(Address of principal executive offices, including zip code)
(i770)
i418-8800
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
i☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
i☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
i☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
i☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title
of each class
Trading Symbol
Name of each exchange on which registered
iCommon Stock, $0.01 par value
iPDM
iNew
York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Item 2.01 Completion of Acquisition or Disposition of Assets.
Disposition of the 500 West Monroe
Street building
On October 28, 2019, Piedmont Office Realty Trust, Inc. (the “Registrant”) sold a 46-story office building containing approximately 967,000 rentable square feet located at 500 West Monroe Street in downtown Chicago, Illinois (the “500 West Monroe Street building”) for a gross sales price of $412 million ($426 per square foot) exclusive of closing costs to an unaffiliated, third-party buyer, Spear Street Capital. As a result of the sale, the Registrant received net sale proceeds of approximately $405.7 million, which may be adjusted should additional information become available in subsequent periods. These proceeds were used to repay outstanding borrowings under the
Registrant's $500 Million Unsecured 2018 Line of Credit, which were initially used to purchase the Galleria 100, Galleria 400, and Galleria 600 buildings, as well as 11.7 acres of developable land, earlier in 2019.
Item 2.02 Results of Operations and Financial Condition.
On October 30, 2019, the Registrant issued a press release announcing its financial results for the third quarter 2019, and published supplemental information for the third quarter 2019 to its website.
The press release and the supplemental information are attached hereto as Exhibit 99.1 and 99.2, respectively, and are incorporated herein by reference. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibits and the information set forth therein are deemed to have been furnished and shall not be deemed to be “filed” under the Securities Exchange Act of 1934.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
Chief Financial Officer and Executive Vice President
Piedmont Office Realty Trust, Inc.
SUMMARY OF UNAUDITED
PRO FORMA FINANCIAL STATEMENTS
This
unaudited pro forma information should be read in conjunction with the financial statements and notes of the Registrant included in its annual report filed on Form 10-K for the year ended December 31, 2018 and its quarterly report filed on Form 10-Q for the nine months ended September 30, 2019.
The following unaudited pro forma balance sheet as of September 30, 2019 has been prepared to give effect to the October 28, 2019 sale of the 500 West Monroe Street building as if the disposition had occurred on September 30, 2019. The
Registrant owned 100% of the 500 West Monroe Street building prior to disposition.
The following unaudited pro forma statements of comprehensive income for the nine months ended September 30, 2019 and for the year ended December 31, 2018 have been prepared to give effect to the sale of the 500 West Monroe Street building as if the disposition had occurred on January 1, 2018, as well as an adjustment for property management fee revenue, which will have a continuing impact beyond twelve months from the date of sale.
These unaudited pro forma financial statements are prepared for informational purposes only and are based on information and assumptions available
at the time of the filing of this financial information on Form 8-K that management believes to be reasonable and factually supportable. These unaudited pro forma statements of comprehensive income are not necessarily indicative of future results or of actual results that would have been achieved if the disposition of the 500 West Monroe Street building had been consummated as of September 30, 2019 or January 1, 2018, as applicable. Actual adjustments may differ materially from the information presented. Specifically, the accompanying pro forma statements of comprehensive income do not include the Registrant's nonrecurring gain that would have been recognized if the aforementioned property sale had occurred on January 1, 2018, as the
gain does not have a continuing impact beyond twelve months from the date of sale. Further, the pro forma statement of comprehensive income for the year ended December 31, 2018 does not reflect the operational results associated with the Galleria 400 and Galleria 600 buildings, as these buildings were purchased on August 23, 2019. The pro forma statement of comprehensive income for the nine months ended September 30, 2019 includes operations related to the Galleria 400 and Galleria 600 buildings for approximately 38 days. Such properties were acquired using borrowings under the Registrant's $500 Million Unsecured 2018 Line of Credit, and were subsequently repaid using the sales proceeds from the 500 West Monroe Street building disposition
mentioned above.
