Piedmont Office Realty Trust(PDM) - 2025 Q2 - Quarterly Results

Introduction Forward-Looking Statements The company's forward-looking statements are subject to inherent risks and uncertainties, with actual results potentially differing due to various factors - The company's forward-looking statements, including its 2025 guidance, are subject to significant risks and uncertainties that could cause actual results to differ[8] - Key risk factors encompass economic and technological changes impacting the office sector, competition, tenant financial health, rising interest rates, and risks in property acquisitions, dispositions, and development delays[9][11] Earnings Release Piedmont reported a Q2 2025 net loss of $16.8 million, widened by debt extinguishment, yet achieved significant leasing success and raised 2025 leasing guidance - Executed over 700,000 square feet of leasing in Q2 2025, with new tenant leasing reaching its highest quarterly volume since 2018[13] - Annual leasing guidance for 2025 increased by over 50% to 2.2 - 2.4 million square feet[13] Q2 2025 Financial Highlights (vs. Q2 2024) | Metric | Three Months Ended June 30, 2025 (in millions USD) | Three Months Ended June 30, 2024 (in millions USD) | | :--- | :--- | :--- | | Net Loss | $(16.8) | $(9.8) | | Net Loss per Share | $(0.14) | $(0.08) | | Core FFO per Share | $0.36 | $0.37 | | Same Store NOI (Cash) | (2.0)% | 5.7% | | Same Store NOI (Accrual) | 1.7% | 3.7% | Q2 2025 Leasing & Balance Sheet Highlights | Metric | Q2 2025 | | :--- | :--- | | Total Leasing (sq ft) | 712,000 | | New Tenant Leasing (sq ft) | 468,000 | | Cash Rent Roll Up | 7.3% | | Leased Percentage | 88.7% | | Total Debt (USD) | $2.18 billion | | Avg Net Debt to Core EBITDA | 6.9x | - Sold 80 and 90 Central for approximately $29.5 million, recognizing a gain of $1.2 million[18] - Repurchased approximately $67.5 million of 9.25% Senior Unsecured Notes due 2028, incurring a $7.5 million loss on early extinguishment but anticipating $7.5 million in interest savings over three years[20] Full Year 2025 Guidance | Metric | Low (in millions USD) | High (in millions USD) | | :--- | :--- | :--- | | Net Loss | $(54) | $(51) | | NAREIT FFO | $167 | $175 | | Core FFO | $175 | $183 | | Core FFO per Diluted Share (USD) | $1.38 | $1.44 | Company Information Company Overview Piedmont Realty Trust is a self-managed real estate company specializing in Class A office properties, primarily in U.S. Sunbelt markets - Piedmont is a fully integrated, self-managed real estate company focused on Class A office properties[25] - The company operates a portfolio of 16 million square feet, primarily located in major U.S. Sunbelt markets[25] - Senior unsecured notes are investment-grade rated by Moody's, Standard & Poor's, and Fitch Ratings[25] Research Coverage & Credit Ratings The company is covered by equity research analysts, with issuer credit ratings of Baa3 (Stable) from Moody's, BB+ (Stable) from S&P, and BBB- (Stable) from Fitch Credit Ratings | Rating Agency | Issuer Credit Rating | Senior Unsecured Notes Rating | | :--- | :--- | :--- | | Moody's | Baa3 (Stable) | Baa3 | | Standard & Poor's | BB+ (Stable) | BBB- | | Fitch | BBB- (Stable) | BBB- | Portfolio Statistics & Key Performance Indicators Quarterly Performance Trends Q2 2025 saw the portfolio's leased percentage at 88.7%, Core FFO at $0.36 per diluted share, and average net debt to Core EBITDA at 6.9x Key Performance Indicators (Quarterly Trend) | Metric | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | 6/30/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Leased percentage | 88.7% | 88.1% | 88.4% | 88.8% | 87.3% | | Total square feet leased (sq ft) | 712k | 363k | 433k | 461k | 1,038k | | Core FFO per share (USD) | $0.36 | $0.36 | $0.37 | $0.36 | $0.37 | | Same store NOI - cash | -2.0% | -2.0% | 0.9% | -0.8% | 