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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934
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Maryland
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58-2328421
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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Large Accelerated filer
x
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Accelerated filer
o
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Non-Accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Page No.
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PART I.
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Financial Statements
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II.
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Other Information
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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•
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The success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions;
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•
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If current market and economic conditions do not improve, our business, results of operations, cash flows, financial condition, real estate and other asset values, and access to capital may be adversely affected or otherwise impact performance, including the potential recognition of impairment charges;
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•
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Lease terminations or lease defaults, particularly by one of our large lead tenants;
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•
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The impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases;
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•
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Changes in the economies and other conditions of the office market in general and of the specific markets in which we operate, particularly in Chicago, Washington, D.C., and the New York metropolitan area;
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•
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Economic and regulatory changes, including accounting standards, that impact the real estate market generally;
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•
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Additional risks and costs associated with directly managing properties occupied by government tenants;
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•
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Adverse market and economic conditions may continue to adversely affect us and could cause us to recognize impairment charges or otherwise impact our performance;
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•
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Availability of financing and our lending banks’ ability to honor existing line of credit commitments;
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•
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Costs of complying with governmental laws and regulations;
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•
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Uncertainties associated with environmental and other regulatory matters;
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•
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Piedmont’s ability to continue to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended; and
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•
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Other factors, including the risk factors discussed under Item 1A. of Piedmont’s Annual Report on Form 10-K for the year ended
December 31, 2010
.
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ITEM 1.
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CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
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September 30,
2011 |
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December 31,
2010 |
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Assets:
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Real estate assets, at cost:
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Land
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$
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637,656
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$
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592,080
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Buildings and improvements, less accumulated depreciation of $766,163 and
$707,314 as of September 30, 2011 and December 31, 2010, respectively
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2,955,186
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2,779,652
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Intangible lease assets, less accumulated amortization of $118,574 and $125,193 as of
September 30, 2011 and December 31, 2010, respectively
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88,047
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68,227
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|
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Construction in progress
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16,853
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|
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8,591
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Real estate assets held for sale, net
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228,896
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228,278
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Total real estate assets
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3,926,638
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3,676,828
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Investments in unconsolidated joint ventures
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38,391
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42,018
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Cash and cash equivalents
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16,128
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56,718
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Tenant receivables, net of allowance for doubtful accounts of $809 and $1,298 as of
September 30, 2011 and December 31, 2010, respectively
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131,094
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123,269
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|
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Notes receivable
|
—
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61,144
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Due from unconsolidated joint ventures
|
643
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1,158
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Restricted cash and escrows
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36,300
|
|
|
814
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Prepaid expenses and other assets
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13,978
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11,249
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Goodwill
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180,097
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|
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180,097
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Deferred financing costs, less accumulated amortization of $8,611 and $11,740 as of
September 30, 2011 and December 31, 2010, respectively
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4,739
|
|
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5,240
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|
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Deferred lease costs, less accumulated amortization of $115,633 and $111,671 as of
September 30, 2011 and December 31, 2010, respectively
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217,757
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165,001
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Other assets held for sale
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47,353
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|
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49,944
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Total assets
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$
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4,613,118
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$
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4,373,480
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Liabilities:
|
|
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||||
Line of credit and notes payable
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$
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1,544,525
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$
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1,282,525
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Accounts payable, accrued expenses, and accrued capital expenditures
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143,106
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112,648
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Deferred income
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32,514
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35,203
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Intangible lease liabilities, less accumulated amortization of $65,496 and $60,850 as of
September 30, 2011 and December 31, 2010, respectively
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51,599
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42,005
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Interest rate swap
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—
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691
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Notes payable and other liabilities held for sale
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124,451
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126,954
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Total liabilities
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1,896,195
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1,600,026
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Commitments and Contingencies
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Stockholders’ Equity:
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||||
Shares-in-trust, 150,000,000 shares authorized; none outstanding as of September 30, 2011 or December 31, 2010
