Piedmont Office Realty Trust reports increased leasing activity and net losses for Q4 and year-end 2024 amid rising interest rates.
Quiver AI Summary
Piedmont Office Realty Trust, Inc. reported its financial results for the year and fourth quarter ending December 31, 2024, revealing a net loss of $30 million, or $0.24 per diluted share, compared to a net loss of $28 million, or $0.23 per share, in the same quarter of 2023. The company faced challenges related to impairment charges and increased interest expenses due to higher market rates. Despite these losses, Piedmont achieved significant leasing milestones, completing 2.4 million square feet of leases in 2024, the most since 2015, with strong rental rate growth. The leased percentage increased to 88.4% by year-end, with a backlog of leases expected to generate an additional $46 million in annual cash rents once they commence. The company also completed refinancing activities to extend debt maturities to 2028. Piedmont introduced guidance for 2025, predicting improved financial performance driven by further leasing activity and constrained interest expenses.
Potential Positives
- Piedmont achieved the highest annual leasing volume since 2015, completing approximately 2.4 million square feet of leases, significantly exceeding its leasing goals for 2024.
- The company's leasing activities resulted in new tenant leases comprising over 1 million square feet, marking the largest amount of new leasing since 2016.
- Strong rental rate growth was reflected, with executed leases seeing an increase of approximately 11.5% on a cash basis for the quarter and an almost 20% rise on an accrual basis, which is indicative of a healthy leasing market.
- The company secured a solid financial position with approximately $710 million in liquidity, ensuring stability and capacity for future operations and investments.
Potential Negatives
- Net loss applicable to Piedmont increased to $30 million for the fourth quarter of 2024, compared to $28 million in the same period of 2023, indicating declining financial health.
- Core FFO per diluted share decreased from $0.41 in Q4 2023 to $0.37 in Q4 2024, reflecting reduced profitability and potential challenges in maintaining earnings.
- Executive separation costs of $4.8 million and substantial impairment charges suggest potential operational turmoil or restructuring issues within the company.
FAQ
What were Piedmont's financial results for Q4 2024?
Piedmont reported a net loss of $30 million, or $0.24 per diluted share, in Q4 2024, compared to $28 million, or $0.23 per share in Q4 2023.
How much leasing activity did Piedmont complete in 2024?
Piedmont completed approximately 2.4 million square feet of leasing in 2024, the highest annual leasing volume since 2015.
What is Piedmont's dividend for the first quarter of 2025?
Piedmont declared a dividend of $0.125 per share for Q1 2025, payable on March 14, 2025, to stockholders of record on February 21, 2025.
What is the guidance for Piedmont's Core FFO in 2025?
The guidance for Core FFO per diluted share in 2025 ranges from $1.38 to $1.44 based on current market conditions.
What percentage of Piedmont's properties are ENERGY STAR rated?
As of December 31, 2024, approximately 84% of Piedmont's portfolio was ENERGY STAR rated and 72% was LEED certified.
Disclaimer: This is an AI-generated summary of a press release distributed by GlobeNewswire. The model used to summarize this release may make mistakes. See the full release here.
$PDM Hedge Fund Activity
We have seen 103 institutional investors add shares of $PDM stock to their portfolio, and 120 decrease their positions in their most recent quarter.
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- VISION CAPITAL CORP added 1,389,477 shares (+65.0%) to their portfolio in Q4 2024, for an estimated $12,713,714
- BROOKFIELD CORP /ON/ added 705,250 shares (+inf%) to their portfolio in Q3 2024, for an estimated $7,123,025
- AMERIPRISE FINANCIAL INC added 699,666 shares (+969.5%) to their portfolio in Q3 2024, for an estimated $7,066,626
- PRUDENTIAL FINANCIAL INC added 699,339 shares (+34.6%) to their portfolio in Q4 2024, for an estimated $6,398,951
- INVESCO LTD. removed 684,102 shares (-45.5%) from their portfolio in Q4 2024, for an estimated $6,259,533
- WELLINGTON MANAGEMENT GROUP LLP added 546,242 shares (+35.0%) to their portfolio in Q4 2024, for an estimated $4,998,114
- AQR CAPITAL MANAGEMENT LLC removed 532,511 shares (-62.1%) from their portfolio in Q3 2024, for an estimated $5,378,361
To track hedge funds' stock portfolios, check out Quiver Quantitative's institutional holdings dashboard.
