Exhibit 99.2
Quarterly Supplemental Information
June 30, 2011
Corporate Headquarters | Institutional Analyst Contact | Investor Relations | ||
11695 Johns Creek Parkway, Suite 350 Johns Creek, GA 30097 Telephone: 770.418.8800 | Telephone: 770.418.8592 research.analysts@piedmontreit.com | Telephone: 866.354.3485 investor.services@piedmontreit.com www.piedmontreit.com |
Piedmont Office Realty Trust, Inc.
Quarterly Supplemental Information
Index
Page | ||
Introduction | ||
Corporate Data | 3 | |
Investor Information | 4 | |
Financial Highlights | 5-8 | |
Key Performance Indicators | 9 | |
Financials | ||
Balance Sheet | 10 | |
Income Statements | 11-12 | |
Funds From Operations / Adjusted Funds From Operations | 13 | |
Same Store Analysis | 14-15 | |
Capitalization Analysis | 16 | |
Debt Summary | 17 | |
Debt Detail | 18 | |
Debt Analysis | 19 | |
Operational & Portfolio Information—Office Investments | ||
Tenant Diversification | 20 | |
Tenant Credit Rating & Lease Distribution Information | 21 | |
Leased Percentage Information | 22 | |
Rental Rate Roll Up / Roll Down Analysis | 23 | |
Lease Expiration Schedule | 24 | |
Annual Lease Expirations | 25 | |
Capital Expenditures & Commitments | 26 | |
Contractual Tenant Improvements & Leasing Commissions | 27 | |
Geographic Diversification | 28 | |
Industry Diversification | 29 | |
Property Investment Activity | 30 | |
Value-Add Activity | 31 | |
Other Investments | ||
Other Investments Detail | 32 | |
Supporting Information | ||
Definitions | 33-34 | |
Research Coverage | 35 | |
Non-GAAP Reconciliations & Other Detail | 36-39 | |
Risks, Uncertainties and Limitations | 40 |
Please refer to page 40 for a discussion of important risks related to the business of Piedmont Office Realty Trust, as well as an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information. Considering these risks, uncertainties, assumptions, and limitations, the forward-looking events contained in this supplemental reporting package might not occur.
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. In addition, many of the schedules herein contain rounding to the nearest thousands or millions and, therefore, the schedules may not total due to this rounding convention.
Piedmont Office Realty Trust, Inc.
Corporate Data
Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE: PDM) is a fully-integrated and self-managed real estate investment trust (“REIT”) specializing in the acquisition, ownership, management, development and disposition of primarily high-quality Class A office buildings located predominantly in large U.S. office markets and leased principally to high-credit-quality tenants. Since its first acquisition in 1998, the Company has acquired $5.8 billion of office and industrial properties (inclusive of joint ventures) through June 30, 2011. Rated as an investment-grade company by Standard & Poor’s and Moody’s, Piedmont has maintained a low-leverage strategy while acquiring its properties. Approximately 83% of our Annualized Lease Revenue ("ALR")(1) is derived from our office properties located within the ten largest U.S. office markets, including Chicago, Washington, D.C., the New York metropolitan area, Boston and greater Los Angeles.
This data supplements the information provided in our reports filed with the Securities and Exchange Commission and should be reviewed in conjunction with such filings.
As of June 30, 2011 | As of December 31, 2010 | |||||||
Number of properties(2) | 79 | 75 | ||||||
Rentable square footage (in thousands)(2) | 21,817 | 20,408 | ||||||
Percent leased(3) | 86.5% | 89.2% | ||||||
Percent leased (not including value-add properties)(4) | 89.0% | 89.9% | ||||||
Capitalization (in thousands): | ||||||||
Total gross debt - principal amount outstanding | $1,637,525 | $1,402,525 | ||||||
Equity market capitalization | $3,523,937 | $3,477,342 | ||||||
Total market capitalization | $5,161,462 | $4,879,867 | ||||||
Total gross debt / Total market capitalization | 31.7% | 28.7% | ||||||
Common stock data | ||||||||
High closing price during quarter | $20.89 | $20.31 | ||||||
Low closing price during quarter | $18.88 | $18.25 | ||||||
Closing price of common stock at period end | $20.39 | $20.14 | ||||||
Weighted average fully diluted shares outstanding (in thousands)(5) | 172,908 | 170,967 | ||||||
Shares of common stock issued and outstanding (in thousands) | 172,827 | 172,658 | ||||||
Rating / outlook | ||||||||
Standard & Poor's | BBB/Stable | BBB/Stable | ||||||
Moody's | Baa2/Stable | Baa2/Stable | ||||||
Employees(6) | 111 | 110 |
(1) | The definition for Annualized Lease Revenue can be found on page 33. |
(2) | As of June 30, 2011, our office portfolio consisted of 79 properties (exclusive of our equity interests in six properties owned through unconsolidated joint ventures and our two industrial properties). During the second quarter of 2011, we acquired The Dupree, a 138,000 square foot building located in Atlanta, GA, and The Medici, a 152,000 square foot building located in Atlanta, GA. Subsequent to quarter end, we sold Eastpointe Corporate Center, a 156,000 square foot building located in Issaquah, WA. |
(3) | Calculated as leased square footage on June 30, 2011 plus square footage associated with executed new leases for currently vacant spaces divided by total rentable square footage, expressed as a percentage. This measure is presented for our 79 office properties and excludes industrial and unconsolidated joint venture properties. Please refer to page 22 for additional analyses regarding Piedmont's leased percentage. |
(4) | Please refer to page 31 for information regarding value-add properties. |
(5) | Weighted average fully diluted shares outstanding are presented on a year-to-date basis for each period. |
(6) | During the first quarter of 2011, the company hired a regional manager for its New York, NY office. The opening of this office is the reason for the increase in number of employees. |
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Piedmont Office Realty Trust, Inc.
Investor Information
Corporate
11695 Johns Creek Parkway, Suite 350, Johns Creek, Georgia 30097
770.418.8800
www.piedmontreit.com
Executive and Senior Management | ||||
Donald A. Miller, CFA | Robert E. Bowers | Laura P. Moon | ||
Chief Executive Officer, President and Director | Chief Financial Officer, Executive Vice President, Secretary, and Treasurer | Chief Accounting Officer and Senior Vice President | ||
Raymond L. Owens | Carroll A. Reddic, IV | |||
Executive Vice President - Capital Markets | Executive Vice President - Real Estate Operations, Assistant Secretary | |||
Board of Directors | ||||
W. Wayne Woody | Donald A. Miller, CFA | Frank C. McDowell | ||
Director and Chairman of the Board of Directors | Chief Executive Officer, President and Director | Director and Vice Chairman of the Board of Directors | ||
Wesley E. Cantrell | Michael R. Buchanan | Donald S. Moss | ||
Director and Chairman of Governance Committee | Director and Chairman of Capital Committee | Director and Chairman of Compensation Committee | ||
Jeffery L. Swope | William H. Keogler, Jr. | |||
Director | Director |
Transfer Agent | Corporate Counsel | |
Bank of New York Mellon Shareowner Services | King & Spalding | |
P.O. Box 358010 | 1180 Peachtree Street, NE | |
Pittsburgh, PA 15252-8010 | Atlanta, GA 30309 | |
Phone: 866.354.3485 | Phone: 404.572.4600 |
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Piedmont Office Realty Trust, Inc.
Financial Highlights
As of June 30, 2011
On January 22, 2010, we filed an amendment to our charter to effect a recapitalization of our common stock as described further in our Securities and Exchange Commission ("SEC") filings. The recapitalization had the effect of a one-for-three reverse stock split. All prior period per share data has been restated to give net effect to this one-for-three reverse stock split.
Financial Results (1) |
- | Funds from operations (FFO) for the quarter ended June 30, 2011 was $65.1M, or $0.38 per share (diluted), compared to $56.6M, or $0.33 per share (diluted), for the same quarter in 2010. FFO for the six months ended June 30, 2011 was $136.4M, or $0.79 per share (diluted), compared to $125.8M, or $0.74 per share (diluted), for the same period in 2010. The increase in FFO for the three months and the six months ended June 30, 2011 as compared to the same periods in 2010 was primarily due to an impairment charge recognized in 2010 for one wholly-owned asset amounting to approximately $9.6 million. |
- | Core funds from operations (Core FFO) for the quarter ended June 30, 2011 was $65.8M, or $0.38 per share (diluted), compared to $66.2M, or $0.38 per share (diluted), for the same quarter in 2010. Core FFO for the six months ended June 30, 2011 was $137.1M, or $0.79 per share (diluted), compared to $135.4M, or $0.80 per share (diluted), for the same period in 2010. While acquisitions completed during the past year did lead to an increase in operating revenue and expenses, reduced rental income from the same store portfolio due to reduced leased percentage and rental rate reductions offset the favorable impact of such acquisitions. The decrease in per share amount for Core FFO for the six months ended June 30, 2011 as compared to the same period in 2010 was primarily due to the dilutive effect of the 13.8 million shares of common stock issued when the Company listed on the NYSE in February 2010. |
- | Adjusted funds from operations (AFFO) for the quarter ended June 30, 2011 was $47.0M, or $0.27 per share (diluted), compared to $55.8M, or $0.32 per share (diluted), for the same quarter in 2010. AFFO for the six months ended June 30, 2011 was $99.0M, or $0.57 per share (diluted), compared to $116.1M, or $0.69 per share (diluted), for the same period in 2010. The decrease in AFFO for the six months ended June 30, 2011 as compared to the same period in 2010 was primarily due to increased capital expenditures in 2011 associated with new leasing activity, including $5.3 million in leasing commissions related to the NASA lease renewal at Two Independence Square and $4.2 million in tenant improvements for Leo Burnett at 35 West Wacker Drive. The per share amount of AFFO for the six months ended June 30, 2011 was also impacted by the dilutive effect of the 13.8 million shares of common stock issued when the Company listed on the NYSE in February 2010. |
- | During the quarter ended June 30, 2011, the Company paid to shareholders a quarterly dividend in the amount of $0.315 per share for its common stock. The Company’s dividend payout percentage for the six months ended June 30, 2011 was 79.4% of Core FFO and 109.9% of AFFO. |
Operations |
- | On a same store square footage leased basis, our portfolio was 88.9% leased as of June 30, 2011 as compared to 89.5% leased as of June 30, 2010. On a square footage basis, our office portfolio was 86.5% leased as of June 30, 2011, as compared to 89.2% as of December 31, 2010 and 89.8% as of June 30, 2010. The decrease in the office portfolio leased percentage during the last year is primarily related to the addition to the portfolio of several properties with existing vacancies, including 500 West Monroe Street in Chicago, IL, 1200 Enclave Parkway in Houston, TX, The Medici in Atlanta, GA, and Suwanee Gateway One in Suwanee, GA. Removing these value-add properties from the total portfolio statistics results in an 89.0% leased rate for our stabilized assets. Please refer to page 22 for additional information. |
- | The weighted average remaining lease term of our portfolio was 6.3 years(2) as of June 30, 2011 as compared to 5.8 years at December 31, 2010. |
- | During the three months ended June 30, 2011, the Company completed 1,179,000 square feet of leasing at our 79 consolidated office properties. We executed renewal leases for 741,000 square feet and new tenant leases for 439,000 square feet, bringing the year-to-date total office leasing activity to 2,022,000 square feet, with an average committed capital cost of $4.85 per square foot per year of lease term. Average committed capital cost per square foot per year of lease term for renewal leases signed during the six months ended June 30, 2011 was $4.56 and average committed capital cost per square foot per year of lease term for new leases during the same time period was $5.45. We did not execute any new leases during the quarter for our two industrial properties. |
- | During the three months ended June 30, 2011, we retained(3) tenants for 80% of the square footage associated with expiring leases. During the six months ended June 30, 2011, we retained tenants for 76% of the square footage associated with expiring leases. This result compares to a 72% retention rate for the year ended December 31, 2010. |
(1) FFO, Core FFO and AFFO are supplemental non-GAAP financial measures. See pages 33-34 for definitions of non-GAAP financial measures. See pages 13 and 37 for reconciliations of FFO, Core FFO and AFFO to Net Income.
(2) Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of June 30, 2011) is weighted based on Annualized Lease Revenue, as defined on page 33.
(3) Piedmont defines a retained tenant to include an existing tenant/occupant signing a lease for the premises it currently occupies or a tenant whose occupancy of a space is structured in a way to eliminate downtime for the space.
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Piedmont Office Realty Trust, Inc.
Financial Highlights
As of June 30, 2011
- | During the three months ended June 30, 2011, we executed ten office leases greater than 20,000 square feet. Please see information on those leases listed below. |
Tenant Name | Property | Property Location | Square Feet Leased | Expiration Year | Lease Type | |||||
United States of America (Comptroller of the Currency) | One Independence Square | Washington, D.C. | 333,815 | 2013 | Renewal | |||||
Chrysler Group, LLC | 1075 West Entrance Drive | Auburn Hills, MI | 210,000 | 2019 | New | |||||
Jones Lang LaSalle, Inc. | Aon Center | Chicago, IL | 164,375 | 2017 | Renewal | |||||
Nike, Inc. | Rogue | Beaverton, OR | 105,272 | 2017 | Renewal | |||||
AmeriCredit Financial Services, Inc. | Chandler Forum | Chandler, AZ | 62,521 | 2018 | Renewal | |||||
Convergys Corporation | 5601 Hiatus Road | Tamarac, FL | 50,000 | 2016 | Renewal | |||||
State Farm Mutual Automobile Insurance Company | 5601 Hiatus Road | Tamarac, FL | 50,000 | 2017 | New | |||||
Grand Canyon Education, Inc. | Desert Canyon 300 | Phoenix, AZ | 45,540 | 2019 | New | |||||
Watkins Meegan, LLC | Piedmont Pointe II | Bethesda, MD | 35,240 | 2025 | New | |||||
Sempris, LLC | Crescent Ridge II | Minnetonka, MN | 21,858 | 2021 | New |
Leasing Update |
- | As of March 31, 2011, a total of seven leases were scheduled to expire either during the remainder of 2011 or in 2012 that each contributed greater than 1% of Annualized Lease Revenue. Information regarding the leasing status of the spaces associated with those leases is presented below. |
Tenant Name | Property | Property Location | Square Footage (1) | Percentage of Current Quarter Annualized Lease Revenue (%) | Expiration (2) | Current Leasing Status | ||||||
United States of America (Comptroller of the Currency) | One Independence Square | Washington, D.C. | 333,815 | 3.0% | Q2 2013 | A 2-year lease was signed with the tenant during the quarter for 333,815 SF, an approximate 3% increase in square footage leased due to a BOMA space remeasurement. | ||||||
Zurich American Insurance Company | Windy Point II | Schaumburg, IL | 300,034 | 1.8% | Q3 2011 | The space has been substantially sublet by the tenant. The Company has leased 16% of the space on a short-term, direct basis to two sublessees and it is actively marketing the entire space for lease. | ||||||
Kirkland & Ellis | Aon Center | Chicago, IL | 331,887 | 1.7% | Q4 2011 | Kirkland & Ellis is vacating. KPMG has leased 218,123 SF (beginning in August 2012), all but 3,000 SF of which is space currently leased to Kirkland & Ellis. | ||||||
Marsh USA | 500 West Monroe Street | Chicago, IL | 173,290 | 1.2% | Q4 2011 | The Company is actively marketing the space for lease. The tenant will be vacating at lease expiration. See GE below. | ||||||
Sanofi-aventis US | 200 Bridgewater Crossing | Bridgewater, NJ | 297,379 | 2.0% | Q1 2012 | The Company is actively marketing the space for lease. The tenant will be vacating at lease expiration. | ||||||
United States of America (National Park Service) | 1201 Eye Street | Washington, D.C. | 219,750 | 1.7% | Q3 2012 | Preliminary discussions with the tenant have commenced. | ||||||
GE | 500 West Monroe Street | Chicago, IL | 311,387 | 1.7% | Q4 2012 | The Company is in discussions with the tenant for a long-term lease renewal and expansion. |
(1) Square footage represents the total square footage leased by the tenant expiring during the expiration quarter.
