What changed in this filing

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Item 1. Business

2024-02-20 compared with 2023-02-23 · 31 added, 51 removed, 96 unchanged (46% of the section changed)

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Additionally, we have one redevelopment asset comprising 127,000 square feet in Orlando, Florida.

Collectively, over two-thirds of our ALR is generated from our properties located in our Sunbelt markets.

Collectively, approximately 70% of our ALR is generated from our properties located in our Sunbelt markets.

We lease space to a mixture of corporate tenants from multiple industries, and our average lease size is approximately 15,000 square feet with an average lease term remaining of approximately six years.

Our diversified tenant base is primarily comprised of investment grade or nationally recognized corporations or governmental agencies, with the majority of our ALR derived from such tenants.

No tenant accounts for more than 5% of our ALR.

No tenant accounts for more than 5% of our ALR and only a total of three tenants, individually, account for 3% or more of our ALR.

Headquartered in Atlanta, Georgia, with local management offices in each of our markets, Piedmont values operational excellence and is a leading participant among REITs based on the number of buildings owned and managed with Building Owners and Managers Association ("BOMA") 360 designations.

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As of December 31, 2023, properties representing approximately 97% of our portfolio (based on square footage) had achieved such a designation, recognizing excellence in building operations and management.

Our focus on operational excellence, fostering long-term relationships with our high-credit quality, diverse tenant base, and maintaining our portfolio of modern, amenity-rich properties, has resulted in an approximate 67% tenant retention rate over the past ten years.

In addition to operational excellence, we also focus on environmental sustainability initiatives at our properties as further detailed below.

During 2022, we were named an Energy Star Partner of the Year for the second year in a row, as well as being selected as a 2022 Green Lease Leader by the Institute for Market Transformation and the U.S.

In addition to operational excellence, we also focus on environmental sustainability initiatives at our properties.

During 2023, we were again named an Energy Star Partner of the Year for the third year in a row, as well as being selected as a 2022 Green Lease Leader by the Institute for Market Transformation and the U.S.

Department of Energy's Better Buildings Alliance.

Approximately half of our portfolio (based on square footage) has achieved and maintains Leadership in Energy and Environmental Design ("LEED") certification and the entire portfolio has been awarded the WELL Health-Safety Rating through the International WELL Building Institute ("IWBI").

Approximately 70% of our portfolio (based on square footage) has achieved and maintains Leadership in Energy and Environmental Design ("LEED") certification.

Our primary operating objectives are to maximize the risk-adjusted return to our stockholders by increasing cash flow from operations, by achieving sustainable growth in funds from operations, and by growing net asset value as a result of long-term capital appreciation.

The strategies we employ to achieve these objectives include:

Recycling Capital Efficiently

We use our proven, disciplined capital recycling capabilities to maximize total return to our stockholders by selectively disposing of non-core assets and assets for which we believe full value potential during our ownership has been achieved, and redeploying the proceeds from those dispositions into new investment opportunities with higher overall return prospects.

Our investment strategy focuses on attractively priced, high quality, Class A office properties located in Sunbelt markets that we have identified based on their positive economic and demographic growth trends, strong amenity base, desired location for large corporate users, above-average job and rental rate growth, proximity to robust housing options, market-leading transportation access and infrastructure, and where we can build a significant market presence.

We generally look to acquire properties that complement our existing portfolio in such a manner that efficiencies can be gained and our market expertise can be maximized.

Further, from time to time we may also selectively enter into strategic joint ventures with third parties to acquire, develop, redevelop or dispose of properties, thereby potentially reducing the amount of our capital required to make investments, diversifying our sources of capital, enabling us to creatively acquire and control targeted properties, or allowing us to reduce our investment concentration in certain properties and/or markets without disrupting our operating performance or local operating capabilities.

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Redevelopment and Repositioning of Properties

We have recently redeveloped the majority of the properties within our portfolio to maintain and enhance the competitive positioning of our properties in their respective marketplaces.

These redevelopment projects have focused on creating additional, or enhancing existing, amenities for our tenants to increase tenant satisfaction, occupancy, and rental rates, thereby supporting our leasing efforts and improving returns on our invested capital.

Proactive Asset and Property Management, Leasing Capabilities, and Management of Portfolio Risk

Our proactive approach to asset and property management encompasses a number of strategies designed to maximize occupancy and rental rates while following leading environmentally-conscious business practices and also meeting or exceeding the needs of today's discerning tenants.

