x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 |
Maryland | 58-2328421 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Large Accelerated filer x | Accelerated filer o | ||
Non-Accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | ||
Emerging growth company o |
Page No. | |||
PART I. | Financial Statements | ||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | Other Information | ||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. |
• | Economic, regulatory, and/or socio-economic changes (including accounting standards) that impact the real estate market generally, or that could affect patterns of use of commercial office space; |
• | The impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases; |
• | Changes in the economies and other conditions affecting the office sector in general and specifically the eight markets in which we primarily operate where we have high concentrations of our Annualized Lease Revenue (see definition below); |
• | Lease terminations, lease defaults, or changes in the financial condition of our tenants, particularly by one of our large lead tenants; |
• | The effect on us of adverse market and economic conditions, including any resulting impairment charges on both our long-lived assets or goodwill; |
• | The success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions and divestitures; |
• | The illiquidity of real estate investments, including 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 of properties, many of which risks and uncertainties may not be known at the time of acquisition; |
• | Development and construction delays and resultant increased costs and risks; |
• | Our real estate development strategies may not be successful; |
• | Future acts of terrorism in any of the major metropolitan areas in which we own properties, or future cybersecurity attacks against us or any of our tenants; |
• | Costs of complying with governmental laws and regulations; |
• | Additional risks and costs associated with directly managing properties occupied by government tenants; |
• | Significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock; |
• | The effect of future offerings of debt or equity securities or changes in market interest rates on the value of our common stock; |
• | Uncertainties associated with environmental and other regulatory matters; |
• | Potential changes in political environment and reduction in federal and/or state funding of our governmental tenants; |
• | The effect of any litigation to which we are, or may become, subject; |
• | 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 (the “Code”) or otherwise adversely affect our stockholders; |
• | The future effectiveness of our internal controls and procedures; and |
• | Other factors, including the risk factors discussed under Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2017. |
ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS |
(Unaudited) | |||||||
June 30, 2018 | December 31, 2017 | ||||||
Assets: | |||||||
Real estate assets, at cost: | |||||||
Land | $ | 547,602 | $ | 544,794 | |||
Buildings and improvements, less accumulated depreciation of $831,692 and $785,206 as of June 30, 2018 and December 31, 2017, respectively | 2,409,749 | 2,418,023 | |||||
Intangible lease assets, less accumulated amortization of $79,934 and $99,145 as of June 30, 2018 and December 31, 2017, respectively | 70,271 | 77,805 | |||||
Construction in progress | 17,831 | 11,710 | |||||
Real estate assets held for sale, net | — | 332,410 | |||||
Total real estate assets | 3,045,453 | 3,384,742 | |||||
Amounts due from unconsolidated joint ventures | — | 10 | |||||
Cash and cash equivalents | 8,944 | 7,382 | |||||
Tenant receivables, net of allowance for doubtful accounts of $597 and $539 as of June 30, 2018 and December 31, 2017, respectively | 9,323 | 12,139 | |||||
Straight-line rent receivables | 172,164 | 163,160 | |||||
Note receivable | 3,200 | — | |||||
Restricted cash and escrows | 1,415 | 1,373 | |||||
Prepaid expenses and other assets | 29,180 | 22,517 | |||||
Goodwill | 98,918 | 98,918 | |||||
Interest rate swaps | 2,679 | 688 | |||||
Deferred lease costs, less accumulated amortization of $169,256 and $183,740 as of June 30, 2018 and December 31, 2017, respectively | 252,714 | 261,907 | |||||
Other assets held for sale, net | — | 47,131 | |||||
Total assets | $ | 3,623,990 | $ | 3,999,967 | |||
Liabilities: | |||||||
Unsecured debt, net of discount and unamortized debt issuance costs of $8,144 and $7,689 as of June 30, 2018 and December 31, 2017, respectively | $ | 1,529,856 | $ | 1,535,311 | |||
Secured debt, net of premiums and unamortized debt issuance costs of $795 and $946 as of June 30, 2018 and December 31, 2017, respectively | 190,990 | 191,616 | |||||
Accounts payable, accrued expenses, dividends payable, and accrued capital expenditures | 94,215 | 216,653 | |||||
Deferred income | 25,532 | 29,582 | |||||
Intangible lease liabilities, less accumulated amortization of $54,540 and $55,847 as of June 30, 2018 and December 31, 2017, respectively | 40,341 | 38,458 | |||||
Interest rate swaps | — | 1,478 | |||||
Other liabilities held for sale, net | — | 380 | |||||
Total liabilities | 1,880,934 | 2,013,478 | |||||
Commitments and Contingencies | — | — | |||||
Stockholders’ Equity: | |||||||
Shares-in-trust, 150,000,000 shares authorized; none outstanding as of June 30, 2018 or December 31, 2017 | — | — | |||||
Preferred stock, no par value, 100,000,000 shares authorized; none outstanding as of June 30, 2018 or December 31, 2017 | — | — | |||||
Common stock, $.01 par value, 750,000,000 shares authorized; 128,370,913 and 142,358,940 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 1,284 | 1,424 | |||||
Additional paid-in capital | 3,681,127 | 3,677,360 | |||||
Cumulative distributions in excess of earnings | (1,953,291 | ) | (1,702,281 | ) | |||
Other comprehensive income | 12,141 | 8,164 | |||||
Piedmont stockholders’ equity | 1,741,261 | 1,984,667 | |||||
Noncontrolling interest | 1,795 | 1,822 | |||||
Total stockholders’ equity | 1,743,056 | 1,986,489 | |||||
Total liabilities and stockholders’ equity | $ | 3,623,990 | $ | 3,999,967 |
(Unaudited) | (Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 101,478 | $ | 118,492 | $ | 202,932 | $ | 236,531 | |||||||
Tenant reimbursements | 22,047 | 24,285 | 45,041 | 49,122 | |||||||||||
Property management fee revenue | 382 | 400 | 691 | 925 | |||||||||||
Other property related income | 5,267 | 5,502 | 10,410 | 10,564 | |||||||||||
129,174 | 148,679 | 259,074 | 297,142 | ||||||||||||
Expenses: | |||||||||||||||
Property operating costs | 52,637 | 56,287 | 104,496 | 112,117 | |||||||||||
Depreciation | 27,115 | 30,059 | 54,260 | 60,827 | |||||||||||
Amortization | 15,245 | 19,314 | 31,978 | 39,729 | |||||||||||
General and administrative | 8,258 | 7,528 | 14,810 | 15,678 | |||||||||||
103,255 | 113,188 | 205,544 | 228,351 | ||||||||||||
Real estate operating income | 25,919 | 35,491 | 53,530 | 68,791 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (15,687 | ) | (18,421 | ) | (29,445 | ) | (36,478 | ) | |||||||
Other income/(expense) | 731 | 38 | 1,177 | (62 | ) | ||||||||||
Equity in income of unconsolidated joint ventures | — | 107 | — | 118 | |||||||||||
Loss on extinguishment of debt | — | — | (1,680 | ) | — | ||||||||||
Gain/(loss) on sale of real estate assets, net | (23 | ) | 6,492 | 45,186 | 6,439 | ||||||||||
Net income | 10,940 | 23,707 | 68,768 | 38,808 | |||||||||||
Plus: Net loss applicable to noncontrolling interest | 2 | 3 | 4 | 6 | |||||||||||
Net income applicable to Piedmont | $ | 10,942 | $ | 23,710 | $ | 68,772 | $ | 38,814 | |||||||
Per share information – basic and diluted: | |||||||||||||||
Net income applicable to common stockholders | $ | 0.09 | $ | 0.16 | $ | 0.52 | $ | 0.27 | |||||||
Weighted-average common shares outstanding – basic | 128,346,433 | 145,412,524 | 132,090,741 | 145,350,074 | |||||||||||
Weighted-average common shares outstanding – diluted | 128,700,743 | 145,813,130 | 132,431,642 | 145,779,709 |
(Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Net income applicable to Piedmont | $ | 10,942 | $ | 23,710 | $ | 68,772 | $ | 38,814 | |||||||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||||||
Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges (See Note 6) | 1,747 | (911 | ) | 3,264 | 132 | ||||||||||||||||||||||
Plus: Reclassification of net (gain)/loss included in net income (See Note 6) | (245 | ) | 977 | 807 | 2,283 | ||||||||||||||||||||||
Gain on investment in available for sale securities | — | 15 | — | 28 | |||||||||||||||||||||||
Other comprehensive income | 1,502 | 81 | 4,071 | 2,443 | |||||||||||||||||||||||
Comprehensive income applicable to Piedmont | $ | 12,444 | $ | 23,791 | $ | 72,843 | $ | 41,257 |
Common Stock | Additional Paid-In Capital | Cumulative Distributions in Excess of Earnings | Other Comprehensive Income/(Loss) | Non- controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balance, December 31, 2016 | 145,235 | $ | 1,452 | $ | 3,673,128 | $ | (1,580,863 | ) | $ | 2,104 | $ | 1,882 | $ | 2,097,703 | ||||||||||||
Share repurchases as part of an announced plan | (3,133 | ) | (31 | ) | — | (61,719 | ) | — | — | (61,750 | ) | |||||||||||||||
Offering costs | — | — | (182 | ) | — | — | — | (182 | ) | |||||||||||||||||
Dividends to common stockholders ($1.34 per share), stockholders of subsidiaries, and dividends reinvested | — | — | (233 | ) | (193,263 | ) | — | (45 | ) | (193,541 | ) | |||||||||||||||
Shares issued and amortized under the 2007 Omnibus Incentive Plan, net of tax | 257 | 3 | 4,647 | — | — | — | 4,650 | |||||||||||||||||||
Net loss applicable to noncontrolling interest | — | — | — | — | — | (15 | ) | (15 | ) | |||||||||||||||||
Net income applicable to Piedmont | — | — | — | 133,564 | — | — | 133,564 | |||||||||||||||||||
Other comprehensive income | — | — | — | — | 6,060 | — | 6,060 | |||||||||||||||||||
Balance, December 31, 2017 | 142,359 | 1,424 | 3,677,360 | (1,702,281 | ) | 8,164 | 1,822 | 1,986,489 | ||||||||||||||||||
Cumulative effect of accounting change (adoption of ASU 2016-01) | — | — | — | 94 | (94 | ) | — | — | ||||||||||||||||||
Share repurchases as part of an announced plan | (14,343 | ) | (143 | ) | — | (264,642 | ) | — | — | (264,785 | ) | |||||||||||||||
Dividends to common stockholders ($0.42 per share), stockholders of subsidiaries, and dividends reinvested | — | — | (51 | ) | (55,234 | ) | — | (23 | ) | (55,308 | ) | |||||||||||||||
Shares issued and amortized under the 2007 Omnibus Incentive Plan, net of tax | 355 | 3 | 3,818 | — | — | — | 3,821 | |||||||||||||||||||
Net loss applicable to noncontrolling interest | — | — | — | — | — | (4 | ) | (4 | ) | |||||||||||||||||
Net income applicable to Piedmont | — | — | — | 68,772 | — | — | 68,772 | |||||||||||||||||||
Other comprehensive income | — | — | — | — | 4,071 | — | 4,071 | |||||||||||||||||||
Balance, June 30, 2018 | 128,371 | $ | 1,284 | $ | 3,681,127 | $ | (1,953,291 | ) | $ | 12,141 | $ | 1,795 | $ | 1,743,056 |
(Unaudited) | |||||||
Six Months Ended | |||||||
June 30, | |||||||
2018 | 2017 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | 68,768 | $ | 38,808 | |||
Operating distributions received from unconsolidated joint ventures | 10 | — | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 54,260 | 60,827 | |||||
Amortization of debt issuance costs and net settlement of interest rate swaps | (207 | ) | 810 | ||||
Other amortization | 29,061 | 39,034 | |||||
Loss on extinguishment of debt | 1,665 | — | |||||
Stock compensation expense | 5,004 | 5,403 | |||||
Equity in income of unconsolidated joint ventures | — | (118 | ) | ||||
Gain on sale of real estate assets, net | (45,186 | ) | (6,439 | ) | |||
Changes in assets and liabilities: | |||||||
Increase in tenant and straight-line rent receivables, net | (6,974 | ) | (13,078 | ) | |||
Increase in prepaid expenses and other assets | (6,452 | ) | (6,908 | ) | |||
Cash received upon settlement of interest rate swaps | 807 | — | |||||
Decrease in accounts payable and accrued expenses | (13,672 | ) | (5,471 | ) | |||
Decrease in deferred income | (3,839 | ) | (1,128 | ) | |||
Net cash provided by operating activities | 83,245 | 111,740 | |||||
Cash Flows from Investing Activities: | |||||||
Acquisition of real estate assets, related intangibles, and cash held in escrow for acquisitions | (28,176 | ) | — | ||||
Capitalized expenditures, net of accruals | (26,476 | ) | (58,320 | ) | |||
Net sales proceeds from wholly-owned properties | 419,557 | 23,023 | |||||
Investments in unconsolidated joint ventures | — | (284 | ) | ||||
Note receivable issuance | (3,200 | ) | — | ||||
Deferred lease costs paid | (10,219 | ) | (9,563 | ) | |||
Net cash provided by/(used in) investing activities | 351,486 | (45,144 | ) | ||||
Cash Flows from Financing Activities: | |||||||
Debt issuance costs paid | (248 | ) | (102 | ) | |||
Proceeds from debt | 773,225 | 147,000 | |||||
Repayments of debt | (780,721 | ) | (115,694 | ) | |||
Costs of issuance of common stock | — | (74 | ) | ||||
Shares withheld for payment of taxes related to employee stock compensation | (2,213 | ) | (3,380 | ) | |||
Repurchases of common stock as part of announced plan | (266,062 | ) | — | ||||
Dividends paid and discount on dividend reinvestments | (157,108 | ) | (91,664 | ) | |||
Net cash used in financing activities | (433,127 | ) | (63,914 | ) | |||
Net increase in cash, cash equivalents, and restricted cash and escrows | 1,604 | 2,682 | |||||
Cash, cash equivalents, and restricted cash and escrows, beginning of period | 8,755 | 8,204 | |||||
Cash, cash equivalents, and restricted cash and escrows, end of period | $ | 10,359 | $ | 10,886 |
(After Adoption of Revenue Recognition Amendments) | |||||||
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | ||||||
Rental income | $ | 101,478 | $ | 118,492 | |||
Tenant reimbursements | 22,047 | 24,285 | |||||
Property management fee revenue | 382 | 400 | |||||
Other property related income | 5,267 | 5,502 | |||||
Total revenues | $ | 129,174 | $ | 148,679 |
Property | Metropolitan Statistical Area | Date of Acquisition | Ownership Percentage Acquired | Rentable Square Feet | Percentage Leased as of Acquisition | Net Contractual Purchase Price (in millions) | |||||||||||
501 West Church Street | Orlando, Florida | February 23, 2018 | 100 | % | 182,461 | 100 | % | $ | 28.0 |
Facility (1) | Stated Rate | Effective Rate (2) | Maturity | Amount Outstanding as of | ||||||||||||
June 30, 2018 | December 31, 2017 | |||||||||||||||
Secured (Fixed) | ||||||||||||||||
$35 Million Fixed-Rate Loan (3) | 5.55 | % | 3.75 | % | 9/1/2021 | $ | 30,195 | $ | 30,670 | |||||||
$160 Million Fixed-Rate Loan (4) | 3.48 | % | 3.58 | % | 7/5/2022 | 160,000 | 160,000 | |||||||||
Net premium and unamortized debt issuance costs | 795 | 946 | ||||||||||||||
Subtotal/Weighted Average (5) | 3.81 | % | 190,990 | 191,616 | ||||||||||||
Unsecured (Variable and Fixed) | ||||||||||||||||
$170 Million Unsecured 2015 Term Loan | LIBOR + 1.125% | 2.54 | % | 5/15/2018 | — | 170,000 | ||||||||||
$300 Million Unsecured 2013 Term Loan | LIBOR + 1.20% | 2.78 | % | (7) | 1/31/2019 | — | 300,000 | |||||||||
$500 Million Unsecured 2015 Line of Credit (6) | LIBOR + 1.00% | 3.08 | % | 6/18/2019 | (8) | 238,000 | 23,000 | |||||||||
$300 Million Unsecured 2011 Term Loan | LIBOR + 1.15% | 3.35 | % | (7) | 1/15/2020 | 300,000 | 300,000 | |||||||||
$350 Million Senior Notes | 3.40 | % | 3.43 | % | 6/01/2023 | 350,000 | 350,000 | |||||||||
$400 Million Senior Notes | 4.45 | % | 4.10 | % | 3/15/2024 | 400,000 | 400,000 | |||||||||
$250 Million Unsecured 2018 Term Loan | LIBOR + 1.60% | 3.95 | % | (9) | 3/31/2025 | 250,000 | — | |||||||||
Discounts and unamortized debt issuance costs | (8,144) | (7,689) | ||||||||||||||
Subtotal/Weighted Average (5) | 3.70 | % | 1,529,856 | 1,535,311 | ||||||||||||
Total/Weighted Average (5) | 3.71 | % | $ | 1,720,846 | $ | 1,726,927 |
(1) | Other than the $35 Million Fixed-Rate Loan, all of Piedmont’s outstanding debt as of June 30, 2018 and December 31, 2017 is interest-only. |
(2) | Effective rate after consideration of settled or in-place interest rate swap agreements, issuance premiums/discounts, and/or fair market value adjustments upon assumption of debt. |
(3) | Collateralized by the 5 Wall Street building in Burlington, Massachusetts. |
(4) | Collateralized by the 1901 Market Street building in Philadelphia, Pennsylvania. |
(5) | Weighted average is based on contractual balance of outstanding debt and the stated or effectively fixed interest rates as of June 30, 2018. |
