On October 30, 2023, Piedmont Office Realty Trust Inc (PDM, Financial) released its earnings report for the third quarter ended September 30, 2023. Despite a $2.9 million increase in total revenues compared to the same period in 2022, the company recognized a net loss of $17 million, or $0.14 per diluted share.
Financial Performance
The net loss included an approximately $11 million non-cash impairment charge associated with a partial write-down of the company's goodwill balance, a $10.1 million increase in interest expense due to higher interest rates on the company's debt, and a $0.8 million loss on early extinguishment of debt associated with refinancing activity.
Core FFO, which removes the impact of the impairment loss and loss on extinguishment of debt, as well as depreciation and amortization expense, was $0.43 per diluted share for the third quarter of 2023, compared to $0.50 per diluted share for the third quarter of 2022. The decrease was attributable to the increase in interest expense, partially offset by continued growth in operating income from the company's properties.
Leasing and Operations
The company completed approximately 302,000 square feet of leasing transactions during the third quarter, the majority of which was for new tenant leasing. The company's leased percentage as of September 30, 2023, increased to 86.7% from 86.2% as of June 30, 2023. The average lease executed during the third quarter of 2023 was approximately 13,000 square feet and the weighted average lease term was approximately seven years.
Balance Sheet
As of September 30, 2023, the company's total real estate assets remained stable at $3.5 billion. The company's total debt increased to $2.05 billion from $1.98 billion at the end of 2022, with a weighted average cost of debt of 5.46%.
Outlook
For the year ending December 31, 2023, the company estimates that it will achieve the lower end of its previously issued guidance range due to interest rates remaining at elevated levels longer than originally anticipated.
CEO Commentary
"The third quarter was productive for Piedmont as we continued to advance on several of our key goals for 2023. First and foremost, we delivered another quarter of solid leasing results - just over 300,000 square feet in total leasing with the majority, or 170,000 square feet, being for new tenant leasing, increasing our overall leased percentage to approximately 86.7% as of the end of the quarter, and reflecting double-digit rollups in both cash and accrual rental rates. Additionally, our previously announced third quarter refinancing activity addressed our upcoming 2024 debt maturities and bolstered our balance sheet as our fixed rate debt now has a weighted average debt tenure of over 5 years at an average rate of approximately 5%." - Brent Smith, Piedmont's President and Chief Executive Officer
Explore the complete 8-K earnings release (here) from Piedmont Office Realty Trust Inc for further details.
