Piedmont Office Realty Trust Announces Pricing of Senior Notes Offering
Piedmont Office Realty Trust announced the pricing of a $400 million senior unsecured notes offering due 2029 at 6.875% interest, priced at 98.993% of the principal amount.
The offering is set to close on June 25, 2024, pending customary conditions.
Proceeds will be used to repay outstanding borrowings and for general corporate purposes.
Guarantees for the notes will be provided by the company on a senior unsecured basis.
BofA Securities, Wells Fargo Securities, J.P. Morgan, Truist Securities, Morgan Stanley, TD Securities, and US Bancorp are the joint book-running managers, with PNC Capital Markets , Scotiabank, and Ramirez & Co., Inc. acting as co-managers.
- The $400 million offering provides substantial liquidity for Piedmont Office Realty Trust.
- The 6.875% interest rate is favorable in the current market, showing investor confidence.
- Proceeds will be used to repay existing borrowings, potentially reducing interest expenses.
- The notes are fully guaranteed on a senior unsecured basis, enhancing investor security.
- Issuing debt increases the company's leverage, which could heighten financial risk.
- The offering is priced at 98.993% of the principal amount, indicating slight discounting.
- Repayment of borrowings suggests existing debt pressure on the company.
Insights
The recent announcement by Piedmont Office Realty Trust regarding the issuance of $400 million in senior unsecured notes is a significant financial event. The notes, priced at 6.875% and due in 2029, indicate a strategic move to refinance existing debt. Using the proceeds to repay borrowings under its 2023 term loan and 2022 line of credit will likely decrease short-term financial pressure and optimize the company’s capital structure.
Key Considerations:
- Interest Rate: The 6.875% interest rate is relatively high, reflecting current market conditions and potential credit risk associated with Piedmont. Investors should weigh this against comparable firms in the industry.
- Debt Repayment: By using the proceeds to repay existing borrowings, Piedmont is prioritizing financial stability. This should bolster the company’s credit profile and potentially improve its credit ratings.
- Capital Structure: The move will also free up liquidity, allowing Piedmont to focus on working capital, capital expenditures, or other corporate needs. This flexibility is critical in managing long-term growth and operational stability.
- Market Conditions: Current macroeconomic conditions, including interest rate trends and investor sentiment towards commercial real estate, will also play a role in the overall impact of this offering.
Overall, this debt issuance can be viewed positively as it aims to manage existing debt effectively and support long-term financial stability.
The pricing of senior notes by Piedmont Office Realty Trust highlights an important move within the commercial real estate sector. Such actions are sometimes indicative of broader industry trends, particularly in debt management and capital raising activities.
Industry Context:
- Debt Financing Trends: Companies in the real estate sector often rely on debt financing to leverage and grow their portfolios. This issuance aligns with a broader industry shift towards refinancing and restructuring debt in response to changing interest rates and economic conditions.
- Investor Sentiment: The involvement of multiple major banks as co-managers signals confidence in Piedmont’s financial strategy. However, retail investors should consider the implications of ongoing interest rate volatility and how it might affect future debt servicing costs.
- Competitive Positioning: Piedmont’s decision to issue new notes and repay existing loans could position them favorably compared to competitors who might be facing more significant refinancing risks. Ensuring financial liquidity now could offer competitive advantages in future real estate investments.
Retail investors should monitor how these financial maneuvers play out in the face of broader economic uncertainties. Understanding these dynamics can provide insights into Piedmont’s long-term strategic positioning.
Atlanta, June 13, 2024 (GLOBE NEWSWIRE) -- Piedmont Office Realty Trust, Inc. (the “Company” or “Piedmont”) (NYSE:PDM) announced today that its operating partnership, Piedmont Operating Partnership, LP (the “Operating Partnership”), has priced an offering of
Piedmont intends to use the net proceeds from the offering to repay borrowings outstanding under its 2023 term loan and its 2022 line of credit, with any remaining amount being used for working capital, capital expenditures and other general corporate purposes, which may include repayment of other borrowings outstanding.
The notes will be fully and unconditionally guaranteed on a senior unsecured basis by the Company.
BofA Securities, Wells Fargo Securities, J.P Morgan, Truist Securities, Morgan Stanley, TD Securities, and US Bancorp, are acting as joint book-running managers. PNC Capital Markets LLC, Scotiabank, and Ramirez & Co., Inc. are acting as co-managers.
