Document0001042776false00010427762019-10-282019-10-28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 2019
Piedmont Office Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
Commission File Number: 001-34626
| | | | | | | | |
| Maryland | | 58-2328421 |
| (State or other jurisdiction of | | (IRS Employer |
| incorporation) | | Identification No.) |
5565 Glenridge Connector Ste. 450
Atlanta, Georgia 30342
(Address of principal executive offices, including zip code)
(770) 418-8800
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| Common Stock, $0.01 par value | | PDM | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Item 2.01 Completion of Acquisition or Disposition of Assets.
Disposition of the 500 West Monroe Street building
On October 28, 2019, Piedmont Office Realty Trust, Inc. (the “Registrant”) sold a 46-story office building containing approximately 967,000 rentable square feet located at 500 West Monroe Street in downtown Chicago, Illinois (the “500 West Monroe Street building”) for a gross sales price of $412 million ($426 per square foot) exclusive of closing costs to an unaffiliated, third-party buyer, Spear Street Capital. As a result of the sale, the Registrant received net sale proceeds of approximately $405.7 million, which may be adjusted should additional information become available in subsequent periods. These proceeds were used to repay outstanding borrowings under the Registrant's $500 Million Unsecured 2018 Line of Credit, which were initially used to purchase the Galleria 100, Galleria 400, and Galleria 600 buildings, as well as 11.7 acres of developable land, earlier in 2019.
Item 2.02 Results of Operations and Financial Condition.
On October 30, 2019, the Registrant issued a press release announcing its financial results for the third quarter 2019, and published supplemental information for the third quarter 2019 to its website. The press release and the supplemental information are attached hereto as Exhibit 99.1 and 99.2, respectively, and are incorporated herein by reference. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibits and the information set forth therein are deemed to have been furnished and shall not be deemed to be “filed” under the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(b) Pro forma financial information. The following pro forma financial statements of the Registrant are submitted at the end of this Current Report on Form 8-K and are filed herewith and incorporated herein by reference:
Unaudited Pro Forma Financial Statements
| | | | | | | | | | |
| Summary of Unaudited Pro Forma Financial Statements | | | F-1 |
| Pro Forma Balance Sheet as of September 30, 2019 | | | F-2 |
| Pro Forma Statements of Comprehensive Income for the Nine Months Ended September 30, 2019 | | | F-3 |
| Pro Forma Statements of Comprehensive Income for the Year Ended December 31, 2018 | | | F-4 |
(d) Exhibits:
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| Exhibit No. | | Description |
| 99.1 | | | |
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| 99.2 | | | |
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| 101.INS | | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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| 101.SCH | | | Inline XBRL Taxonomy Extension Schema Document |
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| 101.CAL | | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.DEF | | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB | | | Inline XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE | | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | | Piedmont Office Realty Trust, Inc. |
| | | | | (Registrant) |
| | | | | |
| Dated: | October 30, 2019 | | By: | | /s/ Robert E. Bowers |
| | | | | Robert E. Bowers |
| | | | | Chief Financial Officer and Executive Vice President |
Piedmont Office Realty Trust, Inc.
SUMMARY OF UNAUDITED
PRO FORMA FINANCIAL STATEMENTS
This unaudited pro forma information should be read in conjunction with the financial statements and notes of the Registrant included in its annual report filed on Form 10-K for the year ended December 31, 2018 and its quarterly report filed on Form 10-Q for the nine months ended September 30, 2019.
The following unaudited pro forma balance sheet as of September 30, 2019 has been prepared to give effect to the October 28, 2019 sale of the 500 West Monroe Street building as if the disposition had occurred on September 30, 2019. The Registrant owned 100% of the 500 West Monroe Street building prior to disposition.
The following unaudited pro forma statements of comprehensive income for the nine months ended September 30, 2019 and for the year ended December 31, 2018 have been prepared to give effect to the sale of the 500 West Monroe Street building as if the disposition had occurred on January 1, 2018, as well as an adjustment for property management fee revenue, which will have a continuing impact beyond twelve months from the date of sale.