(6) | On a periodic basis, Piedmont may select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating. |
(7) | The facility has a stated variable rate; however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes in Piedmont's credit rating, the rate to that shown as the effective rate. |
(8) | Piedmont may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of June 18, 2020) provided Piedmont is not then in default and upon payment of extension fees. |
(9) | The facility has a stated variable rate; however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, $150 million of the principal balance to 4.11% through March 29, 2020, and $100 million of the principal balance to 4.21% from March 30, 2020 through the maturity date of the loan. For the remaining variable portion of the loan, Piedmont may periodically select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating. The rate presented is the weighted-average rate for the effectively fixed and variable portions of the debt outstanding as of June 30, 2018. |
Piedmont's % | Net Carrying Amount as of | Net Carrying Amount as of | ||||||||||||
Entity | Ownership of Entity | Related Building | June 30, 2018 | December 31, 2017 | Primary Beneficiary Considerations | |||||||||
1201 Eye Street N.W. Associates, LLC | 98.6% | 1201 Eye Street | $ | 87.5 | $ | 81.1 | In accordance with the partnership’s governing documents, Piedmont currently receives 100% of the cash flow of the entity and has sole discretion in directing the management and leasing activities of the building. | |||||||
1225 Eye Street N.W. Associates, LLC | 98.1% | 1225 Eye Street | $ | 64.5 | $ | 65.2 | In accordance with the partnership’s governing documents, Piedmont currently receives 100% of the cash flow of the entity and has sole discretion in directing the management and leasing activities of the building. | |||||||
Piedmont 500 W. Monroe Fee, LLC | 100% | 500 W. Monroe | $ | 256.5 | $ | 263.2 | The Omnibus Agreement with the previous owner includes equity participation rights upon sale of the property for the previous owner, if certain financial returns are achieved; however, Piedmont has sole decision making authority and is entitled to 100% of the economic benefits of the property until such returns are met. |
Interest Rate Derivatives: | Number of Swap Agreements | Associated Debt Instrument | Total Notional Amount (in millions) | Effective Date | Maturity Date | |||||||
Interest rate swaps | 3 | $300 Million Unsecured 2011 Term Loan | $ | 300 | 11/22/2016 | 1/15/2020 | ||||||
Interest rate swaps | 2 | $250 Million Unsecured 2018 Term Loan | $ | 100 | 3/29/2018 | 3/31/2025 | ||||||
Interest rate swaps | 1 | $250 Million Unsecured 2018 Term Loan | $ | 50 | 3/29/2018 | 3/29/2020 | ||||||
Total | $ | 450 |
Interest rate swaps classified as: | June 30, 2018 | December 31, 2017 | |||||
Gross derivative assets | $ | 2,679 | $ | 688 | |||
Gross derivative liabilities | — | (1,478 | ) | ||||
Net derivative asset/(liability) | $ | 2,679 | $ | (790 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
Interest Rate Swaps in Cash Flow Hedging Relationships | June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||
Amount of gain/(loss) recognized in OCI | $ | 1,747 | $ | (911 | ) | $ | 3,264 | $ | 132 | ||||||
Amount of previously recorded gain/(loss) reclassified from OCI into Interest Expense | $ | 245 | $ | (977 | ) | $ | 451 | $ | (2,283 | ) | |||||
Amount of gain/(loss) recognized on derivatives reclassified from OCI into Loss on Extinguishment of Debt | $ | — | $ | — | $ | (1,258 | ) | $ | — | ||||||
Total amount of Interest Expense presented in the consolidated statements of income | $ | 15,687 | $ | 18,421 | $ | 29,445 | $ | 36,478 | |||||||
Total amount of Loss on Extinguishment of Debt presented in the consolidated statements of income (1) | $ | — | $ | — | $ | 1,680 | $ | — |
(1) | Includes the write-off of approximately $0.4 million of discounts and unamortized debt issuance costs associated with the repayment of debt (see Note 4). |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||
Financial Instrument | Carrying Value | Estimated Fair Value | Level Within Fair Value Hierarchy | Carrying Value | Estimated Fair Value | Level Within Fair Value Hierarchy | |||||||||||||
Assets: | |||||||||||||||||||
Cash and cash equivalents(1) | $ | 8,944 | $ | 8,944 | Level 1 | $ | 7,382 | $ | 7,382 | Level 1 | |||||||||
Tenant receivables, net(1) | $ | 9,323 | $ | 9,323 | Level 1 | $ | 12,139 | $ | 12,139 | Level 1 | |||||||||
Notes receivable (1) | $ | 3,200 | $ | 3,200 | Level 1 | $ | — | $ | — | Level 1 | |||||||||
Restricted cash and escrows(1) | $ | 1,415 | $ | 1,415 | Level 1 | $ | 1,373 | $ | 1,373 | Level 1 | |||||||||
Interest rate swaps | $ | 2,679 | $ | 2,679 | Level 2 | $ | 688 | $ | 688 | Level 2 | |||||||||
Liabilities: | |||||||||||||||||||
Accounts payable and accrued expenses(1) | $ | 11,000 | $ | 11,000 | Level 1 | $ | 126,429 | $ | 126,429 | Level 1 | |||||||||
Interest rate swaps | $ | — | $ | — | Level 2 | $ | 1,478 | $ | 1,478 | Level 2 | |||||||||
Debt, net | $ | 1,720,846 | $ | 1,725,912 | Level 2 | $ | 1,726,927 | $ | 1,759,905 | Level 2 |
(1) | For the periods presented, the carrying value of these financial instruments approximates estimated fair value due to their short-term maturity. |
June 30, 2018 | December 31, 2017 | |||||||
Real estate assets held for sale, net: | ||||||||
Land | $ | — | $ | 74,498 | ||||
Building and improvements, less accumulated depreciation of $0 and $169,116 as of June 30, 2018 and December 31, 2017, respectively | — | 255,634 | ||||||
Construction in progress | — | 2,278 | ||||||
Total real estate assets held for sale, net | $ | — | $ | 332,410 | ||||
Other assets held for sale, net: | ||||||||
Straight-line rent receivables | $ | — | $ | 25,975 | ||||
Prepaid expenses and other assets | — | 328 | ||||||
Deferred lease costs, less accumulated amortization of $0 and $16,549 as of June 30, 2018 and December 31, 2017, respectively | — | 20,828 | ||||||
Total other assets held for sale, net | $ | — | $ | 47,131 | ||||
Other liabilities held for sale, net: | ||||||||
Intangible lease liabilities, less accumulated amortization of $0 and $935 as of June 30, 2018 and December 31, 2017, respectively | $ | — | $ | 380 |
Shares | Weighted-Average Grant Date Fair Value | |||||
Unvested and Potential Stock Awards as of December 31, 2017 | 868,437 | $ | 21.69 | |||
Deferred Stock Awards Granted | 354,236 | $ | 17.84 | |||
Increase in Estimated Potential Share Award | 379,249 | $ | 23.80 | |||
Performance Stock Awards Vested | (161,005 | ) | $ | 18.47 | ||
Deferred Stock Awards Vested | (331,195 | ) | $ | 19.21 | ||
Deferred Stock Awards Forfeited | (6,515 | ) | $ | 19.98 | ||
Unvested and Potential Stock Awards as of June 30, 2018 | 1,103,207 | $ | 22.42 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||
Weighted-Average Grant Date Fair Value of Deferred Stock Granted During the Period | $ | 17.84 | $ | 21.38 | $ | 17.84 | $ | 21.38 | |||||||
Total Grant Date Fair Value of Deferred Stock Vested During the Period | $ | 5,639 | $ | 5,551 | $ | 6,363 | $ | 5,841 | |||||||
Share-based Liability Awards Paid During the Period(1) | $ | — | $ | — | $ | 2,947 | $ | 2,877 |
(1) | Amounts reflect the issuance of performance share awards related to the 2014-16 and 2015-17 Performance Share Plans during the six months ended June 30, 2018 and 2017, respectively. |
Date of grant | Type of Award | Net Shares Granted (1) | Grant Date Fair Value | Vesting Schedule | Unvested Shares | ||||||||||
January 3, 2014 | Deferred Stock Award | 72,969 | $ | 16.45 | Of the shares granted, 20% vested or will vest on January 3, 2015, 2016, 2017, 2018, and 2019, respectively. | 16,416 | |||||||||
May 24, 2016 | Deferred Stock Award | 208,055 | $ | 19.91 | Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 24, 2017, 2018, and 2019, respectively. | 60,975 | |||||||||
May 24, 2016 | Fiscal Year 2016-2018 Performance Share Program | — | $ | 23.02 | Shares awarded, if any, will vest immediately upon determination of award in 2019. | 119,371 | (2) | ||||||||
May 18, 2017 | Deferred Stock Award | 219,947 | $ | 21.38 | Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 18, 2018, 2019, and 2020, respectively. | 124,281 | |||||||||
May 18, 2017 | Fiscal Year 2017-2019 Performance Share Program | — | $ | 30.45 | Shares awarded, if any, will vest immediately upon determination of award in 2020. | 143,335 | (2) | ||||||||
May 17, 2018 | Deferred Stock Award-Board of Directors | 31,388 | $ | 17.84 | Of the shares granted, 100% will vest by May 17, 2019. | 31,388 | |||||||||
May 17, 2018 | Deferred Stock Award | 302,865 | $ | 17.84 | Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 17, 2019, 2020, and 2021, respectively. | 241,409 | |||||||||
May 17, 2018 | Fiscal Year 2018-2020 Performance Share Program | — | $ | 23.52 | Shares awarded, if any, will vest immediately upon determination of award in 2021. | 366,032 | (2) | ||||||||
Total | 1,103,207 |
(1) | Amounts reflect the total grant to employees and independent directors, net of shares surrendered upon vesting to satisfy required minimum tax withholding obligations through June 30, 2018. |
(2) | Estimated based on Piedmont's cumulative TSR for the respective performance period through June 30, 2018. Share estimates are subject to change in future periods based upon Piedmont's relative performance compared to its peers' total stockholder return. |
Six Months Ended | |||||||
June 30, 2018 | June 30, 2017 | ||||||
Accrued capital expenditures and deferred lease costs | $ | 8,920 | $ | 9,417 | |||
Change in accrued dividends and discount on dividend reinvestments | $ | (101,800 | ) | $ | (30,532 | ) | |
Change in accrued share repurchases as part of an announced plan | $ | (1,277 | ) | $ | — |
Six Months Ended | ||||||||
June 30, 2018 | June 30, 2017 | |||||||
Cash and cash equivalents, beginning of period | $ | 7,382 | $ | 6,992 | ||||
Restricted cash and escrows, beginning of period | 1,373 | 1,212 | ||||||
Total cash, cash equivalents, and restricted cash and escrows shown in the consolidated statement of cash flows, beginning of period | $ | 8,755 | $ | 8,204 | ||||
Cash and cash equivalents, end of period | $ | 8,944 | $ | 9,596 | ||||
Restricted cash and escrows, end of period | 1,415 | 1,290 | ||||||
Total cash, cash equivalents, and restricted cash and escrows shown in the consolidated statement of cash flows, end of period | $ | 10,359 | $ | 10,886 |
Three Months Ended | Six Months Ended | ||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||
Weighted-average common shares – basic | 128,346 | 145,413 | 132,091 | 145,350 | |||
Plus: Incremental weighted-average shares from time-vested deferred and performance stock awards | 355 | 400 | 341 | 430 | |||
Weighted-average common shares – diluted | 128,701 | 145,813 | 132,432 | 145,780 | |||
Common stock issued and outstanding as of period end | 128,371 | 145,490 |
Condensed Consolidating Balance Sheets | |||||||||||||||||||
As of June 30, 2018 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Piedmont (Consolidated) | ||||||||||||||
Assets: | |||||||||||||||||||
Real estate assets, at cost: | |||||||||||||||||||
Land | $ | — | $ | 36,094 | $ | 511,508 | $ | — | $ | 547,602 | |||||||||
Buildings and improvements, less accumulated depreciation | — | 176,704 | 2,233,345 | (300 | ) | 2,409,749 | |||||||||||||
Intangible lease assets, less accumulated amortization | — | — | 70,271 | — | 70,271 | ||||||||||||||
Construction in progress | — | 408 | 17,423 | — | 17,831 | ||||||||||||||
Total real estate assets | — | 213,206 | 2,832,547 | (300 | ) | 3,045,453 | |||||||||||||
Cash and cash equivalents | 150 | 5,311 | 3,483 | — | 8,944 | ||||||||||||||
Tenant and straight-line rent receivables, net | — | 15,467 | 166,020 | — | 181,487 | ||||||||||||||
Investment in subsidiaries | 1,743,439 | 2,803,136 | 169 | (4,546,744 | ) | — | |||||||||||||
Notes receivable | — | 810 | 147,700 | (145,310 | ) | 3,200 | |||||||||||||
Prepaid expenses, restricted cash, escrows, interest rate swaps, and other assets | 77 | 7,020 | 26,205 | (28 | ) | 33,274 | |||||||||||||
Goodwill | — | 98,918 | — | — | 98,918 | ||||||||||||||
Deferred lease costs, net | — | 15,530 | 237,184 | — | 252,714 | ||||||||||||||
Total assets | $ | 1,743,666 | $ | 3,159,398 | $ | 3,413,308 | $ | (4,692,382 | ) | $ | 3,623,990 | ||||||||
Liabilities: | |||||||||||||||||||
Debt, net | $ | — | $ | 1,529,792 | $ | 336,364 | $ | (145,310 | ) | $ | 1,720,846 | ||||||||
Accounts payable, accrued expenses, and accrued capital expenditures | 610 | 15,012 | 78,621 | (28 | ) | 94,215 | |||||||||||||
Deferred income | — | 2,185 | 23,347 | — | 25,532 | ||||||||||||||
Intangible lease liabilities, net | — | — | 40,341 | — | 40,341 | ||||||||||||||
Total liabilities | 610 | 1,546,989 | 478,673 | (145,338 | ) | 1,880,934 | |||||||||||||
Equity: | |||||||||||||||||||
Total stockholders’ equity | 1,743,056 | 1,612,409 | 2,934,635 | (4,547,044 | ) | 1,743,056 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 1,743,666 | $ | 3,159,398 | $ | 3,413,308 | $ | (4,692,382 | ) | $ | 3,623,990 |
Condensed Consolidating Balance Sheets | |||||||||||||||||||
As of December 31, 2017 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Piedmont (Consolidated) | ||||||||||||||
Assets: | |||||||||||||||||||
Real estate assets, at cost: | |||||||||||||||||||
Land | $ | — | $ | 36,094 | $ | 508,700 | $ | — | $ | 544,794 | |||||||||
Buildings and improvements, less accumulated depreciation | — | 180,886 | 2,237,437 | (300 | ) | 2,418,023 | |||||||||||||
Intangible lease assets, less accumulated amortization | — | 181 | 77,624 | — | 77,805 | ||||||||||||||
Construction in progress | — | 85 | 11,625 | — | 11,710 | ||||||||||||||
Real estate assets held for sale, net | — | 32,815 | 299,595 | — | 332,410 | ||||||||||||||
Total real estate assets | — | 250,061 | 3,134,981 | (300 | ) | 3,384,742 | |||||||||||||
Cash and cash equivalents | 150 | 3,890 | 3,342 | — | 7,382 | ||||||||||||||
Tenant and straight-line rent receivables, net, and amounts due from unconsolidated joint ventures | — | 16,891 | 158,418 | — | 175,309 | ||||||||||||||
Advances to affiliates | 1,674,276 | 6,297,632 | — | (7,971,908 | ) | — | |||||||||||||
Investment in subsidiary | 3,437,299 | — | 172 | (3,437,471 | ) | — | |||||||||||||
Notes receivable | — | 88,810 | 144,500 | (233,310 | ) | — | |||||||||||||
Prepaid expenses, restricted cash, escrows, interest rate swaps and other assets | 2 | 5,094 | 20,222 | (740 | ) | 24,578 | |||||||||||||
Goodwill | — | 98,918 | — | — | 98,918 | ||||||||||||||
Deferred lease costs, net | — | 16,611 | 245,296 | — | 261,907 | ||||||||||||||
Other assets held for sale, net | — | 2,266 | 44,865 | — | 47,131 | ||||||||||||||
Total assets | $ | 5,111,727 | $ | 6,780,173 | $ | 3,751,796 | $ | (11,643,729 | ) | $ | 3,999,967 | ||||||||
Liabilities: | |||||||||||||||||||
Debt, net | $ | — | $ | 1,535,239 | $ | 424,998 | $ | (233,310 | ) | $ | 1,726,927 | ||||||||
Accounts payable, accrued expenses, dividends payable, and accrued capital expenditures | 104,028 | 20,279 | 93,086 | (740 | ) | 216,653 | |||||||||||||
Advances from affiliates | 5,277,957 | 941,494 | 1,850,712 | (8,070,163 | ) | — | |||||||||||||
Deferred income | — | 3,631 | 25,951 | — | 29,582 | ||||||||||||||
Intangible lease liabilities, net | — | — | 38,458 | — | 38,458 | ||||||||||||||
Interest rate swaps | — | 1,478 | — | — | 1,478 | ||||||||||||||
Liabilities held for sale, net | — | — | 380 | — | 380 | ||||||||||||||
Total liabilities | 5,381,985 | 2,502,121 | 2,433,585 | (8,304,213 | ) | 2,013,478 | |||||||||||||
Equity: | |||||||||||||||||||
Total stockholders’ equity | (270,258 | ) | 4,278,052 | 1,318,211 | (3,339,516 | ) | 1,986,489 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 5,111,727 | $ | 6,780,173 | $ | 3,751,796 | $ | (11,643,729 | ) | $ | 3,999,967 |
Consolidating Statements of Income | |||||||||||||||||||
For the three months ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||
Revenues: | |||||||||||||||||||
Rental income | $ | — | $ | 9,238 | $ | 92,723 | $ | (483 | ) | $ | 101,478 | ||||||||
Tenant reimbursements | — | 2,195 | 19,961 | (109 | ) | 22,047 | |||||||||||||
Property management fee revenue | — | — | 4,147 | (3,765 | ) | 382 | |||||||||||||
Other property related income | — | 29 | 5,238 | — | 5,267 | ||||||||||||||
— | 11,462 | 122,069 | (4,357 | ) | 129,174 | ||||||||||||||
Expenses: | |||||||||||||||||||
Property operating costs | — | 4,927 | 52,067 | (4,357 | ) | 52,637 | |||||||||||||
Depreciation | — | 2,846 | 24,269 | — | 27,115 | ||||||||||||||
Amortization | — | 463 | 14,782 | — | 15,245 | ||||||||||||||