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—
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—
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Preferred stock, no par value, 100,000,000 shares authorized; none outstanding as of September 30, 2011 or December 31, 2010
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—
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—
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Common stock, $.01 par value, 750,000,000 shares authorized; 172,826,991 and 172,658,489 shares issued and outstanding as of September 30, 2011 and
December 31, 2010, respectively (Note 12 )
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1,728
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1,727
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Additional paid-in capital
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3,663,155
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3,661,308
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Cumulative distributions in excess of earnings
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(952,370
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)
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(895,122
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)
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Other comprehensive loss
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—
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(691
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)
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Piedmont stockholders’ equity
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2,712,513
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2,767,222
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Noncontrolling interest
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1,613
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1,609
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Noncontrolling interest held for sale
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2,797
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4,623
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Total stockholders’ equity
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2,716,923
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2,773,454
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Total liabilities and stockholders’ equity
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$
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4,613,118
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$
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4,373,480
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(Unaudited)
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(Unaudited)
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||||||||||||
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Three Months Ended
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Nine Months Ended
|
||||||||||||
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September 30,
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September 30,
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||||||||||||
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2011
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2010
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2011
|
|
2010
|
||||||||
Revenues:
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Rental income
|
$
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105,878
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$
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102,097
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$
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311,760
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$
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306,238
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Tenant reimbursements
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28,459
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26,983
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|
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86,368
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|
84,100
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|
||||
Property management fee revenue
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110
|
|
|
806
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|
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1,303
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|
2,265
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|
||||
Other rental income
|
(33
|
)
|
|
4,230
|
|
|
4,718
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|
|
5,205
|
|
||||
|
134,414
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|
|
134,116
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|
|
404,149
|
|
|
397,808
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|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Property operating costs
|
51,062
|
|
|
44,417
|
|
|
153,258
|
|
|
143,416
|
|
||||
Depreciation
|
26,375
|
|
|
24,317
|
|
|
77,748
|
|
|
72,264
|
|
||||
Amortization
|
14,907
|
|
|
9,302
|
|
|
39,411
|
|
|
28,215
|
|
||||
General and administrative
|
4,673
|
|
|
6,595
|
|
|
18,631
|
|
|
20,790
|
|
||||
|
97,017
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|
|
84,631
|
|
|
289,048
|
|
|
264,685
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|
||||
Real estate operating income
|
37,397
|
|
|
49,485
|
|
|
115,101
|
|
|
133,123
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(16,236
|
)
|
|
(15,777
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)
|
|
(49,638
|
)
|
|
(50,687
|
)
|
||||
Interest and other (expense)/income
|
(91
|
)
|
|
993
|
|
|
3,130
|
|
|
2,996
|
|
||||
Equity in income of unconsolidated joint ventures
|
485
|
|
|
619
|
|
|
1,032
|
|
|
2,003
|
|
||||
Gain on consolidation of variable interest entity
|
—
|
|
|
—
|
|
|
1,532
|
|
|
—
|
|
||||
|
(15,842
|
)
|
|
(14,165
|
)
|
|
(43,944
|
)
|
|
(45,688
|
)
|
||||
Income from continuing operations
|
21,555
|
|
|
35,320
|
|
|
71,157
|
|
|
87,435
|
|
||||
Discontinued operations:
|
|
|
|
|
|
|
|
||||||||
Operating income
|
2,719
|
|
|
5,268
|
|
|
8,119
|
|
|
13,843
|
|
||||
Impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,587
|
)
|
||||
Gain on sale of real estate assets
|
26,756
|
|
|
—
|
|
|
26,756
|
|
|
—
|
|
||||
Income from discontinued operations
|
29,475
|
|
|
5,268
|
|
|
34,875
|
|
|
4,256
|
|
||||
Net income
|
51,030
|
|
|
40,588
|
|
|
106,032
|
|
|
91,691
|
|
||||
Less: Net income attributable to noncontrolling interest
|
(4
|
)
|
|
(4
|
)
|
|
(12
|
)
|
|
(12
|
)
|
||||
Net income attributable to Piedmont
|
$
|
51,026
|
|
|
$
|
40,584
|
|
|
$
|
106,020
|
|
|
$
|
91,679
|
|
Per share information – basic:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
0.13
|
|
|
$
|
0.21
|
|
|
$
|
0.41
|
|
|
$
|
0.51
|
|
Income from discontinued operations
|
0.17
|
|
|
0.03
|
|
|
0.20
|
|
|
0.03
|
|
||||
Net income available to common stockholders
|
$
|
0.30
|
|
|
$
|
0.24
|
|
|
$
|
0.61
|
|
|
$
|
0.54
|
|
Per share information – diluted:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
0.12
|
|
|
$
|
0.20
|
|
|
$
|
0.41
|
|
|
$
|
0.51
|
|
Income from discontinued operations
|
0.17
|
|
|
0.03
|
|
|
0.20
|
|
|
0.03
|
|
||||
Net income available to common stockholders
|
$
|
0.29
|
|
|
$
|
0.23
|
|
|
$
|
0.61
|
|
|
$
|
0.54
|
|
Weighted-average common shares outstanding – basic
|
172,826,869
|
|
|
172,658,489
|
|
|
172,755,805
|
|
|
170,110,216
|
|
||||
Weighted-average common shares outstanding – diluted
|
173,045,192
|
|
|
172,885,438
|
|
|
172,995,849
|
|
|
170,257,076
|
|
|
Common Stock
(1)
|
|
Additional
Paid-In
Capital
|
|
Cumulative
Distributions
in Excess of
Earnings
|
|
Redeemable
Common
Stock
|
|
Other
Comprehensive
Loss
|
|
Non-
controlling
Interest
|
|
Total
Stockholders’
Equity
|
|||||||||||||||||
|
Shares
|
|
Amount
|
|
||||||||||||||||||||||||||
Balance, December 31, 2009
|
158,917
|
|
|
$
|
1,589
|
|
|
$
|
3,477,168
|
|
|
$
|
(798,561
|
)
|
|
$
|
(75,164
|
)
|
|
$
|
(3,866
|
)
|
|
$
|
5,716
|
|
|
$
|
2,606,882
|
|
Net proceeds from issuance of common stock
|
13,800
|
|
|
138
|
|
|
184,266
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
184,404
|
|
|||||||
Redemption of fractional shares of common stock
|
(200
|
)
|
|
(2
|
)
|
|
(2,900
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,902
|
)
|
|||||||
Change in redeemable common stock outstanding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75,164
|
|
|
—
|
|
|
—
|
|
|
75,164
|
|
|||||||
Dividends to common stockholders ($1.26 per share), distributions to noncontrolling interest, and dividends reinvested
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
(216,940
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(216,988
|
)
|
|||||||
Shares issued under the 2007 Omnibus Incentive Plan, net of tax
|
141
|
|
|
2
|
|
|
2,807
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,809
|
|
|||||||
Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
531
|
|
|
531
|
|
|||||||
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
120,379
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
120,379
|
|
|||||||
Net change in interest rate swap
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,175
|
|
|
—
|
|
|
3,175
|
|
|||||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,554
|
|
||||||||||||||
Balance, December 31, 2010
|
172,658
|
|
|
1,727
|
|
|
3,661,308
|
|
|
(895,122
|
)
|
|
—
|
|
|
(691
|
)
|
|
6,232
|
|
|
2,773,454
|
|
|||||||
Offering costs associated with issuance of common stock
|
—
|
|
|
—
|
|
|
(479
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(479
|
)
|
|||||||
Dividends to common stockholders ($0.945 per share), distributions to noncontrolling interest, and dividends reinvested
|
—
|
|
|
—
|
|
|
(168
|
)
|
|
(163,268
|
)
|
|
—
|
|
|
—
|
|
|
(2,200
|
)
|
|
(165,636
|
)
|
|||||||
Shares issued under the 2007 Omnibus Incentive Plan, net of tax
|
169
|
|
|
1
|
|
|
2,494
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,495
|
|
|||||||
Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
378
|
|
|
378
|
|
|||||||
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
106,020
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106,020
|
|
|||||||
Net change in interest rate derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
691
|
|
|
—
|
|
|
691
|
|
|||||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106,711
|
|
|||||||
Balance, September 30, 2011
|
172,827
|
|
|
$
|
1,728
|
|
|
$
|
3,663,155
|
|
|
$
|
(952,370
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,410
|
|
|
$
|
2,716,923
|
|
(1)
|
See Note 12 for further detail regarding Piedmont's conversion of Common Stock.
