Piedmont Office Realty Trust (PDM) Tops Q3 EPS by 1c
Piedmont Office Realty Trust (NYSE: PDM) reported Q3 EPS of $0.07, $0.01 better than the analyst estimate of $0.06.
Commenting on the third quarter's results, Brent Smith, President and Chief Executive Officer, said, "We continued to experience strong rent collections and stable financial results during the third quarter, thanks in large part to our portfolio of properties located in strong, amenity-rich, growth markets and our well-diversified, credit-worthy tenants. With new leasing and capital transaction activity beginning to slowly recover during the third quarter from COVID-19 restrictions, we are encouraged by the uptick in leasing tours and proposal activity and our growing leasing pipeline. Also, subsequent to the end of the quarter, we closed on the sale of our New Jersey portfolio and purchased 222 South Orange Avenue, bolstering our position in the Orlando market." Continuing, Smith added, "In addition, we were pleased to complete our inaugural 'green' bond issuance during the third quarter, demonstrating our continued commitment to investing in the highest quality office properties while responsibly managing our impact on the environment."
Guidance for 2020
The longer-term consequences on the economy and our tenants as a result of the COVID-19 pandemic continue to be unknown. Notwithstanding the economic backdrop, Piedmont has a strong, diversified tenant base, a majority of which is investment grade quality. During the third quarter of 2020, the Company collected approximately 99% of billed tenant receivables, net of approximately $2.0 million of tenant rental billings that have been deferred until later in 2020 or 2021. Year to date, the Company has entered into approximately 60 agreements with various tenants that primarily defer approximately $6.7 million of 2020 rent payments until either the fourth quarter of 2020 or into 2021. The Company has a strong balance sheet with excellent liquidity, including approximately $24 million of cash and full availability under its $500 million line of credit as of September 30, 2020, as well as no debt maturities until late 2021. Additionally, the Company has recorded a $4.8 million general reserve against billed and straight-line rent tenant receivables.
Additional information regarding the Company's year-to-date performance, identified trends, and current expectations related to the pandemic's impact on 2020 annual performance as compared to the Company's original expectations for the year are as follows:
- While the Company has experienced an uptick in leasing tours and proposals during the third and early fourth quarter, overall “new tenant” leasing for 2020 will be less than originally expected, modestly lowering 2020 net operating income (“NOI”) by approximately $5 million.
- Piedmont’s transient parking income is estimated to be lower by approximately $2 to $3 million for the year.
- Overall retail NOI, which comprises approximately 1% of the Company’s total 2020 revenues, is estimated to be lower by approximately $2 million for the year.
- During the nine months ended September 30, 2020, the Company has taken approximately $2.6 million in bad debt charges against rental revenue in recognition of an increase in collectibility risk. The Company also has recorded a $4.8 million general reserve against billed and straight-line rent tenant receivables.
- Reduced operating expenses (net of tenants' share) at the Company's buildings during 2020 are anticipated to be $3 to $4 million for the year.
- The Company anticipates $5 million lower interest expense for 2020 due to lower prevailing interest rates.
- The Company anticipates $1 to $2 million in lower general and administrative expenses for the year.
The above identified impacts of the COVID-19 pandemic on NOI during 2020 equate to a net reduction of approximately $6 to $8 million from our original expectations for the year.
Based on management's current expectations, the Company is reinstating guidance for the year ending December 31, 2020, which represents an approximately 6% increase over 2019 results
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