Piedmont Office Realty Trust Reports Second Quarter 2018 Results

ATLANTA, August 1, 2018 --Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties in select sub-markets located primarily within eight major Eastern U.S. office markets, today announced its results for the quarter ended June 30, 2018.

Highlights for the Three Months Ended June 30, 2018:

• Reported Net Income Applicable to Common Stockholders of $0.09 per diluted share for the quarter;
• Achieved Core Funds From Operations ("Core FFO") of $0.41 per diluted share for the quarter;
• Completed almost 425,000 square feet of leasing during the quarter; and
• Repurchased 1.9 million shares of the Company's common stock at an average price of $17.67 per share under the Company's board-approved stock repurchase program.

Commenting on the Company's second quarter 2018 results, Donald A. Miller, CFA, President and Chief Executive Officer, said, "Second quarter financial results were in line with our expectations, and increased clarity for the remainder of the year allows us to marginally increase both FFO and cash-basis Same Store NOI guidance for 2018. We are encouraged by the increase in prospective leasing activity that we have seen across all of our strategic markets in recent months, activity which hopefully bodes well for the lease up of currently available vacant space during the last half of 2018."  Continuing further, Miller said "Additionally, we were able to continue to take advantage of the displacement in the equity markets early in the second quarter by acquiring almost two million shares of Company stock at what we believe is a significant discount to net asset value.  While we did not close on any capital transactions during the quarter, we are working on several previously disclosed disposition opportunities that we hope to consummate in the coming quarters."

Results for the Quarter ended June 30, 2018

Piedmont recognized net income applicable to common stockholders for the three months ended June 30, 2018 of $10.9 million, or $0.09 per diluted share, as compared with net income of $23.7 million, or $0.16 per diluted share, for the three months ended June 30, 2017. The three months ended June 30, 2017 included an approximately $6.5 million, or $0.04 per diluted share, gain on sale of real estate assets compared to de minimis gain/loss activity in the second quarter of the current year.  The remaining decrease between quarters is primarily attributable to the sale of sixteen wholly-owned assets and one unconsolidated joint venture since June of 2017.

Funds From Operations ("FFO") and Core FFO, which remove the impact of the gain/loss on sales of real estate assets mentioned above (as well as depreciation and amortization), were both $0.41 per diluted share for the three months ended June 30, 2018, as compared with $0.46 for the three months ended June 30, 2017, with the decrease being attributable to the property sales mentioned above.

Revenues and property operating costs were $129.2 million and $52.6 million, respectively, for the three months ended June 30, 2018, compared to $148.7 million and $56.3 million, respectively, for the second quarter of 2017, with the decrease in both items primarily attributable to the property sales mentioned above.

General and administrative expense was $8.3 million for the second quarter of 2018, compared to $7.5 million for the same period in 2017, primarily as a result of increased accruals for potential performance-based stock compensation as a result of improved relative stock performance during the three months ended June 30, 2018.

Loss on sale of real estate assets was $(23,000) for the second quarter of 2018, as compared to a gain of $6.5 million for the three months ended June 30, 2017, with the second quarter of the previous year reflecting the sale of Sarasota Commerce Center II.

In addition, net income available to common stockholders per share, FFO per diluted share, and Core FFO per diluted share for the three months ended June 30, 2018 were all favorably impacted by an approximately 17.1 million share decrease in our weighted average shares outstanding.  The decrease is a result of the repurchase of shares pursuant to the Company's stock repurchase program during the twelve months ended June 30, 2018, including 1.9 million shares repurchased at an average price of $17.67 per share during the quarter ended June 30, 2018.

Leasing Update

The Company's leasing volume for the second quarter totaled approximately 425,000 square feet, approximately one-third of which related to new leasing. Significant leases completed during the quarter included:

·         In Houston, TX - Schlumberger Technology Corporation executed a renewal and expansion totaling approximately 226,000 square feet at 1430 Enclave Parkway for 10 years through 2028;
·         In Atlanta - Access Clinical Partners, LLC  signed a renewal and expansion totaling approximately  28,000 square feet at Glenridge Highlands One through 2026;
·         In Boston - Symantec Corporation renewed for approximately 27,000 square feet at 80 Central Street through 2026;
·        In Washington, D.C. - The Association for the Advancement of Medical Instrumentation completed a 26,000 square foot lease at Arlington Gateway for 12 years; and
·         In Chicago - Dahlquist and Lutzow Architects executed a renewal and expansion totaling almost 17,000 square feet through 2027, and Chicago Office Technology Group, Inc. renewed their approximately 13,000 square feet through 2024.

With no significant lease expirations for the remainder of 2018, the Company's reported leased percentage and weighted average lease term were approximately 90.6% and 6.7 years, respectively, as of June 30, 2018, as compared to 89.7% and 6.5 years, respectively, as of December 31, 2017.  Same Store NOI increased 2.3% on a cash basis for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017 as several large lease abatements expired; accrual-basis Same Store NOI decreased 1.6% for the three months ended June 30, 2018 as compared to the second quarter of 2017, with 150,000 square feet of space in downtime at the 6011 Connection Drive building in Dallas, Texas before the lease with Gartner commences later in the third quarter. Details outlining Piedmont's largest upcoming lease expirations, the status of certain major leasing activity, and a schedule of the largest lease abatement periods can be found in the Company's quarterly supplemental information package available at www.piedmontreit.com.

Third Quarter 2018 Dividend Declaration

On August 1, 2018, the board of directors of Piedmont declared dividends for the third quarter of 2018 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on August 31, 2018, payable on September 21, 2018.