|
|
(Unaudited)
|
||||||
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2011
|
|
2010
|
||||
Cash Flows from Operating Activities:
|
|
|
|
||||
Net income
|
$
|
106,032
|
|
|
$
|
91,691
|
|
Operating distributions received from unconsolidated joint ventures
|
2,289
|
|
|
3,379
|
|
||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Income attributable to noncontrolling interest- discontinued operations
|
366
|
|
|
397
|
|
||
Depreciation
|
82,660
|
|
|
77,804
|
|
||
Amortization of deferred financing costs, fair market value adjustments on notes payable, and interest rate cap agreements
|
4,126
|
|
|
1,996
|
|
||
Other amortization
|
43,316
|
|
|
31,964
|
|
||
Impairment loss
|
—
|
|
|
9,587
|
|
||
Accretion of notes receivable discount
|
(482
|
)
|
|
(1,928
|
)
|
||
Stock compensation expense
|
2,975
|
|
|
2,458
|
|
||
Equity in income of unconsolidated joint ventures
|
(1,032
|
)
|
|
(2,003
|
)
|
||
Gain on sale of real estate assets
|
(26,756
|
)
|
|
—
|
|
||
Gain on consolidation of variable interest entity
|
(1,532
|
)
|
|
—
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Increase in tenant receivables, net
|
(9,690
|
)
|
|
(1,578
|
)
|
||
Increase in restricted cash and escrows
|
(15,792
|
)
|
|
(7,819
|
)
|
||
Increase in prepaid expenses and other assets
|
(4,864
|
)
|
|
(8,994
|
)
|
||
Increase in accounts payable and accrued expenses
|
1,823
|
|
|
7,520
|
|
||
Decrease in deferred income
|
(7,250
|
)
|
|
(624
|
)
|
||
Net cash provided by operating activities
|
176,189
|
|
|
203,850
|
|
||
Cash Flows from Investing Activities:
|
|
|
|
||||
Investments in real estate assets and related intangibles
|
(175,322
|
)
|
|
(41,378
|
)
|
||
Cash assumed upon consolidation of variable interest entity
|
5,063
|
|
|
—
|
|
||
Net sales proceeds from wholly-owned properties
|
68,041
|
|
|
—
|
|
||
Net sales proceeds from unconsolidated joint ventures
|
3,036
|
|
|
—
|
|
||
Investments in unconsolidated joint ventures
|
(151
|
)
|
|
(29
|
)
|
||
Deferred lease costs paid
|
(27,409
|
)
|
|
(10,524
|
)
|
||
Net cash used in investing activities
|
(126,742
|
)
|
|
(51,931
|
)
|
||
Cash Flows from Financing Activities:
|
|
|
|
||||
Deferred financing costs paid
|
(1,401
|
)
|
|
(669
|
)
|
||
Proceeds from line of credit and notes payable
|
469,000
|
|
|
—
|
|
||
Repayments of line of credit and notes payable
|
(392,000
|
)
|
|
(114,000
|
)
|
||
Net proceeds from issuance of common stock
|
—
|
|
|
185,763
|
|
||
Redemption of fractional shares of common stock
|
—
|
|
|
(2,918
|
)
|
||
Dividends paid and discount on dividend reinvestments
|
(165,636
|
)
|
|
(162,560
|
)
|
||
Net cash used in financing activities
|
(90,037
|
)
|
|
(94,384
|
)
|
||
Net (decrease)/increase in cash and cash equivalents
|
(40,590
|
)
|
|
57,535
|
|
||
Cash and cash equivalents, beginning of period
|
56,718
|
|
|
10,004
|
|
||
Cash and cash equivalents, end of period
|
$
|
16,128
|
|
|
$
|
67,539
|
|
Supplemental Disclosures of Significant Noncash Investing and Financing Activities:
|
|
|
|
||||
Change in accrued offering costs
|
$
|
479
|
|
|
$
|
1,370
|
|
Accrued capital expenditures and deferred lease costs
|
$
|
9,395
|
|
|
$
|
1,249
|
|
Net assets assumed upon consolidation of variable interest entity, net of notes receivable previously recorded
|
$
|
188,283
|
|
|
$
|
—
|
|
Liabilities assumed upon consolidation of variable interest entity
|
$
|
191,814
|
|
|
$
|
—
|
|
Redeemable common stock
|
$
|
—
|
|
|
$
|
75,164
|
|
Property
|
Metropolitan
Statistical
Area
|
|
Acquisition Date
|
|
Number of
Buildings
|
|
Rentable
Square
Feet
|
|
Percentage
Occupied
as of
Acquisition Date
|
|
Acquisition
Price
(in millions)
|
|
||||
1200 Enclave Parkway Building
|
Houston, TX
|
|
March 30, 2011
|
|
1
|
|
|
149,654
|
|
18
|
%
|
|
$
|
18.5
|
|
|
The Dupree Building
|
Atlanta, GA
|
|
April 29, 2011
|
|
1
|
|
|
137,818
|
|
83
|
%
|
|
$
|
20.5
|
|
|
The Medici Building
|
Atlanta, GA
|
|
June 7, 2011
|
|
1
|
|
|
152,221
|
|
22
|
%
|
|
$
|
13.2
|
|
|
The 225 and 235 Presidential Way Buildings
|
Boston, MA
|
|
September 13, 2011
|
|
2
|
|
|
440,130
|
|
100
|
%
|
|
$
|
85.3
|
|
|
500 W. Monroe Building
|
Chicago, IL
|
|
March 31, 2011
|
|
1
|
|
|
962,361
|
|
67
|
%
|
|
$
|
227.5
|
|
(1)
|
(1)
|
Represents the estimated fair value of real estate assets acquired as recorded in Piedmont’s accompanying consolidated balance sheet as of the acquisition date.
|
Facility
|
|
Collateral
|
|
Rate
(1)
|
|
Maturity
|
|
Amount Outstanding as of
|
|||||||
|
September 30,
2011 |
|
December 31,
2010 |
||||||||||||
Secured
|
|
|
|
|
|
|
|
|
|
|
|||||
$45.0 Million Fixed-Rate Loan
|
|
4250 N. Fairfax
|
|
5.20
|
%
|
|
6/1/2012
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
$200.0 Million Mortgage Note
|
|
Aon Center
|
|
4.87
|
%
|
|
5/1/2014
|
|
200,000
|
|
|
200,000
|
|
||
$25.0 Million Mortgage Note
|
|
Aon Center
|
|
5.70
|
%
|
|
5/1/2014
|
|
25,000
|
|
|
25,000
|
|
||
$350.0 Million Secured Pooled Facility
|
|
Nine Property Collateralized
Pool
(2)
|
|
4.84
|
%
|
|
6/7/2014
|
|
350,000
|
|
|
350,000
|
|
||
$105.0 Million Fixed-Rate Loan
|
|
US Bancorp Center
|
|
5.29
|
%
|
|
5/11/2015
|
|
105,000
|
|
|
105,000
|
|
||
$125.0 Million Fixed-Rate Loan
|
|
Four Property Collateralized
Pool
(3)
|
|
5.50
|
%
|
|
4/1/2016
|
|
125,000
|
|
|
125,000
|
|
||
$42.5 Million Fixed-Rate Loan
|
|
Las Colinas Corporate
Center I & II
|
|
5.70
|
%
|
|
10/11/2016
|
|
42,525
|
|
|
42,525
|
|
||
$140.0 Million WDC Mortgage Notes
|
|
1201 & 1225 Eye Street
|
|
5.76
|
%
|
|
11/1/2017
|
|
140,000
|
|
|
140,000
|
|
||
$140.0 Million 500 W. Monroe Mortgage Loan
|
|
500 W. Monroe
|
|
LIBOR + 1.008%
|
|
(4)
|
8/9/2012
|
|
140,000
|
|
|
—
|
|
||
$45.0 Million 500 W. Monroe Mezzanine I Loan- A Participation
|
|
500 W. Monroe
|
|
LIBOR + 1.45%
|
|
(4)
|
8/9/2012
|
|
45,000
|
|
|
—
|
|
||
Subtotal/Weighted Average
(5)
|
|
|
|
4.59
|
%
|
|
|
|
1,217,525
|
|
|
1,032,525
|
|
||
Unsecured
|
|
|
|
|
|
|
|
|
|
|
|||||
$250 Million Unsecured Term Loan
|
|
|
|
LIBOR + 1.50%
|
|
|
6/28/2011
|
|
—
|
|
|
250,000
|
|
||
$500 Million Unsecured Facility
|
|
|
|
0.84
|
%
|
(6)
|
8/30/2012
|
|
327,000
|
|
|
—
|
|
||
Subtotal/Weighted Average
(5)
|
|
|
|
0.84
|
%
|
|
|
|
327,000
|
|
|
250,000
|
|
||
Total/ Weighted Average
(5)
|
|
|
|
3.79
|
%
|
|
|
|
$
|
1,544,525
|
|
|
$
|
1,282,525
|
|
(1)
|
All of Piedmont’s outstanding debt as of
September 30, 2011
and
December 31, 2010
is interest-only debt.
