Table of Contents For the Transition Period From to UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Commission file number 001-34626 ____________________________________________________ _______________________________________________________________________________________ FORM 10-Q Piedmont Office Realty Trust, Inc. (Mark One) (Exact name of registrant as specified in its charter) ____________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) ...

Core Insights - Piedmont Office Realty Trust, Inc. has released its financial and operational results for Q1 2025 [1] - A conference call is scheduled for April 29, 2025, to discuss the Q1 performance and recent events [2] - Piedmont's portfolio is valued at approximately $5 billion, consisting of around 16 million square feet of Class A office properties [3] Financial Performance - The financial results for Q1 2025 have been made available for review [1] - The management team will provide insights into the company's performance during the upcoming conference call [2] Company Overview - Piedmont is a self-managed real estate investment trust (REIT) focused on high-quality office properties primarily in the Sunbelt region [3] - The company holds an investment-grade rating from Moody's (Baa3) and Fitch (BBB-) [3] - Piedmont has been recognized as a 2024 ENERGY STAR Partner of the Year – Sustained Excellence [3]

Core Viewpoint - Piedmont Office Realty Trust will release its first quarter financial results on April 28, 2025, followed by a conference call on April 29, 2025, to discuss performance and recent events [1]. Company Overview - Piedmont Office Realty Trust, Inc. is a real estate investment trust (REIT) focused on owning, managing, developing, and operating high-quality Class A office properties, primarily in the Sunbelt region [3]. - The company has a portfolio valued at approximately $5 billion, consisting of around 16 million square feet of predominantly unencumbered properties [3]. - Piedmont is rated investment-grade by Moody's (Baa3) and Fitch (BBB-) and was recognized as a 2024 ENERGY STAR Partner of the Year – Sustained Excellence [3].

Company Appointments - Piedmont Office Realty Trust, Inc. announced the appointment of three new members to its Board of Directors: Deneen Donnley, Stephen E. Lewis, and Jeffrey J. Donnelly, bringing the total number of board members to ten [1] - Deneen Donnley is currently the Senior Vice President and General Counsel for Consolidated Edison and has held various leadership roles in her career, including at USAA [2] - Stephen E. Lewis served as the Chair and CEO of Troutman Pepper, where he had a 33-year career and was involved in strategic transactions, including mergers and acquisitions [3] - Jeffrey J. Donnelly is the CEO of DiamondRock Hospitality and has extensive experience in real estate investment, having managed assets totaling over $2 billion [4] Company Overview - Piedmont Office Realty Trust is a real estate investment trust (REIT) focused on owning, managing, and developing high-quality Class A office properties, primarily in the Sunbelt region [5] - The company has a portfolio valued at approximately $5 billion, consisting of around 16 million square feet of predominantly unencumbered properties [5] - Piedmont is recognized as a 2024 ENERGY STAR Partner of the Year – Sustained Excellence, highlighting its commitment to sustainability [5]