(2) The lease expiration date presented is that of the majority of the space leased to the tenant at the building.
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Piedmont Office Realty Trust, Inc.
Financial Highlights
As of June 30, 2011
Financing and Capital Activity |
- | As of June 30, 2011, our ratio of gross debt to total market capitalization was 31.7%; our ratio of gross debt to gross real estate assets was 33.9%; and our ratio of gross debt to total gross assets was 29.8%. These debt ratios are based on total principal amount outstanding for our various loans. |
- | On April 29, 2011, Piedmont purchased The Dupree, a 138,000 square foot building located in Atlanta, GA, for approximately $20.5 million, or $148 per square foot. The building is well-located along the northern arc of I-285, a major bypass expressway encircling Atlanta, with close proximity to GA-400, a major state highway connecting downtown Atlanta with the city's northern suburbs, as well as executive housing. The building was constructed in 1997, is approximately 83% leased, and is located near Piedmont's Glenridge Highlands II building. Given the ease of access to the building, Piedmont's intimate knowledge of the market, the low cost basis, and the long-term nature of the existing leases, Piedmont believes the transaction provides a strong risk-adjusted return for its shareholders. |
- | On June 7, 2011, Piedmont purchased The Medici, a 152,000 square foot, six-story, Class A office building located in Atlanta, GA, for approximately $13.2 million, or $87 per square foot. Piedmont acquired the property, which is located in the Piazza at Paces high-end mixed-use development in the Buckhead submarket, at a foreclosure auction. The building was constructed in 2008 and it is currently 22% leased. The building is well-located near the intersection of Interstate 75 and West Paces Ferry Road on the western side of Atlanta's desirable Buckhead submarket, within close proximity to executive housing. The desirable location, the low cost basis, and the high quality construction should afford Piedmont a strong competitive advantage over other landlords to secure tenants for the building at attractive rents relative to the Company's cost basis. |
- | On April 21, 2011, the Company entered into a binding contract to sell Eastpointe Corporate Center, a 156,000 square foot, five-story building located in Issaquah, WA, a suburb of Seattle, to an owner/occupant for approximately $32 million, or $205 per square foot. The transaction closed subsequent to quarter end on July 1, 2011. Piedmont recorded a gain upon the sale of the property. The building was approximately 43% leased as of the end of the second quarter of 2011 and became 19% leased after the end of the second quarter of 2011 due to the expiration of an additional lease. Through the sale, Piedmont was able to mitigate the leasing risk associated with this building and further its strategic objective of focusing on select markets while simultaneously securing an attractive sale price for the property. Piedmont reclassified Eastpointe Corporate Center from real estate assets held-for-use to real estate assets held-for-sale as of April 21, 2011. The results from operations for the asset are presented in discontinued operations as of the second quarter of 2011. |
- | On May 4, 2011, the board of directors of Piedmont declared dividends for the second quarter of 2011 in the amount of $0.315 per common share outstanding to stockholders of record as of the close of business on June 1, 2011. The dividends were paid on June 22, 2011. |
- | On June 2, 2011, Piedmont, along with its joint venture partners, sold 360 Interlocken Boulevard, a 52,000 square foot building in Broomfield, CO, for $9.15 million. Piedmont's ownership in the property was approximately 4%. Piedmont recognized a $45,000 gain on the sale of its interest in the asset. |
- | Piedmont repaid its $250 million term loan on its stated maturity date of June 28, 2011. Funds to repay the loan were obtained through the Company's $500 million line of credit. There was $300 million in outstanding draws on the line of credit as of June 30, 2011. |
- | Three loans, the two loans totaling $185 million in face value associated with 500 West Monroe Street and the $500 million line of credit facility, mature during the third quarter of 2011. However, all three loans have one-year extension options remaining. Piedmont is in the process of securing the one year extension of the maturity date for each of these loans. |
- | On June 30, 2011, the Board of Directors approved an amendment to our charter that reclassified all authorized but unissued shares of Class B Common Stock as Class A Common Stock. Further, after such reclassification, the designation of Class A Common Stock was changed to Common Stock. |
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Subsequent Events |
- | On July 1, 2011, Piedmont completed the sale of Eastpointe Corporate Center located in Issaquah, WA. For additional details on the sale, please review the information presented under Financing and Capital Activity above. |
- | On August 1, 2011, Piedmont entered into an agreement to sell its 96.5% ownership interest in 35 West Wacker Drive, a 1,118,000 square foot office building in Chicago, IL. The agreed upon gross sale price values the building at $401.0 million, or $359 per square foot. The sale is contingent upon satisfactory completion of due diligence and lender approvals and is anticipated to close by the end of 2011. |
- | On August 9, 2011, the board of directors of Piedmont declared dividends for the third quarter of 2011 in the amount of $0.315 per common share outstanding to stockholders of record as of the close of business on September 1, 2011. The dividends are expected to be paid on September 22, 2011. |
Guidance for 2011 |
- | The following financial guidance for calendar year 2011 remains unchanged and is based on management's expectations at this time: |
Low High | ||
Core Funds from Operations | $256 - $269 million | |
Core Funds from Operations per diluted share | $148 - $1.56 |
These estimates reflect management’s view of current market conditions and incorporate certain economic and operational assumptions and projections. These estimates exclude future acquisitions and dispositions which could result in a change in the Company’s 2011 outlook and guidance when they are consummated. Actual results could differ from these estimates. Note that individual quarters may fluctuate on both a cash basis and an accrual basis due to the timing of repairs and maintenance, capital expenditures, capital markets activities 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 supplemental report.
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Piedmont Office Realty Trust, Inc.
Key Performance Indicators
Unaudited (in thousands except for per share data)
This section of our supplemental report includes non-GAAP financial measures, including, but not limited to, Core Earnings Before Interest, Taxes, Depreciation, and Amortization (Core EBITDA), Funds from Operations (FFO), Core Funds from Operations (Core FFO), and Adjusted Funds from Operations (AFFO). Definitions of these non-GAAP measures are provided on pages 33-34 and reconciliations are provided on pages 36-38.
Three Months Ended | ||||||||||||||||||||||
Selected Operating Data | 6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | |||||||||||||||||
Percent leased(1) | 86.5% | 87.3% | 89.2% | 89.0% | 89.8% | |||||||||||||||||
Rental income | $112,834 | $109,457 | $110,334 | $110,134 | $110,049 | |||||||||||||||||
Total revenues | $150,544 | $146,035 | $149,601 | $144,612 | $144,267 | |||||||||||||||||
Total operating expenses | $109,981 | $100,438 | $105,921 | $89,987 | $99,518 | |||||||||||||||||
Real estate operating income | $40,563 | $45,597 | $43,680 | $54,625 | $44,749 | |||||||||||||||||
Impairment losses(2) | $0 | $0 | $0 | $53 | $9,587 | |||||||||||||||||
Core EBITDA(3) | $84,729 | $88,774 | $85,610 | $95,612 | $85,435 | |||||||||||||||||
Core FFO(3) | $65,843 | $71,281 | $68,178 | $78,229 | $66,247 | |||||||||||||||||
Core FFO per share—diluted | $0.38 | $0.41 | $0.39 | $0.45 | $0.38 | |||||||||||||||||
AFFO(3) | $47,019 | $51,974 | $38,086 | $61,468 | $55,812 | |||||||||||||||||
AFFO per share—diluted | $0.27 | $0.30 | $0.22 | $0.36 | $0.32 | |||||||||||||||||
Gross dividends | $54,440 | $54,387 | $54,388 | $54,388 | $54,388 | |||||||||||||||||
Dividends per share | $0.315 | $0.315 | $0.315 | $0.315 | $0.315 | |||||||||||||||||
Selected Balance Sheet Data | ||||||||||||||||||||||
Total real estate assets | $3,899,639 | $3,892,087 | $3,676,828 | $3,689,428 | $3,704,757 | |||||||||||||||||
Total gross real estate assets | $4,828,700 | $4,804,988 | $4,567,326 | $4,573,622 | $4,560,176 | |||||||||||||||||
Total assets | $4,560,206 | $4,563,272 | $4,373,480 | $4,389,585 | $4,405,501 | |||||||||||||||||
Net debt(4) | $1,583,812 | $1,529,603 | $1,333,332 | $1,316,645 | $1,312,116 | |||||||||||||||||
Total liabilities | $1,838,983 | $1,809,755 | $1,600,026 | $1,591,653 | $1,594,278 | |||||||||||||||||
Ratios | ||||||||||||||||||||||
Core EBITDA margin(5) | 56.1% | 60.6% | 56.2% | 65.0% | 58.2% | |||||||||||||||||
Fixed charge coverage ratio (6) (7) | 4.4 x | 5.2 x | 4.9 x | 5.5 x | 4.5 x | |||||||||||||||||
Net debt to core EBITDA(7) (8) | 4.7 x | 4.3 x | 3.9 x | 3.4 x | 3.8 x |
(1) Please refer to page 22 for additional leased percentage information.
(2) Impairment losses include losses for both wholly-owned and our proportionate share of unconsolidated joint venture assets.
(3) Core EBITDA, Core FFO and AFFO have been adjusted to exclude impairments on real estate assets as shown on pages 36 and 37.
(4) Net debt is calculated as the total principal amount of debt outstanding minus cash and cash equivalents and escrow deposits and restricted cash. As of the first quarter of 2011, net debt includes $185 million of secured debt associated with 500 West Monroe Street which was acquired March 31, 2011.
(5) Core EBITDA margin is calculated as Core EBITDA divided by total revenues (including revenues associated with discontinued operations).
(6) Fixed charge coverage is calculated as Core EBITDA divided by the sum of interest expense, principal amortization, capitalized interest and preferred dividends. We had no capitalized interest, principal amortization or preferred dividends during any of the periods presented.
(7) The change in Piedmont's debt coverage ratios in 2011 as compared to those for the year ended December 31, 2010, is primarily attributable to the increased debt load associated with 500 West Monroe Street, amounting to $185 million, and the interest expense associated therewith.
(8) Core EBITDA is annualized for the purposes of this calculation.
9
Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)
June 30, 2011 | March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | ||||||||||||||||
Assets: | ||||||||||||||||||||
Real estate, at cost: | ||||||||||||||||||||
Land assets | $ | 689,611 | $ | 683,752 | $ | 643,302 | $ | 648,524 | $ | 647,525 | ||||||||||
Buildings and improvements | 3,876,346 | 3,848,236 | 3,671,749 | 3,667,306 | 3,650,209 | |||||||||||||||
Buildings and improvements, accumulated depreciation | (789,718 | ) | (767,007 | ) | (741,723 | ) | (734,517 | ) | (710,286 | ) | ||||||||||
Intangible lease asset | 225,182 | 238,504 | 219,770 | 222,952 | 224,532 | |||||||||||||||
Intangible lease asset, accumulated amortization | (136,180 | ) | (142,754 | ) | (145,742 | ) | (145,139 | ) | (140,804 | ) | ||||||||||
Construction in progress | 15,298 | 13,142 | 11,152 | 11,839 | 14,909 | |||||||||||||||
Real estate assets held for sale, gross | 22,263 | 21,354 | 21,353 | 23,001 | 23,001 | |||||||||||||||
Real estate assets held for sale, accumulated depreciation and amortization | (3,163 | ) | (3,140 | ) | (3,033 | ) | (4,538 | ) | (4,329 | ) | ||||||||||
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Total real estate assets | 3,899,639 | 3,892,087 | 3,676,828 | 3,689,428 | 3,704,757 | |||||||||||||||
Investment in unconsolidated joint ventures | 41,271 | 41,759 | 42,018 | 42,591 | 43,005 | |||||||||||||||
Cash and cash equivalents | 21,404 | 42,151 | 56,718 | 67,539 | 81,066 | |||||||||||||||
Tenant receivables, net of allowance for doubtful accounts | 31,143 | 29,726 | 28,849 | 29,269 | 30,986 | |||||||||||||||
Straight line rent receivable | 107,308 | 103,694 | 105,081 | 100,715 | 96,836 | |||||||||||||||
Notes receivable | - | - | 61,144 | 60,671 | 60,101 | |||||||||||||||
Due from unconsolidated joint ventures | 537 | 594 | 1,158 | 1,085 | 1,124 | |||||||||||||||
Escrow deposits and restricted cash | 32,309 | 30,771 | 12,475 | 18,341 | 9,343 | |||||||||||||||
Prepaid expenses and other assets | 14,577 | 11,967 | 11,249 | 18,461 | 15,523 | |||||||||||||||
Goodwill | 180,097 | 180,097 | 180,097 | 180,097 | 180,097 | |||||||||||||||
Deferred financing costs, less accumulated amortization | 4,396 | 5,374 | 5,306 | 5,878 | 6,467 | |||||||||||||||
Deferred lease costs, less accumulated amortization | 227,073 | 224,553 | 192,168 | 175,140 | 175,930 | |||||||||||||||
Other assets held for sale | 452 | 499 | 389 | 370 | 266 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 4,560,206 | $ | 4,563,272 | $ | 4,373,480 | $ | 4,389,585 | $ | 4,405,501 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities: | ||||||||||||||||||||
Line of credit and notes payable | $ | 1,637,054 | $ | 1,601,112 | $ | 1,402,525 | $ | 1,402,525 | $ | 1,402,525 | ||||||||||
Accounts payable, accrued expenses, and accrued capital expenditures | 126,111 | 122,769 | 112,648 | 102,411 | 102,365 | |||||||||||||||
Deferred income | 32,161 | 38,990 | 35,203 | 33,882 | 33,916 | |||||||||||||||
Intangible lease liabilities, less accumulated amortization | 43,657 | 46,517 | 48,959 | 51,807 | 54,730 | |||||||||||||||
Interest rate swap | - | 367 | 691 | 1,028 | 742 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | 1,838,983 | 1,809,755 | 1,600,026 | 1,591,653 | 1,594,278 | |||||||||||||||
Stockholders' equity(1) : | ||||||||||||||||||||
Common stock | 1,728 | 1,727 | 1,727 | 1,727 | 1,727 | |||||||||||||||
Additional paid in capital | 3,662,522 | 3,661,570 | 3,661,308 | 3,660,550 | 3,659,910 | |||||||||||||||
Cumulative distributions in excess of earnings | (948,956 | ) | (915,543 | ) | (895,122 | ) | (869,434 | ) | (855,631 | ) | ||||||||||
Other comprehensive loss | (44 | ) | (465 | ) | (691 | ) | (1,028 | ) | (742 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Piedmont stockholders' equity | 2,715,250 | 2,747,289 | 2,767,222 | 2,791,815 | 2,805,264 | |||||||||||||||
Non-controlling interest | 5,973 | 6,228 | 6,232 | 6,117 | 5,959 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total stockholders' equity | 2,721,223 | 2,753,517 | 2,773,454 | 2,797,932 | 2,811,223 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities, redeemable common stock and stockholders' equity | $ | 4,560,206 | $ | 4,563,272 | $ | 4,373,480 | $ | 4,389,585 | $ | 4,405,501 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
All classes of common stock outstanding at end of period(1) | 172,827 | 172,658 | 172,658 | 172,658 | 172,658 |
(1) On January 22, 2010, we filed an amendment to our charter to effect a recapitalization of our common stock as described further in our Securities and Exchange Commission ("SEC") filings. The recapitalization had the effect of a one-for-three reverse stock split. All prior period per share data has been restated to give net effect to this one-for-three reverse stock split.