These unaudited pro forma financial statements are prepared for informational purposes only and are based on information and assumptions available at the time of the filing of this financial information on Form 8-K that management believes to be reasonable and factually supportable. These unaudited pro forma statements of comprehensive income are not necessarily indicative of future results or of actual results that would have been achieved if the disposition of the 500 West Monroe Street building had been consummated as of September 30, 2019 or January 1, 2018, as applicable. Actual adjustments may differ materially from the information presented. Specifically, the accompanying pro forma statements of comprehensive income do not include the Registrant's nonrecurring gain that would have been recognized if the aforementioned property sale had occurred on January 1, 2018, as the gain does not have a continuing impact beyond twelve months from the date of sale. Further, the pro forma statement of comprehensive income for the year ended December 31, 2018 does not reflect the operational results associated with the Galleria 400 and Galleria 600 buildings, as these buildings were purchased on August 23, 2019. The pro forma statement of comprehensive income for the nine months ended September 30, 2019 includes operations related to the Galleria 400 and Galleria 600 buildings for approximately 38 days. Such properties were acquired using borrowings under the Registrant's $500 Million Unsecured 2018 Line of Credit, and were subsequently repaid using the sales proceeds from the 500 West Monroe Street building disposition mentioned above.
Piedmont Office Realty Trust, Inc.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2019
(Unaudited)
(in thousands, except of share and per share amounts)
| | | | | | | | | | | | | | | | | |
| Historical(a) | | Pro Forma Adjustments | | Pro Forma
Total |
| Assets: | | | | | |
| Real estate assets, at cost: | | | | | |
Land | $ | 506,440 | | | $ | — | | | | $ | 506,440 | |
Buildings and improvements, less accumulated depreciation | 2,327,055 | | | — | | | 2,327,055 | |
Intangible lease assets, less accumulated amortization | 88,371 | | | — | | | 88,371 | |
Construction in progress | 13,866 | | | — | | | | 13,866 | |
Real estate assets held for sale, net (b) | 213,094 | | | | (213,094) | | (c) | — | |
| Total real estate assets | 3,148,826 | | | (213,094) | | | 2,935,732 | |
| | | | | |
| | | | | |
| Cash and cash equivalents | 10,284 | | | 405,719 | | (d) | 416,003 | |
Tenant receivables | 10,091 | | | — | | | 10,091 | |
| | | | | |
| Straight-line rent receivables | 147,197 | | | — | | | 147,197 | |
| Restricted cash and escrows | 1,820 | | | — | | | 1,820 | |
| Prepaid expenses and other assets | 27,143 | | | — | | | | 27,143 | |
| Goodwill | 98,918 | | | — | | | 98,918 | |
| | | | | |
| | | | | |
Deferred lease costs, less accumulated amortization | 267,616 | | | — | | | | 267,616 | |
Other assets held for sale, net (b) | 40,036 | | | | (40,036) | | (c) | — | |
| Total assets | $ | 3,751,931 | | | $ | 152,589 | | | $ | 3,904,520 | |
| Liabilities: | | | | | |
Unsecured debt, net of discount and unamortized debt issuance costs | $ | 1,689,793 | | | $ | — | | | $ | 1,689,793 | |
Secured debt, net of premiums and unamortized debt issuance costs | 189,451 | | | — | | | 189,451 | |
Accounts payable, accrued expenses, and accrued capital expenditures | 114,812 | | | — | | | 114,812 | |
| | | | | |
| Deferred income | 27,985 | | | — | | | 27,985 | |
Intangible lease liabilities, less accumulated amortization | 34,970 | | | — | | | | 34,970 | |
| Interest rate swaps | 6,862 | | | — | | | 6,862 | |
Other liabilities held for sale (b) | 7,275 | | | (7,275) | | (c) | — | |
| Total liabilities | 2,071,148 | | | (7,275) | | | 2,063,873 | |
| Commitments and Contingencies | — | | | — | | | — | |
| Stockholders’ Equity: | | | | | |
Shares-in-trust, 150,000,000 shares authorized; none outstanding as of September 30, 2019 | — | | | — | | | — | |
Preferred stock, no par value, 100,000,000 shares authorized; none outstanding as of September 30, 2019 | — | | | — | | | — | |
Common stock, $0.01 par value, 750,000,000 shares authorized; 125,783,408 shares issued and outstanding as of September 30, 2019 | 1,258 | | | — | | | 1,258 | |
| Additional paid-in capital | 3,685,504 | | | — | | | 3,685,504 | |
| Cumulative distributions in excess of earnings | (2,007,438) | | | 159,864 | | (e) | (1,847,574) | |
| Other comprehensive income | (283) | | | — | | | (283) | |
| Piedmont stockholders’ equity | 1,679,041 | | | 159,864 | | | 1,838,905 | |
| Noncontrolling interest | 1,742 | | | — | | | 1,742 | |
| Total stockholders’ equity | 1,680,783 | | | 159,864 | | | 1,840,647 | |
| Total liabilities and stockholders’ equity | $ | 3,751,931 | | | $ | 152,589 | | | $ | 3,904,520 | |
(a)Historical financial information is presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and has been obtained from the Registrant's quarterly report on Form 10-Q as of September 30, 2019.