A shelf registration statement relating to these securities is effective with the Securities and Exchange Commission. The offering may be made only by means of a prospectus supplement and accompanying prospectus. Copies of these documents may be obtained by contacting BofA Securities, Inc., NC1-004-03-43, 200 North College Street, 3rd Floor, Charlotte, NC 28255-0001, Attention: Prospectus Department or by email at dg.prospectus_requests@bofa.com; Wells Fargo Securities, LLC at 608 2nd Avenue South, Suite 1000, Minneapolis, Minnesota 55402, Attention: WFS Customer Service, or by calling: 1-800-645-3751, or by emailing: wfscustomerservice@wellsfargo.com; J.P Morgan Securities LLC, 383 Madison Avenue, New York, New York, 10179, Attention: Investment Grade Syndicate Desk, 3rd Floor, telephone collect at 1-212-834-4533; or Truist Securities, Inc., 3333 Peachtree Road NE, Atlanta, GA 30326, Attn: Prospectus Dept, Telephone: (800) 685-4786. Electronic copies of these documents are also available from the Securities and Exchange Commission’s website at www.sec.gov.
This press release is neither an offer to purchase nor a solicitation of an offer to sell the notes, nor shall it constitute an offer, solicitation or sale in any state or jurisdiction in which such offer, solicitation or sale is unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.
About Piedmont Office Realty Trust
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 the Sunbelt. Its approximately
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 21 E 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 known and unknown risks and uncertainties, which could cause actual results to differ materially from those 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 the Company's use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or similar words or phrases that indicate predictions of future events or trends or that do not relate solely to historical matters. These statements are based on beliefs and assumptions of Piedmont’s management, which in turn are based on information available at the time the statements are made.
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 (including work from home), technological (e.g. artificial intelligence and machine learning, Zoom, etc.), and other changes that impact the real estate market generally, the office sector or the patterns of use of commercial office space in general, or the markets where we primarily operate or have high concentrations of revenue; the impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases; lease terminations, lease defaults, lease contractions, or changes in the financial condition of our tenants, particularly by one of our large lead tenants; impairment charges on our long-lived assets or goodwill resulting therefrom; the success of our real estate strategies and investment objectives, including our ability to implement successful redevelopment and development strategies or identify and consummate suitable acquisitions and divestitures; the illiquidity of real estate investments, including economic changes, such as rising interest rates, and available financing, which could impact the number of buyers/sellers of our target properties, and regulatory restrictions to which real estate investment trusts (“REITs”) are subject and 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 and disposition of properties, many of which risks and uncertainties may not be known at the time of acquisition or disposition; development and construction delays, including the potential of supply chain disruptions, and resultant increased costs and risks; future acts of terrorism, civil unrest, or armed hostilities in any of the major metropolitan areas in which we own properties; risks related to the occurrence of cybersecurity incidents, including cybersecurity incidents against us or any of our properties or tenants, or a deficiency in our identification, assessment or management of cybersecurity threats impacting our operations and the public's reaction to reported cybersecurity incidents; costs of complying with governmental laws and regulations, including environmental standards imposed on office building owners; uninsured losses or losses in excess of our insurance coverage, and our inability to obtain adequate insurance coverage at a reasonable cost; additional risks and costs associated with directly managing properties occupied by government tenants, such as potential changes in the political environment, a reduction in federal or state funding of our governmental tenants, or an increased risk of default by government tenants during periods in which state or federal governments are shut down or on furlough; significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock; risks associated with incurring mortgage and other indebtedness, including changing capital reserve requirements on our lenders and rapidly rising interest rates for new debt financings; a downgrade in our credit ratings, the credit ratings of the Operating Partnership or the credit ratings of our or the Operating Partnership's unsecured debt securities, which could, among other effects, trigger an increase in the stated rate of one or more of our unsecured debt instruments; the effect of future offerings of debt or equity securities on the value of our common stock; additional risks and costs associated with inflation and continuing increases in the rate of inflation, including the impact of a possible recession; uncertainties associated with environmental and regulatory matters; changes in the financial condition of our tenants directly or indirectly resulting from geopolitical developments that could negatively affect important supply chains and international trade, the termination or threatened termination of existing international trade agreements, or the implementation of tariffs or retaliatory tariffs on imported or exported goods; the effect of any litigation to which we are, or may become, subject; additional risks and costs associated with owning properties occupied by tenants in particular industries, such as oil and gas, hospitality, travel, co-working, etc., including risks of default during start-up and during economic downturns; 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, as amended, or other tax law changes which may adversely affect our stockholders; the future effectiveness of our internal controls and procedures; actual or threatened public health epidemics or outbreaks, such as the COVID-19 pandemic, as well as governmental and private measures taken to combat such health crises,; 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, 2023.
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.
Contacts
Research Analysts/ Institutional Investors Contact:
770-418-8592
research.analysts@piedmontreit.com
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