(in thousands, except of share and per share amounts)
Historical(a)
Pro
Forma Adjustments
Pro Forma Total
Assets:
Real estate assets, at cost:
Land
$
506,440
$
—
$
506,440
Buildings
and improvements, less accumulated depreciation
2,327,055
—
2,327,055
Intangible lease assets, less accumulated amortization
88,371
—
88,371
Construction
in progress
13,866
—
13,866
Real estate assets held for sale, net (b)
213,094
(213,094)
(c)
—
Total
real estate assets
3,148,826
(213,094)
2,935,732
Cash and cash equivalents
10,284
405,719
(d)
416,003
Tenant
receivables
10,091
—
10,091
Straight-line rent receivables
147,197
—
147,197
Restricted
cash and escrows
1,820
—
1,820
Prepaid expenses and other assets
27,143
—
27,143
Goodwill
98,918
—
98,918
Deferred
lease costs, less accumulated amortization
267,616
—
267,616
Other assets held for sale, net (b)
40,036
(40,036)
(c)
—
Total
assets
$
3,751,931
$
152,589
$
3,904,520
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs
$
1,689,793
$
—
$
1,689,793
Secured
debt, net of premiums and unamortized debt issuance costs
189,451
—
189,451
Accounts payable, accrued expenses, and accrued capital expenditures
114,812
—
114,812
Deferred
income
27,985
—
27,985
Intangible lease liabilities, less accumulated amortization
34,970
—
34,970
Interest
rate swaps
6,862
—
6,862
Other liabilities held for sale (b)
7,275
(7,275)
(c)
—
Total
liabilities
2,071,148
(7,275)
2,063,873
Commitments and Contingencies
—
—
—
Stockholders’ Equity:
Shares-in-trust,
150,000,000 shares authorized; none outstanding as of September 30, 2019
—
—
—
Preferred stock, no par value, 100,000,000 shares authorized; none outstanding as of September 30, 2019
—
—
—
Common
stock, $0.01 par value, 750,000,000 shares authorized; 125,783,408 shares issued and outstanding as of September 30, 2019
1,258
—
1,258
Additional paid-in capital
3,685,504
—
3,685,504
Cumulative
distributions in excess of earnings
(2,007,438)
159,864
(e)
(1,847,574)
Other comprehensive income
(283)
—
(283)
Piedmont
stockholders’ equity
1,679,041
159,864
1,838,905
Noncontrolling interest
1,742
—
1,742
Total stockholders’ equity
1,680,783
159,864
1,840,647
Total
liabilities and stockholders’ equity
$
3,751,931
$
152,589
$
3,904,520
(a)Historical financial information is presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and has been obtained from the Registrant's quarterly report on Form 10-Q as of September
30, 2019.
(b)Reflects assets and liabilities held for sale as of September 30, 2019, consisting solely of the 500 West Monroe Street building.
F-2
(c)Amounts represent the necessary adjustments to remove net assets and liabilities associated with the 500 West Monroe Street building as of September 30, 2019.
(d)Reflects the Registrant's estimated net proceeds resulting from the sale of the 500 West Monroe Street building.
(e)Reflects
the Registrant's estimated pro forma, non-recurring gain on the sale of the 500 West Monroe Street building.
(in thousands, except of share and per share amounts)
Historical
(a)
Pro Forma Adjustments
Pro Forma Total
Revenues:
Rental and tenant reimbursement revenue
$
382,213
$
(30,487)
(b)
$
351,726
Property
management fee revenue
2,819
568
(c)
3,387
Other property related income
13,993
(3,297)
(d)
10,696
399,025
(33,216)
365,809
Expenses:
Property
operating costs
158,798
(13,881)
(e)
144,917
Depreciation
80,004
(7,555)
(f)
72,449
Amortization
55,666
(1,148)
(g)
54,518
Impairment
loss on real estate asset
1,953
—
1,953
General and administrative
29,736
(2)
29,734
326,157
(22,586)
303,571
Other
income (expense):
Interest expense
(46,750)
—
(46,750)
Other income/(expense)
1,292
—
1,292
Gain
on sale of real estate assets
39,370
—
39,370
(6,088)
—
(6,088)
Net income
66,780
(10,630)
56,150
Net
loss attributable to noncontrolling interest
3
—
3
Net income attributable to Piedmont
66,783
(10,630)
56,153
Other comprehensive income/(loss):
Effective
portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges
(6,874)
—
(6,874)
Plus/(less): Reclassification of net loss/(gain) included in net income
(1,871)
—
(1,871)
Other
comprehensive income/(loss)
(8,745)
—
(8,745)
Comprehensive income applicable to Piedmont
$
58,038
$
(10,630)
$
47,408
Per
share information – basic and diluted:
Comprehensive income applicable to common stockholders
$
0.46
$
0.38
Weighted-average common
shares outstanding – basic
125,684
125,684
Weighted-average common shares outstanding – diluted
126,190
126,190
(a)Historical financial information has been obtained from the
Registrant's quarterly report on Form 10-Q for the nine months ended September 30, 2019.