10
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended | ||||||||||||||||||||
|
| |||||||||||||||||||
6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | ||||||||||||||||
|
| |||||||||||||||||||
Revenues: | ||||||||||||||||||||
Rental income | $ | 112,834 | $ | 109,457 | $ | 110,334 | $ | 110,134 | $ | 110,049 | ||||||||||
Tenant reimbursements | 36,000 | 32,344 | 36,865 | 29,442 | 33,034 | |||||||||||||||
Property management fee revenue | 363 | 830 | 948 | 806 | 705 | |||||||||||||||
Other rental income | 1,347 | 3,404 | 1,454 | 4,230 | 479 | |||||||||||||||
|
| |||||||||||||||||||
Total revenues | 150,544 | 146,035 | 149,601 | 144,612 | 144,267 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Property operating costs | 58,740 | 54,648 | 60,090 | 46,405 | 55,288 | |||||||||||||||
Depreciation | 27,723 | 26,915 | 26,544 | 25,803 | 25,369 | |||||||||||||||
Amortization | 15,821 | 12,051 | 11,494 | 10,976 | 10,913 | |||||||||||||||
General and administrative | 7,697 | 6,824 | 7,793 | 6,803 | 7,948 | |||||||||||||||
|
| |||||||||||||||||||
Total operating expenses | 109,981 | 100,438 | 105,921 | 89,987 | 99,518 | |||||||||||||||
|
| |||||||||||||||||||
Real estate operating income | 40,563 | 45,597 | 43,680 | 54,625 | 44,749 | |||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest expense | (19,313 | ) | (17,174 | ) | (17,378 | ) | (17,359 | ) | (18,933 | ) | ||||||||||
Interest and other income (expense) | (253 | ) | 3,459 | 491 | 993 | 1,036 | ||||||||||||||
Equity in income of unconsolidated joint ventures | 338 | 209 | 630 | 619 | 647 | |||||||||||||||
Gain / (loss) on consolidation of variable interest entity | (388 | ) | 1,920 | - | - | - | ||||||||||||||
|
| |||||||||||||||||||
Total other income (expense) | (19,616 | ) | (11,586 | ) | (16,257 | ) | (15,747 | ) | (17,250 | ) | ||||||||||
|
| |||||||||||||||||||
Income from continuing operations | 20,947 | 34,011 | 27,423 | 38,878 | 27,499 | |||||||||||||||
Discontinued operations: | ||||||||||||||||||||
Operating income, excluding impairment loss | 201 | 79 | 2,216 | 1,864 | 1,849 | |||||||||||||||
Impairment loss | - | - | - | - | (9,587 | ) | ||||||||||||||
Gain / (loss) on sale of properties | - | - | (817 | ) | - | - | ||||||||||||||
|
| |||||||||||||||||||
Income/(loss) from discontinued operations(1) | 201 | 79 | 1,399 | 1,864 | (7,738 | ) | ||||||||||||||
|
| |||||||||||||||||||
Net income | 21,148 | 34,090 | 28,822 | 40,742 | 19,761 | |||||||||||||||
Less: Net income attributable to noncontrolling interest | (121 | ) | (123 | ) | (122 | ) | (158 | ) | (125 | ) | ||||||||||
|
| |||||||||||||||||||
Net income attributable to Piedmont | $ | 21,027 | $ | 33,967 | $ | 28,700 | $ | 40,584 | $ | 19,636 | ||||||||||
|
| |||||||||||||||||||
Weighted average common shares outstanding - diluted | 172,986 | 172,955 | 172,996 | 172,885 | 172,718 | |||||||||||||||
Net income per share available to common stockholders - diluted | $ | 0.12 | $ | 0.20 | $ | 0.17 | $ | 0.23 | $ | 0.11 | ||||||||||
|
|
(1) Reflects operating results for 111 Sylvan Avenue in Englewood Cliffs, NJ, which was sold on December 8, 2010, and Eastpointe Corporate Center in Issaquah, WA, which was sold on July 1, 2011.
11
Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
6/30/2011 | 6/30/2010 | Change | Change | 6/30/2011 | 6/30/2010 | Change | Change | |||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Rental income | $ | 112,834 | $ | 110,049 | $ | 2,785 | 2.5% | $ | 222,291 | $ | 219,886 | $ | 2,405 | 1.1% | ||||||||||||||||||
Tenant reimbursements | 36,000 | 33,034 | 2,966 | 9.0% | 68,344 | 67,811 | 533 | 0.8% | ||||||||||||||||||||||||
Property management fee revenue | 363 | 705 | (342) | -48.5% | 1,193 | 1,458 | (265) | -18.2% | ||||||||||||||||||||||||
Other rental income | 1,347 | 479 | 868 | 181.2% | 4,751 | 975 | 3,776 | 387.3% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total revenues | 150,544 | 144,267 | 6,277 | 4.4% | 296,579 | 290,130 | 6,449 | 2.2% | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Property operating costs | 58,740 | 55,288 | (3,452) | -6.2% | 113,387 | 110,414 | (2,973) | -2.7% | ||||||||||||||||||||||||
Depreciation | 27,723 | 25,369 | (2,354) | -9.3% | 54,639 | 50,849 | (3,790) | -7.5% | ||||||||||||||||||||||||
Amortization | 15,821 | 10,913 | (4,908) | -45.0% | 27,872 | 22,246 | (5,626) | -25.3% | ||||||||||||||||||||||||
General and administrative | 7,697 | 7,948 | 251 | 3.2% | 14,522 | 14,568 | 46 | 0.3% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total operating expenses | 109,981 | 99,518 | (10,463) | -10.5% | 210,420 | 198,077 | (12,343) | -6.2% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Real estate operating income | 40,563 | 44,749 | (4,186) | -9.4% | 86,159 | 92,053 | (5,894) | -6.4% | ||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense | (19,313) | (18,933) | (380) | -2.0% | (36,487) | (38,024) | 1,537 | 4.0% | ||||||||||||||||||||||||
Interest and other income (expense) | (253) | 1,036 | (1,289) | -124.4% | 3,206 | 2,005 | 1,201 | 59.9% | ||||||||||||||||||||||||
Equity in income of unconsolidated joint ventures | 338 | 647 | (309) | -47.8% | 547 | 1,384 | (837) | -60.5% | ||||||||||||||||||||||||
Gain / (loss) on consolidation of variable interest entity | (388) | - | (388) | 0.0% | 1,532 | - | 1,532 | 0.0% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total other income (expense) | (19,616) | (17,250) | (2,366) | -13.7% | (31,202) | (34,635) | 3,433 | 9.9% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Income from continuing operations | 20,947 | 27,499 | (6,552) | -23.8% | 54,957 | 57,418 | (2,461) | -4.3% | ||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||
Operating income, excluding impairment loss | 201 | 1,849 | (1,648) | -89.1% | 280 | 3,516 | (3,236) | -92.0% | ||||||||||||||||||||||||
Impairment loss | - | (9,587) | 9,587 | 100.0% | - | (9,587) | 9,587 | 100.0% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Income/(loss) from discontinued operations (1) | 201 | (7,738) | 7,939 | 102.6% | 280 | (6,071) | 6,351 | 104.6% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income | 21,148 | 19,761 | 1,387 | 7.0% | 55,237 | 51,347 | 3,890 | 7.6% | ||||||||||||||||||||||||
Less: Net income attributable to noncontrolling interest | (121) | (125) | 4 | 3.2% | (243) | (251) | 8 | 3.2% | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income attributable to Piedmont | $ | 21,027 | $ | 19,636 | $ | 1,391 | 7.1% | $ | 54,994 | $ | 51,096 | $ | 3,898 | 7.6% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Weighted average common shares outstanding - diluted | 172,986 | 172,718 | 172,908 | 168,912 | ||||||||||||||||||||||||||||
Net income per share available to common stockholders - diluted | $ | 0.12 | $ | 0.11 | $ | 0.32 | $ | 0.30 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) Reflects operating results for 111 Sylvan Avenue in Englewood Cliffs, NJ, which was sold on December 8, 2010, and Eastpointe Corporate Center in Issaquah, WA, which was sold on July 1, 2011.
12
Piedmont Office Realty Trust, Inc.
Funds From Operations, Core Funds From Operations and Adjusted Funds From Operations
Unaudited (in thousands except for per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
6/30/2011 | 6/30/2010 | 6/30/2011 | 6/30/2010 | |||||||||||||
Net income attributable to Piedmont | $ | 21,027 | $ | 19,636 | $ | 54,994 | $ | 51,096 | ||||||||
Depreciation(1) (2) | 27,879 | 25,872 | 55,033 | 52,122 | ||||||||||||
Amortization(1) | 15,878 | 11,104 | 27,984 | 22,592 | ||||||||||||
(Gain) / loss on sale of properties(1) | (45) | - | (45) | - | ||||||||||||
(Gain) / loss on consolidation of VIE | 388 | - | (1,532) | - | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Funds from operations | 65,127 | 56,612 | 136,434 | 125,810 | ||||||||||||
Acquisition costs | 716 | 48 | 690 | 48 | ||||||||||||
Impairment loss(1) | - | 9,587 | - | 9,587 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Core funds from operations | 65,843 | 66,247 | 137,124 | 135,445 | ||||||||||||
Depreciation of non real estate assets | 168 | 178 | 338 | 357 | ||||||||||||
Stock-based and other non-cash compensation expense | 896 | 711 | 1,864 | 1,364 | ||||||||||||
Deferred financing cost amortization | 1,060 | 696 | 1,667 | 1,393 | ||||||||||||
Amortization of fair market adjustments on notes payable | 942 | - | 942 | - | ||||||||||||
Straight-line effects of lease revenue(1) | (2,596) | (784) | (359) | 289 | ||||||||||||
Amortization of lease-related intangibles(1) | (1,670) | (1,525) | (3,033) | (2,952) | ||||||||||||
Income from amortization of discount on purchase of mezzanine loans | - | (694) | (484) | (1,362) | ||||||||||||
Acquisition costs | (716) | (48) | (690) | (48) | ||||||||||||
Non-incremental capital expenditures(3) | (16,908) | (8,969) | (38,377) | (18,383) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted funds from operations | $ | 47,019 | $ | 55,812 | $ | 98,992 | $ | 116,103 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares outstanding-diluted | 172,986 | 172,718 | 172,908 | 168,912 | ||||||||||||
Funds from operations per share (diluted) | $ | 0.38 | $ | 0.33 | $ | 0.79 | $ | 0.74 | ||||||||
Core funds from operations per share (diluted) | $ | 0.38 | $ | 0.38 | $ | 0.79 | $ | 0.80 | ||||||||
Adjusted funds from operations per share (diluted) | $ | 0.27 | $ | 0.32 | $ | 0.57 | $ | 0.69 |
(1) Includes adjustments for wholly-owned properties and for our proportionate ownership in unconsolidated joint ventures.
(2) Excludes depreciation of non real estate assets.
(3) Non-incremental capital expenditures are defined on page 34.
13
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months Ended | Six Months Ended | |||||||||||||||
6/30/2011 | 6/30/2010 | 6/30/2011 | 6/30/2010 | |||||||||||||
Net income attributable to Piedmont | $ | 21,027 | $ | 19,636 | $ | 54,994 | $ | 51,096 | ||||||||
Net income attributable to noncontrolling interest | 121 | 125 | 243 | 251 | ||||||||||||
Interest expense | 19,313 | 18,933 | 36,487 | 38,024 | ||||||||||||
Depreciation(1) | 28,047 | 26,050 | 55,371 | 52,478 | ||||||||||||
Amortization(1) | 15,878 | 11,104 | 27,984 | 22,592 | ||||||||||||
Impairment loss(1) | - | 9,587 | - | 9,587 | ||||||||||||
(Gain) / loss on sale of properties(1) | (45) | - | (45) | - | ||||||||||||
(Gain) / loss on consolidation of VIE | 388 | - | (1,532) | - | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Core EBITDA | 84,729 | 85,435 | 173,502 | 174,028 | ||||||||||||
General & administrative expenses (1) | 7,724 | 7,993 | 14,624 | 14,689 | ||||||||||||
Management fee revenue | (363) | (705) | (1,193) | (1,458) | ||||||||||||
Interest and other income(1) | 253 | (1,036) | (3,206) | (2,005) | ||||||||||||
Lease termination income | (1,347) | (479) | (4,751) | (975) | ||||||||||||
Lease termination expense—straight line rent & acquisition intangibles write-offs | 43 | 679 | 479 | 746 | ||||||||||||
Straight-line effects of lease revenue (1) | (2,639) | (1,463) | (667) | (456) | ||||||||||||
Net effect of amortization of above/(below) market in-place lease intangibles(1) | (1,670) | (1,525) | (3,204) | (2,952) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Core net operating income | 86,730 | 88,899 | 175,584 | 181,617 | ||||||||||||
Net operating income from: | ||||||||||||||||
Acquisitions(2) | (3,415) | - | (3,061) | - | ||||||||||||
Dispositions(3) | - | (1,683) | 1 | (3,364) | ||||||||||||
Industrial properties | (242) | (91) | (482) | (364) | ||||||||||||
Unconsolidated joint ventures | (696) | (1,186) | (1,354) | (2,453) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Same Store NOI | $ | 82,377 | $ | 85,939 | $ | 170,688 | $ | 175,436 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change period over period | -4.1% | N/A | -2.7% | N/A |
Same Store Net Operating Income Top Seven Markets
|
| |||||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||
6/30/2011 | 6/30/2010 | 6/30/2011 | 6/30/2010 | |||||||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Chicago(4) | $ | 18,983 | 23.0 | $ | 17,599 | 20.5 | $ | 37,478 | 22.0 | $ | 35,343 | 20.1 | ||||||||||||||||||||||||
Washington, D.C.(5) | 17,742 | 21.5 | 18,448 | 21.5 | 35,766 | 21.0 | 37,320 | 21.3 | ||||||||||||||||||||||||||||
New York(6) | 14,155 | 17.2 | 13,204 | 15.3 | 27,899 | 16.3 | 25,237 | 14.4 | ||||||||||||||||||||||||||||
Minneapolis | 4,955 | 6.0 | 5,416 | 6.3 | 10,271 | 6.0 | 10,675 | 6.1 | ||||||||||||||||||||||||||||
Los Angeles(7) | 3,936 | 4.8 | 5,086 | 5.9 | 7,728 | 4.5 | 10,089 | 5.7 | ||||||||||||||||||||||||||||
Dallas | 3,408 | 4.1 | 3,962 | 4.6 | 7,228 | 4.2 | 7,807 | 4.5 | ||||||||||||||||||||||||||||
Boston(8) | 2,598 | 3.2 | 3,927 | 4.6 | 6,475 | 3.8 | 7,656 | 4.4 | ||||||||||||||||||||||||||||
Other(9) | 16,600 | 20.2 | 18,297 | 21.3 | 37,843 | 22.2 | 41,309 | 23.5 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | $ | 82,377 | 100.0 | $ | 85,939 | 100.0 | $ | 170,688 | 100.0 | $ | 175,436 | 100.0 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
(1)Includes amounts attributable to wholly-owned properties, including discontinued operations, and our proportionate share of amounts attributable to unconsolidated joint ventures.
(2) Acquisitions consist of Suwanee Gateway One in Suwanee, GA, purchased on September 28, 2010, Meridian Crossings in Richfield, MN, purchased on October 1, 2010, 1200 Enclave Parkway in Houston, TX, purchased on March 30, 2011, 500 West Monroe Street in Chicago, IL, acquired on March 31, 2011, The Dupree in Atlanta, GA, purchased on April 29, 2011, and The Medici in Atlanta, GA, purchased on June 7, 2011.
