8-K


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): October 29, 2015
 
Piedmont Office Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number:  001-34626
 
Maryland
 
58-2328421
(State or other jurisdiction of
 
(IRS Employer
incorporation)
 
Identification No.)

11695 Johns Creek Parkway
Suite 350
Johns Creek, GA 30097-1523
(Address of principal executive offices, including zip code)
 
770-418-8800
(Registrant's telephone number, including area code)
 
(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:
[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 



Item 2.01.    Completion of Acquisition or Disposition of Assets

Disposition of the Aon Center building

On October 29, 2015, Piedmont Office Realty Trust, Inc. (the “Registrant”) sold an 83-story office building containing approximately 2.7 million rentable square feet located at 200 E. Randolph Street in downtown in Chicago, Illinois (the “Aon Center building”) for a gross sales price of $712 million ($260 per square foot) exclusive of closing costs to an unaffiliated, third-party buyer, The 601W Companies. As a result of the sale, the Registrant received net sale proceeds of approximately $646.1 million, which may be adjusted should additional information become available in subsequent periods.


Item 9.01.    Financial Statements and Exhibits

(b)     Pro Forma Financial Information. The following pro forma financial statements of the Registrant are submitted at the end of this Current Report on Form 8-K and are filed herewith and incorporated herein by reference:

Unaudited Pro Forma Financial Statements

 
Summary of Unaudited Pro Forma Financial Statements
F-1
 
Pro Forma Balance Sheet as of June 30, 2015
F-2
 
Pro Forma Statements of Income for the six months ended June 30, 2015
F-3
 
Pro Forma Statements of Income for the year ended December 31, 2014
F-4



1



SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
Piedmont Office Realty Trust, Inc.
 
 
 
 
 
Date: November 2, 2015
 
By:
 
/s/    Robert E. Bowers
 
 
 
 
Robert E. Bowers
 
 
 
 
Chief Financial Officer and Executive Vice President

 

2


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 Piedmont Office Realty, Inc. (the “Registrant”) included in its annual report filed on Form 10-K for the year ended December 31, 2014 and its quarterly report filed on Form 10-Q for the six months ended June 30, 2015.

The following unaudited pro forma balance sheet as of June 30, 2015 has been prepared to give effect to the October 29, 2015 sale of the Aon Center building as if the disposition had occurred on June 30, 2015. The Registrant owned 100% of the Aon Center building.

The following unaudited pro forma statements of operations for the six months ended June 30, 2015 and for the year ended December 31, 2014 have been prepared to give effect to the sale of the Aon Center Building as if the disposition had occurred on January 1, 2014.

These unaudited pro forma financial statements are prepared for informational purposes only. These unaudited pro forma statements of operations are not necessarily indicative of future results or of actual results that would have been achieved if the dispositions of the Aon Center building had been consummated as of January 1, 2014. Specifically, the accompanying pro forma statement of operations do not include the Registrant's nonrecurring gain that would have been recognized if the aforementioned property sale had occurred on January 1, 2014.

F-1


Piedmont Office Realty Trust, Inc.
PRO FORMA BALANCE SHEET
JUNE 30, 2015
(Unaudited)
(in thousands, except of share and per share amounts)
 
Historical(a)
 
Pro Forma Adjustments
 
Pro Forma
Total
Assets:
 
 
 
 
 
Real estate assets, at cost:
 
 
 
 
 
Land
$
696,713

 
$
(23,966
)
(b) 
$
672,747

Buildings and improvements, less accumulated depreciation
3,154,044

 
(444,565
)
(b) 
2,709,479

Intangible lease assets, less accumulated amortization
64,152

 
—

 
64,152

Construction in progress
64,804

 
(1,592
)
(b) 
63,212

Real estate assets held for sale, net
26,111

(c) 
—

 
26,111

Total real estate assets
4,005,824

 
(470,123
)
 
3,535,701

 
 
 
 
 
 