General and administrative | 86 | 1,539 | 6,633 | — | 8,258 | ||||||||||||||
86 | 9,775 | 97,751 | (4,357 | ) | 103,255 | ||||||||||||||
Real estate operating income/(loss) | (86 | ) | 1,687 | 24,318 | — | 25,919 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | — | (13,953 | ) | (3,614 | ) | 1,880 | (15,687 | ) | |||||||||||
Other income/(expense) | — | 36 | 2,575 | (1,880 | ) | 731 | |||||||||||||
Loss on sale of real estate assets, net | — | (13 | ) | (10 | ) | — | (23 | ) | |||||||||||
— | (13,930 | ) | (1,049 | ) | — | (14,979 | ) | ||||||||||||
Income/(loss) before consolidated subsidiaries | (86 | ) | (12,243 | ) | 23,269 | — | 10,940 | ||||||||||||
Income from subsidiaries | 11,028 | 24,557 | — | (35,585 | ) | — | |||||||||||||
Net income | 10,942 | 12,314 | 23,269 | (35,585 | ) | 10,940 | |||||||||||||
Plus: Net loss applicable to noncontrolling interest | — | — | 2 | — | 2 | ||||||||||||||
Net income applicable to Piedmont | $ | 10,942 | $ | 12,314 | $ | 23,271 | $ | (35,585 | ) | $ | 10,942 |
Consolidating Statements of Income | |||||||||||||||||||
For the three months ended June 30, 2017 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||
Revenues: | |||||||||||||||||||
Rental income | $ | — | $ | 11,068 | $ | 107,909 | $ | (485 | ) | $ | 118,492 | ||||||||
Tenant reimbursements | — | 2,966 | 21,446 | (127 | ) | 24,285 | |||||||||||||
Property management fee revenue | — | — | 4,590 | (4,190 | ) | 400 | |||||||||||||
Other property related income | — | 22 | 5,480 | — | 5,502 | ||||||||||||||
— | 14,056 | 139,425 | (4,802 | ) | 148,679 | ||||||||||||||
Expenses: | |||||||||||||||||||
Property operating costs | — | 5,853 | 55,236 | (4,802 | ) | 56,287 | |||||||||||||
Depreciation | — | 3,281 | 26,778 | — | 30,059 | ||||||||||||||
Amortization | — | 803 | 18,511 | — | 19,314 | ||||||||||||||
General and administrative | 81 | 1,528 | 5,919 | — | 7,528 | ||||||||||||||
81 | 11,465 | 106,444 | (4,802 | ) | 113,188 | ||||||||||||||
Real estate operating income/(loss) | (81 | ) | 2,591 | 32,981 | — | 35,491 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | — | (14,810 | ) | (7,262 | ) | 3,651 | (18,421 | ) | |||||||||||
Other income/(expense) | — | 2,240 | 1,449 | (3,651 | ) | 38 | |||||||||||||
Equity in income of unconsolidated joint ventures | — | 107 | — | — | 107 | ||||||||||||||
Gain/(loss) on sale of real estate assets, net | — | 6,495 | (3 | ) | — | 6,492 | |||||||||||||
Net income/(loss) | (81 | ) | (3,377 | ) | 27,165 | — | 23,707 | ||||||||||||
Plus: Net loss applicable to noncontrolling interest | — | — | 3 | — | 3 | ||||||||||||||
Net income/(loss) applicable to Piedmont | $ | (81 | ) | $ | (3,377 | ) | $ | 27,168 | $ | — | $ | 23,710 |
Consolidating Statements of Income | |||||||||||||||||||
For the six months ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||
Revenues: | |||||||||||||||||||
Rental income | $ | — | $ | 18,052 | $ | 185,794 | $ | (914 | ) | $ | 202,932 | ||||||||
Tenant reimbursements | — | 4,840 | 40,395 | (194 | ) | 45,041 | |||||||||||||
Property management fee revenue | — | — | 8,328 | (7,637 | ) | 691 | |||||||||||||
Other property related income | — | 57 | 10,353 | — | 10,410 | ||||||||||||||
— | 22,949 | 244,870 | (8,745 | ) | 259,074 | ||||||||||||||
Expenses: | |||||||||||||||||||
Property operating costs | — | 9,641 | 103,600 | (8,745 | ) | 104,496 | |||||||||||||
Depreciation | — | 5,710 | 48,550 | — | 54,260 | ||||||||||||||
Amortization | — | 1,074 | 30,904 | — | 31,978 | ||||||||||||||
General and administrative | 186 | 3,425 | 11,199 | — | 14,810 | ||||||||||||||
186 | 19,850 | 194,253 | (8,745 | ) | 205,544 | ||||||||||||||
Real estate operating income/(loss) | (186 | ) | 3,099 | 50,617 | — | 53,530 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | — | (25,975 | ) | (7,312 | ) | 3,842 | (29,445 | ) | |||||||||||
Other income/(expense) | — | 160 | 4,859 | (3,842 | ) | 1,177 | |||||||||||||
Loss on extinguishment of debt | — | (1,680 | ) | — | — | (1,680 | ) | ||||||||||||
Gain on sale of real estate assets, net | — | 1,417 | 43,769 | — | 45,186 | ||||||||||||||
— | (26,078 | ) | 41,316 | — | 15,238 | ||||||||||||||
Income/(loss) before consolidated subsidiaries | (186 | ) | (22,979 | ) | 91,933 | — | 68,768 | ||||||||||||
Income from subsidiaries | 68,958 | 92,226 | — | (161,184 | ) | — | |||||||||||||
Net income | 68,772 | 69,247 | 91,933 | (161,184 | ) | 68,768 | |||||||||||||
Plus: Net loss applicable to noncontrolling interest | — | — | 4 | — | 4 | ||||||||||||||
Net income applicable to Piedmont | $ | 68,772 | $ | 69,247 | $ | 91,937 | $ | (161,184 | ) | $ | 68,772 |
Consolidating Statements of Income | |||||||||||||||||||
For the six months ended June 30, 2017 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||
Revenues: | |||||||||||||||||||
Rental income | $ | — | $ | 22,456 | $ | 215,019 | $ | (944 | ) | $ | 236,531 | ||||||||
Tenant reimbursements | — | 5,971 | 43,381 | (230 | ) | 49,122 | |||||||||||||
Property management fee revenue | — | — | 9,226 | (8,301 | ) | 925 | |||||||||||||
Other property related income | — | 54 | 10,510 | — | 10,564 | ||||||||||||||
— | 28,481 | 278,136 | (9,475 | ) | 297,142 | ||||||||||||||
Expenses: | |||||||||||||||||||
Property operating costs | — | 11,655 | 109,937 | (9,475 | ) | 112,117 | |||||||||||||
Depreciation | — | 6,744 | 54,083 | — | 60,827 | ||||||||||||||
Amortization | — | 1,659 | 38,070 | — | 39,729 | ||||||||||||||
General and administrative | 183 | 3,231 | 12,264 | — | 15,678 | ||||||||||||||
183 | 23,289 | 214,354 | (9,475 | ) | 228,351 | ||||||||||||||
Real estate operating income/(loss) | (183 | ) | 5,192 | 63,782 | — | 68,791 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | — | (29,254 | ) | (14,514 | ) | 7,290 | (36,478 | ) | |||||||||||
Other income/(expense) | — | 4,469 | 2,759 | (7,290 | ) | (62 | ) | ||||||||||||
Equity in income of unconsolidated joint ventures | — | 118 | — | — | 118 | ||||||||||||||
Gain on sale of real estate assets, net | — | 6,434 | 5 | — | 6,439 | ||||||||||||||
Net income/(loss) | (183 | ) | (13,041 | ) | 52,032 | — | 38,808 | ||||||||||||
Plus: Net loss applicable to noncontrolling interest | — | — | 6 | — | 6 | ||||||||||||||
Net income/(loss) applicable to Piedmont | $ | (183 | ) | $ | (13,041 | ) | $ | 52,038 | $ | — | $ | 38,814 |
Consolidating Statements of Comprehensive Income | |||||||||||||||||||
For the Three Months Ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Piedmont (Consolidated) | ||||||||||||||
Net income | $ | 10,942 | $ | 12,314 | $ | 23,271 | $ | (35,585 | ) | $ | 10,942 | ||||||||
Effective portion of gain on derivative instruments that are designated and qualify as cash flow hedges | 1,747 | 1,747 | — | (1,747 | ) | 1,747 | |||||||||||||
Plus: Reclassification of gain included in net income | (245 | ) | (245 | ) | — | 245 | (245 | ) | |||||||||||
Other comprehensive income | 1,502 | 1,502 | — | (1,502 | ) | 1,502 | |||||||||||||
Comprehensive income | $ | 12,444 | $ | 13,816 | $ | 23,271 | $ | (37,087 | ) | $ | 12,444 |
Consolidating Statements of Comprehensive Income | |||||||||||||||||||
For the Six Months Ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Piedmont (Consolidated) | ||||||||||||||
Net income | $ | 68,772 | $ | 69,247 | $ | 91,937 | $ | (161,184 | ) | $ | 68,772 | ||||||||
Effective portion of gain on derivatives instruments that are designated and qualify as cash flow hedges | 3,264 | 3,264 | — | (3,264 | ) | 3,264 | |||||||||||||
Plus: Reclassification of net loss included in net income | 807 | 807 | — | (807 | ) | 807 | |||||||||||||
Other comprehensive income | 4,071 | 4,071 | — | (4,071 | ) | 4,071 | |||||||||||||
Comprehensive income | $ | 72,843 | $ | 73,318 | $ | 91,937 | $ | (165,255 | ) | $ | 72,843 |
Condensed Consolidating Statements of Cash Flows | |||||||||||||||||||
For the six months ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Piedmont (Consolidated) | ||||||||||||||
Net Cash Provided by Operating Activities | $ | 71,842 | $ | 73,022 | $ | 99,557 | $ | (161,176 | ) | $ | 83,245 | ||||||||
Cash Flows from Investing Activities: | |||||||||||||||||||
Investment in real estate assets and real estate related intangibles, net of accruals | — | (3,159 | ) | (51,493 | ) | — | (54,652 | ) | |||||||||||
Intercompany note receivable | — | 88,000 | — | (88,000 | ) | — | |||||||||||||
Net sales proceeds from wholly-owned properties | — | 36,572 | 382,985 | — | 419,557 | ||||||||||||||
Note receivable issuance | — | — | (3,200 | ) | — | (3,200 | ) | ||||||||||||
Deferred lease costs paid | — | (20 | ) | (10,199 | ) | — | (10,219 | ) | |||||||||||
Distributions from subsidiaries | 353,518 | 64,863 | — | (418,381 | ) | — | |||||||||||||
Net cash provided by investing activities | 353,518 | 186,256 | 318,093 | (506,381 | ) | 351,486 | |||||||||||||
Cash Flows from Financing Activities: | |||||||||||||||||||
Debt issuance costs paid | — | (248 | ) | — | — | (248 | ) | ||||||||||||
Proceeds from debt | — | 773,225 | — | — | 773,225 | ||||||||||||||
Repayments of debt | — | (780,000 | ) | (721 | ) | — | (780,721 | ) | |||||||||||
Intercompany note payable | — | — | (88,000 | ) | 88,000 | — | |||||||||||||
Value of shares withheld to pay tax obligations related to employee stock compensation | (2,213 | ) | — | — | — | (2,213 | ) | ||||||||||||
Repurchases of common stock as part of announced plan | (266,062 | ) | — | — | — | (266,062 | ) | ||||||||||||
Distributions | (157,085 | ) | (250,818 | ) | (328,762 | ) | 579,557 | (157,108 | ) | ||||||||||
Net cash used in financing activities | (425,360 | ) | (257,841 | ) | (417,483 | ) | 667,557 | (433,127 | ) | ||||||||||
Net increase in cash, cash equivalents, and restricted cash and escrows | — | 1,437 | 167 | — | 1,604 | ||||||||||||||
Cash, cash equivalents, and restricted cash and escrows, beginning of period | 150 | 3,906 | 4,699 | — | 8,755 | ||||||||||||||
Cash, cash equivalents, and restricted cash and escrows, end of period | $ | 150 | $ | 5,343 | $ | 4,866 | $ | — | $ | 10,359 |
Condensed Consolidating Statements of Cash Flows | |||||||||||||||||||
For the six months ended June 30, 2017 | |||||||||||||||||||
(in thousands) | Piedmont (Parent) (Guarantor) | Piedmont OP (the Issuer) | Non-Guarantors | Eliminations | Piedmont (Consolidated) | ||||||||||||||
Net Cash Provided by/(Used in) Operating Activities | $ | 3,091 | $ | (10,029 | ) | $ | 118,678 | $ | — | $ | 111,740 | ||||||||
Cash Flows from Investing Activities: | |||||||||||||||||||
Investment in real estate assets, consolidated joint venture, and real estate related intangibles, net of accruals | — | (757 | ) | (57,563 | ) | — | (58,320 | ) | |||||||||||
Investments in unconsolidated joint ventures | — | (284 | ) | — | — | (284 | ) | ||||||||||||
Net sales proceeds from wholly-owned properties | — | 23,032 | (9 | ) | — | 23,023 | |||||||||||||
Deferred lease costs paid | — | (736 | ) | (8,827 | ) | — | (9,563 | ) | |||||||||||
Net cash provided by/(used in) investing activities | — | 21,255 | (66,399 | ) | — | (45,144 | ) | ||||||||||||
Cash Flows from Financing Activities: | |||||||||||||||||||
Debt issuance costs paid | — | (102 | ) | — | — | (102 | ) | ||||||||||||
Proceeds from debt | — | 147,000 | — | — | 147,000 | ||||||||||||||
Repayments of debt | — | (115,000 | ) | (694 | ) | — | (115,694 | ) | |||||||||||
Costs of issuance of common stock | (74 | ) | — | — | — | (74 | ) | ||||||||||||
Value of shares withheld to pay tax obligations related to employee stock compensation | (3,380 | ) | — | — | — | (3,380 | ) | ||||||||||||
(Distributions to)/repayments from affiliates | 92,020 | (41,618 | ) | (50,402 | ) | — | — | ||||||||||||
Dividends paid and discount on dividend reinvestments | (91,657 | ) | — | (7 | ) | — | (91,664 | ) | |||||||||||
Net cash used in financing activities | (3,091 | ) | (9,720 | ) | (51,103 | ) | — | (63,914 | ) | ||||||||||
Net increase in cash, cash equivalents, and restricted cash and escrows | — | 1,506 | 1,176 | — | 2,682 | ||||||||||||||
Cash, cash equivalents, and restricted cash and escrows, beginning of period | 150 | 3,693 | 4,361 | — | 8,204 | ||||||||||||||
Cash, cash equivalents, and restricted cash and escrows, end of period | $ | 150 | $ | 5,199 | $ | 5,537 | $ | — | $ | 10,886 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Six Months Ended | |||||||
June 30, 2018 | June 30, 2017 | ||||||
Capital expenditures for new development | $ | 5 | $ | 4,516 | |||
Capital expenditures for redevelopment/renovations | 4,151 | 653 | |||||
Capital expenditures previously credited as part of property acquisition | — | 9,187 | |||||
Other capital expenditures, including building and tenant improvements | 22,320 | 43,964 | |||||
Total capital expenditures(1) | $ | 26,476 | $ | 58,320 |
(1) | Of the total amounts paid, approximately $0.8 million and $0.2 million relates to soft costs such as capitalized interest, payroll, and other general and administrative expenses for the six months ended June 30, 2018 and 2017, respectively. |
June 30, 2018 | % of Revenues | June 30, 2017 | % of Revenues | Variance | |||||||||||||
Revenue: | |||||||||||||||||
Rental income | $ | 101.5 | $ | 118.5 | $ | (17.0 | ) | ||||||||||
Tenant reimbursements | 22.0 | 24.3 | (2.3 | ) | |||||||||||||
Property management fee revenue | 0.4 | 0.4 | — | ||||||||||||||
Other property related income | 5.3 | 5.5 | (0.2 | ) | |||||||||||||
Total revenues | 129.2 | 100 | % | 148.7 | 100 | % | (19.5 | ) | |||||||||
Expense: | |||||||||||||||||
Property operating costs | 52.6 | 41 | % | 56.3 | 38 | % | (3.7 | ) | |||||||||
Depreciation | 27.1 | 21 | % | 30.1 | 20 | % | (3.0 | ) | |||||||||
Amortization | 15.3 | 12 | % | 19.3 | 13 | % | (4.0 | ) | |||||||||
General and administrative | 8.3 | 6 | % | 7.5 | 5 | % | 0.8 | ||||||||||
Real estate operating income | 25.9 | 20 | % | 35.5 | 24 | % | (9.6 | ) | |||||||||
Other income (expense): | |||||||||||||||||
Interest expense | (15.7 | ) | 12 | % | (18.4 | ) | 12 | % | 2.7 | ||||||||
Other income/(expense) | 0.7 | — | % | — | — | % | 0.7 | ||||||||||
Equity in income of unconsolidated joint ventures | — | — | % | 0.1 | — | % | (0.1 | ) | |||||||||
Gain on sale of real estate assets, net | — | — | % | 6.5 | 4 | % | (6.5 | ) | |||||||||
Net income | $ | 10.9 | 8 | % | $ | 23.7 | 16 | % | $ | (12.8 | ) |
June 30, 2018 | % of Revenues | June 30, 2017 | % of Revenues | Variance | |||||||||||||
Revenue: | |||||||||||||||||
Rental income | $ | 202.9 | $ | 236.5 | $ | (33.6 | ) | ||||||||||
Tenant reimbursements | 45.1 | 49.1 | (4.0 | ) | |||||||||||||
Property management fee revenue | 0.7 | 0.9 | (0.2 | ) | |||||||||||||
Other rental income | 10.4 | 10.6 | (0.2 | ) | |||||||||||||
Total revenues | 259.1 | 100 | % | 297.1 | 100 | % | (38.0 | ) | |||||||||
Expense: | |||||||||||||||||
Property operating costs | 104.5 | 40 | % | 112.1 | 38 | % | (7.6 | ) | |||||||||
Depreciation | 54.3 | 21 | % | 60.8 | 21 | % | (6.5 | ) | |||||||||
Amortization | 32.0 | 12 | % | 39.7 | 13 | % | (7.7 | ) | |||||||||
General and administrative | 14.8 | 6 | % | 15.7 | 5 | % | (0.9 | ) | |||||||||
Real estate operating income | 53.5 | 21 | % | 68.8 | 23 | % | (15.3 | ) | |||||||||
Other income (expense): | |||||||||||||||||
Interest expense | (29.4 | ) | 11 | % | (36.5 | ) | 12 | % | 7.1 | ||||||||
Other income/(expense) | 1.2 | — | % | — | — | % | 1.2 | ||||||||||
Equity in income of unconsolidated joint ventures | — | — | % | 0.1 | — | % | (0.1 | ) | |||||||||
Loss on extinguishment of debt | (1.7 | ) | — | % | — | — | % | (1.7 | ) | ||||||||
Gain on sale of real estate assets, net | 45.2 | 17 | % | 6.4 | 2 | % | 38.8 | ||||||||||
Net income | $ | 68.8 | 27 | % | $ | 38.8 | 13 | % | $ | 30.0 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
June 30, 2018 | Per Share(1) | June 30, 2017 | Per Share(1) | June 30, 2018 | Per Share(1) | June 30, 2017 | Per Share(1) | ||||||||||||||||||||||||
GAAP net income applicable to common stock | $ | 10,942 | $ | 0.09 | $ | 23,710 | $ | 0.16 | $ | 68,772 | $ | 0.52 | $ | 38,814 | $ | 0.27 | |||||||||||||||
Depreciation of real estate assets (2) | 26,894 | 0.21 | 29,932 | 0.21 | 53,863 | 0.41 | 60,561 | 0.41 | |||||||||||||||||||||||
Amortization of lease-related costs (2) | 15,229 | 0.11 | 19,315 | 0.13 | 31,945 | 0.24 | 39,721 | 0.27 | |||||||||||||||||||||||
(Gain)/loss on sale - wholly-owned properties, net | 23 | — | (6,492 | ) | (0.04 | ) | (45,186 | ) | (0.34 | ) | (6,439 | ) | (0.04 | ) | |||||||||||||||||
NAREIT Funds From Operations applicable to common stock | $ | 53,088 | $ | 0.41 | $ | 66,465 | $ | 0.46 | $ | 109,394 | $ | 0.83 | $ | 132,657 | $ | 0.91 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||