|
(2)
|
Nine
property collateralized pool includes: 1200 Crown Colony Drive, Braker Pointe III, 2 Gatehall Drive, One and Two Independence Square, 2120 West End Avenue, 400 Bridgewater Crossing, 200 Bridgewater Crossing, and Fairway Center II.
|
(3)
|
Four
property collateralized pool includes 1430 Enclave Parkway, Windy Point I and II, and 1055 East Colorado Boulevard.
|
(4)
|
Subject to interest rate cap agreements, which limit Piedmont’s exposure to potential increases in the LIBOR rate to
2.19%
.
|
(5)
|
Weighted average is based on contractual balance of outstanding debt and interest rates in the table as of
September 30, 2011
. As such, the following metrics would change to
4.63%
for the weighted average interest rate of secured debt, and
3.89%
for the weighted average interest rate of all outstanding debt if the note payable included in the disposal group of assets and liabilities held for sale (related to the 35 W. Wacker Building) was included in the calculations.
|
(6)
|
Piedmont may select from multiple interest rate options with each draw, including the prime rate and various-length LIBOR
|
Interest Rate Derivative
|
Notional Amount
(in millions)
|
|
Effective Date
|
|
Maturity Date
|
|
||
Interest rate cap
|
$
|
140
|
|
|
8/15/2011
|
|
8/15/2012
|
(1)
|
Interest rate cap
|
62
|
|
(2)
|
8/15/2011
|
|
8/15/2012
|
(1)
|
|
Total
|
$
|
202
|
|
|
|
|
|
|
(1)
|
Mirrors the monthly interest accrual period of the 500 W. Monroe Loans.
|
(2)
|
Interest rate cap agreement is inclusive of both the $45.0 Million 500 W. Monroe Mezzanine I Loan- A Participation payable to an unrelated third-party, as well as the loan participation formerly owned by Piedmont as a note receivable.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
Derivative in
Cash Flow Hedging
Relationships (Interest Rate Swaps and Caps)
|
September 30,
2011 |
|
September 30,
2010 |
|
September 30,
2011 |
|
September 30,
2010 |
||||||||
Amount of loss recognized in OCI on derivative
|
$
|
—
|
|
|
$
|
637
|
|
|
$
|
204
|
|
|
$
|
1,483
|
|
Amount of previously recorded loss reclassified from accumulated OCI into interest expense
|
$
|
(44
|
)
|
|
$
|
(350
|
)
|
|
$
|
(895
|
)
|
|
$
|
(4,321
|
)
|
Entity
|
|
Piedmont’s
%
Ownership
of Entity
|
|
Related
Building
|
|
Consolidated/
Unconsolidated
|
|
Net Carrying
Amount as of
September 30,
2011
|
|
Net Carrying
Amount as of
December 31,
2010
|
|
Primary Beneficiary
Considerations
|
|||||
1201 Eye Street NW Associates, LLC
|
|
49.5
|
%
|
|
1201 Eye Street
|
|
Consolidated
|
|
$
|
(1.6
|
)
|
|
$
|
0.3
|
|
|
In accordance with the partnership’s governing documents, Piedmont is entitled to 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 NW Associates, LLC
|
|
49.5
|
%
|
|
1225 Eye Street
|
|
Consolidated
|
|
$
|
1.1
|
|
|
$
|
1.9
|
|
|
In accordance with the partnership’s governing documents, Piedmont is entitled to 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
|
|
Consolidated
|
|
$
|
43.7
|
|
|
N/A
|
|
|
The Omnibus Agreement with the previous owner includes equity participation rights for the previous owner, if certain financial returns are achieved; however, Piedmont has sole decision making authority and is entitled to the economic benefits of the property until such returns are met.
|
|
Suwanee
Gateway One, LLC
|
|
100
|
%
|
|
Suwanee Gateway One
|
|
Consolidated
|
|
$
|
7.7
|
|
|
$
|
7.8
|
|
|
The fee agreement includes equity participation rights for the incentive manager, if certain returns on investment are achieved; however, Piedmont has sole decision making authority and is entitled to the economic benefits of the property until such returns are met.
|
Medici Atlanta, LLC
|
|
100
|
%
|
|
The Medici Building
|
|
Consolidated
|
|
$
|
13.0
|
|
|
N/A
|
|
|
The fee agreement includes equity participation rights for the incentive manager, if certain returns on investment are achieved; however, Piedmont has sole decision making authority and is entitled to the economic benefits of the property until such returns are met.
|
|
As of September 30, 2011
|
|
As of December 31, 2010
|
||||||||||||
Financial Instrument
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
Cash and cash equivalents
(1)
|
$
|
16,128
|
|
|
$
|
16,128
|
|
|
$
|
56,718
|
|
|
$
|
56,718
|
|
Tenant receivables, net
(1)(2)
|
$
|
142,884
|
|
|
$
|
142,884
|
|
|
$
|
134,006
|
|
|
$
|
134,006
|
|
Accounts payable
(1)
|
$
|
13,521
|
|
|
$
|
13,521
|
|
|
$
|
15,763
|
|
|
$
|
15,763
|
|
Interest rate swap agreements
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
691
|
|
|
$
|
691
|
|
Interest rate cap agreements
|
$
|
3
|
|
|
$
|
3
|
|
|
N/A
|
|
|
N/A
|
|
||
Line of credit and notes payable
(2)
|
$
|
1,664,525
|
|
|
$
|
1,722,246
|
|
|
$
|
1,402,525
|
|
|
$
|
1,428,255
|
|
(1)
|
For the periods presented, the carrying value approximates estimated fair value.
|
(2)
|
For the periods presented, the carrying value and estimated fair value includes assets and liabilities held for sale.
|
Amount
|
|
Expiration of Letter of Credit
(1)
|
||
$
|
382,556
|
|
|
August 2012
|
$
|
14,782,820
|
|
|
February 2012
|
$
|
2,006,589
|
|
|
December 2011
|
$
|
9,033,164
|
|
|
June 2012
|
(1)
|
These letter of credit agreements automatically renew for consecutive, one-year periods each anniversary, subject to the satisfaction of the credit obligation and certain other limitations.