Investments in and amounts due from unconsolidated joint ventures
7,714

 
—

 
7,714

Cash and cash equivalents
8,997

 
646,093

(d) 
655,090

Tenant receivables, net of allowance for doubtful accounts
25,474

 
—

 
25,474

Notes receivable
45,400

 
—

 
45,400

Straight-line rent receivables
171,241

 
(24,609
)
(b) 
146,632

Restricted cash and escrows
521

 
—

 
521

Prepaid expenses and other assets
32,791

 
(1,708
)
(b) 
31,083

Goodwill
180,097

 
—

 
180,097

Interest rate swaps
8,290

 
—

 
8,290

Deferred financing costs, less accumulated amortization
7,491

 
—

 
7,491

Deferred lease costs, less accumulated amortization
283,756

 
(49,629
)
(b) 
234,127

Other assets held for sale, net
3,706

(c) 
—

 
3,706

Total assets
$
4,781,302

 
$
100,024

 
$
4,881,326

Liabilities:
 
 
 
 
 
Unsecured debt, net of discount
$
1,817,538

 
$
—

 
$
1,817,538

Secured debt, inclusive of premium
502,757

 
—

 
502,757

Accounts payable, accrued expenses, and accrued capital expenditures
128,898

 
—

 
128,898

Deferred income
26,633

 
—

 
26,633

Intangible lease liabilities, less accumulated amortization
41,214

 
(617
)
(b) 
40,597

Interest rate swaps
8,411

 
—

 
8,411

Total liabilities
2,525,451

 
(617
)
 
2,524,834

Commitments and Contingencies
—

 
—

 
—

Stockholders’ Equity:
 
 
 
 
 
Common stock, $.01 par value, 750,000,000 shares authorized; 151,833,222 shares issued and outstanding
1,518

 
—

 
1,518

Additional paid-in capital
3,668,378

 
—

 
3,668,378

Cumulative distributions in excess of earnings
(1,427,312
)
 
100,641

(e) 
(1,326,671
)
Other comprehensive income
12,242

 
—

 
12,242

Piedmont stockholders’ equity
2,254,826

 
100,641

 
2,355,467

Noncontrolling interest
1,025

 
—

 
1,025

Total stockholders’ equity
2,255,851

 
100,641

 
2,356,492

Total liabilities and stockholders’ equity
$
4,781,302

 
$
100,024

 
$
4,881,326


(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 June 30, 2015.
(b) 
Amounts represent the necessary adjustments to remove net assets and liabilities associated with the Aon Center building as of June 30, 2015.
(c) 
Reflects assets held for sale as of June 30, 2015, namely the Eastpoint I and II buildings and the 3750 Brookside Parkway building.
(d) 
Reflects the Registrant's net proceeds resulting from the sale of the Aon Center building.
(e) 
Reflects the Registrant's pro forma non-recurring gain on the sale of the Aon Center building.

F-2


Piedmont Office Realty Trust, Inc.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(Unaudited)
(in thousands, except of share and per share amounts)

 
Historical(a)
 
Pro Forma Adjustments
 
Pro Forma
Total
Revenues:
 
 
 
 
 
Rental income
$
235,261

 
$
(21,435
)
(b) 
$
213,826

Tenant reimbursements
60,203

 
(13,858
)
(c) 
46,345

Property management fee revenue
1,029

 
—

 
1,029

 
296,493

 
(35,293
)
 
261,200

 
 
 
 
 
 
Expenses:
 
 
 
 

Property operating costs
125,715

 
(20,957
)
(c) 
104,758

Depreciation
72,271

 
(11,806
)
(d) 
60,465

Amortization
29,625

 
(1,779
)
(e) 
27,846

Impairment loss on real estate asset
5,354

 
—

 
5,354

General and administrative
14,490

 
(1
)
 
14,489

 
247,455

 
(34,543
)
 
212,912

Real estate operating income
49,038

 
(750
)
 