Market Conditions and Economic Factors - Approximately 70% of the company's annual rental revenue (ALR) is generated from properties located in Sunbelt markets as of December 31, 2024[64]. - The company faces significant competition in the leasing market, which may pressure rental rates and affect financial condition[63]. - Economic downturns, rising interest rates, and declining demand for real estate could adversely impact rental revenues and operating results[60]. - Trends towards remote work and co-working spaces are reducing demand for commercial office space, impacting occupancy and rental rates[65]. - Future terrorist attacks or civil unrest could significantly impact the demand for and value of the company's properties[85]. - Climate change risks could adversely affect the company's properties and operations, potentially leading to increased costs and reduced demand for office space[109]. - Transitioning to a lower-carbon economy may impose financial and reputational risks due to policy and market changes affecting both the company and its tenants[110]. Financial Performance and Risks - The company may incur substantial costs related to tenant defaults or lease terminations, which could harm cash flow and earnings[66]. - Future acquisitions may not yield anticipated returns and could disrupt business operations[77]. - The company may recognize impairment charges on real estate assets due to adverse market conditions, affecting financial performance[71]. - The illiquidity of real estate investments could significantly impede the company's ability to respond to adverse changes in property performance[80]. - The company may not be able to dispose of properties that no longer meet strategic plans, potentially affecting cash flows and results of operations[81]. - Development and redevelopment strategies may face uncertainties related to permits, construction delays, and market conditions, impacting financial performance[82]. - The COVID-19 pandemic has negatively impacted tenants' ability to pay rent, which could adversely affect the company's liquidity and operating results[84]. - Cybersecurity incidents pose risks that could disrupt operations and negatively impact financial results[86]. - The company carries comprehensive insurance but may face uninsured losses or losses exceeding coverage limits, adversely affecting financial condition[92]. - Joint venture investments may involve risks due to lack of sole decision-making authority and reliance on partners' financial conditions[95]. Regulatory and Compliance Risks - Lease agreements with federal government agencies introduce additional compliance risks and potential costs[70]. - Compliance with governmental laws and regulations may reduce net income and cash flows due to potential liabilities and costs[99]. - The company may incur material expenditures or additional liabilities due to compliance with new laws or regulations, which could reduce net income and cash flows[100]. - The company could face substantial costs for environmental contamination remediation, regardless of responsibility, impacting financial condition[101]. - The presence of hazardous materials, such as asbestos, in properties may lead to liabilities and additional costs for compliance and remediation[105]. Corporate Governance and Structure - The company's charter contains provisions that may inhibit takeovers, potentially preventing premium offers for common stock[115]. - The board of directors has significant authority to make decisions without stockholder approval, which could impact asset value and distributions[120]. - The company has provisions that may delay or prevent business combinations with interested stockholders for five years, requiring supermajority voting thereafter[125]. - Control share provisions limit voting rights of control shares unless approved by at least two-thirds of stockholders[125]. - The company’s charter limits stockholders' rights to recover claims against the board of directors and officers, potentially reducing recovery in cases of negligence[128]. REIT Status and Tax Implications - The company operates to qualify as a REIT but lacks an IRS ruling on its REIT status, which could impact operations and distributions[131]. - If the company fails to qualify as a REIT, it would face corporate tax rates on taxable income, reducing net earnings available for distribution[132]. - Changes in tax laws could adversely affect the company’s ability to maintain REIT status and impact stockholder taxation[136]. - The company may incur tax liabilities even if it maintains REIT status, which could reduce cash flow available for distributions[137]. - Differences between taxable income recognition and actual cash receipt may require asset sales or borrowing to meet distribution requirements[138]. - The IRS could recharacterize transactions, leading to potential loss of tax benefits or REIT status, adversely affecting cash distributions[141]. - Changes in state and local tax laws regarding REITs may increase tax liabilities, impacting financial condition and cash available for distributions[142]. Debt and Financing - As of December 31, 2024, the company had total outstanding indebtedness of approximately $2.2 billion, including $192.4 million of mortgage debt[146]. - The company may incur additional indebtedness to acquire properties or fund capital expenditures, which could increase business risks[145]. - Rising interest rates may reduce the number of properties the company can acquire and impact net income and cash distributions[149]. - The company has a $600 million unsecured line of credit, with variable-rate debt payments that could increase due to interest rate changes[154]. - The company is exposed to interest rate fluctuations, particularly with unhedged amounts outstanding on its $200 million unsecured term loan after February 1, 2026[273]. - The company aims to limit the impact of interest rate changes on earnings and cash flow through a low-to-moderate level of overall borrowings[274]. - Any failure to meet covenants under existing indebtedness could result in an event of default, adversely affecting financial condition[152]. - The company’s ability to make distributions to stockholders is subject to cash available for distribution and financial condition[159]. - A downgrade in credit ratings could materially affect the company's financial condition and increase interest expenses[157]. - The company may need to refinance its indebtedness, which could be challenging under unfavorable market conditions[148]. - As of December 31, 2024, the total outstanding debt was approximately $2.2 billion, with an average effective interest rate of 6.01% per annum[276]. - The $200 million Unsecured 2024 Term Loan was amended to increase the principal amount to $325 million and extended the maturity date to January 29, 2028[275]. - The estimated fair value of the company's debt increased from approximately $2.0 billion in 2023 to $2.2 billion in 2024[275]. - The company has a $600 million Unsecured 2022 Line of Credit with no amounts outstanding as of December 31, 2024, which is subject to a variable interest rate[278]. - The interest rate swap agreements in place as of December 31, 2024 had a notional amount of $450 million with a weighted-average fixed interest rate of 5.07%[275]. - The company repaid the $250 million Unsecured 2018 Term Loan on February 13, 2025, which had a stated variable rate[277]. - The fixed rate repayments for 2025 are estimated at $253,295 thousand, with varying amounts for subsequent years[275]. - The variable rate average interest rate for the debt maturing in 2027 is 5.41%[275]. - The company has exposure to increases in interest rates if additional funds are borrowed under the $600 million Unsecured 2022 Line of Credit[278]. - The company’s interest rate swap agreements effectively fixed the full principal balance of the $250 million Unsecured 2018 Term Loan to 4.79%[275].

