Piedmont Office Realty Trust (PDM) Q2 2024 earnings summary

Executive summary

• Achieved record leasing activity with over 1 million sq ft leased in Q2 2024, the highest quarterly volume in over a decade, including a major headquarters relocation for Travel + Leisure Co.

• Net loss for Q2 2024 was $9.8 million ($0.08 per share), compared to $2.0 million ($0.02 per share) in Q2 2023, mainly due to higher interest expense and refinancing activities.

• Portfolio comprised 31 in-service projects and 3 redevelopment projects totaling 15.7 million sq ft, with 87.3% leased as of June 30, 2024.

• Leasing success driven by focus on small and medium-sized tenants, high-quality amenities, and sustainability-minded management.

• Portfolio occupancy increased to 87.3% leased, with a backlog of 1.6 million sq ft of leases yet to commence, representing over $50 million in future annualized cash rents.

Financial highlights

• Q2 2024 total revenues were $143.3 million, nearly flat year-over-year; rental and tenant reimbursement revenue decreased by $0.8 million due to asset sale and tenant expirations.

• Core FFO per diluted share was $0.37 for Q2 2024, down from $0.45 in Q2 2023, reflecting higher net interest expense and the impact of asset sales and lease expirations.

• Same-store NOI increased approximately 5.7% on a cash basis and 3.7% on an accrual basis year-over-year.

• Adjusted FFO for Q2 2024 was $27.8 million, down from $44.4 million in Q2 2023.

• AFFO for Q2 2024 was about $28 million, covering the $15 million quarterly dividend and capital needs.

Outlook and guidance

• 2024 annual core FFO guidance narrowed to $1.46-$1.52 per share, with a midpoint of $1.49, reflecting the impact of the recent $400 million bond issuance.

• Guidance for same-store NOI growth raised to 2%-3% for the year, up from flat to 2% previously.

• FFO per share expected to trough in Q3 2024 due to timing of large lease expirations, with improvement anticipated in subsequent quarters.

• Year-end projected lease percentage increased to 87.5%-88.5% based on strong pipeline and low expirations.

• Scheduled lease expirations for the remainder of 2024 represent 3.4% of annualized lease revenue, with some renewals anticipated.