Full Release
Atlanta, Feb. 13, 2025 (GLOBE NEWSWIRE) -- Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in major U.S. Sunbelt markets, today announced its results for the quarter and year ended December 31, 2024.
Highlights for the Three Months and Year Ended December 31, 2024:
Financial Results:
Three Months Ended | Year Ended | ||||||||||||
(in 000s other than per share amounts ) | December 31, 2024 | December 31, 2023 | December 31, 2024 | December 31, 2023 | |||||||||
Net loss applicable to Piedmont | $ | (29,978 | ) | $ | (28,030 | ) | $ | (79,069 | ) | $ | (48,387 | ) | |
Net loss per share applicable to common stockholders - basic and diluted | $ | (0.24 | ) | $ | (0.23 | ) | $ | (0.64 | ) | $ | (0.39 | ) | |
Impairment charges | $ | 15,400 | $ | 18,489 | $ | 33,832 | $ | 29,446 | |||||
Executive separation costs | $ | 4,831 | $ | - | $ | 4,831 | $ | - | |||||
Interest expense, net of interest income | $ | 30,100 | $ | 28,185 | $ | 119,243 | $ | 97,722 | |||||
NAREIT FFO applicable to common stock | $ | 41,605 | $ | 50,624 | $ | 180,350 | $ | 214,399 | |||||
Core FFO applicable to common stock | $ | 46,436 | $ | 50,624 | $ | 185,567 | $ | 215,219 | |||||
NAREIT FFO per diluted share | $ | 0.33 | $ | 0.41 | $ | 1.44 | $ | 1.73 | |||||
Core FFO per diluted share | $ | 0.37 | $ | 0.41 | $ | 1.49 | $ | 1.74 | |||||
Adjusted FFO applicable to common stock | $ | 27,671 | $ | 31,833 | $ | 109,239 | $ | 153,008 | |||||
Same Store NOI - cash basis | 0.9 | % | 2.6 | % | |||||||||
Same Store NOI - accrual basis | 2.5 | % | 1.6 | % | |||||||||
Piedmont recognized a net loss of $30.0 million, or $0.24 per diluted share, for the fourth quarter of 2024, as compared to a net loss of $28.0 million, or $0.23 per diluted share, for the fourth quarter of 2023, with both periods reflecting impairment charges and elevated interest expense, net of interest income, as a result of recent refinancing activity in a higher interest rate environment. Additionally, the results for the fourth quarter of 2024 included $4.8 million of executive separation costs.
Core FFO, which removes the impairment charges and separation costs mentioned above, as well as loss on sale of real estate assets, loss on early extinguishment of debt, and depreciation and amortization expense, was $0.37 per diluted share for the fourth quarter of 2024, as compared to $0.41 per diluted share for the fourth quarter of 2023. Approximately $0.02 of the decrease is due to the increased interest expense, net of interest income, mentioned above, with the remaining decrease attributable to the sale of two properties and the downtime between the expiration of a few large leases during the year ended December 31, 2024, before newly executed leases commence.
Same Store NOI - cash basis for the three months and year ended December 31, 2024 increased 0.9% and 2.6%, respectively, reflecting the fourth straight year of positive growth.
Leasing:
Three Months Ended December 31, 2024 | Year Ended December 31, 2024 | ||||
# of lease transactions | 45 | 230 | |||
Total leasing sf (in 000s) | 433 | 2,431 | |||
New tenant leasing sf (in 000s) | 94 | 1,032 | |||
Cash rent roll up | 11.5 | % | 11.9 | % | |
Accrual rent roll up | 14.7 | % | 18.9 | % | |
Leased Percentage as of period end | 88.4 | % | |||
The Company completed approximately 433,000 square feet of leasing during the fourth quarter, bringing total completed leasing for the year to approximately 2.4 million square feet, the most leasing completed on an annual basis since 2015 and above the Company's original expected 2024 leasing goal.
Over a million square feet, or 42%, of the Company's 2024 leasing activity pertained to new tenant leasing, which is the largest amount of new leasing the Company has completed in a year since 2016.
Rental rates on leases executed during the three months and year ended December 31, 2024 for space vacant one year or less increased approximately 11.5% and 11.9% on a cash basis, respectively, and 14.7% and 18.9% on an accrual basis, respectively.
The Company's leased percentage for its in-service portfolio as of December 31, 2024 was 88.4%, as compared to 87.1% as of December 31, 2023, with the increase attributable to net leasing activity completed, as well as the sale of two assets and the reclassification of two projects to out-of-service, during the year ended December 31, 2024.
