Piedmont Office Realty Trust(PDM) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2020, the company reported core FFO of $0.48 per diluted share, a 6% increase compared to Q3 2019, driven by rental rate roll-ups and capital recycling activities [19][20] - The company experienced a decline in top-line revenue growth due to reduced transient parking and retail revenues, with a total impact of approximately $6 million to $8 million for the year attributed to COVID-19 [20][24] - AFFO for Q3 was approximately $38 million, exceeding the third quarter dividend [22] Business Line Data and Key Metrics Changes - The company completed 229,000 square feet of leasing in Q3, with over one-third related to new tenants, despite the pandemic's impact on leasing demand [9][11] - Cash rent rolls increased approximately 5% year-to-date, while accrual-based rents rose over 11% [11] - The lease occupancy percentage has declined due to the pandemic, with same-store cash NOI comparison being flat year-to-date, impacted by tenant lease modification agreements [13] Market Data and Key Metrics Changes - Strongest leasing activity is observed in the Washington, D.C. area, Boston, and Sunbelt markets, with varying occupancy levels across different regions [11][21] - Daily occupancy at buildings is slowly recovering, with some tenants associated with government services near-normal occupancy, while others remain at 10% to 20% [21] Company Strategy and Development Direction - The company aims to transition its portfolio into high-growth amenity-rich office nodes and improve property quality while maintaining tenant satisfaction [32][33] - The company has exited the New Jersey market and completed a strategic acquisition in Orlando, indicating a focus on refining its portfolio [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledges uncertainties regarding the long-term economic impact of the pandemic on occupancy trends and tenant usage [29] - The leasing pipeline is showing signs of improvement, with expectations for continued momentum into the next year, provided there are no significant COVID-19 waves [39] Other Important Information - The company issued its first green bond of $300 million to fund the acquisition of LEED-certified properties, reflecting its commitment to environmental sustainability [17][18] - The company has a strong liquidity position with approximately $24 million in cash and no debt maturities until late 2021 [23] Q&A Session Summary Question: Can you talk about the utilization of the portfolio by asset type or metropolitan market? - Management noted that occupancy levels vary, with northern markets at 10% to 20% of pre-COVID levels and southern markets at 15% to 40%, while mission-critical facilities are at 80% to 100% [37] Question: Can you discuss the asset sales in New Jersey and the pricing? - The company aimed to clean up its Mid-Atlantic/Northeast portfolio, achieving a reasonable pricing level for the New Jersey assets, generating cash with a cap rate in the high 7s to 8% [41][43] Question: What is the risk of the city of New York moving elsewhere? - Management believes the risk is low due to the unique building fitting the city's needs, with expectations for a shorter-term renewal by year-end [47][48]