(b)Reflects assets and liabilities held for sale as of September 30, 2019, consisting solely of the 500 West Monroe Street building.
(c)Amounts represent the necessary adjustments to remove net assets and liabilities associated with the 500 West Monroe Street building as of September 30, 2019.
(d)Reflects the Registrant's estimated net proceeds resulting from the sale of the 500 West Monroe Street building.
(e)Reflects the Registrant's estimated pro forma, non-recurring gain on the sale of the 500 West Monroe Street building.
Piedmont Office Realty Trust, Inc.
PRO FORMA STATEMENT OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(Unaudited)
(in thousands, except of share and per share amounts)
| | | | | | | | | | | | | | | | | |
| Historical (a) | | Pro Forma Adjustments | | Pro Forma
Total |
| Revenues: | | | | | |
| | | | | |
| | | | | |
| Rental and tenant reimbursement revenue | $ | 382,213 | | | $ | (30,487) | | (b) | $ | 351,726 | |
| Property management fee revenue | 2,819 | | | 568 | | (c) | 3,387 | |
| Other property related income | 13,993 | | | (3,297) | | (d) | 10,696 | |
| 399,025 | | | (33,216) | | | 365,809 | |
| | | | | |
| Expenses: | | | | | |
| Property operating costs | 158,798 | | | (13,881) | | (e) | 144,917 | |
| Depreciation | 80,004 | | | (7,555) | | (f) | 72,449 | |
| Amortization | 55,666 | | | (1,148) | | (g) | 54,518 | |
| Impairment loss on real estate asset | 1,953 | | | — | | | 1,953 | |
| General and administrative | 29,736 | | | (2) | | | 29,734 | |
| 326,157 | | | (22,586) | | | 303,571 | |
| Other income (expense): | | | | | |
| Interest expense | (46,750) | | | — | | | (46,750) | |
| Other income/(expense) | 1,292 | | | — | | | 1,292 | |
| Gain on sale of real estate assets | 39,370 | | | — | | | 39,370 | |
| (6,088) | | | — | | | (6,088) | |
| Net income | 66,780 | | | (10,630) | | | 56,150 | |
Net loss attributable to noncontrolling interest | 3 | | | — | | | 3 | |
| Net income attributable to Piedmont | 66,783 | | | (10,630) | | | 56,153 | |
| Other comprehensive income/(loss): | | | | | |
Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges | (6,874) | | | — | | | (6,874) | |
Plus/(less): Reclassification of net loss/(gain) included in net income | (1,871) | | | — | | | (1,871) | |
| Other comprehensive income/(loss) | (8,745) | | | — | | | (8,745) | |
| Comprehensive income applicable to Piedmont | $ | 58,038 | | | $ | (10,630) | | | $ | 47,408 | |
| Per share information – basic and diluted: | | | | | |
| | | | | |
Comprehensive income applicable to common stockholders | $ | 0.46 | | | | | $ | 0.38 | |
Weighted-average common shares outstanding – basic | 125,684 | | | | | 125,684 | |
Weighted-average common shares outstanding – diluted | 126,190 | | | | | 126,190 | |
(a)Historical financial information has been obtained from the Registrant's quarterly report on Form 10-Q for the nine months ended September 30, 2019.