|
|
|
September 30,
2011 |
|
December 31,
2010 |
||||
Real estate assets held for sale, net:
|
|
|
|
|
||||
Land
|
|
$
|
55,573
|
|
|
$
|
55,573
|
|
Building and improvements, less accumulated depreciation of $41,754 and $37,442 as of September 30, 2011 and December 31, 2010, respectively
|
|
167,024
|
|
|
164,343
|
|
||
Intangible lease assets, less accumulated amortization of $22,725 and $20,549 as of September 30, 2011 and December 31, 2010, respectively
|
|
3,626
|
|
|
5,802
|
|
||
Construction in progress
|
|
2,673
|
|
|
2,560
|
|
||
Total real estate assets held for sale, net
|
|
$
|
228,896
|
|
|
$
|
228,278
|
|
|
|
|
|
|
||||
Other assets held for sale:
|
|
|
|
|
||||
Tenant receivables
|
|
$
|
11,790
|
|
|
$
|
10,737
|
|
Deferred financing costs, less accumulated amortization of $169 and $153 as of September 30, 2011 and December 31, 2010, respectively
|
|
49
|
|
|
66
|
|
||
Deferred lease costs, less accumulated amortization of $29,353 and $26,055 as of September 30, 2011 and December 31, 2010, respectively
|
|
24,067
|
|
|
27,480
|
|
||
Restricted cash and escrows
|
|
11,447
|
|
|
11,661
|
|
||
Total other assets held for sale
|
|
$
|
47,353
|
|
|
$
|
49,944
|
|
|
|
|
|
|
||||
Notes payable and other liabilities held for sale:
|
|
|
|
|
||||
Notes payable, secured by 35 W. Wacker Building, at fixed-rate of 5.10%, maturing January 1, 2014
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
Intangible lease liabilities, less accumulated amortization of $25,960 and $23,458 as of September 30, 2011 and December 31, 2010, respectively
|
|
4,451
|
|
|
6,954
|
|
||
Total notes payable and other liabilities held for sale
|
|
$
|
124,451
|
|
|
$
|
126,954
|
|
|
|
|
|
|
||||
Noncontrolling interest held for sale
|
|
$
|
2,797
|
|
|
$
|
4,623
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
7,477
|
|
|
$
|
10,273
|
|
|
$
|
24,631
|
|
|
$
|
30,455
|
|
Tenant reimbursements
|
3,565
|
|
|
2,708
|
|
|
14,303
|
|
|
14,046
|
|
||||
|
11,042
|
|
|
12,981
|
|
|
38,934
|
|
|
44,501
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Property operating costs
|
3,403
|
|
|
2,395
|
|
|
15,712
|
|
|
14,637
|
|
||||
Depreciation
|
1,516
|
|
|
1,694
|
|
|
4,912
|
|
|
5,541
|
|
||||
Amortization of deferred leasing costs
|
1,676
|
|
|
1,716
|
|
|
5,093
|
|
|
5,193
|
|
||||
General and administrative expenses
|
45
|
|
|
171
|
|
|
80
|
|
|
195
|
|
||||
|
6,640
|
|
|
5,976
|
|
|
25,797
|
|
|
25,566
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(1,568
|
)
|
|
(1,583
|
)
|
|
(4,653
|
)
|
|
(4,697
|
)
|
||||
Interest and other income
|
16
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||
Net income attributable to noncontrolling interest
|
(131
|
)
|
|
(154
|
)
|
|
(366
|
)
|
|
(397
|
)
|
||||
|
(1,683
|
)
|
|
(1,737
|
)
|
|
(5,018
|
)
|
|
(5,092
|
)
|
||||
Operating income, excluding impairment loss and gain on sale
|
$
|
2,719
|
|
|
$
|
5,268
|
|
|
$
|
8,119
|
|
|
$
|
13,843
|
|
Impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,587
|
)
|
||||
Gain on sale of real estate assets
|
26,756
|
|
|
—
|
|
|
26,756
|
|
|
—
|
|
||||
Income from discontinued operations
|
$
|
29,475
|
|
|
$
|
5,268
|
|
|
$
|
34,875
|
|
|
$
|
4,256
|
|
Date of grant
|
Net Shares
Granted
(1)
|
|
Grant
Date Fair
Value
|
|
Vesting Schedule
|
|
Unvested Shares as of
September 30, 2011
|
||||
May 6, 2009
|
135,564
|
|
|
$
|
22.20
|
|
|
Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 6, 2010, 2011, and 2012, respectively.
|
|
44,393
|
|
May 24, 2010
|
180,340
|
|
|
$
|
18.71
|
|
|
Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 24, 2011, 2012, and 2013, respectively.
|
|
107,473
|
|
May 24, 2010
|
46,440
|
|
|
$
|
18.71
|
|
|
Of the shares granted, 33.33% vested or will vest on May 24, 2011, 2012, and 2013, respectively.
|
|
35,268
|
|
April 5, 2011
|
142,468
|
|
|
$
|
19.40
|
|
|
Of the shares granted, 25% vested on the date of grant, and 25% will vest on April 5, 2012, 2013, and 2014, respectively.
|
|
115,746
|
|
Total
|
|
|
|
|
|
|
302,880
|
|
(1)
|
Amounts reflect the total grant, net of cumulative shares surrendered upon vesting to satisfy required minimum tax withholding obligations through
September 30, 2011
.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
|
2011
|
|
2010
|
|
2011
|
|
2010
|
Weighted-average common shares – basic
|
172,827
|
|
172,658
|
|
172,756
|
|
170,110
|
Plus incremental weighted-average shares from time-vested conversions:
|
|
|
|
|
|
|
|
Restricted stock awards
|
218
|
|
227
|
|
240
|
|
147
|
Weighted-average common shares – diluted
|
173,045
|
|
172,885
|
|
172,996
|
|
170,257
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
September 30,
2011 |
|
%
|
|
September 30,
2010 |
|
%
|
|
$
Increase
(Decrease)
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
105.9
|
|
|
|
|
$
|
102.1
|
|
|
|
|
$
|
3.8
|
|
||
Tenant reimbursements
|
28.5
|
|
|
|
|
27.0
|
|
|
|
|
1.5
|
|
|||||
Property management fee revenue
|
0.1
|
|
|
|
|
0.8
|
|
|
|
|
(0.7
|
)
|
|||||
Other rental income
|
—
|
|
|
|
|
4.2
|
|
|
|
|
(4.2
|
)
|
|||||
Total revenues
|
134.5
|
|
|
100
|
%
|
|
134.1
|
|
|
100
|
%
|
|
0.4
|
|
|||
Expense:
|
|
|
|
|
|
|
|
|
|
||||||||
Property operating costs
|
51.1
|
|
|
38
|
%
|
|
44.4
|
|
|
33
|
%
|
|
6.7
|
|
|||
Depreciation
|
26.4
|
|
|
20
|
%
|
|
24.3
|
|
|
18
|
%
|
|
2.1
|
|
|||
Amortization
|
14.9
|
|
|
11
|
%
|
|
9.3
|
|
|
7
|