5.7% | | Total debt - GAAP (in billions USD) | $2.18 | $2.19 | $2.22 | $2.22 | $2.22 | Key Debt Ratios (Quarterly Trend) | Ratio | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | 6/30/2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net debt / Total gross assets | 40.3% | 40.3% | 39.2% | 39.0% | 39.1% | | Avg net debt to Core EBITDA (ttm) | 6.9x | 6.9x | 6.8x | 6.7x | 6.6x | | Fixed charge coverage ratio | 2.1x | 2.2x | 2.2x | 2.1x | 2.3x | Financials Consolidated Balance Sheets As of June 30, 2025, total assets were approximately $4.0 billion, total liabilities $2.4 billion, and total stockholders' equity $1.5 billion Balance Sheet Summary (as of June 30, 2025) | Account | Amount (in thousands) | | :--- | :--- | | Total Real Estate Assets | $3,417,231 | | Cash and Cash Equivalents | $3,314 | | Total Assets | $3,980,263 | | Total Debt (Unsecured & Secured) | $2,177,752 | | Total Liabilities | $2,432,253 | | Total Stockholders' Equity | $1,548,010 | Consolidated Statements of Income Q2 2025 total revenues were $140.3 million, with a net loss of $16.8 million (or $0.14 per share), driven by debt extinguishment and higher interest Income Statement Summary (Three Months Ended) | (in thousands) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Revenues | $140,292 | $143,262 | | Property Operating Costs | $55,610 | $58,565 | | Interest Expense | $(31,954) | $(29,569) | | Loss on Early Extinguishment of Debt | $(7,500) | $— | | Net Loss Applicable to Piedmont | $(16,808) | $(9,809) | | Net Loss Per Share | $(0.14) | $(0.08) | Funds From Operations & Adjusted Funds From Operations Q2 2025 NAREIT FFO was $37.0 million ($0.30/share), Core FFO $44.5 million ($0.36/share), and Adjusted FFO (AFFO) $16.2 million FFO Reconciliation Summary (Three Months Ended June 30) | (in thousands, except per share) | 2025 | 2024 | | :--- | :--- | :--- | | GAAP Net Loss | $(16,808) | $(9,809) | | Depreciation & Amortization | $55,044 | $56,560 | | NAREIT FFO | $37,012 | $46,751 | | Loss on early extinguishment of debt | $7,500 | $— | | Core FFO | $44,512 | $46,751 | | Core FFO per share (diluted) | $0.36 | $0.37 | | Adjusted FFO (AFFO) | $16,241 | $24,685 | Same Store Net Operating Income Q2 2025 Same Store NOI decreased 2.0% cash basis due to lease timing, while increasing 1.7% accrual basis due to straight-line rent effects Same Store NOI Growth (YoY) | Period | Cash Basis | Accrual Basis | | :--- | :--- | :--- | | Three Months Ended 6/30/2025 | (2.0)% | 1.7% | | Six Months Ended 6/30/2025 | (2.2)% | 2.3% | - The difference between cash and accrual NOI is largely driven by a 69.4% increase in straight-line rent effects for the quarter, indicating significant rent escalations and abatements in newly signed leases[52] Debt Summary As of June 30, 2025, total principal debt was $2.2 billion with a 5.99% weighted average interest rate and 49.3 months weighted average maturity Debt Composition (as of June 30, 2025) | Debt Type | Principal Outstanding (in thousands USD) | Weighted Avg. Interest Rate | Weighted Avg. Maturity (months) | | :--- | :--- | :--- | :--- | | Fixed Rate | $2,048,101 | 6.02% | 48.5 | | Floating Rate | $151,000 | 5.60% | 60.0 | | Total | $2,199,101 | 5.99% | 49.3 | Debt Maturities by Year | Maturity Year | Principal Outstanding (in thousands USD) | Percentage of Total Debt | | :--- | :--- | :--- | | 2025-2027 | $— | — | | 2028 | $1,048,101 | 47.7% | | 2029 | $400,000 | 18.2% | | 2030 | $451,000 | 20.5% | | 2032 | $300,000 | 13.6% | - The company is in compliance with all its bank and bond debt covenants as of June 30, 2025, with significant cushion on key metrics like leverage ratio and fixed charge coverage[62] Operational & Leasing Information Leasing Activity & Occupancy Portfolio leased percentage rose to 88.7% in Q2 2025, with cash rental rates increasing 7.3% for new leases and a $71 