(3) Dispositions consists of 111 Sylvan Avenue in Englewood Cliffs, NJ, sold on December 8, 2010.
(4) The increase in Chicago Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is primarily due to a rental abatement concession in 2010 associated with a lease renewal at Windy Point I in Schaumburg, IL.
(5) The decrease in Washington, D.C. Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is primarily related to a lease termination at the beginning of the first quarter of 2011 at 1201 Eye Street in Washington, D.C. in order to accommodate short-term swing space needs for NASA as well as the expiration of a lease during the first quarter of 2011 at 11109 Sunset Hills Road in Reston, VA.
(6) The increase in New York Same Store Net Operating Income for the three months ended June 30, 2011 as compared to the same period in 2010 is primarily related to rental rate increases at 60 Broad Street in New York, NY. The increase in New York Same Store Net Operating Income for the six months ended June 30, 2011 as compared to the same period in 2010 is primarily related to the rental rate increases previously mentioned as well as a rental abatement that was provided in 2010 associated with the lease extension/restructure with the State of New York at 60 Broad Street in New York, NY.
(7) The decrease in Los Angeles Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is primarily due to a space contraction at lease renewal effective third quarter 2010 along with a roll down of total revenues per square foot received from that renewing tenant at 800 North Brand Boulevard in Glendale, CA, as well as a rental abatement associated with a long-term lease renewal at 26200 Enterprise Way in Lake Forest, CA.
(8) The decrease in Boston Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is primarily due to a rental rate reduction and rental abatement associated with a long-term lease renewal with State Street Bank at 1200 Crown Colony Drive in Quincy, MA.
(9) The decrease in Other Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is due to a number of factors, the largest four of which are reduced rental income and operating expense reimbursements due to the expiration of an approximate 87,000 square foot lease during the fourth quarter of 2010 at Eastpointe Corporate Center in Issaquah, WA, a lease contraction of approximately 91,000 square feet effective third quarter 2010 at Chandler Forum in Chandler, AZ, reduced rental income and operating expense reimbursements due to the early termination of a lease at 1075 West Entrance Drive in Auburn Hills, MI which was arranged in order to accommodate the recently executed lease with Chrysler Group, LLC for the entire building, and a rental rate reduction associated with a lease renewal at 150 West Jefferson in Detroit, MI.
14
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Accrual Basis)
Unaudited (in thousands)
Three Months Ended | Six Months Ended | |||||||||||||||
6/30/2011 | 6/30/2010 | 6/30/2011 | 6/30/2010 | |||||||||||||
Net income attributable to Piedmont | $ | 21,027 | $ | 19,636 | $ | 54,994 | $ | 51,096 | ||||||||
Net income attributable to noncontrolling interest | 121 | 125 | 243 | 251 | ||||||||||||
Interest expense | 19,313 | 18,933 | 36,487 | 38,024 | ||||||||||||
Depreciation(1) | 28,047 | 26,050 | 55,371 | 52,478 | ||||||||||||
Amortization (1) | 15,878 | 11,104 | 27,984 | 22,592 | ||||||||||||
Impairment loss(1) | — | 9,587 | — | 9,587 | ||||||||||||
(Gain) / loss on sale of properties(1) | (45) | — | (45) | — | ||||||||||||
(Gain) / loss on consolidation of VIE | 388 | — | (1,532) | — | ||||||||||||
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Core EBITDA | 84,729 | 85,435 | 173,502 | 174,028 | ||||||||||||
General & administrative expenses(1) | 7,724 | 7,993 | 14,624 | 14,689 | ||||||||||||
Management fee revenue | (363) | (705) | (1,193) | (1,458) | ||||||||||||
Interest and other income(1) | 253 | (1,036) | (3,206) | (2,005) | ||||||||||||
Lease termination income | (1,347) | (479) | (4,751) | (975) | ||||||||||||
Lease termination expense—straight line rent & acquisition intangibles write-offs | 43 | 679 | 479 | 746 | ||||||||||||
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Core net operating income | 91,039 | 91,887 | 179,455 | 185,025 | ||||||||||||
Net operating income from: | ||||||||||||||||
Acquisitions (2) | (4,725) | — | (5,545) | — | ||||||||||||
Dispositions (3) | — | (1,586) | — | (3,170) | ||||||||||||
Industrial properties | (257) | (104) | (516) | (385) | ||||||||||||
Unconsolidated joint ventures | (653) | (1,123) | (1,269) | (2,376) | ||||||||||||
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Same Store NOI | $ | 85,404 | $ | 89,074 | $ | 172,125 | $ | 179,094 | ||||||||
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Change period over period | -4.1% | N/A | -3.9% | N/A |
Same Store Net Operating Income Top Seven Markets
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||
6/30/2011 | 6/30/2010 | 6/30/2011 | 6/30/2010 | |||||||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
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Chicago | $ | 19,460 | 22.8 | $ | 19,657 | 22.1 | $ | 38,636 | 22.5 | $ | 38,939 | 21.7 | ||||||||||||||||||||||||
Washington, D.C. (4) | 18,239 | 21.4 | 18,602 | 20.9 | 36,318 | 21.1 | 37,569 | 21.0 | ||||||||||||||||||||||||||||
New York | 13,955 | 16.3 | 13,448 | 15.1 | 27,951 | 16.2 | 27,269 | 15.2 | ||||||||||||||||||||||||||||
Minneapolis | 4,764 | 5.6 | 5,272 | 5.9 | 9,873 | 5.7 | 10,351 | 5.8 | ||||||||||||||||||||||||||||
Los Angeles (5) | 4,252 | 5.0 | 5,057 | 5.7 | 8,166 | 4.7 | 10,177 | 5.7 | ||||||||||||||||||||||||||||
Dallas | 3,619 | 4.2 | 3,682 | 4.1 | 7,660 | 4.5 | 7,532 | 4.2 | ||||||||||||||||||||||||||||
Boston (6) | 2,831 | 3.3 | 3,600 | 4.0 | 6,360 | 3.7 | 7,128 | 4.0 | ||||||||||||||||||||||||||||
Other (7) | 18,284 | 21.4 | 19,756 | 22.2 | 37,161 | 21.6 | 40,129 | 22.4 | ||||||||||||||||||||||||||||
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Total | $ | 85,404 | 100.0 | $ | 89,074 | 100.0 | $ | 172,125 | 100.0 | $ | 179,094 | 100.0 | ||||||||||||||||||||||||
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(1) Includes amounts attributable to wholly-owned properties, including discontinued operations, and our proportionate share of amounts attributable to unconsolidated joint ventures.
(2) Acquisitions consist of Suwanee Gateway One in Suwanee, GA, purchased on September 28, 2010, Meridian Crossings in Richfield, MN, purchased on October 1, 2010, 1200 Enclave Parkway in Houston, TX, purchased on March 30, 2011, 500 West Monroe Street in Chicago, IL, acquired on March 31, 2011, The Dupree in Atlanta, GA, purchased on April 29, 2011, and The Medici in Atlanta, GA, purchased on June 7, 2011.
(3) Dispositions consists of 111 Sylvan Avenue in Englewood Cliffs, NJ, sold on December 8, 2010.
(4)The decrease in Washington, D.C. Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is primarily related to a lease termination at 1201 Eye Street in Washington, D.C. in order to accommodate short-term swing space needs for NASA. The lease termination occurred during the first quarter of 2011.
(5) The decrease in Los Angeles Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is primarily due to a space contraction at lease renewal effective third quarter 2010 along with a roll down of total revenues per square foot received from that renewing tenant at 800 North Brand Boulevard in Glendale, CA.
(6)The decrease in Boston Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is primarily due to a rental rate reduction associated with a long-term lease renewal with State Street Bank at 1200 Crown Colony Drive in Quincy, MA.
(7) The decrease in Other Same Store Net Operating Income for the three months ended June 30, 2011 and the six months ended June 30, 2011 as compared to the same periods in 2010 is due to a number of factors, the largest four of which are reduced rental income and operating expense reimbursements due to the expiration of an approximate 87,000 square foot lease during the fourth quarter of 2010 at Eastpointe Corporate Center in Issaquah, WA, a lease contraction of approximately 91,000 square feet effective third quarter 2010 at Chandler Forum in Chandler, AZ, reduced rental income and operating expense reimbursements due to the early termination of a lease at 1075 West Entrance Drive in Auburn Hills, MI which was arranged in order to accommodate the recently executed lease with Chrysler Group, LLC for the entire building, and a rental rate reduction associated with a lease renewal at 150 West Jefferson in Detroit, MI.
15
Piedmont Office Realty Trust, Inc.
Capitalization Analysis
Unaudited ($ and shares in thousands)
As of June 30, 2011 | As of December 31, 2010 | |||||||
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| |||||
Common stock price(1) | $20.39 | $20.14 | ||||||
Total shares outstanding | 172,827 | 172,658 | ||||||
Equity market capitalization(1) | $3,523,937 | $3,477,342 | ||||||
Total gross debt-principal amount outstanding | $1,637,525 | $1,402,525 | ||||||
Total market capitalization(1) | $5,161,462 | $4,879,867 | ||||||
Total gross debt / Total market capitalization | 31.7% | 28.7% | ||||||
Total gross real estate assets | $4,828,700 | $4,567,326 | ||||||
Total gross debt / Total gross real estate assets(2) | 33.9% | 30.7% | ||||||
Total gross debt / Total gross assets(3) | 29.8% | 26.6% |
(1) Reflects common stock closing price as of the end of the reporting period.
(2) Total gross debt to total gross real estate assets ratio is defined as total gross debt divided by gross real estate assets. Gross real estate assets is defined as total real estate assets with the add back of accumulated depreciation and accumulated amortization related to real estate assets.
(3) Total gross debt to total gross assets ratio is defined as total gross debt divided by gross assets. Gross assets is defined as total assets with the add back of accumulated depreciation and accumulated amortization related to real estate assets.
16
Piedmont Office Realty Trust, Inc.
Debt Summary
As of June 30, 2011
Unaudited ($ in thousands)
Floating Rate & Fixed Rate Debt | ||||||||
Debt(1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate | Weighted Average Maturity | |||||
| ||||||||
Floating Rate | $485,000(2) | 0.91%(3) | 13.8 months | |||||
Fixed Rate | 1,152,525 | 5.16% | 42.9 months | |||||
| ||||||||
Total | $1,637,525 | 3.90% | 34.3 months | |||||
| ||||||||
Unsecured & Secured Debt | ||||||||
Debt(1) | Principal Amount Outstanding | Weighted Average Stated Interest Rate | Weighted Average Maturity | |||||
| ||||||||
Unsecured | $300,000 | 0.67%(4) | 14.0 months | |||||
Secured | 1,337,525 | 4.63% | 38.8 months | |||||
| ||||||||
Total | $1,637,525 | 3.90% | 34.3 months | |||||
| ||||||||
Debt Maturities | ||||||||||||||
Maturity Year | Secured Debt - Principal Amount Outstanding (1) | Unsecured Debt - Principal Amount Outstanding (1) | Weighted Average Rate | Percentage of Total | ||||||||||
| ||||||||||||||
2011 |
$0 |
$0 |
0.0% | |||||||||||
2012 | 230,000(5) | 300,000 (6) | 1.27% | 32.4% | ||||||||||
2013 | 0 | 0 | N/A | N/A | ||||||||||
2014 | 695,000 | 0 | 4.92% | 42.5% | ||||||||||
2015 | 105,000 | 0 | 5.29% | 6.4% | ||||||||||
2016 | 167,525 | 0 | 5.55% | 10.2% | ||||||||||
2017 | 140,000 | 0 | 5.76% | 8.5% | ||||||||||
| ||||||||||||||
Total | $1,337,525 | $300,000 | 3.90% | 100.0% | ||||||||||
|
(1) All of Piedmont’s outstanding debt as of June 30, 2011 is interest-only debt.
(2) Amount represents the outstanding balance as of June 30, 2011 on the $500 million unsecured line of credit, totaling $300 million, along with the balances on two loans secured by 500 West Monroe Street or equity ownership interests therein, totaling $185 million.
(3) The weighted average interest rate is a weighted average rate for amounts drawn under our $500 million unsecured line of credit and the loans totaling $185 million related to 500 West Monroe Street. Please see the following page for additional details on the interest rate for each loan.
(4) The weighted average interest rate is a weighted average rate for amounts drawn under our $500 million unsecured line of credit.
(5) Amount includes the balances as of June 30, 2011 of the loans related to 500 West Monroe Street, totaling $185 million, which mature in August 2011. Management provided notice of its election to exercise the one-year extension option available under each loan to extend the maturity date of each to August 2012. The payment of a 25 basis point fee will be required to extend each of the loans related to 500 West Monroe Street. Additionally, in order to extend the loans related to 500 West Monroe Street, Piedmont must purchase interest rate caps for the extension period, pay certain reserve amounts to the lender to be held on Piedmont’s behalf to fund potential future expenses, and not then be in default under either loan agreement.
(6) Amount represents the outstanding balance as of June 30, 2011 on the $500 million unsecured line of credit, which matures in August 2011. Management provided notice of its election to exercise the one-year extension option available under the loan to extend the maturity date to August 2012. The payment of a 15 basis point fee will be required to extend the term of the loan.
17
Piedmont Office Realty Trust, Inc.
Debt Detail
Unaudited ($ in thousands)
Facility | Property | Rate(1) | Maturity | Principal Amount Outstanding as of June 30, 2011 | ||||||||
Secured | ||||||||||||
500 West Monroe Mortgage Loan | 500 West Monroe Street | LIBOR + 1.01% (2) | 8/9/2011 | (3) | $140,000 | |||||||
500 West Monroe Mezzanine Loan(4) | 500 West Monroe Street | LIBOR + 1.45% (2) | 8/9/2011 | (3) | 45,000 | |||||||
$45.0 Million Fixed-Rate Loan | 4250 North Fairfax | 5.20% | 6/1/2012 | 45,000 | ||||||||
35 West Wacker Building Mortgage Note | 35 West Wacker Drive | 5.10% | 1/1/2014 | 120,000 | ||||||||
Aon Center Chicago Mortgage Note | Aon Center | 4.87% | 5/1/2014 | 200,000 | ||||||||
Aon Center Chicago Mortgage Note | Aon Center | 5.70% | 5/1/2014 | 25,000 | ||||||||
Secured Pooled Facility | Nine Property Collateralized Pool(5) | 4.84% | 6/7/2014 | 350,000 | ||||||||
$105.0 Million Fixed-Rate Loan | US Bancorp Center | 5.29% | 5/11/2015 | 105,000 | ||||||||
$125.0 Million Fixed-Rate Loan | Four Property Collateralized Pool(6) | 5.50% | 4/1/2016 | 125,000 | ||||||||
$42.5 Million Fixed-Rate Loan | Las Colinas Corporate Center I & II | 5.70% | 10/11/2016 | 42,525 | ||||||||
WDC Mortgage Notes | 1201 & 1225 Eye Street | 5.76% | 11/1/2017 | 140,000 | ||||||||
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Subtotal / Weighted Average(7) | 4.63% | $1,337,525 | ||||||||||
Unsecured | ||||||||||||
$500 Million Unsecured Facility(8) | N/A | 0.67%(9) | 8/30/2011 | (10) | 300,000 | |||||||
| ||||||||||||
Subtotal / Weighted Average(7) | 0.67% | $300,000 | ||||||||||
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Total Gross Debt-Principal Amount Outstanding / Weighted Average Stated Rate(7) | 3.90% | $1,637,525 | ||||||||||
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Purchase Accounting Valuation Adjustments(11) | ($471) | |||||||||||
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Total Debt-GAAP Amount Outstanding / Weighted Average Effective Rate(12) | 4.17% | $1,637,054 | ||||||||||
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(1) All of Piedmont’s outstanding debt as of June 30, 2011 is interest-only debt.