As of December 31, 2024, the Company had approximately 1.4 million square feet of executed leases for vacant space that is yet to commence or is currently under rental abatement, representing approximately $46 million of future additional annual cash rents.
Balance Sheet (including subsequent events):
(in 000s except for ratios) | December 31, 2024 | December 31, 2023 | |||||
Cash and Cash Equivalents | $ | 109,637 | $ | 825 | |||
Total Real Estate Assets | $ | 3,461,239 | $ | 3,512,527 | |||
Total Assets | $ | 4,114,651 | $ | 4,057,082 | |||
Total Debt | $ | 2,222,346 | $ | 2,054,596 | |||
Weighted Average Cost of Debt | 6.01 | % | 5.82 | % | |||
Net Principal Amount of Debt*/Total Gross Assets less Cash and Cash Equivalents | 39.2 | % | 38.2 | % | |||
Average Net Debt-to-Core EBITDA (qtr) | 6.8 x | 6.5 x | |||||
As of December 31, 2024, the Company's total liquidity was $710 million comprised of an unused $600 million line of credit and approximately $110 million in cash and cash equivalents.
Subsequent to December 31, 2024, the Company amended its $200 million syndicated bank term loan to increase the principal amount of the loan by $125 million (to a total of $325 million) and add two six month extension options for a final maturity date of January 29, 2028. The net proceeds from the increased principal, along with cash on hand and the Company's line of credit were used to repay a $250 million unsecured bank term loan that was scheduled to mature in March of 2025.
Also subsequent to December 31, 2024, the Company recast its $600 million revolving credit facility to extend the maturity date to June 30, 2028, with two additional one year extension options, for a final maturity date of June 30, 2030. The Company currently has approximately $500 million of availability under this $600 million revolving credit facility.
As a result of the above refinancing activity, the Company currently has no debt with a final maturity until 2028.
ESG and Operations:
Five projects in the Company's portfolio won TOBY (The Outstanding Building of the Year) recognition in their respective categories during the fourth quarter.
As of December 31, 2024, approximately 84% and 72% of the Company's portfolio was ENERGY STAR rated and LEED certified, respectively, and 61% of its portfolio is certified LEED gold or higher.
Commenting on the Company's results, Brent Smith, Piedmont's President and Chief Executive Officer, said, "2024 was an extremely successful year from a leasing perspective as we completed the greatest volume of leasing on an annual basis since 2015. Over a million square feet of that leasing was related to new tenant leases, resulting in absorption for our in-service portfolio and a year-end leased percentage of 88.4%, significantly above our original projections for the year. Furthermore, the leases we executed during 2024 reflected strong rental rate growth - approximately 12% on a cash basis and almost 20% on an accrual basis. At the end of 2024 our contractual backlog of leased space yet to commence or begin paying cash rents, stood at $46 million of future annual cash flow, which we expect will bolster our financial results during the latter half of 2025 as those leases commence or reach the end of their abatement period. Continuing, Mr. Smith added "Further, the refinancing activity we completed today means that we have no remaining debt with a final maturity until 2028."
First Quarter 2025 Dividend
As previously announced, on February 3, 2025, the board of directors of Piedmont declared a dividend for the first quarter of 2025 in the amount of $0.125 per share on its common stock to stockholders of record as of the close of business on February 21, 2025, payable on March 14, 2025.
Guidance for 2025
The Company is introducing guidance for the year ending December 31, 2025 as follows:
(in millions, except per share data) | Low | High | |||||
Net loss | $ | (49 | ) | $ | (46 | ) | |
Add: | |||||||
Depreciation | 165 | 168 | |||||
Amortization | 58 | 60 | |||||
NAREIT FFO applicable to common stock | 174 | 182 | |||||
Loss on early extinguishment of debt | 0.5 | 0.5 | |||||
Core FFO applicable to common stock | $ | 175 | $ | 183 | |||
Core FFO applicable to common stock per diluted share | $ | 1.38 | $ | 1.44 | |||
This guidance is based on information available to management as of the date of this release and reflects management's view of current market conditions, including the following specific assumptions and projections:
Property Operation Assumptions:
Executed leasing for the year of approximately 1.4-1.6 million square feet resulting in an increase in the anticipated year-end leased percentage for the Company's in-service portfolio to approximately 89-90%, exclusive of any speculative acquisition or disposition activity;
Same Store NOI of flat to 3% increase on both a cash and accrual basis for the year;
Financing Assumptions
:
Interest expense (net of interest income) of approximately $127-129 million as compared to $119 million in 2024, reflecting a full year of higher interest rates as a result of refinancing activity completed by the Company during 2024 and early 2025;
Other Assumptions:
General and administrative expense of approximately $30-32 million;
Weighted average shares outstanding of 126-127 million;
No speculative acquisitions, dispositions, or refinancing are included in the above guidance. The Company will adjust guidance if such transactions occur.
