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PIEDMONT OFFICE REALTY TRUST INC Reports Operating Results (10-Q)

August 09, 2011 | About:
10qk

10qk

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PIEDMONT OFFICE REALTY TRUST INC (PDM) filed Quarterly Report for the period ended 2011-06-30.

Piedmont Office Realty Trust Cl A has a market cap of $2.93 billion; its shares were traded at around $17.12 with a P/E ratio of 13 and P/S ratio of 5. The dividend yield of Piedmont Office Realty Trust Cl A stocks is 7.4%.

Highlight of Business Operations:

We intend to use cash flows generated from the operation of our wholly-owned properties, distributions from our unconsolidated joint ventures, proceeds from property dispositions anticipated to close during the third quarter, and proceeds from our existing $500 Million Unsecured Facility as our primary sources of immediate and long-term liquidity. In addition, potential additional selective dispositions of existing properties and other financing opportunities (such as issuance of additional equity or debt securities or additional borrowings from third-party lenders) afforded to us based on our relatively low leverage and quality asset base may also provide additional sources of capital; however, the availability and attractiveness of terms for these sources of capital is highly dependent on market conditions. As of the time of this filing, we had $280.0 million outstanding under our $500 Million Unsecured Facility, primarily as a result of paying off the $250 Million Term Loan during June 2011. As a result, we had approximately $192.8 million under this facility available as of the date of this filing for future borrowing (approximately $27.2 million of capacity is reserved as security for outstanding letters of credit required by various third parties). We anticipate the receipt of significant net sales proceeds during 2011 related to properties currently under contract to be sold.

Amortization expense increased approximately $4.9 million for the three months ended June 30, 2011 compared to the same period in the prior year. The variance is primarily attributable to properties acquired subsequent to June 30, 2010, contributing approximately $6.0 million of the increase. The increase was also partially attributable to an increase in amortization related to new deferred lease acquisition costs associated with the acquisition or renewal of tenant leases subsequent to June 30, 2010 of approximately $0.5 million, which are amortized over the life of the respective leases. However, these increases were offset by lower amortization expense of approximately $1.6 million recognized for lease intangible assets arising from initial purchase price allocations in accordance with GAAP that were fully amortized subsequent to June 30, 2010.

Tenant reimbursements increased from approximately $67.8 million for the six months ended June 30, 2010 to approximately $68.3 million for the six months ended June 30, 2011 primarily due to (i) properties acquired subsequent to June 30, 2010, accounting for an approximate $3.6 million increase in tenant reimbursements; (ii) an approximate $1.0 million increase in tenant-requested services (i.e. billback expenses); and (iii) an approximate $1.1 million increase in operating expense recoveries. These increases were partially offset by a decrease in estimated property taxes due to successful appeals of the assessed values at several of our buildings of approximately $5.2 million.

Property operating costs increased approximately $3.0 million for the six months ended June 30, 2011 compared to the same period in the prior year. This variance is due primarily to properties acquired subsequent to June 30, 2010, which accounts for a $5.4 million increase in property costs. Property operating costs also increased due to higher recoverable repair and maintenance costs of approximately $1.0 million and higher recoverable tenant-requested services (i.e. billback expenses) of approximately $0.5 million. This unfavorable variance was partially offset as a result of successful appeals of the assessed values at several of our buildings resulting in lower estimated property tax expense of approximately $3.7 million.

Depreciation expense increased approximately $3.8 million for the six months ended June 30, 2011 compared to the same period in the prior year. The variance is primarily attributable to properties acquired subsequent to June 30, 2010, comprising approximately $1.9 million of the increase. Additionally, new tenant improvements and building expenditures capitalized at our existing properties subsequent to June 30, 2010 resulted in additional depreciation expense of approximately $1.3 million. The remainder of the variance is due to an adjustment to accelerate depreciation expense on tenant improvements in the current period related to lease terminations at various properties of approximately $0.6 million.

Amortization expense increased approximately $5.7 million for the six months ended June 30, 2011 compared to the same period in the prior year. The variance is primarily attributable to properties acquired subsequent to June 30, 2010, accounting for approximately $6.2 million of the increase. The increase is also attributable to approximately $1.3 million of adjustments to accelerate amortization expense on certain lease intangible assets related to various lease terminations at certain of our buildings, as well as an increase in amortization related to new deferred lease acquisition costs associated with the acquisition or renewal of tenant leases subsequent to June 30, 2010 of approximately $1.0 million. Such costs are amortized over the life of the respective leases. However, these increases were offset by lower amortization expense of approximately $2.8 million recognized for lease intangible assets arising from initial purchase price allocations in accordance with GAAP at our existing properties that became fully amortized subsequent to June 30, 2010.

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