(b)Removal of the 500 West Monroe Street building's rental and tenant reimbursement income. Rental income for the 500 West Monroe Street building is recognized on a straight-line basis.
(c)Addition of expected property management fee revenue to be earned by managing the 500 West Monroe Street building subsequent to sale of the property to an unrelated, third-party purchaser.
(d)Removal of other property related income, consisting primarily of parking income.
(e)Removal of the 500 West Monroe Street building's operating expenses.
(f)Depreciation expense for the 500 West Monroe Street building is recognized on a straight-line basis using a 40-year life for building assets and using the respective lease terms for tenant allowance assets.
(g)Amortization expense for the 500 West Monroe Street building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.
Piedmont Office Realty Trust, Inc.
PRO FORMA STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2018
(Unaudited)
(in thousands, except of share and per share amounts)
| | | | | | | | | | | | | | | | | |
| Historical (a) | | Pro Forma Adjustments | | Pro Forma
Total |
| Revenues: | | | | | |
| | | | | |
| | | | | |
| Rental and tenant reimbursement revenue | $ | 504,410 | | | $ | (37,908) | | (b) | $ | 466,502 | |
| Property management fee revenue | 1,450 | | | 760 | | (c) | 2,210 | |
| Other property related income | 20,107 | | | (4,430) | | (d) | 15,677 | |
| 525,967 | | | (41,578) | | | 484,389 | |
| | | | | |
| Expenses: | | | | | |
| Property operating costs | 209,338 | | | (17,389) | | (e) | 191,949 | |
| Depreciation | 107,956 | | | (10,047) | | (f) | 97,909 | |
| Amortization | 63,295 | | | (1,491) | | (g) | 61,804 | |
| | | | | |
| General and administrative | 29,713 | | | (3) | | | 29,710 | |
| 410,302 | | | (28,930) | | | 381,372 | |
| Other income (expense): | | | | | |
| Interest expense | (61,023) | | | — | |
| (61,023) | |
| Other income/(expense) | 1,638 | | | — | | | 1,638 | |
Loss on extinguishment of debt | (1,680) | | | — | | | (1,680) | |
| Gain on sale of real estate assets | 75,691 | | | — | | | 75,691 | |
| 14,626 | | | — | | | 14,626 | |
| Net income | 130,291 | | | (12,648) | | | 117,643 | |
Net loss applicable to noncontrolling interest | 5 | | | — | | | 5 | |
| Net income applicable to Piedmont | 130,296 | | | (12,648) | | | 117,648 | |
| Other comprehensive income/(loss): | | | | | |
Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges | 692 | | | — | | | 692 | |
Plus/(less): Reclassification of net loss/(gain) included in net income | (300) | | | — | | | (300) | |
| Other comprehensive income/(loss) | 392 | | | — | | | 392 | |
| Comprehensive income attributable to Piedmont | $ | 130,688 | | | $ | (12,648) | | | $ | 118,040 | |
| Per share information: | | | | | |
| Comprehensive income available to common stockholders- basic | $ | 1.00 | | | | | $ | 0.91 | |
| Comprehensive income available to common stockholders- diluted | $ | 1.00 | | | | | $ | 0.90 | |
Weighted-average common shares outstanding – basic | 130,161 | | | | | 130,161 | |
Weighted-average common shares outstanding – diluted | 130,636 | | | | | 130,636 | |
(a)Historical financial information has been obtained from the Registrant's annual report on Form 10-K for the year ended December 31, 2018.
(b)Removal of the 500 West Monroe Street building's rental and tenant reimbursement income. Rental income for the 500 West Monroe Street building is recognized on a straight-line basis.
(c)Addition of expected property management fee revenue to be earned by managing the 500 West Monroe Street building subsequent to sale of the property to an unrelated, third-party purchaser.
(d)Removal of other property related income, consisting primarily of parking income.
(e)Removal of the 500 West Monroe Street building's operating expenses.
(f)Depreciation expense for the 500 West Monroe Street building is recognized on a straight-line basis using a 40-year life for building assets and using the respective lease terms for tenant allowance assets.
(g)Amortization expense for the 500 West Monroe Street building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.