Piedmont Realty Trust, Inc. · NYSE:PDM
Piedmont Realty Trust — Piedmont Office Realty Trust — Investor Presentation (June 2020)
47 slides from Piedmont Realty Trust's investor presentation, June 2020
Slide 1: Investor Presentation June 2020
INVESTOR PRESENTATION JUNE 2020
Slide 2: Introduction
INTRODUCTION Piedmont Office Realty Trust, Inc. (also referred to herein as “Piedmont” or the “Company”) (NYSE: PDM) is an owner, manager, developer, redeveloper and operator of high-quality, Class A office properties in select sub-markets located primarily within seven major eastern U.S. office mar
Slide 3: COVID-19 Discussion
COVID-19 DiscUSSION PIEDMONT”
Slide 4: COVID-19 Strategy: Protect People, Preserve Capital, Prepare for Future
COVID-19 STRATEGY PROTECT OUR PEOPLE Top Priority are Piedmont’s Employees, Tenants and Contractors GALLERIA DALLAS DALLAS, TX PRESERVE OUR CAPITAL Access to Liquidity / Cash Low Leveraged Balance Sheet PREPARE FOR THE FUTURE Anticipate Customers’ Needs and Adapt the Business GALLERIA ATLANTA ATLANT
Slide 5: Protecting Our Greatest Asset… Our People
PROTECTING OUR GREATEST ASSET… OUR PEOPLE HEALTH AND WELLNESS • Facemasks for PDM employees and vendors required to be worn at all times in building common areas • Facemasks for tenants requested to be worn at all times in building common areas • Increased fresh air ventilation CLEANLINESS • Janitor
Slide 6: Preserve Our Capital… Positioned for Opportunity
PRESERVE OUR CAPITAL… POSITIONED FOR OPPORTUNITY CASH PRESERVATION / RENTAL INCOME STREAM • Collected 96% and over 97% of expected rental receipts for the months of April and May, respectively • Full $500 million line of credit availability * • No planned or pending acquisitions • Low net lease expi
Slide 7: Prepare for the Future
PREPARE FOR THE FUTURE OVERVIEW OF FINANCIAL IMPACTS… • New leasing activity has slowed meaningfully • Retail tenants represent about 1% of ALR • Renewal leasing activity has increased; expect increase in • Coworking represents about 2% of ALR short-term renewals • Transient parking represents about
Slide 8: Points of Discussion
POINTS OF DISCUSSION
Slide 9: Corporate Objectives and Recent Accomplishments
POINTS OF DISCUSSION CORPORATE OBJECTIVES RECENT ACCOMPLISHMENTS & 2020 OBJECTIVES • Revenue enhancing improvements at 200 South Orange Concentrate Ownership in Specific Submarkets Avenue, 60 Broad Street, and Atlanta Galleria assets Balance of CBD, Urban Infill and “Hub-urban” Locations underway; r
Slide 10: Recent Performance
RECENT PERFORMANCE DELIVERING RESULTS FOR SHAREHOLDERS AND GROWING NAV Two Year TSR GreenStreet Estimated NAV- Growth (Last 5 Years) As of May 28, 2020 As of May 28, 2020 12% 0.5% -9.1% -5% -9.5% -19.7% -18.0% PDM Office Sector Average * -32.6% -47.3% NYC Diverse GW Diverse NGW West Coast Sunbelt DC
Slide 11: Who Is Piedmont?