%
|
|
5.6
|
|
|||
General and administrative expense
|
4.7
|
|
|
3
|
%
|
|
6.6
|
|
|
5
|
%
|
|
(1.9
|
)
|
|||
Real estate operating income
|
37.4
|
|
|
28
|
%
|
|
49.5
|
|
|
37
|
%
|
|
(12.1
|
)
|
|||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(16.2
|
)
|
|
(12
|
)%
|
|
(15.8
|
)
|
|
(12
|
)%
|
|
(0.4
|
)
|
|||
Interest and other (expense)/income
|
(0.1
|
)
|
|
—
|
%
|
|
1.0
|
|
|
1
|
%
|
|
(1.1
|
)
|
|||
Equity in income of unconsolidated joint ventures
|
0.5
|
|
|
—
|
%
|
|
0.6
|
|
|
—
|
%
|
|
(0.1
|
)
|
|||
Income from continuing operations
|
$
|
21.6
|
|
|
16
|
%
|
|
$
|
35.3
|
|
|
26
|
%
|
|
$
|
(13.7
|
)
|
|
September 30,
2011 |
|
%
|
|
September 30,
2010 |
|
%
|
|
$
Increase
(Decrease)
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
311.8
|
|
|
|
|
$
|
306.2
|
|
|
|
|
$
|
5.6
|
|
||
Tenant reimbursements
|
86.3
|
|
|
|
|
84.1
|
|
|
|
|
2.2
|
|
|||||
Property management fee revenue
|
1.3
|
|
|
|
|
2.3
|
|
|
|
|
(1.0
|
)
|
|||||
Other rental income
|
4.7
|
|
|
|
|
5.2
|
|
|
|
|
(0.5
|
)
|
|||||
Total revenues
|
404.1
|
|
|
100
|
%
|
|
397.8
|
|
|
100
|
%
|
|
6.3
|
|
|||
Expense:
|
|
|
|
|
|
|
|
|
|
||||||||
Property operating costs
|
153.3
|
|
|
38
|
%
|
|
143.4
|
|
|
36
|
%
|
|
9.9
|
|
|||
Depreciation
|
77.7
|
|
|
19
|
%
|
|
72.3
|
|
|
18
|
%
|
|
5.4
|
|
|||
Amortization
|
39.4
|
|
|
10
|
%
|
|
28.2
|
|
|
7
|
%
|
|
11.2
|
|
|||
General and administrative expense
|
18.6
|
|
|
5
|
%
|
|
20.8
|
|
|
6
|
%
|
|
(2.2
|
)
|
|||
Real estate operating income
|
115.1
|
|
|
28
|
%
|
|
133.1
|
|
|
33
|
%
|
|
(18.0
|
)
|
|||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(49.6
|
)
|
|
(12
|
)%
|
|
(50.7
|
)
|
|
(13
|
)%
|
|
1.1
|
|
|||
Interest and other income
|
3.2
|
|
|
1
|
%
|
|
3.0
|
|
|
1
|
%
|
|
0.2
|
|
|||
Equity in income of unconsolidated joint ventures
|
1.0
|
|
|
—
|
%
|
|
2.0
|
|
|
1
|
%
|
|
(1.0
|
)
|
|||
Gain on consolidation of VIE
|
1.5
|
|
|
1
|
%
|
|
—
|
|
|
—
|
%
|
|
1.5
|
|
|||
Income from continuing operations
|
$
|
71.2
|
|
|
18
|
%
|
|
$
|
87.4
|
|
|
22
|
%
|
|
$
|
(16.2
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||
|
2011
|
|
Per
Share
(1)
|
|
2010
|
|
Per
Share
(1)
|
|
2011
|
|
Per
Share
(1)
|
|
2010
|
|
Per
Share
(1)
|
||||||||||||||||
Net income attributable to Piedmont
|
$
|
51,026
|
|
|
$
|
0.29
|
|
|
$
|
40,584
|
|
|
$
|
0.23
|
|
|
$
|
106,020
|
|
|
$
|
0.61
|
|
|
$
|
91,679
|
|
|
$
|
0.54
|
|
Depreciation of real assets
(2)
|
28,102
|
|
|
0.16
|
|
|
26,163
|
|
|
0.15
|
|
|
83,135
|
|
|
0.48
|
|
|
78,285
|
|
|
0.46
|
|
||||||||
Amortization of lease-related
costs
(2)
|
16,616
|
|
|
0.10
|
|
|
11,119
|
|
|
0.07
|
|
|
44,601
|
|
|
0.26
|
|
|
33,712
|
|
|
0.20
|
|
||||||||
Gain on consolidation of VIE
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,532
|
)
|
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
||||||||
Gain on sale- wholly-owned properties
|
(26,756
|
)
|
|
(0.15
|
)
|
|
—
|
|
|
—
|
|
|
(26,756
|
)
|
|
(0.15
|
)
|
|
—
|
|
|
—
|
|
||||||||
Gain on sale- unconsolidated partnership
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Funds From Operations
|
$
|
68,918
|
|
|
$
|
0.40
|
|
|
$
|
77,866
|
|
|
$
|
0.45
|
|
|
$
|
205,352
|
|
|
$
|
1.19
|
|
|
$
|
203,676
|
|
|
$
|
1.20
|
|
Adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Acquisition costs
|
285
|
|
|
—
|
|
|
310
|
|
|
—
|
|
|
975
|
|
|
—
|
|
|
358
|
|
|
—
|
|
||||||||
Impairment loss
(2)
|
—
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,640
|
|
|
0.06
|
|
||||||||
Core Funds From Operations
|
$
|
69,203
|
|
|
$
|
0.40
|
|
|
$
|
78,229
|
|
|
$
|
0.45
|
|
|
$
|
206,327
|
|
|
$
|
1.19
|
|
|
$
|
213,674
|
|
|
$
|
1.26
|
|
Deferred financing cost amortization
|
879
|
|
|
—
|
|
|
607
|
|
|
—
|
|
|
2,546
|
|
|
0.02
|
|
|
2,000
|
|
|
0.01
|
|
||||||||
Amortization of fair market adjustments on notes payable
|
471
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,413
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
||||||||
Depreciation of non real estate assets
|
84
|
|
|
—
|
|
|
176
|
|
|
—
|
|
|
422
|
|
|
—
|
|
|
533
|
|
|
—
|
|
||||||||
Straight-line effects of lease expense
(2)
|
(4,129
|
)
|
|
(0.02
|
)
|
|
(2,921
|
)
|
|
(0.02
|
)
|
|
(4,488
|
)
|
|
(0.03
|
)
|
|
(2,632
|
)
|
|
(0.01
|
)
|
||||||||
Stock-based and other non-cash compensation
|
1,111
|
|
|
0.01
|
|
|
1,095
|
|
|
0.01
|
|
|
2,975
|
|
|
0.02
|
|
|
2,458
|
|
|
0.01
|
|
||||||||
Net effect of amortization of below-market in-place lease intangibles
(2)
|
(1,817
|
)
|
|
(0.01
|
)
|
|
(1,510
|
)
|
|
(0.01
|
)
|
|
(4,850
|
)
|
|
(0.03
|
)
|
|
(4,461
|
)
|
|
(0.03
|
)
|
||||||||
Income from amortization of discount on purchase of mezzanine loans
|
—
|
|
|
—
|
|
|
(569
|
)
|
|
—
|
|
|
(484
|
)
|
|
—
|
|
|
(1,932
|
)
|
|
(0.01
|
)
|
||||||||
Acquisition costs
|
(285
|
)
|
|
—
|
|
|
(310
|
)
|
|
—
|
|
|
(975
|
)
|
|
—
|
|
|
(358
|
)
|
|
—
|
|
||||||||
Non-incremental capital expenditures
(3)
|
(15,538
|
)
|
|
(0.09
|
)
|
|
(8,023
|
)
|
|
(0.04
|
)
|
|
(46,018
|
)
|
|
(0.27
|
)
|
|
(22,722
|
)
|
|
(0.13
|
)
|
||||||||
Adjusted Funds From Operations
|
$
|
49,979
|
|
|
$
|
0.29
|
|
|
$
|
66,774
|
|
|
$
|
0.39
|
|
|
$
|
156,868
|
|
|
$
|
0.91
|
|
|
$
|
186,560
|
|
|
$
|
1.10
|
|
Weighted-average shares outstanding – diluted
|
173,045
|
|
|
|
|
172,885
|
|
|
|
|
172,996
|
|
|
|
|
170,257
|
|
|
|
(1)
|
Based on weighted average shares outstanding – diluted.