million future annual cash rent pipeline - The portfolio's leased percentage rose to 88.7% at the end of Q2 2025, a 140 basis point increase year-over-year[69] Rental Rate Roll Up (Q2 2025) | Metric | % Change | | :--- | :--- | | Cash Rents | 7.3% | | Accrual Rents | 13.6% | - Contractual tenant improvements and leasing commissions for leases signed in Q2 2025 totaled $7.52 per square foot per year of lease term[75] - As of June 30, 2025, the company had 730,000 sq ft of uncommenced leases for vacant space, representing $28.6 million in future annual cash rent[83] - An additional 1.3 million sq ft of leases were under abatement, representing $41.9 million in future annual cash rent[83] Lease Expiration Schedule The portfolio has a 6.0-year weighted average remaining lease term, with 4.2% of rentable SF expiring in remainder of 2025 and 10.0% in 2026 - The weighted average remaining lease term for the portfolio is 6.0 years as of June 30, 2025[86] Annual Lease Expirations (% of Rentable Square Footage) | Expiration Year | % of Rentable SF | | :--- | :--- | | 2025 | 4.2% | | 2026 | 10.0% | | 2027 | 9.0% | | 2028 | 8.2% | | 2029 | 8.8% | | Thereafter | 57.8% | Diversification Tables Tenant, Industry, and Geographic Diversification Top 10 tenants account for 25.5% of ALR, 46.5% of ALR from investment-grade/governmental tenants, with Atlanta (31.5%) and Dallas (19.5%) as largest markets - The top tenant, State of New York, contributes 5.0% of Annualized Lease Revenue (ALR). The top 10 tenants combined contribute 25.5% of ALR[97] - 46.5% of ALR is derived from investment-grade rated tenants (BBB-/Baa3 or higher) and governmental entities[100][103] - The largest industry concentrations are Business Services (14.6% of ALR), Engineering/Accounting/Management (13.5%), and Legal Services (10.8%)[103] Geographic Diversification by ALR | Location | % of Annualized Lease Revenue | | :--- | :--- | | Atlanta | 31.5% | | Dallas | 19.5% | | Orlando | 11.6% | | Northern Virginia / D.C. | 9.9% | | New York | 9.6% | | Minneapolis | 8.5% | | Boston | 5.8% | | Other | 3.6% | - The portfolio is split between Urban Infill/Suburban locations (59.8% of ALR) and Central Business District (CBD) locations (40.2% of ALR)[109] Portfolio Information Portfolio Detail and Investment Activity The in-service portfolio comprises 29 projects (14.9 million sq ft) at 88.7% leased, with three projects (788,000 sq ft) out-of-service for redevelopment - The in-service portfolio comprises 29 projects and 14.9 million sq ft, with a leased percentage of 88.7% and a commenced leased percentage of 85.0%[111][112] - Three projects totaling 788,000 sq ft in Orlando and Minneapolis are currently out-of-service for redevelopment and are 30.5% pre-leased[112][114] Recent Dispositions | Property | Market | Disposition Period | Sale Price (millions USD) | | :--- | :--- | :--- | :--- | | One Lincoln Park | Dallas | Q1 2024 | $54.0 | | 750 West John Carpenter | Dallas | Q3 2024 | $23.0 | | 80 and 90 Central | Boston | Q2 2025 | $29.5 | - The company owns 57.2 acres of developable land with a book value of $50.2 million, primarily located in Atlanta, Dallas, and Orlando[117] Supporting Information Definitions and Non-GAAP Reconciliations This section defines and reconciles non-GAAP financial measures including FFO, Core FFO, AFFO, EBITDAre, and Same Store NOI to comparable GAAP figures - Provides definitions for non-GAAP measures including Funds From Operations (FFO), Core FFO, Adjusted FFO (AFFO), Core EBITDA, and Same Store Net Operating Income (Same Store NOI)[119][122][129] - Includes detailed tables reconciling GAAP Net Income (Loss) to NAREIT FFO, Core FFO, and AFFO on a quarterly basis for the last five quarters[133] - Contains reconciliations of GAAP Net Income (Loss) to Same Store Net Operating Income on both a cash and accrual basis[134]