Acquisition costs | — | — | — | — | — | — | 6 | — | |||||||||||||||||||||||
Loss on extinguishment of debt | — | — | — | — | 1,680 | 0.01 | — | — | |||||||||||||||||||||||
Core Funds From Operations applicable to common stock | $ | 53,088 | $ | 0.41 | $ | 66,465 | $ | 0.46 | $ | 111,074 | $ | 0.84 | $ | 132,663 | $ | 0.91 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||
Amortization of debt issuance costs, fair market value adjustments on notes payable, and discount on debt | 545 | 628 | 1,011 | 1,258 | |||||||||||||||||||||||||||
Depreciation of non real estate assets | 213 | 184 | 382 | 379 | |||||||||||||||||||||||||||
Straight-line effects of lease revenue (2) | (4,806 | ) | (6,634 | ) | (8,279 | ) | (12,337 | ) | |||||||||||||||||||||||
Stock-based and other non-cash compensation | 2,513 | 911 | 2,801 | 2,952 | |||||||||||||||||||||||||||
Net effect of amortization of above and below-market in-place lease intangibles | (1,987 | ) | (1,611 | ) | (3,630 | ) | (3,170 | ) | |||||||||||||||||||||||
Acquisition costs | — | — | — | (6 | ) | ||||||||||||||||||||||||||
Non-incremental capital expenditures (3) | (10,178 | ) | (9,073 | ) | (18,131 | ) | (16,745 | ) | |||||||||||||||||||||||
Adjusted Funds From Operations applicable to common stock | $ | 39,388 | $ | 50,870 | $ | 85,228 | $ | 104,994 | |||||||||||||||||||||||
Weighted-average shares outstanding – diluted | 128,701 | 145,813 | 132,432 | 145,780 | |||||||||||||||||||||||||||
Common stock issued and outstanding as of period end | 128,371 | 145,490 | 128,371 | 145,490 |
(1) | Based on weighted average shares outstanding – diluted. |
(2) | Includes amounts for wholly-owned properties, as well as such amounts for our proportionate ownership in unconsolidated joint ventures. |
(3) | We define non-incremental capital expenditures as capital expenditures of a recurring nature related to tenant improvements, leasing commissions, and building capital that do not incrementally enhance the underlying assets' income generating capacity. Tenant improvements, leasing commissions, building capital and deferred lease incentives incurred to lease space that was vacant at acquisition, leasing costs for spaces vacant for greater than one year, leasing costs for spaces at newly acquired properties for which in-place leases expire shortly after acquisition, improvements associated with the expansion of a building, and renovations that either enhance the rental rates of a building or change the property's underlying classification, such as from a Class B to a Class A property, are excluded from this measure. |
Cash Basis | Accrual Basis | ||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||
Net income applicable to Piedmont (GAAP basis) | $ | 10,942 | $ | 23,710 | $ | 10,942 | $ | 23,710 | |||||||
Net income applicable to noncontrolling interest | (2 | ) | (3 | ) | (2 | ) | (3 | ) | |||||||
Interest expense | 15,687 | 18,421 | 15,687 | 18,421 | |||||||||||
Depreciation (1) | 27,107 | 30,116 | 27,107 | 30,116 | |||||||||||
Amortization (1) | 15,229 | 19,315 | 15,229 | 19,315 | |||||||||||
Net recoveries from casualty events | — | (26 | ) | — | (26 | ) | |||||||||
(Gain)/loss on sale of real estate assets, net (1) | 23 | (6,492 | ) | 23 | (6,492 | ) | |||||||||
General & administrative expenses(1) | 8,258 | 7,551 | 8,258 | 7,551 | |||||||||||
Management fee revenue | (200 | ) | (180 | ) | (200 | ) | (180 | ) | |||||||
Other income(1) | (157 | ) | (12 | ) | (157 | ) | (12 | ) | |||||||
Straight-line rent effects of lease revenue(1) | (4,806 | ) | (6,634 | ) | |||||||||||
Amortization of lease-related intangibles(1) | (1,987 | ) | (1,611 | ) | |||||||||||
Property NOI | $ | 70,094 | $ | 84,155 | $ | 76,887 | $ | 92,400 | |||||||
Net operating income from: | |||||||||||||||
Acquisitions(2) | (917 | ) | — | (1,270 | ) | — | |||||||||
Dispositions(3) | (205 | ) | (15,486 | ) | (205 | ) | (14,269 | ) | |||||||
Other investments(4) | (920 | ) | (2,171 | ) | (1,044 | ) | (2,555 | ) | |||||||
Same Store NOI | $ | 68,052 | $ | 66,498 | $ | 74,368 | $ | 75,576 | |||||||
Change period over period in Same Store NOI | 2.3 | % | N/A | (1.6 | )% | N/A |
(1) | Includes amounts applicable to consolidated properties and our proportionate share of amounts applicable to unconsolidated joint ventures. |
(2) | Acquisitions consist of Norman Pointe I in Bloomington, Minnesota, purchased on December 28, 2017; and 501 West Church Street in Orlando, Florida, purchased on February 23, 2018. |
(3) | Dispositions consist of Sarasota Commerce Center II in Sarasota, Florida, sold on June 16, 2017; Two Independence Square in Washington, D.C., sold on July 5, 2017; and the 14-property portfolio sale completed on January 4, 2018. |
(4) | Other investments consist of our interests in unconsolidated joint ventures, active redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current and/or prior year reporting periods. The operating results from 500 TownPark in Lake Mary, Florida, and Two Pierce Place in Itasca, Illinois, are included in this line item. |
Cash Basis | Accrual Basis | ||||||||||||||
Six Months Ended | Six Months Ended | ||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||
Net income applicable to Piedmont (GAAP basis) | $ | 68,772 | $ | 38,814 | $ | 68,772 | $ | 38,814 | |||||||
Net loss applicable to noncontrolling interest | (4 | ) | (6 | ) | (4 | ) | (6 | ) | |||||||
Interest expense | 29,445 | 36,478 | 29,445 | 36,478 | |||||||||||
Loss on extinguishment of debt | 1,680 | — | 1,680 | — | |||||||||||
Depreciation (1) | 54,246 | 60,940 | 54,246 | 60,940 | |||||||||||
Amortization (1) | 31,945 | 39,721 | 31,945 | 39,721 | |||||||||||
Acquisition costs | — | 6 | — | 6 | |||||||||||
Net loss from casualty events | — | 32 | — | 32 | |||||||||||
Gain on sale of real estate assets, net (1) | (45,186 | ) | (6,439 | ) | (45,186 | ) | (6,439 | ) | |||||||
General & administrative expenses (1) | 14,810 | 15,706 | 14,810 | 15,706 | |||||||||||
Management fee revenue | (349 | ) | (510 | ) | (349 | ) | (510 | ) | |||||||
Other (income)/expense (1) | (388 | ) | 25 | (388 | ) | 25 | |||||||||
Straight-line rent effects of lease revenue (1) | (8,279 | ) | (12,337 | ) | |||||||||||
Amortization of lease-related intangibles (1) | (3,630 | ) | (3,170 | ) | |||||||||||
Property NOI | $ | 143,062 | $ | 169,260 | $ | 154,971 | $ | 184,767 | |||||||
Net operating income from: | |||||||||||||||
Acquisitions (2) | (1,583 | ) | — | (2,132 | ) | — | |||||||||
Dispositions (3) | (387 | ) | (31,076 | ) | (378 | ) | (28,656 | ) | |||||||
Other investments (4) | (2,437 | ) | (3,937 | ) | (2,482 | ) | (4,778 | ) | |||||||
Same Store NOI | $ | 138,655 | $ | 134,247 | $ | 149,979 | $ | 151,333 | |||||||
Change period over period in Same Store NOI | 3.3 | % | N/A | (0.9 | )% | N/A |
(1) | Includes amounts applicable to consolidated properties and our proportionate share of amounts applicable to unconsolidated joint ventures. |
(2) | Acquisitions consist of Norman Pointe I in Bloomington, Minnesota, purchased on December 28, 2017; and 501 West Church Street in Orlando, Florida, purchased on February 23, 2018. |
(3) | Dispositions consist of Sarasota Commerce Center II in Sarasota, Florida, sold on June 16, 2017; Two Independence Square in Washington, D.C., sold on July 5, 2017; and the 14-property portfolio sale completed on January 4, 2018. |
(4) | Other investments consist of our interests in unconsolidated joint ventures, active redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current and/or prior year reporting periods. The operating results from 500 TownPark in Lake Mary, Florida, and Two Pierce Place in Itasca, Illinois, are included in this line item. |
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Long-term debt (1) | $ | 1,728,195 | $ | 238,907 | (2) | $ | 302,145 | (3) | $ | 537,143 | $ | 650,000 | (4) |
(1) | Amounts include principal payments only and balances outstanding as of June 30, 2018, not including unamortized issuance discounts, debt issuance costs paid to lenders, or estimated fair value adjustments. We made interest payments, including payments under our interest rate swaps, of approximately $30.7 million during the six months ended June 30, 2018, and expect to pay interest in future periods on outstanding debt obligations based on the rates and terms disclosed herein and in Note 4 to our accompanying consolidated financial statements. |
(2) | Includes the balance outstanding as of June 30, 2018 of the $500 Million Unsecured 2015 Line of Credit. However, we may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of June 18, 2020) provided we are not then in default and upon payment of extension fees. |
(3) | Includes the $300 Million Unsecured 2011 Term Loan which has a stated variable rate; however, we have entered into interest rate swap agreements which effectively fix, exclusive of changes to our credit rating, the rate on this facility to 3.35% through maturity. As such, we estimate incurring, exclusive of changes to our credit rating, approximately $10.1 million per annum in total interest (comprised of combination of variable contractual rate and settlements under interest rate swap agreements) through maturity in January 2020. |
(4) | Includes the $250 Million Unsecured 2018 Term Loan, which has a stated variable rate; however, we entered into $100 million in notional amount of seven-year interest rate swap agreements and $50 million in notional amount of two-year interest rate swap agreements, resulting in an effectively fixed interest rate on $150 million of the term loan at 4.11% through March 29, 2020 and on $100 million of the term loan at 4.21% from March 30, 2020 through the loan's maturity date of March 31, 2025, assuming no change in our credit rating. For the portion of the $250 Million Unsecured 2018 Term Loan that continues to have a variable interest rate, we may select from multiple interest rate options, including the prime rate and various length LIBOR locks. All LIBOR selections are subject to an additional spread (1.60% as of March 31, 2018) over the selected interest rate based on our then current credit rating. |
• | Commitments Under Existing Lease Agreements; and |
• | Contingencies Related to Tenant Audits/Disputes. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
(a) | There were no unregistered sales of equity securities during the second quarter 2018. |
(b) | Not applicable. |
(c) | During the three months ended June 30, 2018, we repurchased shares of our common stock in the open market in order to reissue such shares under our dividend reinvestment plan (the "DRP"), as well as repurchasing and retiring shares as part of our stock repurchase plan. |
Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan (in thousands) (1) | Maximum Approximate Dollar Value of Shares Available That May Yet Be Purchased Under the Plan (in thousands) | ||||||||||
April 1, 2018 to April 30, 2018 | 1,861 | $ | 17.67 | 1,861 | $ | 123,464 | ||||||||
May 1, 2018 to May 31, 2018 | — | $ | — | — | $ | 123,464 | ||||||||
June 1, 2018 to June 30, 2018 (2) | 81 | $ | 19.06 | — | $ | 123,464 | (1) | |||||||
Total | 1,942 | $ | 17.73 | 1,861 |
(1) | Amounts available for purchase relate only to our stock repurchase plan, which was previously re-authorized on February 21, 2018 by the Board of Directors of Piedmont to permit the purchase of shares of common stock having an aggregate purchase price of up to $200 million between February 21, 2018 and February 21, 2020. As of June 30, 2018, we have $123.5 million of availability remaining under our current authorization to repurchase shares of our common stock through February 21, 2020. The share repurchase plan is separate from shares purchased for DRP issuance. |
(2) | Under our amended and restated DRP, as set forth in a Current Report on Form 8-K filed February 24, 2011, we have the option to either issue shares that we purchase in the open market or issue shares directly from Piedmont from authorized but unissued shares. Such election will take place at the settlement of each quarterly dividend in which there are participants in our DRP, and may change from quarter to quarter based on our judgment of the best use of proceeds for Piedmont. |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Exhibit Number | Description of Document | ||
3.1 | |||
3.2 | |||
3.3 | |||
3.4 | |||
3.5 | |||
3.6 | |||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
PIEDMONT OFFICE REALTY TRUST, INC. | |||
(Registrant) | |||
Dated: | August 1, 2018 | By: | /s/ Robert E. Bowers |
Robert E. Bowers | |||
Chief Financial Officer and Executive Vice President | |||
(Principal Financial Officer and Duly Authorized Officer) |
1. | I have reviewed this Form 10-Q for the quarter ended June 30, 2018 of Piedmont Office Realty Trust, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Donald A. Miller, CFA | |
Donald A. Miller, CFA | ||
Principal Executive Officer |
1. | I have reviewed this Form 10-Q for the quarter ended June 30, 2018 of Piedmont Office Realty Trust, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Robert E. Bowers | |
Robert E. Bowers | ||
Principal Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
By: | /s/ Donald A. Miller, CFA | |
Donald A. Miller, CFA | ||
Chief Executive Officer | ||
August 1, 2018 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
By: | /s/ Robert E. Bowers | |
Robert E. Bowers | ||
Chief Financial Officer | ||
August 1, 2018 |
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2018 |
Jul. 31, 2018 |
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Document and Entity Information [Abstract] | ||
Entity Registrant Name | Piedmont Office Realty Trust, Inc. | |
Entity Central Index Key | 0001042776 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 128,370,913 |
Consolidated Statements of Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Revenues: | ||||
Rental income | $ 101,478 | $ 118,492 | $ 202,932 | $ 236,531 |
Tenant reimbursements | 22,047 | 24,285 | 45,041 | 49,122 |
Property management fee revenue | 382 | 400 | 691 | 925 |
Other property related income | 5,267 | 5,502 | 10,410 | 10,564 |
Total revenues | 129,174 | 148,679 | 259,074 | 297,142 |
Expenses: | ||||
Property operating costs | 52,637 | 56,287 | 104,496 | 112,117 |
Depreciation | 27,115 | 30,059 | 54,260 | 60,827 |
Amortization | 15,245 | 19,314 | 31,978 | 39,729 |
General and administrative | 8,258 | 7,528 | 14,810 | 15,678 |
Operating expenses | 103,255 | 113,188 | 205,544 | 228,351 |
Real estate operating income | 25,919 | 35,491 | 53,530 | 68,791 |
Other income (expense): | ||||
Interest expense | (15,687) | (18,421) | (29,445) | (36,478) |
Other income/(expense) | 731 | 38 | 1,177 | (62) |
Equity in income of unconsolidated joint ventures | 0 | 107 | 0 | 118 |
Loss on extinguishment of debt | 0 | 0 | (1,680) | 0 |
Gain/(loss) on sale of real estate assets, net | (23) | 6,492 | 45,186 | 6,439 |
Net income | 10,940 | 23,707 | 68,768 | 38,808 |
Plus: Net loss applicable to noncontrolling interest | 2 | 3 | 4 | 6 |
Net income applicable to Piedmont | $ 10,942 | $ 23,710 | $ 68,772 | $ 38,814 |
Per share information – basic and diluted: | ||||
Net income applicable to common stockholders (in usd per share) | $ 0.09 | $ 0.16 | $ 0.52 | $ 0.27 |
Weighted-average common shares outstanding – basic (in shares) | 128,346,433 | 145,412,524 | 132,090,741 | 145,350,074 |
Weighted-average common shares outstanding – diluted (in shares) | 128,700,743 | 145,813,130 | 132,431,642 | 145,779,709 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income applicable to Piedmont | $ 10,942 | $ 23,710 | $ 68,772 | $ 38,814 |
Other comprehensive income: | ||||
Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges (See Note 6) | 1,747 | (911) | 3,264 | 132 |
Plus: Reclassification of net (gain)/loss included in net income (See Note 6) | (245) | 977 | 807 | 2,283 |
Gain on investment in available for sale securities | 0 | 15 | 0 | 28 |
Other comprehensive income | 1,502 | 81 | 4,071 | 2,443 |
Comprehensive income applicable to Piedmont | $ 12,444 | $ 23,791 | $ 72,843 | $ 41,257 |
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares |
6 Months Ended | 12 Months Ended |
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Jun. 30, 2018 |
Dec. 31, 2017 |
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Statement of Stockholders' Equity [Abstract] | ||
Dividends to common stockholders per share (in USD per share) | $ 0.42 | $ 1.34 |