|
(2)
|
Includes adjustments for wholly-owned properties, as well as such adjustments for our proportionate ownership in unconsolidated joint ventures.
|
(3)
|
Effective July 1, 2011, Piedmont defines non-incremental capital expenditures as capital expenditures of a recurring nature related to tenant improvements and leasing commissions 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 change the underlying classification of a building are excluded from this measure. All prior periods presented have been recalculated in accordance with the new definition for comparability.
|
Buildings
|
40 years
|
Building improvements
|
5-25 years
|
Land improvements
|
20-25 years
|
Tenant improvements
|
Shorter of economic life or lease term
|
Intangible lease assets
|
Lease term
|
|
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)
|
$
|
1,664,525
|
|
|
|
$
|
557,000
|
|
|
$
|
695,000
|
|
|
$
|
230,000
|
|
|
$
|
182,525
|
|
Operating lease obligations
(2)
|
78,777
|
|
|
|
721
|
|
|
2,249
|
|
|
1,500
|
|
|
74,307
|
|
|||||
Total
|
$
|
1,743,302
|
|
|
|
$
|
557,721
|
|
|
$
|
697,249
|
|
|
$
|
231,500
|
|
|
$
|
256,832
|
|
(1)
|
Amounts include principal payments only. We made interest payments, including payments under our interest rate swaps, of approximately
$50.1 million
during the
nine months ended
September 30, 2011
, and expect to pay interest in future periods on outstanding debt obligations based on the rates and terms disclosed herein and in Note 5 of our accompanying consolidated financial statements.
|
(2)
|
Three properties (the River Corporate Center Building in Tempe, Arizona; the 8700 South Price Road Building in Tempe, Arizona; and the 2001 NW 64
th
Street Building in Ft. Lauderdale, Florida) are subject to ground leases with expiration dates ranging between 2048 and 2101. The aggregate remaining payments required under the terms of these operating leases as of
September 30, 2011
are presented above.
|
•
|
Commitments Under Existing Lease Agreements;
|
•
|
Contingencies Related to Tenant Audits;
|
•
|
Letters of Credit; and
|
•
|
Assertion of Legal Action.
|
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
third
quarter
2011
.
|
(b)
|
Not applicable.
|
(c)
|
During the quarter ended
September 30, 2011
, Piedmont’s transfer agent repurchased shares of its common stock in the open market, in order to reissue such shares under its dividend reinvestment plan (the “DRP”), as follows:
|
Period
|
Total Number of
Shares Purchased
(in 000’s)
|
|
Average Price Paid
per Share
|
|
Total Number of
Shares Purchased
as Part of
Publicly Announced
Program
(in 000’s)
(1)
|
|
Maximum Approximate
Dollar Value of Shares
Available That May
Yet Be Purchased
Under the Program
(in 000’s)
(1)
|
|
||||||
July 1, 2011 to July 31, 2011
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
August 1, 2011 to August 31, 2011
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
September 1, 2011 to September 30, 2011
|
257
|
|
|
$
|
16.07
|
|
|
—
|
|
|
$
|
—
|
|
(1)
|
(1)
|
Under our DRP, 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. Therefore, repurchases may occur on a quarterly basis, but only to the extent necessary to satisfy DRP elections by our stockholders.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
RESERVED
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
|
PIEDMONT OFFICE REALTY TRUST, INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Dated:
|
November 3, 2011
|
By:
|
/s/ Robert E. Bowers
|
|
|
|
Robert E. Bowers
|
|
|
|
Chief Financial Officer and Executive Vice President
|
|
|
|
(Principal Financial Officer and Duly Authorized Officer)
|
Exhibit
Number
|
|
Description of Document
|
|
3.1
|
|
|
Third Articles of Amendment and Restatement of Piedmont Office Realty Trust, Inc. (the “Company”) (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed on March 16, 2010)
|
|
|
|
|
3.2
|
|
|
Articles of Amendment of the Company effective June 30, 2011 (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on July 6, 2011)
|
|
|
|
|
3.3
|
|
|
Articles Supplementary of the Company effective June 30, 2011 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on July 6, 2011)
|
|
|
|
|
3.4
|
|
|
Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s current Report on Form 8-K filed on January 22, 2010)
|
|
|
|
|
10.1
|
|
|
2010 Long-Term Incentive Program Award Agreement
|
|
|
|
|
10.2
|
|
|
2010 Long-Term Incentive Program
|
|
|
|
|
10.3
|
|
|
Long-Term Incentive Program Award Agreement
|
|
|
|
|
10.4
|
|
|
Long-Term Incentive Program
|
10.5
|
|
|
Amendment Number One to Employment Agreement dated as of February 2, 2007, by and between the Company and Donald A. Miller, CFA (incorporated by reference to the Company's Current Report on Form 8-K, filed on September 14, 2011)
|
|
|
|
|
31.1
|
|
|
Rule 13a-14(a)/15d-14(a) Certification, executed by Donald A. Miller, CFA, Principal Executive Officer of the Company
|
|
|
|
|
31.2
|
|
|
Rule 13a-14(a)/15d-14(a) Certification, executed by Robert E. Bowers, Principal Financial Officer of the Company
|
|
|
|
|
32.1
|
|
|
Certification required by Rule 13a-14(b)/15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, executed by Donald A. Miller, CFA, Chief Executive Officer and President of the Company
|
|
|
|
|
32.2
|
|
|
Certification required by Rule 13a-14(b)/15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, executed by Robert E. Bowers, Chief Financial Officer and Executive Vice-President of the Company
|
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 *
|
|
|
|
|
*
|
|
|
Furnished with this Form 10-Q
|
Target Amount
|
|
Interim Performance Period
|
|
January 1, 2010-December 31, 2010
|
1/6th of Target Amount
|
January 1, 2010-December 31, 2011
|
½ of Target Amount, Cumulative
|
January 1, 2010-December 31, 2012
|
100% of Target Amount, Cumulative
|
Performance Level
|
Peer Group Percentile Ranking
|
Percentage of Target Amount Payable
|
Maximum or above
|
75
th
percentile or above
|
200%
|
Target
|
Median
|
100%
|
Threshold
|
25
th
percentile
|
50%
|
Below Threshold
|
below 25
th
percentile
|
—%
|
1.
|
Definitions
. For the purposes of the LTIP, the following terms shall have the meanings set forth below:
|
2.
|
Grant of LTIP Awards
. Subject to the terms and provisions of the Plan and the LTIP, each year the Committee may grant LTIP Awards to such Participants in such amount and pursuant to such terms and conditions (to the extent consistent with the LTIP and the Plan) as the Committee may determine and as set forth in the applicable LTIP Award agreement. LTIP Awards are generally granted to Participants with respect to successive overlapping Performance Cycles. Not later than 120 days after the commencement of each Interim Performance Period, and as otherwise required by the Plan, the Committee shall establish in writing the LTIP Awards for such Interim Performance Periods, which shall include the applicable Target Amount, the Performance Levels, the Peer Group, and any required Performance Adjustments.
|
Interim Performance Period
|
Cumulative Maximum Percentage of Target Amount Which May Be Paid
|
February 10, 2010 to December 31, 2010
|
16.67%
|
February 10, 2010 to December 31, 2011
|
50%
|
February 10, 2010 to December 31, 2012
|
100%
|
4.
|
Settlement of LTIP Awards.
