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PDM

Piedmont Office Realty Trust NYSE:PDM Stock Report

Last Price

US$10.56

Market Cap

US$1.3b

7D

-5.8%

1Y

-41.7%

Updated

01 Oct, 2022

Data

Company Financials +
PDM fundamental analysis
Snowflake Score
Valuation4/6
Future Growth0/6
Past Performance0/6
Financial Health1/6
Dividends4/6

PDM Stock Overview

Piedmont Office Realty Trust, Inc. (NYSE: PDM) is an owner, manager, developer, redeveloper, and operator of high-quality, Class A office properties located primarily in select sub-markets within seven major Eastern U.S.

Piedmont Office Realty Trust, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Piedmont Office Realty Trust
Historical stock prices
Current Share PriceUS$10.56
52 Week HighUS$19.84
52 Week LowUS$10.16
Beta0.97
1 Month Change-10.20%
3 Month Change-20.78%
1 Year Change-41.69%
3 Year Change-48.96%
5 Year Change-47.85%
Change since IPO-32.31%

Recent News & Updates

Aug 23

Piedmont Office Realty Trust: A 6.5% Yielding Sunbelt REIT Due For A Rebound

Piedmont Office Realty owns a portfolio of Class A office properties concentrated in the Sunbelt region of the United States that are leased to a diverse group of tenants. Since the height of the COVID-19 pandemic, occupancy levels have continued to increase, and this has been paired with strong leasing activity. Shares, however, are trading near levels last seen during March of 2020, at a multiple of just 6x forward FFO, less than the 8x commanded by a related peer. Including a 6.5% dividend yield, the risk/reward is skewed materially to the upside, providing investors an opportunity for market-beating returns. Piedmont Office Realty Trust, Inc (PDM) is a real estate investment trust (“REIT") that owns and operates a portfolio of Class A office properties that are leased to a diversified tenant base primarily comprised of investment-grade or nationally recognized corporations or governmental agencies. Headquartered in Atlanta, Georgia, their properties are located in seven major U.S. office markets, primarily in the Sunbelt region, which accounts for over 60% of annualized lease revenue ("ALR"). Currently, shares are trading at just 6.4x forward funds from operations (“FFO”) and are hovering at the bottom of their 52-week range. This is a sizeable discount to the REIT sector at large, which is trading at about 17x forward FFO, and to a related peer, City Office REIT, Inc (CIO), who is a third of the size of PDM by market cap, but is trading at a multiple of 8x. YCharts - Summary of Recent Share Price History YTD, PDM is down over 30% and is not too far off their lows last attained during the height of the COVID-19 pandemic. This is despite a significantly improved outlook that includes rising occupancy levels and more certainty regarding the future of work. For investors, shares in PDM offer sizeable upside potential with the risk/reward very much in their favor. In addition to share price upside, investors would also receive a quarterly dividend payout, currently yielding nearly 6.5%. Though there are plenty of attractive opportunities in the office sector, PDM is one selective investment that can produce stand-out returns. A Quality Portfolio With Room For Improvement PDM’s portfolio of assets include 52 properties concentrated in seven markets, 23 of which are in Atlanta and Dallas, representing approximately 40% of ALR. At 87%, total leased occupancy is still trailing 2019 levels, which stood above 90%, but they are 150 basis points (“bps”) improved from the end of 2021. In their second largest market, Dallas, the trailing leased rate of 83% presents an attractive future growth opportunity for PDM. In the current quarterly period ended June 30, 2022, for example, the market experienced strong new leasing and touring activity, with corporate relocations into the area totaling 200 for the year, which is up significantly from 90 in 2020. Q2FY22 Form 10-Q - Summary of Geographic Concentration In addition, there is one large lease in the market which is set to expire in 2023. This expiration is expected to be accompanied with an extension of up to five years at a spread of 25%. The Dallas market, therefore, is likely to contribute meaningfully to future NOI growth, despite its currently lagging leased rate. Solidified Strength In The Atlanta Market During the current quarter, PDM also strengthened their market position in Atlanta by closing on 1180 Peachtree, which is a landmark asset that is one of the most recognizable trophy assets in the city. Anchor tenants in the 41-story skyscraper include Bain & Company and Cushman & Wakefield (CWK), to name just two. The acquisition of the property cemented PDM’s position in Midtown Atlanta, ranking them as the largest landlord on Peachtree Street. PDM Company Website - Snapshot of Recent High-Profile Acquisition Additionally, the acquisition came at a significant discount with an acquisition cost of $675 per square foot (“sqft”) and a blended acquisition basis of approximately $525/sqft. This is estimated to be modestly below replacement cost with in-place rents that are 20% below market values. Furthermore, the current leased rate on the building is 95%, and the historical occupancy levels have never dipped below 90% in the last ten years. The strong occupancy levels paired with the upside potential in rents is sure to provide accretive benefits to PDM beginning in Q3, which is when the acquisition is expected to be completed. Diversified Tenant Base With Strong Portfolio Metrics PDM also has a diversified tenant base where no single tenant accounts for over 5.5% of ALR. Within their top five are U.S. Bancorp (USB), whose national headquarters are owned by PDM, and Amazon (AMZN) and Microsoft (MSFT). Both the State and City of New York are also among the top five. Collectively, these five tenants accounted for less than 20% of ALR, a testament to the portfolio’s diversification. Q2FY22 Investor Supplement - Summary of Top Tenants The overall tenant base is also comprised of highly credited companies, operating primarily in the professional services industry, as well as in the governmental sectors. Q2FY22 Investor Supplement - Summary of Tenant Credit Ratings The engrained popularity of hybrid/remote working arrangements is one oft-cited risk for office-related landlords. But the governmental sector, especially in New York, are among the biggest proponents of bringing workers back to the office, if nothing else but to claw back those that have left their governing localities. This works in PDM’s favor, considering governmental entities account for nearly 10% of ALR. For others, a full return to the office may be unlikely. But that doesn’t mean they are eliminating space in its entirety. Hybrid arrangements still requires in-person work. And for that, there certainly appears to be a flight to quality, which is likely to be a continued tailwind for PDM. Continuing Strength in Leasing, Despite Ongoing Concerns Regarding The Future of Work In addition to rising occupancy levels, PDM’s leasing activity remains robust, with over 700k square feet signed during the current quarter, surpassing last quarter’s volume. In addition, over 200k of this activity was attributable to new leasing activity. Moreover, spreads are still growing, with cash roll-ups at 3% at an average lease term of 6.5 years. If offices were truly at secular risk, signings wouldn’t be commanding positive spreads, nor would companies be committing themselves to long-term leases. There was one high-profile short-term signing during the quarter that did cause some concern. And that was with USB. However, it should be noted that the company is currently going through a merger. The short-term nature of the renewal likely had more to do with merger economics as opposed to the holistic question regarding the future of their working arrangements, which is unlikely to change, given the space is their national headquarters. With few leases set to expire for the remainder of the year, management is expecting positive net space absorption for the year with an anticipated year-end occupancy level of 87-88%. And over the next several years, PDM will benefit from a healthy expiration schedule that will enable the roll-up of existing leases to market rates. They will also benefit from the continuing commencement of signed leases in vacant space or under rental abatement, representing approximately +$36M in ALR. Q2FY22 Investor Supplement - Summary of Lease Expirations Anchored By An Investment-Grade Balance Sheet Supporting PDM’s acquisition strategy is their strong balance sheet that includes a stable investment-grade rating from two out of the three major credit agencies. This is backed by a low debt ratio, representing 34.6% of their total market cap, 250bps lower than the end of 2021 despite the significant decline in their share price. As a multiple of core EBITDA on a twelve month basis, net debt stood at 5.7x, within targeted levels. PDM is, furthermore, well within compliance of their covenant requirements. The strong fixed charge coverage ratio of 5.2x is a reliable indicator of their ability to adequately cover their interest obligations, which is expected to increase in subsequent periods, creating a drag on earnings, at least in the near-term.