WHO IS PIEDMONT? QUALITY, DISTINCTIVE PORTFOLIO ACCRETIVE CAPITAL RECYCLING GLENRIDGE HIGHLANDS ONE & TWO Atlanta, GA FINANCIAL STRENGTH AND FLEXIBILITY LOCAL OPERATIONAL MANAGEMENT ARLINGTON GATEWAY ARLINGTON, VA 10
Slide 12: Quality, Distinctive Portfolio
QUALITY, DISTINCTIVE PORTFOLIO SEVEN OF THE NATION’S LARGEST MARKETS: WELL-LOCATED, AMENITIZED OFFICE ENVIRONMENTS – CBD, URBAN INFILL & “HUB-URBAN” NODES 20% 17% 14% 14% 12% 13% 13% 13% 11% 11% 11% 10% 10% 10% 10% 8% 3% 1% 3 Dallas Atlanta DC Minneapolis NY/NJ Boston Orlando Chicago Other Mar-18 Ma
Slide 13: Quality, Distinctive Portfolio: Organic NOI Growth
QUALITY, DISTINCTIVE PORTFOLIO ORGANIC NOI GROWTH Strong Recent Performance Capitalizing on Future Expirations (% of ALR 4) Realizing Contractual Cash Flow As of 3/31/2020, with pro forma adjustments As of 3/31/2020, as reported 94% 2015-2019 Avg Same Store Cash NOI* 12% 92% 10% 90% 2.2% PDM Growth
Slide 14: Accretive Capital Recycling
ACCRETIVE CAPITAL RECYCLING SHAPING DIFFERENTIATING POSITIONS - SINCE DECEMBER 2018, PIEDMONT HAS INVESTED $800M TO STRENGTHEN OR BUILD DOMINANT POSITIONS WITHIN DISTINCT AND VIBRANT SUBMARKETS IN MAJOR MSAS. ATLANTA $326M Galleria- 5 bldgs, 2.1M SF BOSTON $74M Burlington- 4 bldgs, 943K SF DALLAS $3
Slide 15: Accretive Capital Recycling: Recent Acquisitions
ACCRETIVE CAPITAL RECYCLING ACCRETIVELY RECYCLING CAPITAL- SINCE 2014, PIEDMONT HAS RECYCLED $1.8 BILLION OF DISPOSITION CAPITAL INTO REAL ESTATE ASSETS AT ROUGHLY ~180 BPS HIGHER YIELD THAN DISPOSED ASSETS Recent Acquisitions as Redeployment Evidence 25 Mall Rd., Burlington Galleria 100, 400, & 600
Slide 16: Reimagining the Portfolio
ACCRETIVE CAPITAL RECYCLING REIMAGINING THE PORTFOLIO PIEDMONT IS SELECTIVELY IDENTIFYING REPOSITIONING OPPORTUNITIES TO CREATE ADDITIONAL VALUE Rationale for Investment • Activate and energize the environment for tenants • Basis remains at significant discount to development ✓ User needs are evolvi
Slide 17: Selective Development to Expand Large-Scale Positions
ACCRETIVE CAPITAL RECYCLING SELECTIVE DEVELOPMENT TO EXPAND LARGE-SCALE POSITIONS 1,000,000 SF 250,000 SF 300,000 SF Lake Mary, FL Atlanta, GA Dallas, TX Adjacent to 400 & 500 TownPark Adjacent to Glenridge Highlands One & Two Adjacent to One, Two, & Three Galleria Towers Land Basis: $7.1M Land Basi
Slide 18: Financial Strength and Flexibility
FINANCIAL STRENGTH AND FLEXIBILITY LADDERED DEBT MATURITY SCHEDULE $400,000 $328,512 $350,000 $300,000 $250,000 6 2020 2021 2022 2023 2024 2025 Term Loan & Term Loan Revolver 7 & Bonds Term Loan 5 Wall Bonds DEBT PROFILE Secured Encumbered NOI 2% 2% Unsecured Unencumbered NOI 98% 98% DEBT METRICS CR
Slide 19: Local Operational Management
LOCAL OPERATIONAL MANAGEMENT REAL ESTATE IS A LOCAL BUSINESS George Wells Piedmont maintains four regional offices to ensure local expertise is EVP, Real Estate Operations leveraged and relationships are cultivated within our markets. MIDWEST REGION - CHICAGO Minneapolis Tom Prescott 7 buildings EVP
Slide 20: Piedmont's Commitment to ESG
PIEDMONT’S COMMITMENT TO ESG ENVIRONMENTAL RESPONSIBILITY GOVERNANCE GOALS ACHIEVEMENTS On behalf of all our stakeholders, Piedmont is dedicated to environmentally sustainable practices which enhance our commitment to • Board of Directors • 20% reduction in energy • 80% of our buildings have BOMA 36
Slide 21: Appendix
APPENDIX
Slide 22: Piedmont at a Glance
PIEDMONT AT A GLANCE Corporate Overview AS OF 3/31/2020 Portfolio Overview1 AS OF 3/31/2020 (INCLUDING PRO FORMA ADJUSTMENTS; Ticker (NYSE) PDM DISPOSITION OF 1901 MARKET STREET) Square Feet (millions) 17.2 Equity Market Cap as of 5/28/2020 (billions) $2.2 Five-Year Total Return (5/28/15-5/28/20) /
Slide 23: Atlanta
ATLANTA CONCENTRATED POSITIONS IN THREE ATLANTA SUBMARKETS WITH LAND TO ACCOMMODATE GROWTH Central Perimeter Three Buildings 1.1 million SF Adjacent land for 250,000 SF Central Perimeter Galleria Buckhead The Galleria Five Buildings 2.1 million SF Adjacent land for 900,000 SF Buckhead One Building 1