(b)Removal of the 500 West Monroe Street building's rental and tenant reimbursement income. Rental income for the 500 West Monroe Street building is recognized on a straight-line basis.
(c)Addition of expected property management fee revenue to be earned by managing the 500 West Monroe Street building subsequent to sale of the property to an unrelated, third-party purchaser.
(d)Removal of other property related income, consisting primarily of parking income.
F-3
(e)Removal
of the 500 West Monroe Street building's operating expenses.
(f)Depreciation expense for the 500 West Monroe Street building is recognized on a straight-line basis using a 40-year life for building assets and using the respective lease terms for tenant allowance assets.
(g)Amortization expense for the 500 West Monroe Street building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.
(in thousands, except of share and per share amounts)
Historical (a)
Pro Forma Adjustments
Pro Forma Total
Revenues:
Rental
and tenant reimbursement revenue
$
504,410
$
(37,908)
(b)
$
466,502
Property management fee revenue
1,450
760
(c)
2,210
Other
property related income
20,107
(4,430)
(d)
15,677
525,967
(41,578)
484,389
Expenses:
Property
operating costs
209,338
(17,389)
(e)
191,949
Depreciation
107,956
(10,047)
(f)
97,909
Amortization
63,295
(1,491)
(g)
61,804
General
and administrative
29,713
(3)
29,710
410,302
(28,930)
381,372
Other income (expense):
Interest
expense
(61,023)
—
(61,023)
Other income/(expense)
1,638
—
1,638
Loss on extinguishment of debt
(1,680)
—
(1,680)
Gain
on sale of real estate assets
75,691
—
75,691
14,626
—
14,626
Net income
130,291
(12,648)
117,643
Net
loss applicable to noncontrolling interest
5
—
5
Net income applicable to Piedmont
130,296
(12,648)
117,648
Other comprehensive income/(loss):
Effective
portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges
692
—
692
Plus/(less): Reclassification of net loss/(gain) included in net income
(300)
—
(300)
Other
comprehensive income/(loss)
392
—
392
Comprehensive income attributable to Piedmont
$
130,688
$
(12,648)
$
118,040
Per
share information:
Comprehensive income available to common stockholders- basic
$
1.00
$
0.91
Comprehensive income available to common stockholders- diluted
$
1.00
$
0.90
Weighted-average
common shares outstanding – basic
130,161
130,161
Weighted-average common shares outstanding – diluted
130,636
130,636
(a)Historical financial information has been obtained from the
Registrant's annual report on Form 10-K for the year ended December 31, 2018.
(b)Removal of the 500 West Monroe Street building's rental and tenant reimbursement income. Rental income for the 500 West Monroe Street building is recognized on a straight-line basis.
F-4
(c)Addition of expected property management fee revenue to be earned by managing the 500 West Monroe Street building subsequent to sale of the property to an unrelated, third-party purchaser.
(d)Removal of other property related income, consisting primarily of parking income.
(e)Removal
of the 500 West Monroe Street building's operating expenses.
(f)Depreciation expense for the 500 West Monroe Street building is recognized on a straight-line basis using a 40-year life for building assets and using the respective lease terms for tenant allowance assets.
(g)Amortization expense for the 500 West Monroe Street building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.
F-5
Dates Referenced Herein and Documents Incorporated by Reference