Core Insights - The article discusses the potential for Piedmont Office Realty Trust to experience P/FFO multiple expansion due to strong revenue growth and future cost savings from high interest expenses [1] Group 1: Company Overview - Piedmont Office Realty Trust is currently viewed as relatively undervalued, with a focus on its potential for growth and cost savings [1] Group 2: Investment Strategy - The author emphasizes the importance of identifying high-yield Real Estate Investment Trusts (REITs) that provide stable passive income and potential mean reversion [1]

Financial Data and Key Metrics Changes - Core FFO per diluted share for Q4 2024 was $0.37, down from $0.41 in Q4 2023, primarily due to increased net interest expense and lower rental income from property sales [38][39] - Core FFO for the year was $1.49, reflecting an increase in net interest expense of approximately $22 million compared to the previous year [19][39] - Cash basis same-store NOI grew by 2.6%, exceeding original projections for the year [15][39] Business Line Data and Key Metrics Changes - In 2024, the company completed 2.4 million square feet of total leasing, the highest since 2015, with over 1 million square feet related to new tenant leases [14][15] - The lease percentage at year-end was 88.4%, with strong rental rate growth of approximately 12% on a cash basis and nearly 20% on an accrual basis [15][21] - The fourth quarter saw 45 lease transactions totaling 433,000 square feet, with renewal transactions dominating the activity [24][25] Market Data and Key Metrics Changes - National office transactional activity improved by 29% year-over-year, although still at historic lows [16] - The company noted that 90% of vacancy resides in the bottom 30% of office stock, indicating a tightening demand for high-quality office space [12][13] - Dallas was the most active market, accounting for 52% of the company's overall leasing volume in the fourth quarter [27] Company Strategy and Development Direction - The company aims to capitalize on the tightening market for high-quality office space, particularly in Sunbelt markets, with expectations of strong rental rate increases [11][21] - The strategy includes acquiring existing assets in desirable locations and enhancing them to meet current standards [13] - The company plans to dispose of select non-core and mature assets in 2025 to optimize its portfolio [17][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued demand for well-located, amenitized office spaces, driven by major employers advocating for in-office attendance [9][10] - The company anticipates manageable lease expirations in 2025, with a backlog of approximately 1.4 million square feet expected to contribute to financial results in the latter half of the year [21][22] - Management expects core FFO guidance for 2025 to be in the range of $1.38 to $1.44 per share, with a projected year-end leased percentage of approximately 89% to 90% [44] Other Important Information - The company completed a $400 million bond offering in June 2024, improving credit spreads compared to previous offerings [18] - The liquidity position at year-end included full capacity on a $600 million revolving line of credit and approximately $110 million in cash [40] - The company has no debt maturities until 2028, providing a stable financial foundation for future growth [42] Q&A Session Summary Question: Update on leasing pipeline - Management reported a strong leasing pipeline with 300,000 square feet in late-stage activity and 2.6 million square feet in proposals, indicating a healthy outlook for 2025 [58][59] Question: Acquisitions versus dispositions - Management emphasized a balanced approach, focusing on disposing of non-core assets while remaining open to acquisition opportunities, particularly in joint ventures [60][64] Question: Acceleration in new leasing activity - Management noted that new leasing activity is expected to be robust, particularly in Atlanta and Minneapolis, with a focus on professional services and technology sectors [73][76] Question: Lease percentage and large-scale move-outs - Management confirmed that the projected lease percentage for year-end does not include significant move-outs, ensuring a clean comparison to previous years [82] Question: Prospects for net effective rent growth - Management indicated that net effective rent growth is expected to be strong in Sunbelt markets, while remaining flat to slightly positive in other regions [98][100]