(2) The LIBOR rate effective under this loan on June 30, 2011 was 0.188%. There are interest rate cap agreements in place through August 2011 that limit Piedmont’s LIBOR exposure to 1.00%. Any increases in LIBOR above 1.00% are the responsibility of our counterparty.
(3) Piedmont may extend the term for one additional year provided that Piedmont is not then in default, a 25 basis point extension fee is paid, interest rate caps are purchased for the extension period, and certain reserve amounts are provided to the lender to be held on Piedmont’s behalf to fund potential future expenses of the property. Piedmont has provided notice to the lender of its election to extend the term of the loan.
(4) The principal balance of this loan is $61.5 million. Piedmont owns a $16.5 million junior participation in this loan, which is eliminated upon consolidation.
(5) The nine property collateralized pool includes 1200 Crown Colony Drive, Braker Pointe III, 2 Gatehall Drive, One and Two Independence Square, 2120 West End Avenue, 200 and 400 Bridgewater Crossing, and Fairway Center II.
(6) The four property collateralized pool includes 1430 Enclave Parkway, Windy Point I and II, and 1055 East Colorado Boulevard.
(7) Weighted average is based on the total balance outstanding and interest rate at June 30, 2011.
(8) All of Piedmont’s outstanding debt as of June 30, 2011 is term debt with the exception of the $500 million unsecured line of credit.
(9) The interest rate on the $500 million unsecured line of credit is equal to the weighted-average interest rate on all outstanding draws as of June 30, 2011. Piedmont may select from multiple interest rate options with each draw, including the prime rate and various length LIBOR locks. All LIBOR selections are subject to an additional spread (0.475% as of June 30, 2011) over the selected rate based on Piedmont’s current credit rating.
(10) Piedmont may extend the term for one additional year provided Piedmont is not then in default and upon the payment of a 15 basis point extension fee. Piedmont has provided notice to the lender of its election to extend the term of the loan.
(11) Adjustments relate to the fair market valuation of the debt associated with 500 West Monroe Street upon consolidation. The discounts will be amortized to interest expense through August 2011, the remaining contractual term of the debt.
(12) Weighted average effective rate reflects the higher effective rate under the 500 West Monroe Street loans as a result of fair market valuation of the debt upon consolidation of 500 West Monroe Street.
18
Piedmont Office Realty Trust, Inc.
Debt Analysis
As of June 30, 2011
Unaudited
Debt Covenant Compliance(1) | Required | Actual | ||||||||
Maximum Leverage Ratio | 0.60 | 0.34 | ||||||||
Minimum Fixed Charge Coverage Ratio (2) | 1.50 | 5.03 | ||||||||
Maximum Secured Indebtedness Ratio | 0.40 | 0.28 | ||||||||
Minimum Unencumbered Leverage Ratio | 1.60 | 6.64 | ||||||||
Minimum Unencumbered Interest Coverage Ratio(3) | 1.75 | 21.04 | ||||||||
Maximum Certain Permitted Investments Ratio(4) | 0.35 | 0.01 | ||||||||
(1) Debt covenant compliance calculations relate to specific calculations detailed in our line of credit agreement. |
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(2) Defined as EBITDA for the trailing four quarters (including the company’s share of EBITDA from unconsolidated interests), less one-time or non-recurring gains or losses, less a $0.15 per square foot capital reserve, and excluding the impact of straight line rent leveling adjustments and amortization of intangibles divided by the company’s share of fixed charges, as more particularly described in the credit agreements. This definition of fixed charge coverage ratio as prescribed by our line of credit agreement is different from the fixed charge coverage ratio definition employed elsewhere within this report. |
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(3) Defined as net operating income for the trailing four quarters for unencumbered assets (including the company’s share of net operating income from unconsolidated interests that are unencumbered) less a $0.15 per square foot capital reserve divided by the company’s share of interest expense associated with unsecured financings only, as more particularly described in the credit agreements. |
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(4) Permitted investments are defined as unconsolidated interests, debt investments, unimproved land, and development projects. Investments in permitted investments shall not exceed 35% of total asset value.
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Other Debt Coverage Ratios(5) | Three months ended June 30, 2011 | Six months ended June 30, 2011 | Year ended December 31, 2010 | |||||||
Net debt to core EBITDA | 4.7 x | 4.6 x | 3.8 x | |||||||
Fixed charge coverage ratio(6) | 4.4 x | 4.8 x | 4.9 x | |||||||
Interest coverage ratio(7) | 4.4 x | 4.8 x | 4.9 x | |||||||
(5) The change in Piedmont’s debt coverage ratios in 2011 as compared to those for the year ended December 31, 2010, is primarily attributable to the increased debt load associated with 500 West Monroe Street, amounting to $185 million, and the interest expense associated therewith. |
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(6) Fixed charge coverage is calculated as Core EBITDA divided by the sum of interest expense, principal amortization, capitalized interest and preferred dividends. We had no capitalized interest, principal amortization or preferred dividends during the periods ended June 30, 2011 and December 31, 2010. |
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(7) Interest coverage ratio is calculated as Core EBITDA divided by the sum of interest expense and capitalized interest. We had no capitalized interest during the periods ended June 30, 2011 and December 31, 2010.
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19
Piedmont Office Realty Trust, Inc.
Tenant Diversification (1)
As of June 30, 2011
(in thousands except for number of properties)
Credit Rating (2) | Number of Properties | Lease Expiration(s) (3) | Annualized Lease Revenue | Percentage of Annualized Lease Revenue (%) | Leased Square Footage | Percentage of Leased Square Footage (%) | ||||||||
U.S. Government | AA+ / Aaa | 10 | (4) | $76,242 | 12.6 | 1,789 | 9.5 | |||||||
BP(5) | A / A2 | 1 | 2013 | 31,289 | 5.2 | 776 | 4.1 | |||||||
US Bancorp | A+ / Aa3 | 3 | 2014 / 2023(6) | 26,810 | 4.4 | 973 | 5.2 | |||||||
Leo Burnett | BBB+ / Baa2 | 2 | 2019 | 26,469 | 4.4 | 682 | 3.6 | |||||||
State of New York | AA / Aa2 | 1 | 2019 | 21,469 | 3.6 | 481 | 2.6 | |||||||
Winston & Strawn | No rating available (7) | 1 | 2024 | 18,300 | 3.0 | 417 | 2.2 | |||||||
Sanofi-aventis | AA- / A2 | 2 | 2012 | 16,837 | 2.8 | 415 | 2.2 | |||||||
Independence Blue Cross | No rating available | 1 | 2023 | 14,571 | 2.4 | 761 | 4.0 | |||||||
Nestle | AA / Aa1 | 1 | 2015 | 13,744 | 2.3 | 392 | 2.1 | |||||||
GE | AA+ / Aa2 | 2 | 2012 | 11,047 | 1.8 | 333 | 1.8 | |||||||
Zurich American | AA- | 1 | 2011 | 10,611 | 1.8 | 300 | 1.6 | |||||||
Kirkland & Ellis | No rating available (7) | 1 | 2011 | 10,185 | 1.7 | 332 | 1.8 | |||||||
Shaw | BBB- / Ba1 | 1 | 2018 | 9,782 | 1.6 | 313 | 1.7 | |||||||
City of New York | AA / Aa2 | 1 | 2020 | 9,318 | 1.5 | 313 | 1.7 | |||||||
Lockheed Martin | A- / Baa1 | 3 | 2014 | 9,142 | 1.5 | 284 | 1.5 | |||||||
DDB Needham | BBB+ / Baa1 | 1 | 2018 | 8,874 | 1.5 | 246 | 1.3 | |||||||
Gallagher | No rating available | 1 | 2018 | 7,969 | 1.3 | 307 | 1.6 | |||||||
Marsh USA | BBB- / Baa2 | 1 | 2011 | 7,362 | 1.2 | 173 | 0.9 | |||||||
Gemini | A+ / Aa3 | 1 | 2013 | 7,320 | 1.2 | 205 | 1.1 | |||||||
Caterpillar Financial | A / A2 | 1 | 2022 | 7,125 | 1.2 | 312 | 1.7 | |||||||
Harvard University | AAA / Aaa | 2 | 2017 | 6,600 | 1.1 | 105 | 0.6 | |||||||
KeyBank | A- / A3 | 2 | 2016 | 6,393 | 1.1 | 210 | 1.1 | |||||||
Other | Various | 245,490 | 40.8 | 8,742 | 46.1 | |||||||||
Total | $602,949 | 100.0 | 18,861 | 100.0 |
(1)This schedule presents all tenants contributing greater than 1.0% to Annualized Lease Revenue.
(2)Credit rating may reflect credit rating of parent or guarantor. When available, both the Standard & Poor’s credit rating and the Moody’s credit rating are provided. Noteworthy credit rating changes subsequent to June 30, 2011 are reflected herein.
(3)Represents the expiration year of the majority of the square footage leased by the tenant.
(4)There are several leases with several different agencies of the U.S. Government with expiration years ranging from 2012 to 2027.
(5)Majority of space is subleased to Aon Corporation.
(6) US Bank’s lease at One & Two Meridian Crossings, representing approximately 337,000 square feet and $8.1 million of Annualized Lease Revenue, expires in 2023. US Bancorp’s lease at US Bancorp Center for 635,000 square feet, representing $18.7 million of Annualized Lease Revenue, expires in 2014.
(7)While no ratings are available for Winston & Strawn and Kirkland & Ellis, these tenants are ranked #34 and #6, respectively, in the 2011 AmLaw 100 ranking (based on 2010 financial data), a publication of The American Lawyer Magazine, which annually ranks the top-grossing and most profitable law firms.
20
Piedmont Office Realty Trust, Inc.
Tenant Credit Rating & Lease Distribution Information
As of June 30, 2011
Tenant Credit Rating(1) | Annualized Lease Revenue ($’s in thousands) | Percentage of Annualized Lease Revenue (%) | ||||||
AAA / Aaa | $83,549 | 13.9 | ||||||
AA / Aa | 143,168 | 23.7 | ||||||
A / A | 102,287 | 17.0 | ||||||
BBB / Baa | 100,010 | 16.6 | ||||||
BB / Ba | 7,507 | 1.2 | ||||||
B / B | 22,073 | 3.7 | ||||||
Below | 0 | 0.0 | ||||||
Not rated (2) | 144,355 | 23.9 | ||||||
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Total | $602,949 | 100.0 | ||||||
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Lease Distribution
As of June 30, 2011
Number of Leases | Percentage of Leases (%) | Annualized Lease Revenue (in thousands) | Percentage of Annualized Lease Revenue (%) | Leased Square Footage (in thousands) | Percentage of Leased Square Footage (%) | |||||||||
| ||||||||||||||
2,500 or Less | 170 | 33.6 | $15,921 | 2.6 | 133 | 0.7 | ||||||||
2,501 - 10,000 | 132 | 26.1 | 24,061 | 4.0 | 698 | 3.7 | ||||||||
10,001 - 20,000 | 60 | 11.9 | 27,282 | 4.5 | 876 | 4.6 | ||||||||
20,001 - 40,000 | 57 | 11.3 | 50,908 | 8.4 | 1,639 | 8.7 | ||||||||
40,001 - 100,000 | 32 | 6.3 | 58,930 | 9.8 | 2,047 | 10.9 | ||||||||
Greater than 100,000 | 55 | 10.8 | 425,847 | 70.7 | 13,468 | 71.4 | ||||||||
| ||||||||||||||
Total | 506 | 100.0 | $602,949 | 100.0 | 18,861 | 100.0 | ||||||||
|
(1)Credit rating may reflect credit rating of parent or guarantor. Where differences exist between the Standard & Poor’s credit rating for a tenant and the Moody’s credit rating for a tenant, the higher credit rating is selected for this analysis.
(2) The classification of a tenant as “not rated” does not indicate that the tenant is of poor credit quality, but rather that the tenant or the tenant’s debt, if any, is not rated. Included in this category are such tenants as Winston & Strawn, Independence Blue Cross, McKinsey & Company and KPMG.
21
Piedmont Office Realty Trust, Inc.
Leased Percentage Information
(in thousands)
Impact of Strategic Transactions on Leased Percentage
The Company’s stated long-term growth strategy includes the recycling of capital from certain stabilized or non-core assets into office properties located in focused concentration and opportunistic markets. Some of the recently acquired properties are value-add properties which are defined as low-occupancy properties acquired at attractive bases with earnings growth and capital appreciation potential achievable through leasing up such assets to a stabilized occupancy. Because the value-add properties have large vacancies, they negatively affect Piedmont’s overall leased percentage. In order to identify the effect they have on Piedmont’s overall leased percentage, the following information is being provided. The analysis below: 1) removes the impact of the value-add properties from Piedmont’s overall office portfolio total under the heading “Stabilized Portfolio Analysis”; and 2) provides a year-over-year comparison of leased percentage on the same subset of properties under the heading “Same Store Analysis”.
Three Months Ended June 30, 2011 | Three Months Ended June 30, 2010 | |||||||||||||||||||||||
Leased Square Footage | Rentable Square Footage | Percent Leased (1) | Leased Square Footage | Rentable Square Footage | Percent Leased (1) | |||||||||||||||||||
|
|
|
| |||||||||||||||||||||
As of March 31, 20xx | 18,773 | 21,516 | 87.3% | 18,116 | 20,230 | 89.6% | ||||||||||||||||||
New leases | 1,018 | 618 | ||||||||||||||||||||||
Expired leases | (1,075 | ) | (537 | ) | ||||||||||||||||||||
Other | (2 | ) | 11 | 1 | 44 | |||||||||||||||||||
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| |||||||||||||||||||||
Subtotal | 18,714 | 21,527 | 86.9% | 18,198 | 20,274 | 89.8% | ||||||||||||||||||
Acquisitions during period | 147 | 290 | - | - | ||||||||||||||||||||
Dispositions during period | - | - | - | - | ||||||||||||||||||||
As of June 30, 20xx(2) (3) (4) | 18,861 | 21,817 | 86.5% | 18,198 | 20,274 | 89.8% | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Six Months Ended June 30, 2011 | Six Months Ended June 30, 2010 | |||||||||||||||||||||||
Leased Square Footage | Rentable Square Footage | Percent Leased (1) | Leased Square Footage | Rentable Square Footage | Percent Leased (1) | |||||||||||||||||||
|
|
|
| |||||||||||||||||||||
As of December 31, 20xx | 18,214 | 20,408 | 89.2% | 18,221 | 20,229 | 90.1% | ||||||||||||||||||
New leases | 1,814 | 1,153 | ||||||||||||||||||||||
Expired leases | (1,979 | ) | (1,177 | ) | ||||||||||||||||||||
Other | (3 | ) | 7 | 1 | 45 | |||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Subtotal | 18,046 | 20,415 | 88.4% | 18,198 | 20,274 | 89.8% | ||||||||||||||||||
Acquisitions during period | 815 | 1,402 | - | - | ||||||||||||||||||||
Dispositions during period | - | - | - | - | ||||||||||||||||||||
As of June 30, 20xx(2) (3) (4) | 18,861 | 21,817 | 86.5% | 18,198 | 20,274 | 89.8% | ||||||||||||||||||
Same Store Analysis | ||||||||||||||||||||||||
Less acquisitions/dispositions after June 30, 2010(5) (6) | (1,183 | ) | (1,928 | ) | 61.4% | (410 | ) | (410 | ) | 100.0% | ||||||||||||||
Same Store Total | 17,678 | 19,889 | 88.9% | 17,788 | 19,864 | 89.5% | ||||||||||||||||||
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| |||||||||||||||||||||
Stabilized Portfolio Analysis | ||||||||||||||||||||||||
Less value-add properties(6) | (701 | ) | (1,406 | ) | 49.9% | - | - | 0.0% | ||||||||||||||||
Stabilized Total | 18,160 | 20,411 | 89.0% | 18,198 | 20,274 | 89.8% | ||||||||||||||||||
|
|
|
|
(1) Calculated as leased square footage as of period end with the addition of square footage associated with uncommenced leases for spaces vacant as of period end, divided by total rentable square footage as of period end, expressed as a percentage.