Organization |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Piedmont Office Realty Trust, Inc. (“Piedmont”) (NYSE: PDM) is a Maryland corporation that operates in a manner so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes and engages in the acquisition, development, management, and ownership of commercial real estate properties located primarily in the Eastern-half of the United States, including properties that are under construction, are newly constructed, or have operating histories. Piedmont was incorporated in 1997 and commenced operations in 1998. Piedmont conducts business primarily through Piedmont Operating Partnership, L.P. (“Piedmont OP”), a Delaware limited partnership, as well as performing the management of its buildings through two wholly-owned subsidiaries, Piedmont Government Services, LLC and Piedmont Office Management, LLC. Piedmont owns 99.9% of, and is the sole general partner of, Piedmont OP and as such, possesses full legal control and authority over the operations of Piedmont OP. The remaining 0.1% ownership interest of Piedmont OP is held indirectly by Piedmont through its wholly-owned subsidiary, Piedmont Office Holdings, Inc. ("POH"), the sole limited partner of Piedmont OP. Piedmont OP owns properties directly, through wholly-owned subsidiaries, and through various joint ventures which we control. References to Piedmont herein shall include Piedmont and all of its subsidiaries, including Piedmont OP and its subsidiaries and joint ventures. As of June 30, 2018, Piedmont owned 53 in-service office properties and one redevelopment asset. As of June 30, 2018, Piedmont's 53 in-service office properties comprise approximately 16.2 million square feet of primarily Class A commercial office space and were approximately 90.6% leased. As of June 30, 2018, approximately 91% of Piedmont's Annualized Lease Revenue (unaudited) was generated from select sub-markets located primarily within eight major office markets located in the Eastern-half of the United States: Atlanta, Boston, Chicago, Dallas, Minneapolis, New York, Orlando, and Washington, D.C. Piedmont internally evaluates all of its real estate assets as one operating segment, and accordingly does not report segment information. |
Summary of Significant Accounting Policies |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The consolidated financial statements of Piedmont have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of a full year’s results. Piedmont’s consolidated financial statements include the accounts of Piedmont, Piedmont’s wholly-owned subsidiaries, any variable interest entity ("VIE") for which Piedmont or any of its wholly-owned subsidiaries is considered to have the power to direct the activities of the entity and the obligation to absorb losses/right to receive benefits, or any entity in which Piedmont or any of its wholly-owned subsidiaries owns a controlling interest. In determining whether Piedmont or Piedmont OP has a controlling interest, the following factors, among others, are considered: equity ownership, voting rights, protective rights of investors, and participatory rights of investors. For further information, refer to the financial statements and footnotes included in Piedmont’s Annual Report on Form 10-K for the year ended December 31, 2017. All intercompany balances and transactions have been eliminated upon consolidation. Further, Piedmont has formed special purpose entities to acquire and hold real estate. Each special purpose entity is a separate legal entity. Consequently, the assets of these special purpose entities are not available to all creditors of Piedmont. The assets owned by these special purpose entities are being reported on a consolidated basis with Piedmont’s assets for financial reporting purposes only. Use of Estimates The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from those estimates. Income Taxes Piedmont has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and has operated as such, beginning with its taxable year ended December 31, 1998. To qualify as a REIT, Piedmont must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income. As a REIT, Piedmont is generally not subject to federal income taxes, subject to fulfilling, among other things, its taxable income distribution requirement. Piedmont is subject to certain taxes related to the operations of properties in certain locations, as well as operations conducted by its taxable REIT subsidiary, POH, which have been provided for in the financial statements. Tax Cuts and Jobs Act The Tax Cuts and Jobs Act ("H.R. 1"), which generally took effect for taxable years that began on or after January 1, 2018 (subject to certain exceptions), made many significant changes to the U.S. federal income tax laws that will profoundly impact the taxation of individuals and corporations (including both regular C corporations and corporations that have elected to be taxed as REITs). For example, H.R. 1 limits the ability of corporations to utilize net operating loss carryforwards and limits the deductibility of business interest for all taxpayers, subject to an exception for taxpayers that are engaged in certain specified real property trades or business who make an irrevocable election not to apply the limitation to a particular real property trade or business and to depreciate their real property investments held in such trade or business using the less favorable alternative depreciation system. To date, the IRS has issued limited guidance with respect to certain of the provisions of H.R. 1, and there are numerous interpretive issues that will require guidance. In addition, changes made by H.R. 1 may require Piedmont to accrue certain income for U.S. federal income tax purposes no later than when such income is taken into account as revenue on its GAAP-based financial statements, unless the income is already subject to certain special methods of accounting under the Code. This could cause Piedmont to recognize taxable income prior to the receipt of the associated cash and accordingly, increase its distribution levels in order to maintain its status as a REIT. H.R. 1 also includes limitations on the deductibility of certain compensation paid to Piedmont's executives, certain interest payments, and certain net operating loss carryforwards, each of which could potentially increase Piedmont's taxable income and its required distributions. Piedmont recorded an approximate $0.2 million reduction to its tax liability related to its taxable REIT subsidiary as a result of the rate reduction included in H.R. 1 during the six months ended June 30, 2018. Although management is still evaluating the other effects of H.R. 1, Piedmont does not believe that H.R. 1 will significantly impact its financial statements. Reclassifications Certain prior period amounts presented in the accompanying consolidated statements of income have been reclassified to conform to the current period financial statement presentation. These amounts included: (i) the reclassification of approximately $5.5 million and $10.6 million for the three and six months ended June 30, 2017, respectively, of parking, antennae license and fiber income that was previously included in rental income into other property related income, as well as certain other miscellaneous revenue into tenant reimbursements and/or property management fee revenue in conjunction with the adoption of the Revenue Recognition Amendments, as further defined and described below; and (ii) the reclassification of $0.5 million and $1.0 million for the three and six months ended June 30, 2017, respectively, of expense related to certain regional employees who are primarily engaged in the operation and management of properties that was previously included in general and administrative expense to property operating costs. Accounting Pronouncements Adopted during the Six Months Ended June 30, 2018 Revenue Recognition On January 1, 2018, Piedmont adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") and Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606) Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08") issued by the Financial Accounting Standards Board (the "FASB"). The amendments in ASU 2014-09, which are further clarified in ASU 2016-08, as well as Accounting Standards Update 2016-10, Accounting Standards Update 2016-12, and Accounting Standards Update 2016-20 (collectively the "Revenue Recognition Amendments") change the criteria for the recognition of certain revenue streams to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services using a five-step determination process. Piedmont's revenues which are included in the scope of the Revenue Recognition Amendments include its property management fee revenue, the majority of its parking revenue, as well as certain license agreements which allow third-parties to place their antennas or fiber-optic cabling on or inside Piedmont's buildings. Lease contracts are specifically excluded from the Revenue Recognition Amendments and, Piedmont intends to utilize a leasing practical expedient, which has been tentatively approved by the FASB, to group certain non-lease components related to operating expense reimbursements with other leasing components, provided they meet certain criteria. Because the timing and pattern of transfer of Piedmont's non-lease related revenue already followed the prescribed method of the Revenue Recognition Amendments, Piedmont was able to effectively adopt these amendments on a full retrospective basis, with no impact to the timing of recognition of the related revenue; however, such non-lease revenues are now being presented as "Other property related income" in the accompanying consolidated statements of income. Further, for comparative purposes, Piedmont reclassified approximately $5.5 million and $10.6 million for the three and six months ended June 30, 2017, respectively, of parking, antennae license, and fiber income that was previously included in rental income into other property related income, as well as certain other miscellaneous revenue into tenant reimbursements and/or property management fee revenue. Piedmont did not elect to adopt any practical expedients provided by the Revenue Recognition Amendments. A detail of Piedmont's total revenues for the three months ended June 30, 2018 and 2017 (after reclassifications as a result of the adoption of the Revenue Recognition Amendments), including a detailed description of each line item is as follows:
Rental income - consists of revenue from leases with Piedmont's tenants, which is not within the scope of the Revenue Recognition Amendments. Tenant reimbursements - consists of revenue derived from reimbursements for services prescribed by leases with Piedmont's tenants separate from, but in conjunction with, the revenue generated from leasing office space. Such income is not within the scope of the Revenue Recognition Amendments. Property management fee revenue - consists of revenue earned by Piedmont related to operating and managing office properties owned by other third-parties. Such income is within the scope of the Revenue Recognition Amendments; however, because the property management services represent a performance obligation that would be satisfied over the length of the contract, not at any specific point in time, and has the same measure of transfer (time elapsed), property management fee revenue will be recognized over time, consistent with the timing of Piedmont’s historic recognition. Any variable consideration transferred as part of these management agreements will continue to be recognized in the quarter that the underlying cash receipts are collected, consistent with the allocation objective of allocating the transaction price in an amount that depicts the amount of consideration to which Piedmont expects to be entitled in exchange for transferring the promised service to the customer. Other property related income - consists of all other property related income from Piedmont's customers (tenants) that is not derived from a contract meeting the definition of a lease. Examples of such income include parking revenue and income from licenses with unrelated third-parties to place antennae and/or fiber optic cables in or on Piedmont's buildings. Since these services are substantially the same and have the same pattern of transfer, there is no timing difference between the recognition of other property related income and the recognition of the underlying expense/delivery of “service” under the new Revenue Recognition Amendments. Additionally, no modification to the timing of Piedmont’s previous revenue recognition is necessary, as these items have been recognized historically in accordance with this pattern of transfer. Gain/(loss) on Sale of Real Estate Assets On January 1, 2018, Piedmont adopted Accounting Standards Update No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05") concurrent with the Revenue Recognition Amendments mentioned above. Piedmont elected to apply the amendments of ASU 2017-05 on a full retrospective basis; however, there were no adjustments to previously recorded gains/(losses) on sale of real estate as a result of the transition. Equity Investments Held in Non-qualified Deferred Compensation Plan On January 1, 2018, Piedmont adopted Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), as well as Accounting Standards Update No. 2018-03 Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10) ("ASU 2018-03"). These amendments require equity investments, except those accounted for under the equity method of accounting, to be measured at estimated fair value with changes in fair value recognized in net income. Investments in trading securities held in a "rabbi trust" by Piedmont are the only securities affected by ASU 2016-01 and ASU 2018-03. As such, Piedmont has made a cumulative-effect adjustment to its consolidated balance sheet and consolidated statements of stockholders' equity of approximately $0.1 million from other comprehensive income to cumulative distributions in excess of earnings, and has recorded changes in fair value in net income for the three and six months ended June 30, 2018 related to these investment securities. Interest Rate Derivatives On January 1, 2018, Piedmont early adopted Accounting Standards Update No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). Piedmont adopted ASU 2017-12 using the modified retrospective transition method; however, no adjustment was necessary to account for the cumulative effect of the change on the opening balance of each affected component of equity in the consolidated balance sheet as of the date of adoption because there was no cumulative ineffectiveness that had been recorded on Piedmont's existing interest rate swaps as of December 31, 2017, and all other trades were perfectly effective. The amended presentation and disclosure guidance which is required to be presented prospectively is provided in Note 6. Other Recent Accounting Pronouncements The FASB has issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which fundamentally changes the definition of a lease, as well as the accounting for operating leases by requiring lessees to recognize assets and liabilities which arise from the lease, consisting of a liability to make lease payments (the lease liability) and a right-of-use asset, representing the right to use the leased asset over the term of the lease. Accounting for leases by lessors is substantially unchanged from prior practice as lessors will continue to recognize lease revenue on a straight-line basis. Additionally, Accounting Standards Update No. 2018-11, Leases (Topic 842) Targeted Improvements ("ASU 2018-11") issued by the FASB allows certain non-lease operating expense reimbursements to be accounted for as part of the lease provided certain criteria are met under an optional practical expedient. Further, the FASB has issued Accounting Standards Update No. 2018-01 Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic 842 ("ASU 2018-01"). The amendments to ASU No. 2018-01 clarify that a land easement is required to be evaluated to determine whether it should be accounted for as a lease upon adoption of ASU 2016-02, and provides an optional practical transition expedient allowing entities not currently assessing land easements under existing leasing guidance prior to adoption of ASU 2016-02 to not apply the new guidance to land easements existing at the date of initial adoption of ASU 2016-02. The amendments in ASU 2016-02, ASU 2018-01, and ASU 2018-11 are effective in the first quarter of 2019. Although management continues to evaluate the guidance and disclosures required by these amendments, Piedmont does not anticipate any material impact to its consolidated financial statements as a result of adoption related to lessor accounting. However, Piedmont does expect to record a right-to-use asset and related liability under lessee accounting, and Piedmont is still evaluating the potential impact of such lessee accounting. The FASB has issued Accounting Standards Update No. 2018-07, Stock Compensation (Topic 718), Improvements to NonEmployee Share-Based Payment Accounting ("ASU 2018-07"). The provisions of ASU 2018-07 align accounting for stock based compensation for non-employees for goods and services with existing accounting for similar compensation for employees. The amendments supersede previous guidance on accounting for share-based payments to non-employees codified in the FASB's Accounting Standards Codification ("ASC") 505-50. ASU 2018-07 is effective in the first quarter of 2019, with early adoption permitted at any time provided that the entity has already adopted the provisions of ASC 606. Piedmont does not anticipate any material impact to its consolidated financial statements as a result of adoption. The FASB has issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The provisions of ASU 2016-13 replace the "incurred loss" approach with an "expected loss" model for impairing trade and other receivables, held-to-maturity debt securities, net investment in leases, and off-balance-sheet credit exposures, which will generally result in earlier recognition of allowances for credit losses. Additionally, the provisions change the classification of credit losses related to available-for-sale securities to an allowance, rather than a direct reduction of the amortized cost of the securities. ASU 2016-13 is effective in the first quarter of 2020, with early adoption permitted as of January 1, 2019. Piedmont is currently evaluating the potential impact of adoption. |
Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions During the six months ended June 30, 2018, Piedmont acquired one property using proceeds available as a result of dispositions (see Note 9) in January 2018 and cash on hand, as noted below:
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt During the six months ended June 30, 2018, Piedmont fully repaid the balances of the $300 Million Unsecured 2013 Term Loan and the $170 Million Unsecured 2015 Term Loan using proceeds from the 2017 Disposition Portfolio (see Note 9) and cash on hand, as well as drawing on its $500 Million Unsecured 2015 Line of Credit. Further, Piedmont had net borrowings during the six months ended June 30, 2018 on its $500 Million Unsecured 2015 Line of Credit of approximately $215.0 million, which brought the outstanding balance on the $500 Million Unsecured 2015 Line of Credit to $238 million as of June 30, 2018. Additionally during the six months ended June 30, 2018, Piedmont entered into a $250 million unsecured term loan facility (the “$250 Million Unsecured 2018 Term Loan”) with a consortium of lenders. The term of the $250 Million Unsecured 2018 Term Loan is seven years with a maturity date of March 31, 2025; however, Piedmont may prepay the $250 Million Unsecured 2018 Term Loan, in whole or in part, at any time after March 29, 2020 without premium or penalty. The proceeds of the $250 Million Unsecured 2018 Term Loan were used to reduce the outstanding balance under the $500 Million Unsecured 2015 Line of Credit on the date the proceeds were received. The $250 Million Unsecured 2018 Term Loan has the option to bear interest at varying levels based on either (i) the London Interbank Offered Rate (“LIBOR”) for an interest period selected by Piedmont of one, two, three, or six months, or to the extent available from all lenders in each case, one year or periods of less than one month, or (ii) Base Rate, defined as the greater of the prime rate, the federal funds rate plus 0.5%, or LIBOR for a one-month period plus 1%; plus a stated interest rate spread based on the higher credit rating level issued for either Piedmont or Piedmont OP. The stated interest rate spread over LIBOR can vary from 1.45% to 2.40% based upon the then current credit rating of Piedmont or Piedmont OP, whichever is higher. As of June 30, 2018, the stated interest rate spread on the $250 Million Unsecured 2018 Term Loan was 1.60%. Under the $250 Million Unsecured 2018 Term Loan, Piedmont is subject to certain financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 1.75, an unencumbered leverage ratio of at least 1.60, a fixed charge coverage ratio of at least 1.50, a leverage ratio of no more than 0.60, and a secured debt ratio of no more than 0.40. In addition, Piedmont entered into three interest rate swap agreements for a total notional amount of $150 million which effectively fixed $150 million of the $250 Million Unsecured 2018 Term Loan at an interest rate of approximately 4.11%. The following table summarizes the terms of Piedmont’s indebtedness outstanding as of June 30, 2018 and December 31, 2017 (in thousands):
Piedmont made interest payments on all debt facilities, including interest rate swap cash settlements, of approximately $14.8 million and $16.7 million for the three months ended June 30, 2018 and 2017, respectively, and approximately $30.7 million and $36.0 million for the six months ended June 30, 2018 and 2017, respectively. Also, Piedmont capitalized interest of approximately $346,000 and $35,000 for the three months ended June 30, 2018 and 2017, respectively, and approximately $0.5 million and $0.1 million for the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, Piedmont believes it was in compliance with all financial covenants associated with its debt instruments. See Note 7 for a description of Piedmont’s estimated fair value of debt as of June 30, 2018. |
Variable Interest Entities |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | Variable Interest Entities Variable interest holders who have the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and have the obligation to absorb the majority of losses of the entity or the right to receive significant benefits of the entity must consolidate the VIE. Each of the following VIEs has the sole purpose of holding land and office buildings and their resulting operations, and are classified in the accompanying consolidated balance sheets in the same manner as Piedmont’s wholly-owned properties. A summary of Piedmont’s interests in its consolidated VIEs and their related carrying values as of June 30, 2018 and December 31, 2017 is as follows (net carrying amount in millions):
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Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | Derivative Instruments Risk Management Objective of Using Derivatives In addition to operational risks which arise in the normal course of business, Piedmont is exposed to economic risks such as interest rate, liquidity, and credit risk. In certain situations, Piedmont has entered into derivative financial instruments such as interest rate swap agreements and other similar agreements to manage interest rate risk exposure arising from current or future variable rate debt transactions. Interest rate swap agreements involve the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Piedmont’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. Cash Flow Hedges of Interest Rate Risk Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for Piedmont making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of June 30, 2018, Piedmont was party to interest rate swap agreements, all of which are designated as effective cash flow hedges and fully hedge the variable cash flows covering the entire outstanding balance of the $300 Million Unsecured 2011 Term Loan, and $150 million of the $250 Million Unsecured 2018 Term Loan. The maximum length of time over which Piedmont is hedging its exposure to the variability in future cash flows for forecasted transactions is 81 months. A detail of Piedmont’s interest rate derivatives outstanding as of June 30, 2018 is as follows:
Piedmont presents its interest rate derivatives on its consolidated balance sheets on a gross basis as interest rate swap assets and interest rate swap liabilities. A detail of Piedmont’s interest rate derivatives on a gross and net basis as of June 30, 2018 and December 31, 2017, respectively, is as follows (in thousands):
The gain/(loss) on Piedmont's interest rate derivatives, including previously settled forward swaps, that was recorded in OCI and the accompanying consolidated statements of income as a component of interest expense for the three and six months ended June 30, 2018 and 2017, respectively, was as follows (in thousands):
Piedmont estimates that approximately $2.8 million will be reclassified from OCI as a reduction of interest expense over the next twelve months. Piedmont recognized no hedge ineffectiveness on its cash flow hedges during the three and six months ended June 30, 2018 and 2017, respectively. Additionally, see Note 7 for fair value disclosures of Piedmont's derivative instruments. Credit-risk-related Contingent Features Piedmont has agreements with its derivative counterparties that contain a provision whereby if Piedmont defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Piedmont could also be declared in default on its derivative obligations. Because all of Piedmont's interest rate swaps are in an asset position, if Piedmont were to breach any of the contractual provisions of the derivative contracts, the settlement of its obligations under the agreements would not result in a penalty as of June 30, 2018. Additionally, Piedmont has rights of set-off under certain of its derivative agreements related to potential termination fees and amounts payable under the agreements, if a termination were to occur. |
Fair Value Measurement of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement of Financial Instruments | Fair Value Measurement of Financial Instruments Piedmont considers its cash and cash equivalents, tenant receivables, notes receivable, restricted cash and escrows, accounts payable and accrued expenses, interest rate swap agreements, and debt to meet the definition of financial instruments. The following table sets forth the carrying and estimated fair value for each of Piedmont’s financial instruments, as well as its level within the GAAP fair value hierarchy, as of June 30, 2018 and December 31, 2017, respectively (in thousands):
Piedmont's debt was carried at book value as of June 30, 2018 and December 31, 2017; however, Piedmont's estimate of its estimated fair value is disclosed in the table above. Piedmont uses widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the debt facilities, including the period to maturity of each instrument, and uses observable market-based inputs for similar debt facilities which have transacted recently in the market. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). Scaling adjustments are made to these inputs to make them applicable to the remaining life of Piedmont's outstanding debt. Piedmont has not changed its valuation technique for estimating the fair value of its debt. Piedmont’s interest rate swap agreements presented above, and further discussed in Note 6, are classified as “Interest rate swap” assets and liabilities in the accompanying consolidated balance sheets and were carried at estimated fair value as of June 30, 2018 and December 31, 2017. The valuation of these derivative instruments was determined using widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the derivatives, including the period to maturity of each instrument, and uses observable market-based inputs, including interest rate curves and implied volatilities. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). In addition, Piedmont considered both its own and the respective counterparties’ risk of nonperformance in determining the estimated fair value of its derivative financial instruments by estimating the current and potential future exposure under the derivative financial instruments that both Piedmont and the counterparties were at risk for as of the valuation date. The credit risk of Piedmont and its counterparties were factored into the calculation of the estimated fair value of the interest rate swaps; however, as of June 30, 2018 and December 31, 2017, this credit valuation adjustment did not comprise a material portion of the estimated fair value. Therefore, Piedmont believes that any unobservable inputs used to determine the estimated fair values of its derivative financial instruments are not significant to the fair value measurements in their entirety, and does not consider any of its derivative financial instruments to be Level 3 assets or liabilities. |
Commitments and Contingencies |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Commitments Under Existing Lease Agreements Under its existing lease agreements, Piedmont may be required to fund significant tenant improvements, leasing commissions, and building improvements. In addition, certain agreements contain provisions that require Piedmont to issue corporate or property guarantees to provide funding for capital improvements or other financial obligations. Piedmont classifies its capital improvements into two categories: (i) improvements which maintain the building's existing asset value and its revenue generating capacity (“non-incremental capital expenditures”) and (ii) improvements which incrementally enhance the building's asset value by expanding its revenue generating capacity (“incremental capital expenditures”). As of June 30, 2018, commitments to fund potential non-incremental capital expenditures over the next five years for tenant improvements totaled approximately $40.0 million related to Piedmont's existing lease portfolio over the respective lease terms, the majority of which Piedmont estimates may be required to be funded over the next three years based on when the underlying leases commence. For most of Piedmont’s leases, the timing of the actual funding of these tenant improvements is largely dependent upon tenant requests for reimbursement. In some cases, these obligations may expire with the leases without further recourse to Piedmont. As of June 30, 2018, commitments for incremental capital expenditures for tenant improvements associated with executed leases totaled approximately $11.8 million. Contingencies Related to Tenant Audits/Disputes Certain lease agreements include provisions that grant tenants the right to engage independent auditors to audit their annual operating expense reconciliations. Such audits may result in the re-interpretation of language in the lease agreements which could result in the refund of previously recognized tenant reimbursement revenues, resulting in financial loss to Piedmont. Piedmont recorded $0 and $20,000 of such reductions in reimbursement revenues related to such tenant audits/disputes during the three months ended June 30, 2018 and 2017, respectively, and $0.4 million and $0.3 million of such reductions in reimbursement revenues related to such tenant audits/disputes during the six months ended June 30, 2018 and 2017, respectively. |
Assets Held for Sale |
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Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets Held for Sale | Assets Held for Sale As of June 30, 2018, no properties met the criteria for held for sale classification. However, during the six months ended June 30, 2018, Piedmont sold a portfolio of 14 properties (the "2017 Disposition Portfolio"). As of December 31, 2017, the 2017 Disposition Portfolio met the criteria for held for sale classification, and such properties are shown as held for sale as of December 31, 2017 in the consolidated balance sheet. Details of assets held for sale as of June 30, 2018 and December 31, 2017 are presented below (in thousands):
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Stock Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation | Stock Based Compensation The Compensation Committee of Piedmont's Board of Directors has periodically granted deferred stock awards to all of Piedmont's employees and independent directors. Employee awards typically vest ratably over a multi-year period and independent director awards vest over one year. Certain employees' long-term equity incentive program is split equally between the time-vested awards described above and a multi-year performance share program whereby the actual awards are contingent upon Piedmont's total stockholder return ("TSR") relative to a peer group's TSR. The peer group is predetermined by the Board of Directors. Any shares earned are awarded at the end of the multi-year performance period and vest upon award. A rollforward of Piedmont's equity based award activity for the six months ended June 30, 2018 is as follows:
The following table provides additional information regarding stock award activity during the three and six months ended June 30, 2018 and 2017, respectively (in thousands, except per share amounts):
A detail of Piedmont’s outstanding stock awards as of June 30, 2018 is as follows:
During the three months ended June 30, 2018 and 2017, Piedmont recognized approximately $4.0 million and $2.6 million of compensation expense related to stock awards, of which $2.6 million and $1.1 million is related to the amortization of unvested shares, respectively. During the six months ended June 30, 2018 and 2017, Piedmont recognized approximately $5.0 million and $5.7 million of compensation expense related to stock awards, of which $3.9 million and $4.2 million is related to the amortization of unvested shares, respectively. During the six months ended June 30, 2018, a net total of 354,526 shares were issued to employees. As of June 30, 2018, approximately $6.3 million of unrecognized compensation cost related to unvested deferred stock awards remained, which Piedmont will record in its consolidated statements of income over a weighted-average vesting period of approximately two years. |
Supplemental Disclosures for the Statement of Consolidated Cash Flows |
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Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosures for the Statement of Consolidated Cash Flows | Supplemental Disclosures for the Statement of Consolidated Cash Flows Certain noncash investing and financing activities for the six months ended June 30, 2018 and 2017, (in thousands) are outlined below:
The following table provides a reconciliation of cash, cash equivalents, and restricted cash and escrows as reported, or previously reported, within the consolidated balance sheet to the consolidated statement of cash flows as of the six months ended June 30, 2018 and 2017, respectively (in thousands).
Amounts in real estate tax and escrowed cash represent deposits which are required by Piedmont’s lenders under certain of its debt agreements to escrow amounts for the payment of real estate taxes, and other amounts escrowed, for instance, earnest money deposited for the purchase of a property. Security and utility deposit escrows represent the cash held for tenants and/or Piedmont for lease related deposits. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share There are no adjustments to “Net income applicable to Piedmont” for the diluted earnings per share computations. Net income per share-basic is calculated as net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Net income per share-diluted is calculated as net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during the period, including unvested deferred stock awards. Diluted weighted average number of common shares reflects the potential dilution under the treasury stock method that would occur if the remaining unvested deferred stock awards vested and resulted in additional common shares outstanding. Unvested deferred stock awards which are determined to be anti-dilutive are not included in the calculation of diluted weighted average common shares. The following table reconciles the denominator for the basic and diluted earnings per share computations shown on the consolidated statements of income for the three and six months ended June 30, 2018 and 2017, respectively (in thousands):
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Guarantor and Non-Guarantor Financial Information |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor and Non-Guarantor Financial Information | Guarantor and Non-Guarantor Financial Information The following condensed consolidating financial information for Piedmont (the "Parent", "Guarantor", and/or "Consolidated"), Piedmont OP (the "Issuer"), and the other directly and indirectly owned subsidiaries of Piedmont as the Guarantor (the "Non-Guarantors") is provided pursuant to the requirements of Rule 3-10 of Regulation S-X regarding financial statements of guarantors and issuers of guaranteed registered securities. The Issuer is a wholly-owned subsidiary of the Guarantor, and all guarantees by the Guarantor of securities issued by the Issuer are full and unconditional. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Non-Guarantors.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Third Quarter Dividend Declaration On August 1, 2018, the Board of Directors of Piedmont declared dividends for the third quarter 2018 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on August 31, 2018. Such dividends are to be paid on September 21, 2018. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | The consolidated financial statements of Piedmont have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of a full year’s results. |
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Principles of Consolidation | Piedmont’s consolidated financial statements include the accounts of Piedmont, Piedmont’s wholly-owned subsidiaries, any variable interest entity ("VIE") for which Piedmont or any of its wholly-owned subsidiaries is considered to have the power to direct the activities of the entity and the obligation to absorb losses/right to receive benefits, or any entity in which Piedmont or any of its wholly-owned subsidiaries owns a controlling interest. In determining whether Piedmont or Piedmont OP has a controlling interest, the following factors, among others, are considered: equity ownership, voting rights, protective rights of investors, and participatory rights of investors. For further information, refer to the financial statements and footnotes included in Piedmont’s Annual Report on Form 10-K for the year ended December 31, 2017. All intercompany balances and transactions have been eliminated upon consolidation. Further, Piedmont has formed special purpose entities to acquire and hold real estate. Each special purpose entity is a separate legal entity. Consequently, the assets of these special purpose entities are not available to all creditors of Piedmont. The assets owned by these special purpose entities are being reported on a consolidated basis with Piedmont’s assets for financial reporting purposes only. |
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Use of Estimates | Use of Estimates The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from those estimates. |
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Income Taxes | Income Taxes Piedmont has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and has operated as such, beginning with its taxable year ended December 31, 1998. To qualify as a REIT, Piedmont must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income. As a REIT, Piedmont is generally not subject to federal income taxes, subject to fulfilling, among other things, its taxable income distribution requirement. Piedmont is subject to certain taxes related to the operations of properties in certain locations, as well as operations conducted by its taxable REIT subsidiary, POH, which have been provided for in the financial statements. Tax Cuts and Jobs Act The Tax Cuts and Jobs Act ("H.R. 1"), which generally took effect for taxable years that began on or after January 1, 2018 (subject to certain exceptions), made many significant changes to the U.S. federal income tax laws that will profoundly impact the taxation of individuals and corporations (including both regular C corporations and corporations that have elected to be taxed as REITs). For example, H.R. 1 limits the ability of corporations to utilize net operating loss carryforwards and limits the deductibility of business interest for all taxpayers, subject to an exception for taxpayers that are engaged in certain specified real property trades or business who make an irrevocable election not to apply the limitation to a particular real property trade or business and to depreciate their real property investments held in such trade or business using the less favorable alternative depreciation system. To date, the IRS has issued limited guidance with respect to certain of the provisions of H.R. 1, and there are numerous interpretive issues that will require guidance. In addition, changes made by H.R. 1 may require Piedmont to accrue certain income for U.S. federal income tax purposes no later than when such income is taken into account as revenue on its GAAP-based financial statements, unless the income is already subject to certain special methods of accounting under the Code. This could cause Piedmont to recognize taxable income prior to the receipt of the associated cash and accordingly, increase its distribution levels in order to maintain its status as a REIT. H.R. 1 also includes limitations on the deductibility of certain compensation paid to Piedmont's executives, certain interest payments, and certain net operating loss carryforwards, each of which could potentially increase Piedmont's taxable income and its required distributions. Piedmont recorded an approximate $0.2 million reduction to its tax liability related to its taxable REIT subsidiary as a result of the rate reduction included in H.R. 1 during the six months ended June 30, 2018. Although management is still evaluating the other effects of H.R. 1, Piedmont does not believe that H.R. 1 will significantly impact its financial statements. |
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Reclassifications | Reclassifications Certain prior period amounts presented in the accompanying consolidated statements of income have been reclassified to conform to the current period financial statement presentation. These amounts included: (i) the reclassification of approximately $5.5 million and $10.6 million for the three and six months ended June 30, 2017, respectively, of parking, antennae license and fiber income that was previously included in rental income into other property related income, as well as certain other miscellaneous revenue into tenant reimbursements and/or property management fee revenue in conjunction with the adoption of the Revenue Recognition Amendments, as further defined and described below; and (ii) the reclassification of $0.5 million and $1.0 million for the three and six months ended June 30, 2017, respectively, of expense related to certain regional employees who are primarily engaged in the operation and management of properties that was previously included in general and administrative expense to property operating costs. |
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Recent Accounting Pronouncements | Accounting Pronouncements Adopted during the Six Months Ended June 30, 2018 Revenue Recognition On January 1, 2018, Piedmont adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09") and Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606) Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08") issued by the Financial Accounting Standards Board (the "FASB"). The amendments in ASU 2014-09, which are further clarified in ASU 2016-08, as well as Accounting Standards Update 2016-10, Accounting Standards Update 2016-12, and Accounting Standards Update 2016-20 (collectively the "Revenue Recognition Amendments") change the criteria for the recognition of certain revenue streams to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services using a five-step determination process. Piedmont's revenues which are included in the scope of the Revenue Recognition Amendments include its property management fee revenue, the majority of its parking revenue, as well as certain license agreements which allow third-parties to place their antennas or fiber-optic cabling on or inside Piedmont's buildings. Lease contracts are specifically excluded from the Revenue Recognition Amendments and, Piedmont intends to utilize a leasing practical expedient, which has been tentatively approved by the FASB, to group certain non-lease components related to operating expense reimbursements with other leasing components, provided they meet certain criteria. Because the timing and pattern of transfer of Piedmont's non-lease related revenue already followed the prescribed method of the Revenue Recognition Amendments, Piedmont was able to effectively adopt these amendments on a full retrospective basis, with no impact to the timing of recognition of the related revenue; however, such non-lease revenues are now being presented as "Other property related income" in the accompanying consolidated statements of income. Further, for comparative purposes, Piedmont reclassified approximately $5.5 million and $10.6 million for the three and six months ended June 30, 2017, respectively, of parking, antennae license, and fiber income that was previously included in rental income into other property related income, as well as certain other miscellaneous revenue into tenant reimbursements and/or property management fee revenue. Piedmont did not elect to adopt any practical expedients provided by the Revenue Recognition Amendments. A detail of Piedmont's total revenues for the three months ended June 30, 2018 and 2017 (after reclassifications as a result of the adoption of the Revenue Recognition Amendments), including a detailed description of each line item is as follows:
Rental income - consists of revenue from leases with Piedmont's tenants, which is not within the scope of the Revenue Recognition Amendments. Tenant reimbursements - consists of revenue derived from reimbursements for services prescribed by leases with Piedmont's tenants separate from, but in conjunction with, the revenue generated from leasing office space. Such income is not within the scope of the Revenue Recognition Amendments. Property management fee revenue - consists of revenue earned by Piedmont related to operating and managing office properties owned by other third-parties. Such income is within the scope of the Revenue Recognition Amendments; however, because the property management services represent a performance obligation that would be satisfied over the length of the contract, not at any specific point in time, and has the same measure of transfer (time elapsed), property management fee revenue will be recognized over time, consistent with the timing of Piedmont’s historic recognition. Any variable consideration transferred as part of these management agreements will continue to be recognized in the quarter that the underlying cash receipts are collected, consistent with the allocation objective of allocating the transaction price in an amount that depicts the amount of consideration to which Piedmont expects to be entitled in exchange for transferring the promised service to the customer. Other property related income - consists of all other property related income from Piedmont's customers (tenants) that is not derived from a contract meeting the definition of a lease. Examples of such income include parking revenue and income from licenses with unrelated third-parties to place antennae and/or fiber optic cables in or on Piedmont's buildings. Since these services are substantially the same and have the same pattern of transfer, there is no timing difference between the recognition of other property related income and the recognition of the underlying expense/delivery of “service” under the new Revenue Recognition Amendments. Additionally, no modification to the timing of Piedmont’s previous revenue recognition is necessary, as these items have been recognized historically in accordance with this pattern of transfer. Gain/(loss) on Sale of Real Estate Assets On January 1, 2018, Piedmont adopted Accounting Standards Update No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05") concurrent with the Revenue Recognition Amendments mentioned above. Piedmont elected to apply the amendments of ASU 2017-05 on a full retrospective basis; however, there were no adjustments to previously recorded gains/(losses) on sale of real estate as a result of the transition. Equity Investments Held in Non-qualified Deferred Compensation Plan On January 1, 2018, Piedmont adopted Accounting Standards Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), as well as Accounting Standards Update No. 2018-03 Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10) ("ASU 2018-03"). These amendments require equity investments, except those accounted for under the equity method of accounting, to be measured at estimated fair value with changes in fair value recognized in net income. Investments in trading securities held in a "rabbi trust" by Piedmont are the only securities affected by ASU 2016-01 and ASU 2018-03. As such, Piedmont has made a cumulative-effect adjustment to its consolidated balance sheet and consolidated statements