Shareholder Returns

PDMUS REITsUS Market
7D-5.8%-4.1%-2.5%
1Y-41.7%-20.4%-23.2%

Return vs Industry: PDM underperformed the US REITs industry which returned -20.4% over the past year.

Return vs Market: PDM underperformed the US Market which returned -23.2% over the past year.

Price Volatility

Is PDM's price volatile compared to industry and market?
PDM volatility
PDM Average Weekly Movement4.2%
REITs Industry Average Movement4.1%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: PDM is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: PDM's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1997134Christopher Smithhttps://www.piedmontreit.com

Piedmont Office Realty Trust, Inc. (NYSE: PDM) is an owner, manager, developer, redeveloper, and operator of high-quality, Class A office properties located primarily in select sub-markets within seven major Eastern U.S. office markets, with the majority of its revenue being generated from the Sunbelt. Its geographically-diversified, approximately $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 markets and is investment-grade rated by S&P Global Ratings (BBB) and Moody’s (Baa2).

Piedmont Office Realty Trust, Inc. Fundamentals Summary

How do Piedmont Office Realty Trust's earnings and revenue compare to its market cap?
PDM fundamental statistics
Market CapUS$1.30b
Earnings (TTM)US$47.49m
Revenue (TTM)US$541.69m

27.4x

P/E Ratio

2.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
PDM income statement (TTM)
RevenueUS$541.69m
Cost of RevenueUS$215.11m
Gross ProfitUS$326.59m
Other ExpensesUS$279.10m
EarningsUS$47.49m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)0.38
Gross Margin60.29%
Net Profit Margin8.77%
Debt/Equity Ratio92.2%

How did PDM perform over the long term?

See historical performance and comparison

Dividends

8.0%

Current Dividend Yield

42%

Payout Ratio