(2) The square footage associated with leases with end of period expiration dates is included in the end of the period leased square footage.
(3) End of period leased square footage for 2011 includes short-term space leased on behalf of NASA in accordance with requirements stipulated under its lease to allow it to restructure its space at Two Independence Square in Washington, DC. As of June 30, 2011, total short-term space amounts to approximately 63,000 square feet and it will be occupied until an estimated date of June 30, 2013.
(4) Excluding executed but not commenced leases for currently vacant spaces, comprising approximately 652,000 square feet, Piedmont’s physical occupancy as of June 30, 2011 was 83.5%.
(5) Dispositions completed during the previous twelve months are deducted from the previous period data and acquisitions completed during the previous twelve months are deducted from the current period data.
(6) For additional information on acquisitions/dispositions completed during the last year and value-add properties, please refer to pages 30 and 31, respectively.
22
Piedmont Office Realty Trust, Inc.
Rental Rate Roll Up / Roll Down Analysis (1)
(in thousands)
Three Months Ended June 30, 2011 | ||||||||||||||||||||
Square Feet | % of Total Signed During Period | % of Rentable Square Footage | % Change Cash Rents(2) | % Change Accrual Rents(3) (4) | ||||||||||||||||
|
| |||||||||||||||||||
Leases executed for spaces vacant less than one year | 1,084 | 92 | % | 5.0 | % | 3.0 | % | 5.5% | ||||||||||||
Leases executed for spaces excluded from analysis(5) | 95 | 8 | % | |||||||||||||||||
Six Months Ended June 30, 2011 | ||||||||||||||||||||
Square Feet | % of Total Signed During Period | % of Rentable Square Footage | % Change Cash Rents(2) | % Change Accrual Rents(3) (4) | ||||||||||||||||
|
| |||||||||||||||||||
Leases executed for spaces vacant less than one year | 1,807 | 89 | % | 8.3 | % | 5.4 | % | 8.6% | ||||||||||||
Leases executed for spaces excluded from analysis(5) | 215 | 11 | % |
(1) The population analyzed consists of office leases executed during the period (retail leases as well as leases associated with storage spaces, management offices, industrial properties and unconsolidated joint venture assets were excluded from this analysis). Spaces that had been vacant for greater than one year were excluded from this analysis.
(2) For the purposes of this analysis, the cash rents last in effect for the previous leases were compared to the initial cash rents of the new leases in order to calculate the percentage change.
(3) For the purposes of this analysis, the accrual basis rents for the previous leases were compared to the accrual basis rents of the new leases in order to calculate the percentage change. For newly signed leases which have variations in accrual basis rents, whether because of known future expansions, contractions, lease expense recovery structure changes, or other similar reasons, the weighted average of such accrual basis rents is used for the purposes of this analysis.
(4) For leases under which a tenant may use, at its discretion, a portion of its tenant improvement allowance for expenses other than those related to improvements to its space, an assumption is made that the tenant elects to use any such portion of its tenant improvement allowance for improvements to its space prior to the commencement of its lease. This assumption is made based upon the historical tenant improvement allowance usage patterns of the Company’s tenants.
(5) Represents leases signed at our consolidated office assets that do not qualify for inclusion in the analysis primarily because the spaces for which the new leases were signed had been vacant for greater than one year. Leases signed with Piedmont entities are excluded from the analysis.
23
Piedmont Office Realty Trust, Inc.
Lease Expiration Schedule
As of June 30, 2011
(in thousands)
OFFICE PORTFOLIO | GOVERNMENTAL ENTITIES | |||||||||||||
Annualized Lease Revenue(1) | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage | Percentage of Rentable Square Footage (%) | Annualized Lease Revenue(1) | Percentage of Annualized Lease Revenue (%) | Percentage of Current Year Total Annualized Lease Revenue Expiring (%) | ||||||||
|
| |||||||||||||
Vacant | $0 | 0.0 | 2,954 | 13.5 | $0 | 0.0 | N/A | |||||||
2011 | 29,949 | 5.0 | 850 | 3.9 | 523 | 0.1 | 1.7 | |||||||
2012(2) | 60,857 | 10.1 | 1,888 | 8.7 | 7,764 | 1.3 | 12.8 | |||||||
2013 | 78,051 | 12.9 | 1,990 | 9.1 | 19,518 | 3.2 | 25.0 | |||||||
2014 | 51,423 | 8.5 | 1,701 | 7.8 | 3,517 | 0.6 | 6.8 | |||||||
2015 | 42,579 | 7.1 | 1,524 | 7.0 | 32 | 0.0 | 0.1 | |||||||
2016 | 29,687 | 4.9 | 1,100 | 5.0 | 1,440 | 0.2 | 4.9 | |||||||
2017 | 31,415 | 5.2 | 1,000 | 4.6 | 1,237 | 0.2 | 3.9 | |||||||
2018 | 49,235 | 8.2 | 1,639 | 7.5 | 8,647 | 1.4 | 17.6 | |||||||
2019 | 64,154 | 10.6 | 1,870 | 8.6 | 21,469 | 3.6 | 33.5 | |||||||
2020 | 32,034 | 5.3 | 1,165 | 5.3 | 11,944 | 2.0 | 37.3 | |||||||
2021 | 14,319 | 2.4 | 558 | 2.6 | 1,025 | 0.2 | 7.2 | |||||||
2022 | 17,335 | 2.9 | 708 | 3.2 | 0 | 0.0 | 0.0 | |||||||
2023 | 25,623 | 4.2 | 1,183 | 5.4 | 0 | 0.0 | 0.0 | |||||||
2024 | 25,706 | 4.3 | 576 | 2.6 | 0 | 0.0 | 0.0 | |||||||
Thereafter | 50,582 | 8.4 | 1,111 | 5.2 | 30,276 | 5.0 | 59.9 | |||||||
|
| |||||||||||||
Total / Weighted Average | $602,949 | 100.0 | 21,817 | 100.0 | $107,392 | 17.8 | ||||||||
|
|
(1) Annualized rental income associated with newly executed leases for currently occupied space is incorporated herein only at the expiration date for the current lease. Annualized rental income associated with such new leases is removed from the expiry year of the current lease and added to the expiry year of the new lease. These adjustments effectively incorporate known roll ups and roll downs into the expiration schedule.
(2) Leases and other revenue-producing agreements on a month-to-month basis, aggregating 30,839 square feet and Annualized Lease Revenue of $642,662, are assigned a lease expiration date of a year and a day beyond the period end date.
24
Piedmont Office Realty Trust, Inc.
Annual Lease Expirations
As of June 30, 2011
(in thousands)
12/31/2011 | 12/31/2012 | 12/31/2013 | 12/31/2014 | 12/31/2015 | ||||||||||||||||
|
|
|
|
| ||||||||||||||||
Expiring Square Footage | Expiring Lease Revenue(1) | Expiring Square Footage | Expiring Lease Revenue(1) | Expiring Square Footage | Expiring Lease Revenue(1) | Expiring Square Footage | Expiring Lease Revenue(1) | Expiring Square Footage | Expiring Lease Revenue(1) | |||||||||||
|
|
|
|
| ||||||||||||||||
Atlanta | 97 | $2,100 | 39 | $720 | 37 | $980 | 28 | $576 | 0 | $0 | ||||||||||
Austin | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Boston | 0 | 0 | 7 | 336 | 0 | 31 | 27 | 1,884 | 133 | 2,610 | ||||||||||
Central & South Florida | 16 | 435 | 4 | 107 | 8 | 215 | 18 | 452 | 6 | 138 | ||||||||||
Chicago | 539 | 19,999 | 450 | 14,872 | 805 | 31,508 | 34 | 1,317 | 202 | 5,611 | ||||||||||
Cleveland | 0 | 0 | 112 | 1,890 | 14 | 340 | 0 | 0 | 0 | 0 | ||||||||||
Dallas | 23 | 517 | 104 | 2,614 | 10 | 248 | 41 | 983 | 284 | 6,130 | ||||||||||
Denver | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Detroit | 13 | 309 | 84 | 2,261 | 136 | 3,255 | 12 | 225 | 132 | 3,872 | ||||||||||
Houston | 15 | 355 | 11 | 346 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Los Angeles | 9 | 325 | 46 | 1,738 | 78 | 2,709 | 5 | 211 | 423 | 14,710 | ||||||||||
Minneapolis | 98 | 3,148 | 26 | 812 | 45 | 1,446 | 807 | 22,794 | 98 | 3,366 | ||||||||||
Nashville | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
New York | 0 | 33 | 540 | 19,179 | 228 | 8,343 | 102 | 4,268 | 66 | 2,416 | ||||||||||
Philadelphia | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||
Phoenix | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 132 | 1,948 | ||||||||||
Portland | 0 | 0 | 147 | 2,023 | 0 | 0 | 74 | 1,079 | 0 | 0 | ||||||||||
Seattle | 38 | 1,625 | 0 | 0 | 0 | 0 | 0 | 0 | 22 | 534 | ||||||||||
Washington, D.C. | 2 | 97 | 318 | 15,029 | 629 | 28,266 | 553 | 17,732 | 26 | 1,073 | ||||||||||
|
|
|
|
| ||||||||||||||||
Total / Weighted Average (2) | 850 | $28,943 | 1,888 | $61,927 | 1,990 | $77,341 | 1,701 | $51,521 | 1,524 | $42,408 | ||||||||||
|
|
|
|
|
(1)Expiring lease revenue is calculated as expiring square footage multiplied by the gross rent per square foot of the tenant currently leasing the space.
(2)Total expiring lease revenue in any given year will not tie to the expiring Annualized Lease Revenue presented on the Lease Expiration Schedule as the Lease Expiration Schedule accounts for the revenue effects of newly signed leases. Reflected herein are expiring revenues based on in place rental rates.
25
Piedmont Office Realty Trust, Inc.
Capital Expenditures by Type
For the quarter ended June 30, 2011
Unaudited ($ in thousands)
For the Three Months Ended | ||||||||||||||||||||||
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| |||||||||||||||||||||
6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | ||||||||||||||||||
|
| |||||||||||||||||||||
Non-incremental(1) | ||||||||||||||||||||||
Bldg / construction / dev | $1,577 | $1,734 | $3,082 | $2,293 | $3,607 | |||||||||||||||||
Tenant improvements | 10,102 | 10,266 | 17,197 | 6,088 | 2,333 | |||||||||||||||||
Leasing costs | 5,229 | 9,469 | 6,315 | 4,948 | 3,029 | |||||||||||||||||
|
| |||||||||||||||||||||
Total non-incremental | 16,908 | 21,469 | 26,594 | 13,329 | 8,969 | |||||||||||||||||
Incremental(1) | ||||||||||||||||||||||
Bldg / construction / dev | 721 | 923 | 1,174 | 417 | 439 | |||||||||||||||||
Tenant improvements | 2,035 | 1,053 | 6 | 0 | 0 | |||||||||||||||||
Leasing costs | 810 | 75 | 2,531 | 0 | 0 | |||||||||||||||||
|
| |||||||||||||||||||||
Total incremental
| 3,566 | 2,051 | 3,711 | 417 | 439 | |||||||||||||||||
|
| |||||||||||||||||||||
Total capital expenditures | $20,474 | $23,520 | $30,305 | $13,746 | $9,408 | |||||||||||||||||
|
|
Tenant improvement commitments(2) | ||||||||||||||||
Tenant improvement commitments outstanding as of March 31, 2011 | $131,417 | |||||||||||||||
New tenant improvement commitments related to leases executed during period | 10,782 | |||||||||||||||
Tenant improvement expenditures | (12,137) | |||||||||||||||
Less: Tenant improvement expenditures fulfilled through accrued liabilities already presented on Piedmont’s balance sheet, expired commitments or other adjustments | (1,133) | |||||||||||||||
Tenant improvement commitments fulfilled, expired or other adjustments | (13,270) | |||||||||||||||
|
| |||||||||||||||
Total as of June 30, 2011 | $128,929 | |||||||||||||||
|
| |||||||||||||||
|
|
NOTE: The information presented on this page is for all consolidated assets, inclusive of our industrial properties.
(1) Definitions for non-incremental and incremental capital expenditures can be found on pages 33 and 34.
(2) Commitments are unexpired contractual tenant improvement obligations for leases executed in current and prior periods that have not yet been incurred and have not otherwise been presented on Piedmont’s financial statements. The four largest commitments total approximately $70.0 million, or 54% of total outstanding commitments.
26
Piedmont Office Realty Trust, Inc.
Contractual Tenant Improvements and Leasing Commissions
For the Year Ended | ||||||||||||
For the Three Months Ended June 30, 2011 | For the Six Months Ended June 30, 2011 | 2010 | 2009 | 2008 | ||||||||
Renewal Leases | ||||||||||||
Number of leases | 13 | 21 | 37 | 34 | 34 | |||||||
Square feet | 740,590 | 1,356,383 | 1,241,481 | 1,568,895 | 967,959 | |||||||
Tenant improvements per square foot(1) | $0.60 | $29.60 | $14.40 | $12.01 | $8.28 | |||||||
Leasing commissions per square foot | $0.47 | $7.56 | $8.40 | $5.51 | $7.17 | |||||||
Total per square foot | $1.07 | $37.16 | $22.80 | $17.52 | $15.45 | |||||||
Tenant improvements per square foot per year of lease term | $0.22 | $3.63 | $1.74 | $1.44 | $1.39 | |||||||
Leasing commissions per square foot per year of lease term | $0.17 | $0.93 | $1.02 | $0.66 | $1.20 | |||||||
Total per square foot per year of lease term | $0.39 | $4.56 | $2.76 | $2.10 | $2.59 | |||||||
New Leases | ||||||||||||
Number of leases | 22 | 38 | 56 | 28 | 37 | |||||||
Square feet | 438,879 | 665,810 | 866,212 | 700,295 | 747,919 | |||||||
Tenant improvements per square foot(1) | $23.54 | $31.93 | $32.65 | $45.04 | $30.59 | |||||||
Leasing commissions per square foot | $10.09 | $12.08 | $11.28 | $17.12 | $15.95 | |||||||
Total per square foot | $33.63 | $44.01 | $43.93 | $62.16 | $46.54 | |||||||
Tenant improvements per square foot per year of lease term | $3.03 | $3.95 | $4.16 | $4.05 | $3.24 | |||||||
Leasing commissions per square foot per year of lease term | $1.30 | $1.50 | $1.44 | $1.54 | $1.69 | |||||||
Total per square foot per year of lease term | $4.33 | $5.45 | $5.60 | $5.59 | $4.93 | |||||||
Total | ||||||||||||
Number of leases | 35 | 59 | 93 | 62 | 71 | |||||||
Square feet | 1,179,469 | 2,022,193 | 2,107,693 | 2,269,190 | 1,715,878 | |||||||
Tenant improvements per square foot(1) | $9.14 | $30.36 | $21.90 | $22.21 | $18.01 | |||||||
Leasing commissions per square foot | $4.05 | $9.05 | $9.59 | $9.09 | $11.00 | |||||||
Total per square foot | $13.19 | $39.41 | $31.49 | $31.30 | $29.01 | |||||||
Tenant improvements per square foot per year of lease term | $1.99 | $3.74 | $2.70 | $2.42 | $2.41 | |||||||
Leasing commissions per square foot per year of lease term | $0.88 | $1.11 | $1.18 | $0.99 | $1.47 | |||||||
Total per square foot per year of lease term | $2.87 | $4.85 | $3.88 | $3.41 | $3.88 |
NOTE: This information is presented for our consolidated office assets only. Short-term leases (leases for a term of less than one year) are excluded from this information.