of stockholders' equity of approximately $0.1 million from other comprehensive income to cumulative distributions in excess of earnings, and has recorded changes in fair value in net income for the three and six months ended June 30, 2018 related to these investment securities. Interest Rate Derivatives On January 1, 2018, Piedmont early adopted Accounting Standards Update No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). Piedmont adopted ASU 2017-12 using the modified retrospective transition method; however, no adjustment was necessary to account for the cumulative effect of the change on the opening balance of each affected component of equity in the consolidated balance sheet as of the date of adoption because there was no cumulative ineffectiveness that had been recorded on Piedmont's existing interest rate swaps as of December 31, 2017, and all other trades were perfectly effective. The amended presentation and disclosure guidance which is required to be presented prospectively is provided in Note 6. Other Recent Accounting Pronouncements The FASB has issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which fundamentally changes the definition of a lease, as well as the accounting for operating leases by requiring lessees to recognize assets and liabilities which arise from the lease, consisting of a liability to make lease payments (the lease liability) and a right-of-use asset, representing the right to use the leased asset over the term of the lease. Accounting for leases by lessors is substantially unchanged from prior practice as lessors will continue to recognize lease revenue on a straight-line basis. Additionally, Accounting Standards Update No. 2018-11, Leases (Topic 842) Targeted Improvements ("ASU 2018-11") issued by the FASB allows certain non-lease operating expense reimbursements to be accounted for as part of the lease provided certain criteria are met under an optional practical expedient. Further, the FASB has issued Accounting Standards Update No. 2018-01 Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic 842 ("ASU 2018-01"). The amendments to ASU No. 2018-01 clarify that a land easement is required to be evaluated to determine whether it should be accounted for as a lease upon adoption of ASU 2016-02, and provides an optional practical transition expedient allowing entities not currently assessing land easements under existing leasing guidance prior to adoption of ASU 2016-02 to not apply the new guidance to land easements existing at the date of initial adoption of ASU 2016-02. The amendments in ASU 2016-02, ASU 2018-01, and ASU 2018-11 are effective in the first quarter of 2019. Although management continues to evaluate the guidance and disclosures required by these amendments, Piedmont does not anticipate any material impact to its consolidated financial statements as a result of adoption related to lessor accounting. However, Piedmont does expect to record a right-to-use asset and related liability under lessee accounting, and Piedmont is still evaluating the potential impact of such lessee accounting. The FASB has issued Accounting Standards Update No. 2018-07, Stock Compensation (Topic 718), Improvements to NonEmployee Share-Based Payment Accounting ("ASU 2018-07"). The provisions of ASU 2018-07 align accounting for stock based compensation for non-employees for goods and services with existing accounting for similar compensation for employees. The amendments supersede previous guidance on accounting for share-based payments to non-employees codified in the FASB's Accounting Standards Codification ("ASC") 505-50. ASU 2018-07 is effective in the first quarter of 2019, with early adoption permitted at any time provided that the entity has already adopted the provisions of ASC 606. Piedmont does not anticipate any material impact to its consolidated financial statements as a result of adoption. The FASB has issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The provisions of ASU 2016-13 replace the "incurred loss" approach with an "expected loss" model for impairing trade and other receivables, held-to-maturity debt securities, net investment in leases, and off-balance-sheet credit exposures, which will generally result in earlier recognition of allowances for credit losses. Additionally, the provisions change the classification of credit losses related to available-for-sale securities to an allowance, rather than a direct reduction of the amortized cost of the securities. ASU 2016-13 is effective in the first quarter of 2020, with early adoption permitted as of January 1, 2019. Piedmont is currently evaluating the potential impact of adoption. |
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Risk Management Objective of Using Derivatives | Risk Management Objective of Using Derivatives In addition to operational risks which arise in the normal course of business, Piedmont is exposed to economic risks such as interest rate, liquidity, and credit risk. In certain situations, Piedmont has entered into derivative financial instruments such as interest rate swap agreements and other similar agreements to manage interest rate risk exposure arising from current or future variable rate debt transactions. Interest rate swap agreements involve the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Piedmont’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | A detail of Piedmont's total revenues for the three months ended June 30, 2018 and 2017 (after reclassifications as a result of the adoption of the Revenue Recognition Amendments), including a detailed description of each line item is as follows:
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Acquisitions (Tables) |
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Schedule of Purchased Assets | During the six months ended June 30, 2018, Piedmont acquired one property using proceeds available as a result of dispositions (see Note 9) in January 2018 and cash on hand, as noted below:
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Debt (Tables) |
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | The following table summarizes the terms of Piedmont’s indebtedness outstanding as of June 30, 2018 and December 31, 2017 (in thousands):
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Variable Interest Entities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Entities | A summary of Piedmont’s interests in its consolidated VIEs and their related carrying values as of June 30, 2018 and December 31, 2017 is as follows (net carrying amount in millions):
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Derivative Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Notional Amounts of Outstanding Derivative Positions | A detail of Piedmont’s interest rate derivatives outstanding as of June 30, 2018 is as follows:
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Schedule of Interest Rate Derivatives | A detail of Piedmont’s interest rate derivatives on a gross and net basis as of June 30, 2018 and December 31, 2017, respectively, is as follows (in thousands):
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Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) | The gain/(loss) on Piedmont's interest rate derivatives, including previously settled forward swaps, that was recorded in OCI and the accompanying consolidated statements of income as a component of interest expense for the three and six months ended June 30, 2018 and 2017, respectively, was as follows (in thousands):
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Fair Value Measurement of Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, by Balance Sheet Grouping | The following table sets forth the carrying and estimated fair value for each of Piedmont’s financial instruments, as well as its level within the GAAP fair value hierarchy, as of June 30, 2018 and December 31, 2017, respectively (in thousands):
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Assets Held for Sale (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Held for Sale | Details of assets held for sale as of June 30, 2018 and December 31, 2017 are presented below (in thousands):
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Stock Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Nonvested Share Activity | A rollforward of Piedmont's equity based award activity for the six months ended June 30, 2018 is as follows:
The following table provides additional information regarding stock award activity during the three and six months ended June 30, 2018 and 2017, respectively (in thousands, except per share amounts):
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Schedule of Outstanding Employee Stock Awards | A detail of Piedmont’s outstanding stock awards as of June 30, 2018 is as follows:
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Supplemental Disclosures for the Statement of Consolidated Cash Flows (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Flow, Supplemental Disclosures | Certain noncash investing and financing activities for the six months ended June 30, 2018 and 2017, (in thousands) are outlined below:
The following table provides a reconciliation of cash, cash equivalents, and restricted cash and escrows as reported, or previously reported, within the consolidated balance sheet to the consolidated statement of cash flows as of the six months ended June 30, 2018 and 2017, respectively (in thousands).
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Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares | The following table reconciles the denominator for the basic and diluted earnings per share computations shown on the consolidated statements of income for the three and six months ended June 30, 2018 and 2017, respectively (in thousands):
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Guarantor and Non-Guarantor Financial Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Balance Sheets |
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Condensed Consolidated Statements of Income |
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Condensed Statement of Comprehensive Income |
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Condensed Consolidated Statements of Cash Flows |
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Organization (Details) ft² in Millions |
6 Months Ended |
---|---|
Jun. 30, 2018
ft²
segment
subsidiary
property
asset
market
| |
Real Estate Properties [Line Items] | |
Number of wholly-owned subsidiaries | subsidiary | 2 |
Percentage ownership by sole general partner | 99.90% |
Percentage ownership by sole limited partner | 0.10% |
Number of redevelopment assets | asset | 1 |
Percentage of annualized lease revenue | 91.00% |
Number of operating segments | segment | 1 |
U.S. | |
Real Estate Properties [Line Items] | |
Number of major U.S. office markets | market | 8 |
In Service Office Properties | |
Real Estate Properties [Line Items] | |
Number of real estate properties | property | 53 |
Square footage of real estate property | ft² | 16.2 |
Percentage leased | 90.60% |
Summary of Significant Accounting Policies - Revenue Recognition Amendments (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Accounting Policies [Abstract] | ||||
Rental income | $ 101,478 | $ 118,492 | $ 202,932 | $ 236,531 |
Tenant reimbursements | 22,047 | 24,285 | 45,041 | 49,122 |
Property management fee revenue | 382 | 400 | 691 | 925 |
Other property related income | 5,267 | 5,502 | 10,410 | 10,564 |
Total revenues | $ 129,174 | $ 148,679 | $ 259,074 | $ 297,142 |
Acquisitions (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
ft²
building
| |
Business Acquisition [Line Items] | |
Properties acquired | building | 1 |
501 West Church Street | |
Business Acquisition [Line Items] | |
Ownership Percentage Acquired | 100.00% |
Rentable Square Feet | ft² | 182,461 |
Percentage Leased as of Acquisition | 100.00% |
Net Contractual Purchase Price (in millions) | $ | $ 28.0 |
Variable Interest Entities (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Eye Street 1201 N.W. Associates LLC | ||
Variable Interest Entity [Line Items] | ||
Piedmont's % | 98.60% | |
Net Carrying Amount | $ 87.5 | $ 81.1 |
Percent of cash flow entitled to entity | 100.00% | |
Eye Street 1225 N.W. Associates LLC | ||
Variable Interest Entity [Line Items] | ||
Piedmont's % | 98.10% | |
Net Carrying Amount | $ 64.5 | 65.2 |
Percent of cash flow entitled to entity | 100.00% | |
Piedmont 500 W. Monroe Fee LLC | ||
Variable Interest Entity [Line Items] | ||
Piedmont's % | 100.00% | |
Net Carrying Amount | $ 256.5 | $ 263.2 |
Percent of cash flow entitled to entity | 100.00% |
Commitments and Contingencies (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018
USD ($)
category
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
category
|
Jun. 30, 2017
USD ($)
|
|
Loss Contingencies [Line Items] | ||||
Number of tenant and building improvement categories | category | 2 | 2 | ||
Collectibility of Tenant Reimbursements | ||||
Loss Contingencies [Line Items] | ||||
Reductions in reimbursement revenues | $ 0 | $ 20,000 | $ 400,000 | $ 300,000 |
Non-Incremental Capital Expenditures | ||||
Loss Contingencies [Line Items] | ||||
Period for commitments for funding non-incremental capital expenditures | 5 years | |||
Potential obligations for tenant improvements | 40,000,000 | $ 40,000,000 | ||
Non-Incremental Capital Expenditures | Maximum | ||||
Loss Contingencies [Line Items] | ||||
Period for commitments for funding non-incremental capital expenditures | 3 years | |||
Incremental Capital Expenditures | ||||
Loss Contingencies [Line Items] | ||||
Potential obligations for tenant improvements | $ 11,800,000 | $ 11,800,000 |
Stock Based Compensation (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation expense related to stock awards | $ 4.0 | $ 2.6 | $ 5.0 | $ 5.7 |
Compensation expense, non-vested awards | 2.6 | $ 1.1 | $ 3.9 | $ 4.2 |
Total shares issued to employees, directors, and officers (in shares) | 354,526 | |||
Unrecognized compensation cost related to nonvested | $ 6.3 | $ 6.3 | ||
Weighted Average | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Unrecognized compensation cost related to nonvested, weighted-average vesting period | 2 years | |||
Stock Awards | Board of Directors | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period | 1 year |
Stock Based Compensation (Additional Information Regarding Stock Award Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Deferred Stock Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted-Average Grant Date Fair Value of Deferred Stock Granted During the Period (in dollars per share) | $ 17.84 | $ 21.38 | $ 17.84 | $ 21.38 |
Total Grant Date Fair Value of Deferred Stock Vested During the Period | $ 5,639 | $ 5,551 | $ 6,363 | $ 5,841 |
Performance Share Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Liability Awards Paid During the Period | $ 0 | $ 0 | $ 2,947 | $ 2,877 |
Supplemental Disclosures for the Statement of Consolidated Cash Flows (Details) - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Supplemental Cash Flow Elements [Abstract] | ||||
Accrued capital expenditures and deferred lease costs | $ 8,920 | $ 9,417 | ||
Change in accrued dividends and discount on dividend reinvestments | (101,800) | (30,532) | ||
Change in accrued share repurchases as part of an announced plan | (1,277) | 0 | ||
Cash and cash equivalents | 8,944 | 9,596 | $ 7,382 | $ 6,992 |
Restricted cash and escrows | 1,415 | 1,290 | 1,373 | 1,212 |
Total cash, cash equivalents, and restricted cash and escrows shown in the consolidated statement of cash flows | $ 10,359 | $ 10,886 | $ 8,755 | $ 8,204 |
Earnings Per Share (Details) - shares |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Earnings Per Share [Abstract] | |||||
Weighted-average common shares outstanding – basic (in shares) | 128,346,433 | 145,412,524 | 132,090,741 | 145,350,074 | |
Plus: Incremental weighted-average shares from time-vested deferred and performance stock awards (in shares) | 355,000 | 400,000 | 341,000 | 430,000 | |
Weighted-average common shares outstanding – diluted (in shares) | 128,700,743 | 145,813,130 | 132,431,642 | 145,779,709 | |
Common stock, shares issued (in shares) | 128,370,913 | 145,490,000 | 128,370,913 | 145,490,000 | 142,358,940 |
Common stock, shares outstanding (in shares) | 128,370,913 | 145,490,000 | 128,370,913 | 145,490,000 | 142,358,940 |
Subsequent Events (Details) |
Aug. 01, 2018
$ / shares
|
---|---|
Subsequent Event | |
Subsequent Event [Line Items] | |
Dividends declared (in dollars per share) | $ 0.21 |
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