any of the major metropolitan areas in which
we own properties, or future cybersecurity attacks against us or
any of our tenants; costs of complying with governmental laws and
regulations; additional risks and costs associated with directly
managing properties occupied by government tenants; significant
price and volume fluctuations in the public markets, including on
the exchange which we listed our common stock; the effect of future
offerings of debt or equity securities or changes in market
interest rates on the value of our common stock; uncertainties
associated with environmental and other regulatory matters;
potential changes in political environment and reduction in federal
and/or state funding of our governmental tenants; any change in the
financial condition of any of our large lead tenants; the effect of
any litigation to which we are, or may become, subject; 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 (the "Code"); the future effectiveness of our internal
controls and procedures; 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, 2017.
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
PDM Q3 2018 Financials
This
announcement is distributed by West Corporation on behalf of West
Corporation clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Piedmont Office Realty Trust, Inc. via
Globenewswire
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