Core Insights - Piedmont Office (PDM) reported revenue of $143.23 million for the quarter ended December 2024, reflecting a year-over-year decline of 1.4% [1] - The earnings per share (EPS) for the same period was $0.37, a significant improvement from -$0.23 a year ago [1] - The reported revenue exceeded the Zacks Consensus Estimate of $142.16 million, resulting in a surprise of +0.75% [1] Revenue Breakdown - Rental and tenant reimbursement revenue was $135.48 million, slightly below the two-analyst average estimate of $136.01 million, marking a year-over-year decline of 2.8% [4] - Other property-related income reached $7.55 million, surpassing the two-analyst average estimate of $5.46 million, with a year-over-year increase of 37.3% [4] - Property management fee revenue was reported at $0.20 million, significantly lower than the two-analyst average estimate of $0.69 million, indicating a year-over-year decline of 47.8% [4] Stock Performance - Piedmont Office shares have returned -9.3% over the past month, contrasting with the Zacks S&P 500 composite's +3.9% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

分组1 - Piedmont Office reported quarterly funds from operations (FFO) of $0.37 per share, matching the Zacks Consensus Estimate, but down from $0.41 per share a year ago [1] - The company posted revenues of $143.23 million for the quarter ended December 2024, exceeding the Zacks Consensus Estimate by 0.75%, but down from $145.33 million year-over-year [2] - Piedmont Office shares have declined approximately 12.4% since the beginning of the year, contrasting with the S&P 500's gain of 2.9% [3] 分组2 - The current consensus FFO estimate for the upcoming quarter is $0.35 on revenues of $141.37 million, and for the current fiscal year, it is $1.45 on revenues of $567.88 million [7] - The Zacks Industry Rank indicates that the REIT and Equity Trust - Other sector is in the bottom 39% of over 250 Zacks industries, suggesting potential underperformance compared to higher-ranked industries [8]