Subject to Section 5 hereof, the percentage (if any) of each Participant's LTIP Award that is payable with respect to an Interim Performance Period as provided in Section 3 hereof shall be paid by the Company in the calendar year after the end of such Interim Performance Period, as applicable. Payments hereunder may be made in cash, Stock, or a combination thereof in accordance with the Plan, as determined by the Committee in its sole discretion.
|
5.
|
Termination of Employment
. Except as otherwise provided in this Section 5, a Participant shall not be entitled to any payment under an LTIP Award with respect to an Interim Performance Period ending after his or her termination of employment. In the event of a Participant's termination of employment during an Interim Performance Period due to (a) termination by the Company without Cause or by the Participant for Good Reason, (b) the Participant's death or Disability, (c) the
|
6.
|
409A Compliance.
The Company intends that payments under the LTIP comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”), and the Company shall have complete discretion to interpret and construe the LTIP and any associated documents in any manner that establishes an exemption from (or compliance with) the requirements of Code Section 409A. If any provision of the LTIP does not accurately reflect its intended establishment of an exemption from (or compliance with) Code Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with) Code Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company. A termination of employment shall not be deemed to have occurred for purposes of any provision of the LTIP providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A, and, for purposes of any such provision of the LTIP, references to a “termination,” “termination of employment” or like terms shall mean “such a separation from service.” The determination of whether and when a separation from service has occurred for proposes of the LTIP shall be made in accordance with the presumptions set forth in Section 1.409A-1(h) of the Treasury Regulations. Any provision of the LTIP to the contrary notwithstanding, if the Company determines that the Participant is a “specified employee,” within the meaning of Code Section 409A, then to the extent that any payment under the LTIP on account of Participant's separation from service would be considered nonqualified deferred compensation under Code Section 409A, such payment shall be delayed and paid at the date which is the earlier of (i) six (6) months and one day after the Participant's separation from service and (ii) the date of Participant's death (the “Delay Period”). Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 6 shall be paid in a lump-sum. The Company makes no representation or warranty and shall have no liability to any participant or any other person if any provisions of the LTIP are determined to constitute deferred compensation subject to Code Section 409A, but do not satisfy an exemption from, or the conditions of, Code Section 409A.
|
7.
|
Miscellaneous
. The Board may, at any time and with or without prior notice, amend, alter, suspend or terminate the LTIP in accordance with Section 17 of the Plan. For the avoidance of doubt, prior to the time the Committee grants any LTIP Awards with respect to an Interim Performance Period, the Committee shall have complete discretion to award or not award LTIP Awards with respect to such Interim Performance Period. All provisions of the LTIP are subject to the terms and conditions set forth in the Plan, which are hereby incorporated herein by reference. To the extent the terms of the LTIP are inconsistent with or modify, amend of supplement any provisions of the Plan, to the extent permitted under the Plan, the LTIP will be deemed to be a determination by the
|
Performance Level
|
Peer Group Percentile Ranking
|
Percentage of Target Amount Payable
|
Maximum or above
|
75
th
percentile or above
|
200%
|
Target
|
Median
|
100%
|
Threshold
|
25
th
percentile
|
50%
|
Below Threshold
|
below 25
th
percentile
|
—%
|
1.
|
Definitions
. For the purposes of the LTIP, the following terms shall have the meanings set forth below:
|
2.
|
Grant of LTIP Awards
. Subject to the terms and provisions of the Plan and the LTIP, each year the Committee may grant LTIP Awards to such Participants in such amount and pursuant to such terms and conditions (to the extent consistent with the LTIP and the Plan) as the Committee may determine and as set forth in the applicable LTIP Award agreement. LTIP Awards are generally granted to Participants with respect to successive overlapping Performance Cycles. Not later than 120 days after the commencement of each Performance Cycle or as otherwise required by the Plan, the Committee shall establish in writing the LTIP Awards for such Performance Cycle, which shall include the applicable Target Amount, the Performance Levels, the Peer Group, and any required Performance Adjustments.
|
4.
|
Settlement of LTIP Awards.
Subject to Section 5 hereof, the percentage (if any) of each Participant's LTIP Award that is earned with respect to a Performance Cycle as provided in Section 3 hereof shall be paid by the Company in the calendar year after the end of such Performance Cycle . Payments hereunder may be made in cash, Stock, or a combination thereof in accordance with the Plan, as determined by the Committee in its sole discretion.
|
5.
|
Termination of Employment
. Except as otherwise provided in this Section 5, a Participant shall not be entitled to any payment under an LTIP Award with respect to a Performance Cycle ending after his or her termination of employment. In the event of a Participant's termination of employment during a Performance Cycle due to (a) termination by the Company without Cause or by the Participant for Good Reason, (b) the Participant's death or Disability, (c) the expiration of the Participant's employment agreement due to non-renewal by the Company or (d) a Change of Control (as defined in the Plan), such Participant will be entitled to payment of a portion of his or her LTIP Award for such Performance Cycle based on the Company's TSR relative to the TSR of the companies in the Peer Group determined as of the date of the Participant's termination of employment. The percentage of the Target Amount earned pursuant to Section 3 will then be multiplied by a fraction, the numerator of which equals the number of days during such Performance Cycle that such Participant was actively employed by the Company, and the denominator of which equals 1095 days, or total days in the Performance Cycle. Such payment will be paid by the Company 90 days after such Participant's termination of employment occurs.
|
6.
|
409A Compliance.
The Company intends that payments under the LTIP comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder
|
7.
|
Miscellaneous
. The Board may, at any time and with or without prior notice, amend, alter, suspend or terminate the LTIP in accordance with Section 17 of the Plan. For the avoidance of doubt, prior to the time the Committee grants any LTIP Awards with respect to a particular Performance Cycle , the Committee shall have complete discretion to award or not award LTIP Awards with respect to such Performance Cycle. All provisions of the LTIP are subject to the terms and conditions set forth in the Plan, which are hereby incorporated herein by reference. To the extent the terms of the LTIP are inconsistent with or modify, amend of supplement any provisions of the Plan, to the extent permitted under the Plan, the LTIP will be deemed to be a determination by the Committee to so modify, amend or supplement the Plan and the terms of the LTIP will have precedence over the Plan.
|
1.
|
I have reviewed this Form 10-Q for the quarter ended
September 30, 2011
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
|
|
|
Chief Executive Officer and President
(Principal Executive Officer)
|
1.
|
I have reviewed this Form 10-Q for the quarter ended
September 30, 2011
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
|
|
|
Chief Financial Officer and Executive Vice
President (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 and President
|
|
|
November 3, 2011
|
|
(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
and Executive Vice President
|
|
|
November 3, 2011
|
|