Guidance for 2018

The Company increases its previously announced guidance for full-year 2018 as follows:

These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections. Actual results could differ materially from these estimates based on a variety of factors, particularly the timing of any future acquisitions and dispositions as well as those factors discussed under "Forward Looking Statements" below.

Note that individual quarters may fluctuate on both a cash basis and an accrual basis due to lease commencements and expirations, abatement periods, the timing of repairs and maintenance, capital expenditures, capital markets activities, seasonal general and administrative expenses, accrued potential performance-based compensation expenses, and one-time revenue or expense events. In addition, the Company's guidance is based on information available to management as of the date of this release.

Non-GAAP Financial Measures

To supplement the presentation of the Company's financial results prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this release and the accompanying quarterly supplemental information as of and for the period ended June 30, 2018 contain certain financial measures that are not prepared in accordance with GAAP, including FFO, Core FFO, AFFO, Same Store NOI (cash and accrual basis), Property NOI (cash and accrual basis), EBITDAre, and Core EBITDA. Definitions and reconciliations of each of these non-GAAP measures to their most comparable GAAP metrics are included below and in the accompanying quarterly supplemental information.

Each of the non-GAAP measures included in this release and the accompanying quarterly supplemental financial information has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of the Company's results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company's presentation of non-GAAP measures in this release and the accompanying quarterly supplemental information may not be comparable to similarly titled measures disclosed by other companies, including other REITs. The Company may also change the calculation of any of the non-GAAP measures included in this news release and the accompanying supplemental financial information from time to time in light of its then existing operations to include other adjustments that may affect its operations.

Conference Call Information

Piedmont has scheduled a conference call and an audio web cast for Thursday, August 2, 2018 at 11:00 A.M. Eastern daylight time. The live audio web cast of the call may be accessed on the Company's website at www.piedmontreit.com in the Investor Relations section. Dial-in numbers are (877) 407-0778 for participants in the United States and Canada and (201) 689-8565 for international participants. A replay of the conference call will be available through 11 A.M. EDT on August 16, 2018, and may be accessed by dialing (877) 481-4010 for participants in the United States and Canada and (919) 882-2331 for international participants, followed by conference identification code 34364. A web cast replay will also be available after the conference call in the Investor Relations section of the Company's website. During the audio web cast and conference call, the Company's management team will review second quarter 2018 performance, discuss recent events, and conduct a question-and-answer period.

Supplemental Information

Quarterly supplemental information as of and for the period ended June 30, 2018 can be accessed on the Company`s website under the Investor Relations section at www.piedmontreit.com.

About Piedmont Office Realty Trust

Piedmont Office Realty Trust, Inc. (NYSE: PDM) is an owner, manager, developer, and operator of high-quality, Class A office properties in select sub-markets located primarily within eight major U.S. office markets. Its geographically-diversified, almost $5 billion portfolio is currently comprised of approximately 17 million square feet. The Company is a fully-integrated, self-managed real estate investment trust (REIT) with local management offices in each of its major markets and is investment-grade rated by Standard & Poor's (BBB) and Moody's (Baa2). For more information, see www.piedmontreit.com.

Forward Looking Statements

Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company intends for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of the Company`s performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "believe," "continue" or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters. Examples of such statements in this press release include the Company's optimism regarding it's leasing pipeline and whether the pipeline will result in increased leasing volume during the second half of the year, the Company's estimated range of Net Income, Depreciation, Amortization, Gain on Sale of Real Estate Assets, NAREIT FFO/Core FFO and NAREIT FFO/Core FFO per diluted share for the year ending December 31, 2018.

The following are some of the factors that could cause the Company`s actual results and its expectations to differ materially from those described in the Company`s forward-looking statements: Economic, regulatory, socio-economic and/or technology changes (including accounting standards) that impact the real estate market generally, or that could affect patterns of use of commercial office space; the impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases; changes in the economies and other conditions affecting the office sector in general and the specific markets in which we operate; lease terminations or lease defaults, particularly by one of our large lead tenants; the effect on us of adverse market and economic conditions, including any resulting impairment charges on both our long-lived assets or goodwill; the success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions and divestitures; the illiquidity of real estate investments, including the resulting impediment on our ability to quickly respond to adverse changes in the performance of our properties; the risks and uncertainties associated with our acquisition of properties, many of which risks and uncertainties may not be known at the time of acquisition; development and construction delays and resultant increased costs and risks; our real estate development strategies may not be successful; future acts of terrorism in any of the major metropolitan areas in which we own properties, or future cybersecurity attacks against us or any of our tenants; costs of complying with governmental laws and regulations; additional risks and costs associated with directly managing properties occupied by government tenants; significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock; the effect of future offerings of debt or equity securities or changes in market interest rates on the value of our common stock; uncertainties associated with environmental and other regulatory matters; potential changes in political environment and reduction in federal and/or state funding of our governmental tenants; any change in the financial condition of any of our large lead tenants; the effect of any litigation to which we are, or may become, subject; changes in tax laws impacting REITs and real estate in general, as well as our ability to continue to qualify as a REIT under the Internal Revenue Code of 1986 (the "Code"); the future effectiveness of our internal controls and procedures; and other factors, including the risk factors discussed under Item 1A. of Piedmont's Annual Report on Form 10-K for the year ended December 31, 2017.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company cannot guarantee the accuracy of any such forward-looking statements contained in this press release, and the Company does not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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