Financial Performance - Piedmont reported a net loss of $29.978 million, or $0.24 per diluted share, for Q4 2024, compared to a net loss of $28.030 million, or $0.23 per diluted share, in Q4 2023[18]. - NAREIT FFO applicable to common stock was $41.605 million for Q4 2024, down from $50.624 million in Q4 2023, with NAREIT FFO per diluted share decreasing to $0.33 from $0.41[18]. - Core FFO for Q4 2024 was $46.436 million, or $0.37 per diluted share, compared to $50.624 million, or $0.41 per diluted share, in Q4 2023[19]. - Rental income for Q4 2024 was $111,169,000, a slight decrease of 1.0% from $114,357,000 in Q4 2023[44]. - Net income applicable to Piedmont for Q4 2024 was a loss of $29,978,000, compared to a loss of $28,030,000 in Q4 2023[44]. - Total revenue for the twelve months ended December 31, 2024, was $560,050,000, reflecting a 2.6% increase from $545,886,000 in 2023[61]. - The company reported a net loss applicable to Piedmont of $(79,069) thousand for the twelve months ended December 31, 2024, compared to $(48,387) thousand in 2023, highlighting a worsening financial position[142]. - Core Funds From Operations applicable to common stock for the twelve months ended December 31, 2024, was $185,567 thousand, compared to $215,219 thousand in 2023, showing a decline of approximately 13.8%[141]. Debt and Liquidity - The total debt as of December 31, 2024, was $2.222 billion, up from $2.055 billion as of December 31, 2023[23]. - The weighted average cost of debt increased to 6.01% in Q4 2024 from 5.82% in Q4 2023[23]. - Total liquidity as of December 31, 2024, was $710 million, including an unused $600 million line of credit and approximately $110 million in cash[25]. - The Company amended its $200 million syndicated bank term loan to increase the principal amount to $325 million and extended the maturity date to January 29, 2028[25]. - The company has a total net debt of $2,128,541,000 after accounting for cash and cash equivalents of $113,882,000[72]. - The maximum leverage ratio is 0.44, well below the required maximum of 0.60, indicating strong compliance with bank debt covenants[81]. - The minimum fixed charge coverage ratio stands at 2.24, exceeding the required minimum of 1.50, reflecting robust financial health[81]. Leasing Activity - The leased percentage as of December 31, 2024, was 88.4%, an increase from 87.1% in the previous year[8]. - Piedmont had 45 lease transactions in Q4 2024, totaling 433,000 square feet, with new tenant leasing of 94,000 square feet[22]. - The Company completed approximately 2.4 million square feet of leasing in 2024, the highest annual leasing volume since 2015, exceeding the original 2024 leasing goal[24]. - New tenant leasing accounted for over 1 million square feet, representing 42% of the Company's 2024 leasing activity, the largest amount since 2016[24]. - The total leased square footage as of December 31, 2024, is 15,323,000 square feet[100]. - The company completed leasing transactions totaling 432,469 square feet in the three months ended December 31, 2024, with tenant improvements averaging $3.56 per square foot per year of lease term[109]. Operational Metrics - Same Store NOI on a cash basis increased by 0.9% for Q4 2024 and 2.6% for the full year, marking the fourth consecutive year of positive growth[20]. - Same store net operating income (cash basis) for the twelve months ended December 31, 2024, was $313,763 thousand, an increase from $305,888 thousand in 2023, representing a growth of about 2.9%[142]. - The company reported annualized lease revenues of $567,344,000 across its portfolio[145]. - The average lease term remaining as of December 31, 2024, is 6.0 years, up from 5.7 years as of December 31, 2023[100]. - The largest segment of lease revenue comes from leases greater than 100,000 square feet, contributing 36.1% of total annualized lease revenue[87]. Asset Management - Total assets as of December 31, 2024, were $4,114,651,000, a decrease of 1.4% from $4,138,217,000 on September 30, 2024[43]. - Total liabilities increased to $2,526,524,000 as of December 31, 2024, up from $2,508,049,000 in the previous quarter[43]. - Total stockholders' equity decreased to $1,588,127,000 as of December 31, 2024, down from $1,630,168,000 in the previous quarter[43]. - The company has a total of 739 tenants, with the business services sector representing 14.8% of annualized lease revenue at $83.929 million[117]. - The company has ongoing redevelopment projects with a total of 784 thousand square feet, including properties in Orlando and Minneapolis, with a current asset basis of $117 million[121]. Risks and Challenges - The company faces economic, regulatory, and technological changes impacting the real estate market, particularly in the office sector[156]. - Competition affects the company's ability to renew existing leases or re-let space under similar terms[156]. - The company is exposed to risks from lease terminations, defaults, and financial conditions of large tenants[156]. - Cybersecurity incidents pose risks to operations and could impact the company's reputation and stock value[156]. - The company must navigate the illiquidity of real estate investments, influenced by rising interest rates and construction costs[156].