48,288

Other income (expense):
 
 
 
 

Interest expense
(37,188
)
 
—

 
(37,188
)
Other income/(expense)
415

 
—

 
415

Equity in income of unconsolidated joint ventures
283

 
—

 
283

 
(36,490
)
 
—

 
(36,490
)
Income from continuing operations
$
12,548

 
$
(750
)
 
$
11,798

Gain on sale of real estate assets(f)
$
36,684

 
$
—

 
$
36,684

 
 
 
 
 
 
Per share information – basic and diluted:
 
 
 
 

Income from continuing operations and gain on sale of real estate assets
$
0.32

 

 
$
0.31

Weighted-average common shares outstanding – basic
153,947

 

 
153,947

Weighted-average common shares outstanding – diluted
154,174

 
 
 
154,174


(a) 
Historical financial information has been obtained from the Registrant's quarterly report on Form 10-Q for the six months ended June 30, 2015.
(b) 
Rental income for the Aon Center building is recognized on a straight-line basis.
(c) 
Removal of Aon Center operating expenses and related tenant reimbursements.
(d) 
Depreciation expense for the Aon Center 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.
(e) 
Amortization expense for the Aon Center building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.
(f) 
Represents the gain on sale of the 3900 Dallas Parkway building, the 5601 Headquarters Drive building, the River Corporate Center building, and the Copper Ridge Center building sold during the six months ended June 30, 2015.

F-3


Piedmont Office Realty Trust, Inc.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
(Unaudited)
(in thousands, except of share and per share amounts)

 
Historical(a)
 
Pro Forma Adjustments
 
Pro Forma
Total
Revenues:
 
 
 
 
 
Rental income
$
454,635

 
$
(41,892
)
(b) 
$
412,743

Tenant reimbursements
109,548

 
(27,901
)
(c) 
81,647

Property management fee revenue
2,069

 
—

 
2,069

 
566,252

 
(69,793
)
 
496,459

 
 
 
 
 
 
Expenses:
 
 
 
 

Property operating costs
239,436

 
(41,126
)
(c) 
198,310

Depreciation
138,596

 
(22,364
)
(d) 
116,232

Amortization
56,579

 
(3,371
)
(e) 
53,208

General and administrative
23,820

 
(2
)
 
23,818

 
458,431

 
(66,863
)
 
391,568

Real estate operating income
107,821

 
(2,930
)
 
104,891

Other income (expense):
 
 
 
 
 
Interest expense
(74,446
)
 
941

(f) 
(73,505
)
Other income/(expense)
62

 
—

 
62

Net recoveries from casualty events and litigation settlements
6,992

 
—

 
6,992

Equity in loss of unconsolidated joint ventures
(350
)
 
—

 
(350
)
 
(67,742
)
 
941

 
(66,801
)
Income from continuing operations
$
40,079

 
$
(1,989
)
 
$
38,090

Gain on sale of real estate assets(g)
$
1,132

 
$
—

 
$
1,132

 
 
 
 
 
 
Per share information – basic and diluted:
 
 
 
 
 
Income from continuing operations and gain on sale of real estate assets
$
0.27

 
 
 
$
0.25

Weighted-average common shares outstanding – basic
154,452

 
 
 
154,452

Weighted-average common shares outstanding – diluted
154,585

 
 
 
154,585


(a) 
Historical financial information has been obtained from the Registrant's annual report on Form 10-K for the year ended December 31, 2014.
(b) 
Rental income for the Aon Center building is recognized on a straight-line basis.
(c) 
Removal of the Aon Center building's operating expenses and related tenant reimbursements.
(d) 
Depreciation expense for the Aon Center 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.
(e) 
Amortization expense for the Aon Center building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.
(f) 
Interest expense recognized on $225 million of mortgage debt secured by Aon Center, which was repaid in January 2014.
(g) 
Represents the gain on sale of the 2020 W. 89th Street building.



F-4