Slide 24: Atlanta: The Galleria Consolidated
ATLANTA THE GALLERIA IS CONSOLIDATED FOR THE FIRST TIME: WITH THE ACQUISITION OF GALLERIA 400, 500 AND 600, PIEDMONT NOW OWNS 2.1M SF AND 12 ACRES FOR DEVELOPMENT IN ONE OF ATLANTA’S MOST VIBRANT PROFESSIONAL ENVIRONMENTS The Galleria Office Towers ❑ Strong Demographic Trends The Galleria is located
Slide 25: Atlanta: Strong Demographic Trends
ATLANTA STRONG DEMOGRAPHIC TRENDS ATLANTA’S COBB COUNTY FOSTERS A PRO-BUSINESS ENVIRONMENT WITH A PLETHORA OF AMENITIES AND YOUNG TALENT #1 32% ~$700M ~$900M Superior Access to/from Multiple Destinations: #1 private investment made improvements including lowest property taxes in submarket in Atlanta
Slide 26: Atlanta: Amenity-Rich Walkability
ATLANTA AMENITY-RICH WALKABILITY IN THE URBANIZED GALLERIA SUBMARKET OVER 6,500 PEOPLE OCCUPY THE GALLERIA OFFICE TOWERS ON A DAILY BASIS • 7 Cafes ONSITE • 5 Conference Centers • 6,000 SF Fitness Facility with Locker Rooms 25
Slide 27: Atlanta: Competitive Investment Basis
ATLANTA COMPETITIVE INVESTMENT BASIS WITH UNMATCHED SCALE IN A DYNAMIC “HUBURB” OFFERS BUSINESSES AN ECONOMICAL, VIBRANT ALTERNATIVE TO ATTRACT AND RETAIN TODAY’S WORKFORCE Piedmont Galleria Investment Relative Rental Rates by Market (includes parking) $55 40% discount ~$500M ~$215 ~55% Original Inv
Slide 28: Atlanta: Galleria 87% Leased
ATLANTA THE GALLERIA COMPLEX IS 87% LEASED WITH A FAVORABLE EXPIRATION SCHEDULE TO CAPTURE NEAR-TERM RENTAL RATE MARK TO MARKET UPSIDE What Piedmont’s Accomplished Thus Far… What’s Ahead… Galleria 200 and 300 Galleria 100, 200, 300, 400, 600 $29.45 Annual Expirations and Availability (000s SF) $28.6
Slide 29: Atlanta: Placemaking Repositioning
ATLANTA STEP ONE OF A PLACEMAKING REPOSITIONING: PIEDMONT PLANS TO LEAD A SIGNIFICANT ENHANCEMENT OF THE GALLERIA To date, fragmented ownership has restricted potential activation and prohibited the opportunity to introduce new additional retail, hotel, or residential components to the complex. Pied
Slide 30: Dallas: Transaction Rationale
DALLAS TRANSACTION RATIONALE PIEDMONT HAS ACQUIRED ONE, TWO AND THREE GALLERIA TOWERS, TOTALING 1.4 MILLION SQUARE FEET IN DALLAS, TEXAS FOR APPROXIMATELY $400 MILLION. THIS TRANSACTION SIGNIFICANTLY REDEFINES PIEDMONT’S CONCENTRATION IN AND COMMITMENT TO ONE OF THE NATION’S MOST VIBRANT ECONOMIES.
Slide 31: Dallas: Unparalleled Demographic Environment
DALLAS UNPARALLELED DEMOGRAPHIC ENVIRONMENT - DALLAS RANKS AS ONE OF THE NATION’S MOST VIBRANT CITIES Dallas- National Leader in Economic Conditions Dallas–Fort Worth is one of the top regions in the nation for #1 #1 #1 #1 #1 business, thanks to low cost of living, a business-friendly Total Net Offi
Slide 32: Dallas: North Dallas
DALLAS NORTH DALLAS GALLERIA OFFICE TOWERS ARE IDEALLY LOCATED AT THE EPICENTER OF DALLAS’ GROWING POPULATION HUBS Lower Tollway Attributes Legacy Primary Growth Corridor for Dallas Centrally Located to Downtown and Legacy Premier Public and Private Schools Plano Lower Tollway World Class Shopping a
Slide 33: Dallas: Modern Workforce Value Proposition
DALLAS MODERN WORKFORCE VALUE PROPOSITION: DELIVERING A UNIQUE ENVIRONMENT…AT A COMPELLING VALUE Piedmont’s Galleria Office Towers Investment The Lower Tollway Value Proposition24 Asking Rents (Net) $50 45% discount ~$400M ~$275 ~40% $47 Original Investment Est. Discount to $40 34% discount Original
Slide 34: Dallas: Landmark Class A Office Towers
DALLAS LANDMARK, CLASS A OFFICE TOWERS Financial Snapshot Purchase price (inc. land) $396M Price/SF (buildings) $273 Wtd. Avg. In-Place Rent vs. Market ~25% discount Accrual NOI Yield2 8.1% On-Site Amenities Rooftop Terrace State-of-the-Art Fitness Center Tenant Lounges Abundant Conference Facilitie
