Piedmont Office Realty Trust Inc (PDM) Q3 2024 Earnings Call Highlights: Record Leasing Volume ...

In This Article:

  • Total Leasing Executed: Over 461,000 square feet in Q3 2024, totaling approximately 2 million square feet year-to-date.

  • Lease Percentage: Increased to 88.8% for the in-service portfolio.

  • Rental Rate Growth: 12% increase on a cash basis and almost 20% on an accrual basis for new leases.

  • Core FFO per Diluted Share: 36 for Q3 2024, down from 43 in Q3 2023.

  • Existing Tenant Retention Rate: 80%, higher than the longstanding average of 65%.

  • Lease Expansions: Seven tenant expansions recorded, resulting in a net increase of 60,000 square feet.

  • Leasing Capital Spend: Approximately $5.5 per square foot per lease year.

  • Liquidity Position: Full capacity on $600 million line of credit and over $130 million in cash and cash equivalents.

  • Debt Maturities: No final debt maturities until 2027, with a $250 million term loan maturing in Q1 2025.

  • 2024 Annual Core FFO Guidance: Narrowed to 48 to 50 per share.

  • Same Store NOI Guidance: Remains between 2% to 3% for 2024.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Piedmont Office Realty Trust Inc (NYSE:PDM) achieved a record leasing volume of 2 million square feet year-to-date, the highest in over a decade.

  • The company's in-service portfolio lease percentage increased to 88.8%, the highest since Q1 2020.

  • PDM experienced double-digit rental rate growth, with a 12% increase on a cash basis and nearly 20% on an accrual basis.

  • The company has a robust leasing pipeline with approximately 3 million square feet of potential leases in the proposal stage.

  • PDM's proactive refinancing activity has addressed $1.4 billion of maturing debt, with no major debt maturities until 2027.

Negative Points

  • Core FFO per diluted share decreased to 36 from 43 in the same quarter last year, partly due to increased net interest expense.

  • The Washington DC market continues to face unique challenges, impacting overall leasing activity.

  • The company is experiencing historically wide gaps between reported lease percentage and economically leased space, affecting cash flow.

  • Interest expenses have more than doubled over the last two years, impacting earnings.

  • The transaction market remains choppy and uncertain, affecting potential dispositions of non-core assets.

Q & A Highlights

Q: Can you provide more details on the 3 million square foot leasing pipeline, including where it might be concentrated and the nature of the tenants? A: George Wells, Chief Operating Officer, explained that the pipeline is concentrated in markets like Minneapolis, Dallas, Nova, Atlanta, and Boston, with 70% of the activity being new. The sectors involved include financial, construction, healthcare, associations, and insurance, but not technology. The increase is attributed to having large blocks of space available and a positive outlook for near-term prospects.

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