Below is a roll forward of 2024 Actual Core FFO per diluted share to the Company's 2025 Guidance Range, given the assumptions listed above:
Low | High | ||||||
2024 Annual Core FFO (actual) | $ | 1.49 | $ | 1.49 | |||
Increase in property net operating income | 0.04 | 0.08 | |||||
Decrease in property net operating income due to 2024 dispositions of assets | (0.02 | ) | (0.02 | ) | |||
Increase in interest expense (net of interest income) | (0.08 | ) | (0.07 | ) | |||
Increase in general and administrative costs | (0.02 | ) | (0.01 | ) | |||
Decrease in third-party management revenue | (0.01 | ) | (0.01 | ) | |||
$ | (0.09 | ) | $ | (0.03 | ) | ||
Dilution due to increase in weighted average shares outstanding | (0.02 | ) | (0.02 | ) | |||
2025 Annual Core FFO Guidance Range | $ | 1.38 | $ | 1.44 | |||
Note that actual results could differ materially from these estimates and individual quarters may fluctuate on both a cash basis and an accrual basis due to the timing of any future dispositions, significant lease commencements and expirations, abatement periods, repairs and maintenance expenses, capital expenditures, capital markets activities, general and administrative expenses, accrued potential performance-based compensation expense, one-time revenue or expense events, and other factors discussed under "Forward Looking Statements" below.
Non-GAAP Financial Measures
To supplement the presentation of the Company’s financial results prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this release and the accompanying quarterly supplemental information as of and for the period ended December 31, 2024 contain certain financial measures that are not prepared in accordance with GAAP, including FFO, Core FFO, AFFO, Same Store NOI (cash and accrual basis), Property NOI (cash and accrual basis), EBITDAre, and Core EBITDA. Definitions and reconciliations of each of these non-GAAP measures to their most comparable GAAP metrics are included below and in the accompanying quarterly supplemental information.
Each of the non-GAAP measures included in this release and the accompanying quarterly supplemental financial information has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of the Company’s results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release and the accompanying quarterly supplemental information may not be comparable to similarly titled measures disclosed by other companies, including other REITs. The Company may also change the calculation of any of the non-GAAP measures included in this release and the accompanying quarterly supplemental financial information from time to time in light of its then existing operations.
Conference Call Information
Piedmont has scheduled a conference call and an audio web cast for Friday, February 14, 2025, at 9:00 A.M. Eastern time. The live, listen-only, audio web cast of the call may be accessed on the Company's website at
http://investor.piedmontreit.com/news-and-events/events-calendar
. Dial-in numbers for analysts who plan to actively participate in the call are (888) 506-0062 for participants in the United States and Canada and (973) 528-0011 for international participants. Participant Access Code is 864662. A replay of the conference call will be available through February 28, 2025, and may be accessed by dialing (877) 481-4010 for participants in the United States and Canada and (919) 882-2331 for international participants, followed by conference identification code 51895. A web cast replay will also be available after the conference call in the Investor Relations section of the Company's website. During the audio web cast and conference call, the Company's management team will review fourth quarter and annual 2024 performance, discuss recent events, and conduct a question-and-answer period.
Supplemental Information
Quarterly supplemental information as of and for the year ended December 31, 2024 can be accessed on the Company`s website under the Investor Relations section at www.piedmontreit.com.
About Piedmont Office Realty Trust
Piedmont Office Realty Trust, Inc. (NYSE: PDM) is an owner, manager, developer, redeveloper, and operator of high-quality, Class A office properties located primarily in the Sunbelt. Its approximately $5 billion, predominantly unencumbered portfolio is currently comprised of approximately 16 million square feet. The Company is a fully integrated, self-managed real estate investment trust (REIT) with local management offices in each of its markets and is investment-grade rated by Moody’s (Baa3) and Fitch (BBB-). Piedmont is a 2024 ENERGY STAR Partner of the Year – Sustained Excellence. For more information, see www.piedmontreit.com.
Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company intends for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. Therefore, such statements are not intended to be a guarantee of the Company`s performance in future periods. Such forward-looking statements can generally be identified by the Company's use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue" or similar words or phrases that indicate predictions of future events or trends or that do not relate solely to historical matters. Examples of such statements in this press release include the Company's estimated range of Net Income/(Loss), Depreciation, Amortization, NAREIT FFO, Core FFO and Core FFO per diluted share for the year ending December 31, 2025. These statements are based on beliefs and assumptions of Piedmont’s management, which in turn are based on information available at the time the statements are made.
The following are some of the factors that could cause the Company's actual results and its expectations to differ materially from those described in the Company's forward-looking statements:
Economic, regulatory, socio-economic (including work from home and "hybrid" work policies), technological (e.g. artificial intelligence and machine learning, virtual meeting platforms, etc.), and other changes that impact the real estate market generally, the office sector or the patterns of use of commercial office space in general, or the markets where we primarily operate or have high concentrations of revenue;
The impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases;
Lease terminations, lease defaults, lease contractions, or changes in the financial condition of our tenants, particularly by one of our large tenants;
Impairment charges on our long-lived assets or goodwill resulting therefrom;
The success of our real estate strategies and investment objectives, including our ability to implement successful redevelopment and development strategies or identify and consummate suitable acquisitions and divestitures;
The illiquidity of real estate investments, including economic changes, such as rising interest rates, costs of construction and available financing, which could impact the number of buyers/sellers of our target properties, and regulatory restrictions to which real estate investment trusts ("REITs") are subject and the resulting impediment on our ability to quickly respond to adverse changes in the performance of our properties;
The risks and uncertainties associated with our acquisition and disposition of properties, many of which risks and uncertainties may not be known at the time of acquisition or disposition;
Development and construction delays, including the potential of supply chain disruptions, and resultant increased costs and risks;
Future acts of terrorism, civil unrest, or armed hostilities in any of the major metropolitan areas in which we own properties;
Risks related to the occurrence of cybersecurity incidents, including cybersecurity incidents against us or any of our properties, vendors, or tenants, or a deficiency in our identification, assessment or management of cybersecurity threats impacting our operations and the public's reaction to reported cybersecurity incidents, including the reputational impact on our business and value of our common stock;
Costs of complying with governmental laws and regulations, including environmental standards imposed on office building owners;
Uninsured losses or losses in excess of our insurance coverage, and our inability to obtain adequate insurance coverage at a reasonable cost;
Additional risks and costs associated with directly managing properties occupied by government tenants, such as potential changes in the political environment, a reduction in federal or state funding of our governmental tenants, or an increased risk of default by government tenants during periods in which state or federal governments are shut down or on furlough;
Significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock;
Risks associated with incurring mortgage and other indebtedness, including changing capital reserve requirements on our lenders and rising interest rates for new debt financings;
A downgrade in our credit ratings, the credit ratings of Piedmont Operating Partnership, L.P. (the "Operating Partnership") or the credit ratings of our or the Operating Partnership's unsecured debt securities, which could, among other effects, trigger an increase in the stated rate of one or more of our unsecured debt instruments;
The effect of future offerings of debt or equity securities on the value of our common stock;
Additional risks and costs associated with inflation and potential increases in the rate of inflation, including the impact of a possible recession, and any changes in governmental rules, regulations, and fiscal policies;
Uncertainties associated with environmental and regulatory matters;
Changes in the financial condition of our tenants directly or indirectly resulting from geopolitical developments that could negatively affect important supply chains and international trade, the termination or threatened termination of existing international trade agreements, or the implementation of tariffs or retaliatory tariffs on imported or exported goods;
The effect of any litigation to which we are, or may become, subject;
Additional risks and costs associated with owning properties occupied by tenants in particular industries, such as oil and gas, hospitality, travel, co-working, etc., including risks of default during start-up and during economic downturns;
Changes in tax laws impacting REITs and real estate in general, as well as our ability to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), or other tax law changes which may adversely affect our stockholders;
The future effectiveness of our internal controls and procedures;
Actual or threatened public health epidemics or outbreaks of highly infectious or contagious diseases, such as the COVID-19 pandemic, as well as immediate and long-term governmental and private measures taken to combat such health crises; and
Other factors, including the risk factors described in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company cannot guarantee the accuracy of any such forward-looking statements contained in this press release, and the Company does not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Research Analysts/ Institutional Investors Contact:
770-418-8592
investor.relations@piedmontreit.com
Shareholder Services/Transfer Agent Services Contact:
Computershare, Inc.
866-354-3485
investor.services@piedmontreit.com
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