Slide 35: Boston: Burlington Submarket
BOSTON BOSTON - BURLINGTON SUBMARKET PDM Submarket Investment Submarket Rents Burlington $41/SF $270M ~$285 ~30% Original Original Est. Current 6% Basis Discount Contribution to Investment Investment to Replacement Total PDM ALR per SF Cost PDM Assets’ Performance Submarket vs. National Average Rent
Slide 36: Boston: Burlington Amenity Base
BOSTON BOSTON - BURLINGTON AMENITY BASE • 3 Cafes ONSITE • Conference Center Burlington Mall • 4,000 SF of Fitness Facilities with Locker Rooms Burlington Marketplace The District at Burlington Representative Tenants 35
Slide 37: Orlando: CBD
ORLANDO ORLANDO - CBD PDM Submarket Investment Submarket Rents Lake Mary $27/SF $365M ~$250 ~40% Original Original Est. Current 8% Basis Discount Contribution to Investment Investment to Replacement Total PDM ALR per SF Cost Maitland $28/SF PDM Assets’ Performance Submarket vs. National Average Rent
Slide 38: Orlando: CBD Amenity Base
ORLANDO ORLANDO – CBD AMENITY BASE • 3 Cafes ONSITE • Conference Center • 5,000 SF Fitness Facility with Locker Rooms Representative Tenants 37
Slide 39: Orlando: Lake Mary Submarket
ORLANDO ORLANDO – LAKE MARY SUBMARKET PDM Submarket Investment Submarket Rents Lake Mary $27/SF $55M ~$175 ~20+% Original Original Est. Current 2% Basis Discount Contribution to Investment Investment to Replacement Total PDM ALR per SF Cost Maitland $28/SF PDM Assets’ Performance Submarket vs. Natio
Slide 40: Orlando: Lake Mary Amenity Base
ORLANDO ORLANDO – LAKE MARY AMENITY BASE • Foodsby Service at Both Properties ONSITE • Conference Center Future Development • 1,000 SF Fitness Facility with Locker Rooms Representative Tenants 39
Slide 41: Dallas: Las Colinas Submarket
DALLAS DALLAS – LAS COLINAS SUBMARKET PDM Submarket Investment Submarket Rents $295M ~$175 ~40% 8% Las Colinas $28/SF Est. Current Original Original Preston Center $44/SF Basis Discount Contribution to Investment Investment to Replacement Total PDM ALR per SF Cost PDM Assets’ Performance Submarket v
Slide 42: Dallas: Las Colinas Amenity Base
DALLAS DALLAS – LAS COLINAS AMENITY BASE 2 Miles Southeast Representative Tenants • 7 Cafes ONSITE • 6 Conference Centers • 25,000 SF of Fitness Facilities with Locker Rooms 41
Slide 43: Washington DC: R-B Corridor Submarket
WASHINGTON, DC WASHINGTON DC – R-B CORRIDOR SUBMARKET PDM Submarket Investment Submarket Rents $350M ~$405 ~15% Original Original Est. Current 8% DC CBD $58/SF East End $61/SF Basis Discount Contribution to Investment Investment to Replacement Total PDM ALR per SF Cost R-B Corridor $45/SF Capitol Hi
Slide 44: Washington DC: R-B Corridor Amenity Base
WASHINGTON, DC WASHINGTON DC – R-B CORRIDOR AMENITY BASE • 10 Cafes ONSITE • 1 Conference Center • 5,000 SF of Fitness Facilities with Locker Rooms • 3 Bike Lockers Representative Tenants 43
Slide 45: Appendix - Footnotes
APPENDIX - FOOTNOTES 1. Statistical information is as of March 31, 2020, includes all in-service properties, and is adjusted on a pro forma basis for the disposition of 1901 Market Street in Philadelphia, PA, unless otherwise noted. 2. Management estimates; in-place accrual yield as of February 2020
Slide 46: Appendix - Footnotes
APPENDIX - FOOTNOTES 21. Source: CBRE Research. 22. Source: Fortune. 23. Dallas Chamber of Commerce. 24. Asking Rates. Source: Cushman & Wakefield Q4 19 Report. 25. Asking Rates. Set includes: Colonnade I, II, III, International Plaza I, III, Pinnacle Tower, Lincoln Tower, Galleria North Tower I, II
Slide 47: 2020 REIT Week Discussion Topics
EXHIBIT 4S a 2020 REIT WEEK DISCUSSION TOPICS Covin-19 Urnate Hich Creo WorTHy TENANT BASE Ampte Liquiorry aNp Capra STRENGTH (Operational Procedures Renta Collected Capital Availability (100% of net sale proceeds om 1901 Meret api t reduce dei) Implemented comorehersive signage Enranced mechanical
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