Piedmont Office Realty Trust(PDM) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2020, the company reported core FFO of $0.47 per diluted share, a two-thirds increase compared to Q1 2019 [41] - AFFO was approximately $19 million for the first quarter, impacted by a one-time payment of lease commissions [42] - Same-store NOI increased approximately 2% on a cash basis and 4% on an accrual basis for Q1 2020 [42] - The average net debt to core EBITDA ratio was 5.7 times, and the debt to gross asset ratio was approximately 38.7% at the end of the quarter [43] Business Line Data and Key Metrics Changes - The company completed approximately 470,000 square feet of leasing in Q1 2020, including about 120,000 square feet of new tenant leasing [29] - The first quarter executed leases reflected a 5% roll-up in cash rents and a 15.4% increase in accrual rent [29] - The portfolio was approximately 90% leased at the end of the quarter [32] Market Data and Key Metrics Changes - The company has limited exposure to the retail and co-working sectors, with only about 1% and 2% of forecasted 2020 revenues related to these sectors, respectively [18] - As of April, 96% of tenants submitted full rent payments, with many seeking rent deferrals [20] Company Strategy and Development Direction - The company is focused on protecting tenants and employees, preserving capital, and adapting to new business needs due to the COVID-19 pandemic [10][11] - The company plans to use proceeds from the sale of its Philadelphia asset to repay debt and improve liquidity [25][44] - The company remains optimistic about the future of commercial office real estate despite the pandemic's impact [39] Management's Comments on Operating Environment and Future Outlook - The management noted that the recovery from the pandemic will be slow and dependent on its duration [13] - Leasing activity has slowed, with expectations that new leasing goals will be pushed out by at least a quarter [27] - The company has withdrawn its guidance for 2020 due to the uncertainty surrounding the pandemic [45] Other Important Information - The company donated over $40,000 to local charities across its seven markets to support communities affected by the pandemic [16] - The company has a favorable liquidity position with access to a largely unused $500 million line of credit [24] Q&A Session Summary Question: Confidence in closing the sale of 1901 Market - Management expressed confidence in the transaction, noting the buyer's deposit and interest in the asset [56][58] Question: Impact of the pandemic on New York City lease negotiations - Management indicated that the public hearing process for the lease may be delayed due to the pandemic, pushing back the timeline for finalizing the lease [60][62] Question: Update on redevelopment projects - Management confirmed that the Two Pierce project is completed and now 41% leased, while the Orlando project is delayed due to permitting issues [70][72] Question: Cash yield and CapEx plans for Galleria acquisition - Management provided details on expected cash yield and noted that the building requires minimal CapEx due to prior modernization [78][81] Question: Co-working tenant discussions and future plans - Management stated that discussions with co-working tenants are ongoing, with a focus on maintaining tenant relationships and exploring options if tenants cannot pay rent [93][112]