(1) For leases under which a tenant may use, at its discretion, a portion of its tenant improvement allowance for expenses other than those related to improvements to its space, an assumption is made that the tenant elects to use any such portion of its tenant improvement allowance for improvements to its space prior to the commencement of its lease. This assumption is made based upon the historical tenant improvement allowance usage patterns of the Company’s tenants.
27
Piedmont Office Realty Trust, Inc.
Geographic Diversification
As of June 30, 2011
Location | Number of Properties | Annualized Lease Revenue ($’s in thousands) | Percentage of Annualized Lease Revenue (%) | Rentable Square Footage (in Thousands) | Percentage of Rentable Square Footage (%) | Leased Square Footage (in thousands) | Percent Leased (%) | |||||||
| ||||||||||||||
Chicago | 7 | $178,145 | 29.6 | 5,850 | 26.8 | 4,915 | 84.0 | |||||||
Washington, D.C. | 14 | 117,466 | 19.5 | 3,055 | 14.0 | 2,781 | 91.0 | |||||||
New York | 8 | 94,458 | 15.7 | 2,920 | 13.4 | 2,743 | 93.9 | |||||||
Minneapolis | 4 | 44,175 | 7.3 | 1,612 | 7.4 | 1,537 | 95.3 | |||||||
Los Angeles | 5 | 28,851 | 4.8 | 1,144 | 5.2 | 921 | 80.5 | |||||||
Dallas | 7 | 24,100 | 4.0 | 1,275 | 5.8 | 1,078 | 84.5 | |||||||
Boston | 4 | 20,069 | 3.3 | 583 | 2.7 | 562 | 96.4 | |||||||
Detroit | 4 | 18,788 | 3.1 | 930 | 4.3 | 810 | 87.1 | |||||||
Philadelphia | 1 | 14,571 | 2.4 | 761 | 3.5 | 761 | 100.0 | |||||||
Atlanta | 6 | 13,762 | 2.3 | 1,040 | 4.8 | 588 | 56.5 | |||||||
Houston | 2 | 10,520 | 1.7 | 463 | 2.1 | 341 | 73.7 | |||||||
Nashville | 1 | 7,125 | 1.2 | 312 | 1.4 | 312 | 100.0 | |||||||
Phoenix | 4 | 6,785 | 1.1 | 554 | 2.5 | 344 | 62.1 | |||||||
Central & South Florida | 3 | 5,781 | 1.0 | 299 | 1.4 | 250 | 83.6 | |||||||
Austin | 1 | 5,482 | 0.9 | 195 | 0.9 | 195 | 100.0 | |||||||
Portland | 4 | 4,603 | 0.8 | 325 | 1.5 | 325 | 100.0 | |||||||
Cleveland | 2 | 3,240 | 0.5 | 187 | 0.9 | 175 | 93.6 | |||||||
Denver | 1 | 2,712 | 0.4 | 156 | 0.7 | 156 | 100.0 | |||||||
Seattle | 1 | 2,316 | 0.4 | 156 | 0.7 | 67 | 42.9 | |||||||
| ||||||||||||||
Total / Weighted Average | 79 | $602,949 | 100.0 | 21,817 | 100.0 | 18,861 | 86.5 | |||||||
|
28
Piedmont Office Realty Trust, Inc.
Industry Diversification
As of June 30, 2011
Industry Diversification | Number of Tenants | Percentage of Total Tenants (%) | Annualized Lease Revenue ($’s in thousands) | Percentage of Annualized Lease Revenue (%) | Leased Square Footage (in thousands) | Percentage of Leased Square Footage (%) | ||||||
Governmental Entity | 7 | 1.6 | $107,392 | 17.8 | 2,590 | 13.7 | ||||||
Business Services | 64 | 14.8 | 65,151 | 10.8 | 2,009 | 10.7 | ||||||
Depository Institutions | 13 | 3.0 | 49,625 | 8.2 | 1,707 | 9.1 | ||||||
Legal Services | 11 | 2.5 | 36,575 | 6.1 | 1,026 | 5.4 | ||||||
Insurance Carriers | 21 | 4.9 | 36,715 | 6.1 | 1,508 | 8.0 | ||||||
Petroleum Refining & Related Industries | 1 | 0.2 | 31,289 | 5.2 | 776 | 4.1 | ||||||
Nondepository Credit Institutions | 13 | 3.0 | 31,009 | 5.1 | 1,070 | 5.7 | ||||||
Chemicals & Allied Products | 7 | 1.6 | 22,866 | 3.8 | 661 | 3.5 | ||||||
Engineering, Accounting, Research, Management & Related Services | 25 | 5.8 | 20,903 | 3.5 | 640 | 3.4 | ||||||
Insurance Agents, Brokers & Services | 9 | 2.1 | 18,961 | 3.1 | 598 | 3.2 | ||||||
Communications | 38 | 8.8 | 17,655 | 2.9 | 599 | 3.2 | ||||||
Security & Commodity Brokers, Dealers, Exchanges & Services | 22 | 5.1 | 15,632 | 2.6 | 560 | 3.0 | ||||||
Transportation Equipment | 5 | 1.2 | 15,265 | 2.5 | 557 | 3.0 | ||||||
Food & Kindred Products | 6 | 1.4 | 14,790 | 2.5 | 433 | 2.3 | ||||||
Educational Services | 7 | 1.6 | 12,099 | 2.0 | 276 | 1.5 | ||||||
Other | 183 | 42.4 | 107,022 | 17.8 | 3,851 | 20.2 | ||||||
Total | 432 | 100.0 | $602,949 | 100.0 | 18,861 | 100.0 | ||||||
|
29
Piedmont Office Realty Trust, Inc.
Property Investment Activity
As of June 30, 2011
Acquisitions | ||||||||||||||
Property Name | Location | Acquisition Date | Percent Ownership (%) | Year Built | Purchase Price ($’s in | Rentable Square Footage (in thousands) | Percent Leased at Acquisition (%) | |||||||
Suwanee Gateway One | Suwanee, GA | 9/28/2010 | 100 | 2008 | $7,875 | 142 | 0 | |||||||
Meridian Crossings | Richfield, MN | 10/1/2010 | 100 | 1997-1998 | 65,611 | 384 | 96 | |||||||
1200 Enclave Parkway | Houston, TX | 3/30/2011 | 100 | 1999 | 18,500 | 150 | 18 | |||||||
500 West Monroe Street(1) | Chicago, IL | 3/31/2011 | 100 | 1991 | 227,500 | 962 | 67 | |||||||
The Dupree | Atlanta, GA | 4/29/2011 | 100 | 1997 | 20,450 | 138 | 83 | |||||||
The Medici | Atlanta, GA | 6/7/2011 | 100 | 2008 | 13,210 | 152 | 22 | |||||||
| ||||||||||||||
$353,146 | 1,928 | 61 | ||||||||||||
| ||||||||||||||
Dispositions | ||||||||||||||
Property Name | Location | Disposition Date | Percent Ownership (%) | Year Built | Sale Price ($’s in thousands) | Rentable Square Footage (in thousands) | Percent Leased at Disposition (%) | |||||||
111 Sylvan Avenue(2) | Englewood Cliffs, NJ | 12/8/2010 | 100 | 1953-1967 | $55,000 | 410 | 100 | |||||||
14400 Hertz Quail Springs Parkway | Oklahoma City, OK | 10/15/2010 | 4 | 1997 | 5,300 | 57 | 100 | |||||||
360 Interlocken Boulevard | Broomfield, CO | 6/2/2011 | 4 | 1996 | 9,150 | 52 | 100 | |||||||
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$69,450 | 519 | 100 | ||||||||||||
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Dispositions Subsequent to Quarter End | ||||||||||||||
Property Name | Location | Disposition Date | Percent Ownership (%) | Year Built | Sale Price ($’s in thousands) | Rentable Square Footage (in thousands) | Percent Leased at Disposition (%) | |||||||
Eastpointe Corporate Center | Issaquah, WA | 7/1/2011 | 100 | 2001 | $32,000 | 156 | 19 |
(1) Investment in this property was converted from a structured finance investment to an owned real estate asset through a UCC foreclosure of an equity ownership interest on March 31, 2011. The purchase price presented equates to the book basis for the real estate assets comprising the property.
(2) Property was to become vacant within six months of disposition.
30
Piedmont Office Realty Trust, Inc.
Value-Add Activity
As of June 30, 2011
Presented below are properties that were acquired employing a value-add strategy. Once a property acquired under a value-add strategy reaches 80% leased, it is deemed stabilized for the purposes of supplemental reporting and will be removed from the value-add classification.
Value-Add Properties | ||||||||||||||||
Property Name | Location | Acquisition Date | Percent Ownership (%) | Year Built | Purchase Price ($’s in thousands) | Rentable Square Footage (in thousands) | Current Percent Leased (%) | Percent Leased at Acquisition (%) | ||||||||
Suwanee Gateway One | Suwanee, GA | 9/28/2010 | 100 | 2008 | $7,875 | 142 | 0 | 0 | ||||||||
1200 Enclave Parkway | Houston, TX | 3/30/2011 | 100 | 1999 | 18,500 | 150 | 18 | 18 | ||||||||
500 West Monroe Street(1) | Chicago, IL | 3/31/2011 | 100 | 1991 | 227,500 | 962 | 67 | 67 | ||||||||
The Medici | Atlanta, GA | 6/7/2011 | 100 | 2008 | 13,210 | 152 | 22 | 22 | ||||||||
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$267,085 | 1,406 | 50 | 50 | |||||||||||||
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(1) Property was acquired through the foreclosure of an equity ownership interest. While 67% leased at acquisition, the asset had near-term lease expirations comprising approximately 50% of the building’s rentable square footage.
31
Piedmont Office Realty Trust, Inc.
Other Investments
As of June 30, 2011
Industrial Properties | Location | Percent Ownership (%) | Year Built | Real Estate Net Book Value ($’s in thousands) | Rentable Square Footage (in thousands) | Percent Leased (%) | ||||||||
112 Hidden Lake Circle | Duncan, SC | 100 | 1987 | $9,705 | 313.4 | 100 | ||||||||
110 Hidden Lake Circle | Duncan, SC | 100 | 1987 | 13,057 | 473.4 | 37 | ||||||||
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$22,762 | 786.8 | 62 | ||||||||||||
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Unconsolidated Joint Venture Properties | Location | Percent Ownership (%) | Year Built | Piedmont Share of Real Estate Net Book Value ($’s in thousands) | Real Estate Net Book Value ($’s in thousands) | Rentable Square Footage (in thousands) | Percent Leased (%) | |||||||
47300 Kato Road | Fremont, CA | 78 | 1982 | 2,650 | 3,419 | 58.4 | 0 | |||||||
20/20 Building | Leawood, KS | 57 | 1992 | 2,514 | 4,429 | 68.3 | 91 | |||||||
4685 Investment Drive | Troy, MI | 55 | 2000 | 5,109 | 9,287 | 77.1 | 100 | |||||||
5301 Maryland Way | Brentwood, TN | 55 | 1989 | 10,928 | 19,865 | 201.2 | 100 | |||||||
8560 Upland Drive | Parker, CO | 72 | 2001 | 7,585 | 10,551 | 148.2 | 100 | |||||||
Two Park Center | Hoffman Estates, IL | 72 | 1999 | 11,401 | 15,860 | 193.7 | 39 | |||||||
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$40,187 | $63,411 | 746.9 | 75 | |||||||||||
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Land Parcels | Location | Acres | ||||||||||||
Portland Land Parcels | Beaverton, OR | 18.2 | ||||||||||||
Enclave Parkway | Houston, TX | 4.5 | ||||||||||||
Durham Avenue | South Plainfield, NJ | 8.9 | ||||||||||||
Corporate Court | Holtsville, NY | 10.0 | ||||||||||||
State Highway 161 | Irving, TX | 4.5 | ||||||||||||
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46.1 | ||||||||||||||
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32
Piedmont Office Realty Trust, Inc.
Supplemental Definitions
Included in this section are management’s statements regarding certain non-GAAP financial measures provided in this supplemental report and reasons why management believes that these measures provide useful information to investors about the Company’s financial condition and results of operations. Reconciliations of these non-GAAP measures are included within pages 36-38.
Adjusted Funds From Operations (“AFFO”):AFFO is calculated by deducting from Core FFO non-incremental capital expenditures and adding back non-cash items including non-real estate depreciation, straight lined rents and fair value lease revenue, non-cash components of interest expense and compensation expense, and by making similar adjustments for unconsolidated partnerships and joint ventures. Although AFFO may not be comparable to that of other REITs, we believe it provides a meaningful indicator of our ability to fund cash needs and to make cash distributions to equity owners. AFFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income, as an alternative to net cash flows from operating activities or as a measure of our liquidity.
Annualized Lease Revenue (“ALR”):ALR is calculated by multiplying (i) rental payments (defined as base rent plus operating expense reimbursements, if payable by the tenant on a monthly basis under the terms of a lease that have been executed, but excluding a) rental abatements and b) rental payments related to executed but not commenced leases for space that was covered by an existing lease), by (ii) 12. In instances in which contractual rents or operating expense reimbursements are collected on an annual, semi-annual, or quarterly basis, such amounts are multiplied by a factor of 1, 2, or 4, respectively, to calculate the annualized figure. For leases that have been executed but not commenced relating to un-leased space, ALR is calculated by multiplying (i) the monthly base rental payment (excluding abatements) plus any operating expense reimbursements for the initial month of the lease term, by (ii) 12. Unless stated otherwise, this measure excludes our industrial properties and unconsolidated joint venture interests.
Core EBITDA:Core EBITDA is defined as net income before interest, taxes, depreciation and amortization and incrementally removing any impairment losses, gains or losses from sales of property, or other extraordinary items. We do not include impairment losses in this measure because we feel these types of losses create volatility in our earnings and make it difficult to determine the earnings generated by our ongoing business. We believe Core EBITDA is a reasonable measure of our liquidity. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative measurement of cash flows from operating activities or other GAAP basis liquidity measures. Other REITs may calculate Core EBITDA differently and our calculation should not be compared to that of other REITs.
Core Funds From Operations (“Core FFO”):We calculate Core FFO by starting with FFO, as defined by NAREIT, and adjusting for certain non-recurring items such as impairment losses and other extraordinary items. Such items create significant earnings volatility. We believe Core FFO provides a meaningful measure of our operating performance and more predictability regarding future earnings potential. Core FFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income; therefore, it should not be compared to other REITs’ equivalent to Core FFO.
Core Net Operating Income (“Core NOI”): Core NOI is defined as real estate operating income with the add-back of corporate general and administrative expense, depreciation and amortization, and casualty and impairment losses and the deduction of income and expense associated with lease terminations and income associated with property management performed by Piedmont for other organizations. We present this measure on an accrual basis and a cash basis, which eliminates the effects of straight lined rents and fair value lease revenue. The company uses this measure to assess its operating results and believes it is important in assessing operating performance. Core NOI is a non-GAAP measure which does not have any standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies.
EBITDA:EBITDA is defined as net income before interest, taxes, depreciation and amortization. We believe EBITDA is an appropriate measure of our ability to incur and service debt. EBITDA should not be considered as an alternative to cash flows from operating activities, as a measure of our liquidity or as an alternative to net income as an indicator of our operating activities. Other REITs may calculate EBITDA differently and our calculation should not be compared to that of other REITs.
Funds From Operations (“FFO”):FFO is calculated in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as net income (computed in accordance with GAAP), excluding gains or losses from sales of property, adding back depreciation and amortization on real estate assets, and after the same adjustments for unconsolidated partnerships and joint ventures. Such factors can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. FFO may provide valuable comparisons of operating performance between periods and with other REITs. FFO is a non-GAAP financial measure and should not be viewed as an alternative measurement of our operating performance to net income. We believe that FFO is a beneficial indicator of the performance of an equity REIT. However, other REITs may not define FFO in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than we do; therefore, our computation of FFO may not be comparable to that of such other REITs.
Incremental Capital Expenditures: Incremental Capital Expenditures are defined as capital expenditures of a non-recurring nature that incrementally enhance the underlying assets’ income generating capacity. Tenant improvements, leasing commissions, building capital and deferred lease incentives incurred to lease space that was dark at acquisition, improvements associated with the expansion of a building and renovations that change the underlying classification of a building are included in this measure.
33
Piedmont Office Realty Trust, Inc.
Supplemental Definitions
NOI from Unconsolidated Joint Ventures:NOI from Unconsolidated Joint Ventures is defined as Core NOI attributable to our interests in eight properties owned through unconsolidated partnerships. We present this measure on an accrual basis and a cash basis, which eliminates the effects of straight lined rents and fair value lease revenue. NOI from Unconsolidated Joint Ventures is a non-GAAP measure and therefore may not be comparable to similarly defined data provided by other REITs.
Non-Incremental Capital Expenditures:Non-Incremental Capital Expenditures are defined as capital expenditures of a recurring nature related to tenant improvements and leasing commissions that do not incrementally enhance the underlying assets’ income generating capacity. We exclude first generation tenant improvements and leasing commissions from this measure.
Same Store Net Operating Income (“Same Store NOI”): Same Store NOI is calculated as the Core NOI attributable to the properties owned or placed in service during the entire span of the current and prior year reporting periods. Same Store NOI excludes amounts attributable to industrial properties and unconsolidated joint venture assets. We present this measure on an accrual basis and a cash basis, which eliminates the effects of straight lined rents and fair value lease revenue. We believe Same Store NOI is an important measure of comparison of our stabilized properties’ operating performance. Other REITs may calculate Same Store NOI differently and our calculation should not be compared to that of other REITs.
Same Store Properties:Same Store Properties is defined as properties owned or placed in service during the entire span of the current and prior year reporting periods. Same Store Properties excludes industrial properties and unconsolidated joint venture assets. We believe Same Store Properties is an important measure of comparison of our stabilized portfolio performance.
34
Piedmont Office Realty Trust, Inc.
Research Coverage
Paul E. Adornato, CFA | John W. Guinee, III | Brendon Maiorana | ||
BMO Capital Markets | Stifel, Nicolaus & Company | Wells Fargo | ||
3 Time Square | One South Street | 7 St. Paul Street | ||
New York, NY 10036 | 16th Floor | MAC R1230-011 | ||
Phone: (212) 885-4170 | Baltimore, MD 21202 | Baltimore, MD 21202 | ||
Phone: (443) 224-1307 | Phone: (443) 263-6516 | |||
Paul Morgan | Anthony Paolone, CFA | David B. Rodgers, CFA | ||
Morgan Stanley | JP Morgan | RBC Capital Markets | ||
555 California Street, 21st Floor | 277 Park Avenue | Arbor Court | ||
San Francisco, CA 94104 | New York, NY 10172 | 30575 Bainbridge Road, Suite 250 | ||
Phone: (415) 576-2627 | Phone: (212) 622-6682 | Solon, OH 44139 | ||
Phone: (440) 715-2647 | ||||
John J. Stewart, CFA | Stephen C. Swett | |||
Green Street Advisors | Morgan Keegan & Co. | |||
660 Newport Center Drive, Suite 800 | 535 Madison Avenue | |||
Newport Beach, CA 92660 | 10th Floor | |||
Phone: (949) 640-8780 | New York, NY 10022 | |||
Phone: (212) 508-7585 |
35
Piedmont Office Realty Trust, Inc.
Same Store Net Operating Income (Cash Basis)
Unaudited (in thousands)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | 6/30/2011 | 6/30/2010 | ||||||||||||||||||||||
Net income attributable to Piedmont | $ | 21,027 | $ | 33,967 | $ | 28,700 | $ | 40,584 | $ | 19,636 | $ | 54,994 | $ | 51,096 | ||||||||||||||
Net income attributable to noncontrolling interest | 121 | 123 | 122 | 158 | 125 | 243 | 251 | |||||||||||||||||||||
Interest expense | 19,313 | 17,174 | 17,378 | 17,359 | 18,933 | 36,487 | 38,024 | |||||||||||||||||||||
Depreciation | 28,047 | 27,324 | 26,995 | 26,339 | 26,050 | 55,371 | 52,478 | |||||||||||||||||||||
Amortization | 15,878 | 12,106 | 11,623 | 11,119 | 11,104 | 27,984 | 22,592 | |||||||||||||||||||||
Impairment loss | - | - | - | 53 | 9,587 | - | 9,587 | |||||||||||||||||||||
(Gain)/loss on sale of properties | (45) | - | 792 | - | - | (45) | - | |||||||||||||||||||||
(Gain)/loss on consolidation of VIE | 388 | (1,920) | - | - | - | (1,532) | - | |||||||||||||||||||||
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Core EBITDA | 84,729 | 88,774 | 85,610 | 95,612 | 85,435 | 173,502 | 174,028 | |||||||||||||||||||||
General & administrative expenses | 7,724 | 6,899 | 7,934 | 7,001 | 7,993 | 14,624 | 14,689 | |||||||||||||||||||||
Management fee revenue | (363) | (830) | (948) | (806) | (705) | (1,193) | (1,458) | |||||||||||||||||||||
Interest and other income | 253 | (3,460) | (491) | (993) | (1,036) | (3,206) | (2,005) | |||||||||||||||||||||
Lease termination income | (1,347) | (3,404) | (2,589) | (4,230) | (479) | (4,751) | (975) | |||||||||||||||||||||
Lease termination expense-straight line rent & acquisition intangibles write-offs | 43 | 436 | 461 | 131 | 679 | 479 | 746 | |||||||||||||||||||||
Straight-line effects of lease revenue | (2,639) | 1,972 | (3,791) | (3,053) | (1,463) | (667) | (456) | |||||||||||||||||||||
Net effect of amortization of above/(below) market in-place lease intangibles | (1,670) | (1,534) | (1,457) | (1,510) | (1,525) | (3,204) | (2,952) | |||||||||||||||||||||
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Core net operating income | 86,730 | 88,853 | 84,729 | 92,152 | 88,899 | 175,584 | 181,617 | |||||||||||||||||||||
Net operating income from: | ||||||||||||||||||||||||||||
Acquisitions | (3,415) | 354 | 881 | 2 | - | (3,061) | - | |||||||||||||||||||||
Dispositions | - | - | (1,119) | (1,686) | (1,683) | 1 | (3,364) | |||||||||||||||||||||
Industrial properties | (242) | (239) | (347) | (91) | (91) | (482) | (364) | |||||||||||||||||||||
Unconsolidated joint ventures | (696) | (658) | (1,165) | (1,217) | (1,186) | (1,354) | (2,453) | |||||||||||||||||||||
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Same Store NOI | $ | 82,377 | $ | 88,310 | $ | 82,979 | $ | 89,160 | $ | 85,939 | $ | 170,688 | $ | 175,436 | ||||||||||||||
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36
Piedmont Office Realty Trust, Inc.
FFO/ Core FFO/ AFFO Reconciliations
Unaudited (in thousands)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | 6/30/2011 | 6/30/2010 | ||||||||||||||||||||||
Net income attributable to Piedmont | $ | 21,027 | $ | 33,967 | $ | 28,700 | $ | 40,584 | $ | 19,636 | $ | 54,994 | $ | 51,096 | ||||||||||||||
Depreciation | 27,879 | 27,154 | 26,821 | 26,163 | 25,872 | 55,033 | 52,122 | |||||||||||||||||||||
Amortization | 15,878 | 12,106 | 11,623 | 11,119 | 11,104 | 27,984 | 22,592 | |||||||||||||||||||||
(Gain)/loss on sale of properties | (45) | - | 792 | - | - | (45) | - | |||||||||||||||||||||
(Gain)/loss on consolidation of VIE | 388 | (1,920) | - | - | - | (1,532) | - | |||||||||||||||||||||
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Funds from operations | 65,127 | 71,307 | 67,936 | 77,866 | 56,612 | 136,434 | 125,810 | |||||||||||||||||||||
Acquisition costs | 716 | (26) | 242 | 310 | 48 | 690 | 48 | |||||||||||||||||||||
Impairment loss | - | - | - | 53 | 9,587 | - | 9,587 | |||||||||||||||||||||
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Core funds from operations | 65,843 | 71,281 | 68,178 | 78,229 | 66,247 | 137,124 | 135,445 | |||||||||||||||||||||
Depreciation of non real estate assets | 168 | 170 | 173 | 176 | 178 | 338 | 357 | |||||||||||||||||||||
Stock-based and other non-cash compensation expense | 896 | 968 | 1,223 | 1,095 | 711 | 1,864 | 1,364 | |||||||||||||||||||||
Deferred financing cost amortization | 1,060 | 607 | 608 | 607 | 696 | 1,667 | 1,393 | |||||||||||||||||||||
Amortization of fair market adjustments on notes payable | 942 | - | - | - | - | 942 | - | |||||||||||||||||||||
Straight-line effects of lease revenue | (2,596) | 2,237 | (3,456) | (2,921) | (784) | (359) | 289 | |||||||||||||||||||||
Amortization of lease related intangibles | (1,670) | (1,362) | (1,331) | (1,510) | (1,525) | (3,033) | (2,952) | |||||||||||||||||||||
Income from amortization of discount on purchase of mezzanine loans | - | (484) | (473) | (569) | (694) | (484) | (1,362) | |||||||||||||||||||||
Acquisition costs | (716) | 26 | (242) | (310) | (48) | (690) | (48) | |||||||||||||||||||||
Non-incremental capital expenditures | (16,908) | (21,469) | (26,594) | (13,329) | (8,969) | (38,377) | (18,383) | |||||||||||||||||||||
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Adjusted funds from operations | $ | 47,019 | $ | 51,974 | $ | 38,086 | $ | 61,468 | $ | 55,812 | $ | 98,992 | $ | 116,103 | ||||||||||||||
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37
Piedmont Office Realty Trust, Inc.
Unconsolidated Joint Venture NOI Reconciliation
Pro-rata(in thousands)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | 6/30/2011 | 6/30/2010 | ||||||||||||||||||||||
Equity in Income of Unconsolidated JVs | $ | 338 | $ | 209 | $ | 630 | $ | 619 | $ | 647 | $ | 547 | $ | 1,384 | ||||||||||||||
Interest expense | - | - | - | - | - | - | - | |||||||||||||||||||||
Depreciation | 300 | 302 | 310 | 329 | 337 | 602 | 685 | |||||||||||||||||||||
Amortization | 33 | 30 | 101 | 101 | 101 | 63 | 202 | |||||||||||||||||||||
Impairment loss | - | - | - | 53 | - | - | - | |||||||||||||||||||||
(Gain)/loss on sale of properties | (45) | - | (25) | - | - | (45) | - | |||||||||||||||||||||
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Core EBITDA | 626 | 541 | 1,016 | 1,102 | 1,085 | 1,167 | 2,271 | |||||||||||||||||||||
General & administrative expenses | 27 | 75 | 73 | 40 | 38 | 102 | 105 | |||||||||||||||||||||
Interest and other income | - | - | - | - | - | - | - | |||||||||||||||||||||
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Core net operating income (accrual basis) | 653 | 616 | 1,089 | 1,142 | 1,123 | 1,269 | 2,376 | |||||||||||||||||||||
Straight-line effects of lease revenue | 43 | 42 | 77 | 76 | 64 | 85 | 80 | |||||||||||||||||||||
Net effect of amortization of above/(below) market in-place lease intangibles | - | - | (1) | (1) | (1) | - | (3) | |||||||||||||||||||||
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Core net operating income (cash basis) | $ | 696 | $ | 658 | $ | 1,165 | $ | 1,217 | $ | 1,186 | $ | 1,354 | $ | 2,453 | ||||||||||||||
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38
Piedmont Office Realty Trust, Inc.
Discontinued Operations
Unaudited (in thousands)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
6/30/2011 | 3/31/2011 | 12/31/2010 | 9/30/2010 | 6/30/2010 | 6/30/2011 | 6/30/2010 | ||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Rental income | $ | 372 | $ | 373 | $ | 1,506 | $ | 2,236 | $ | 2,167 | $ | 745 | $ | 4,437 | ||||||||||||||
Tenant reimbursements | 157 | 146 | 132 | 249 | 341 | 303 | 645 | |||||||||||||||||||||
Other rental income | - | - | 1,136 | - | - | - | - | |||||||||||||||||||||
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Total revenues | 529 | 519 | 2,774 | 2,485 | 2,508 | 1,048 | 5,082 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Property operating costs | 279 | 309 | 320 | 213 | 218 | 588 | 461 | |||||||||||||||||||||
Depreciation | 24 | 107 | 141 | 208 | 344 | 130 | 945 | |||||||||||||||||||||
Amortization | 24 | 24 | 29 | 42 | 91 | 49 | 144 | |||||||||||||||||||||
General and administrative | - | - | 68 | 158 | 6 | - | 16 | |||||||||||||||||||||
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Total operating expenses | 327 | 440 | 558 | 621 | 659 | 767 | 1,566 | |||||||||||||||||||||
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Operating income, excluding impairment loss | 202 | 79 | 2,216 | 1,864 | 1,849 | 281 | 3,516 | |||||||||||||||||||||
Other income/(expense) | (1) | - | - | - | - | (1) | - | |||||||||||||||||||||
Impairment loss | - | - | - | - | (9,587) | - | (9,587) | |||||||||||||||||||||
Gain/(loss) on sale of properties | - | - | (817) | - | - | - | - | |||||||||||||||||||||
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Income/(loss) from discontinued operations | $ | 201 | $ | 79 | $ | 1,399 | $ | 1,864 | $ | (7,738) | $ | 280 | $ | (6,071) | ||||||||||||||
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39
Piedmont Office Realty Trust, Inc. |
Supplemental Operating & Financial Data |
Risks, Uncertainties and Limitations
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Certain statements contained in this supplemental package 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”). We intend 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 our 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. |
The following are some of the factors that could cause our actual results and expectations to differ materially from those described in our forward-looking statements: our ability to successfully identify and consummate suitable acquisitions; current adverse market and economic conditions; lease terminations or lease defaults, particularly by one of our large lead tenants; the impact of competition on our efforts to renew existing leases or re-let space; changes in the economies and other conditions of the office market in general and of the specific markets in which we operate; economic and regulatory changes; additional risks and costs associated with directly managing properties occupied by government tenants; adverse market and economic conditions and related impairments to our assets, including, but not limited to, receivables, real estate assets and other intangible assets; the success of our real estate strategies and investment objectives; availability of financing; costs of complying with governmental laws and regulations; uncertainties associated with environmental and other regulatory matters; our ability to continue to qualify as a REIT under the Internal Revenue Code; the impact of outstanding or potential litigation; and other factors detailed in our most recent Annual Report on Form 10-K and other documents we file with the Securities and Exchange Commission. |
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this supplemental report. We cannot guarantee the accuracy of any such forward-looking statements contained in this supplemental report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. |
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