Our proactive, hospitality-minded approach to asset and property management encompasses a number of strategies designed to maximize occupancy and rental rates while following leading environmentally-conscious business practices and also meeting or exceeding the needs of today's discerning tenants.

Such strategies include:

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• offering, or being located near, superior amenities that help our tenants attract and retain their employees;

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• maintaining our high quality properties in an environmentally-friendly manner;

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• utilizing our purchasing power and market knowledge to reduce property operating costs.

Financing Strategy

We employ a conservative leverage strategy by maintaining a targeted debt-to-gross assets ratio of between 30% to 40%, and a targeted debt to EBITDA of low 6x or below.

To effectively manage our long-term leverage strategy, we continue to analyze various sources of debt capital to prudently ladder debt maturities and to determine which sources will be the most beneficial to our investment strategy at any particular time.

Redevelopment and Repositioning of Properties

As circumstances warrant, we may redevelop or reposition properties within our portfolio, including the creation of additional amenities for our tenants to increase tenant satisfaction, occupancy, and rental rates and thereby improve returns on our invested capital, as well as to maintain and enhance the competitive positioning of our properties in their respective marketplaces.

Operating our Properties in an Environmentally Responsible Manner

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Risk Factors which follow), we have set goals to reduce property energy and water consumption and greenhouse gas emissions and improve landfill diversion rates.

To reduce the risk that increasing stringent building and energy codes could increase construction, capital, and maintenance costs, we continue to update our buildings with energy efficient equipment to stay ahead of anticipated future code

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changes in both landlord and tenant-controlled spaces.

We also closely engage with our tenants regarding our environmental initiatives and encourage them to partner with us to reduce energy use within their leased spaces.

Additionally, we periodically incorporate the issuance of green bonds to acquire, develop, redevelop, and renovate buildings to reduce operating costs, meet recognized sustainable development standards, and reduce our environmental impact.

As our environmental programs have been ongoing for several years under the coordinated supervision of our National Vice President of Sustainability, we currently do not anticipate incurring any unusually large or material capital expenditures within any given year in order to meet these goals.

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The information contained on our website is not incorporated herein by reference.

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Recycling Capital Efficiently

We use our proven capital recycling capabilities to maximize total return to our stockholders by selectively disposing of non-core assets and assets for which we believe full value potential during our ownership has been achieved, and redeploying the proceeds from those dispositions into new investment opportunities with higher overall return prospects.

We generally look to acquire properties that complement our existing portfolio in such a manner that efficiencies can be gained and our market expertise can be maximized.

Financing Strategy

We employ a conservative leverage strategy by targeting a debt-to-gross assets ratio of between 30% to 40%, and debt to EBITDA ratio of mid 6x or below.

Human Capital and Social Involvement

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Approximately two-thirds of our workforce are salaried, with the remainder compensated on an hourly basis.

We are committed to hiring and supporting a diverse workforce that fosters skilled and motivated people working together to deliver results in support of our core business values.

We encourage all employees, tenants, and vendors to mutually respect one another's diversity in order to maintain a cohesive work environment that values fairness and equal treatment.

During 2022, we continued our training programs for our employees, managers, and contractors including professional training on workplace harassment and cybersecurity.

In addition, employees and managers received diversity, communication, ethics, and safety training.

Select managers also received individual management development.

Training programs for our employees, managers, and contractors during 2023 included professional training on workplace harassment and cybersecurity.

In addition, employees and managers received diversity, conflict management, collaboration, ethics, and safety training.

We intend to provide an environment that is equitable, unbiased, pleasant, diverse, healthy, comfortable, and free from intimidation, hostilities, or other offenses that might interfere with work performance.

We apply this policy to all of our employees, suppliers, and vendors, regardless of their geographic location.

The Piedmont Wayne Woody ("PWW") Foundation, which was established in memory of our first independent Chairman of the Board, W.

Wayne Woody, distributes charitable contributions to nonprofit organizations that fit our charitable giving criteria, demonstrate fiscal and administrative stability, and are not discriminatory or political.

The PWW Foundation, in partnership with two Historically Black Colleges and Universities, also provides funding for the Piedmont Office Realty Trust Scholarship Program which provides renewable, need-based, scholastic support to selected students interested in pursuing a career related to the real estate industry.

In addition to financial contributions through the PWW Foundation, we recognize the value and benefit of employee volunteerism and fully appreciate its positive impact on the community, our employees, and ultimately, our company culture by promoting team building, collaboration, and unity.

We are committed to hiring and supporting a diverse workforce that fosters skilled and motivated people working together to deliver results in support of our core business values.

We encourage all employees, tenants, and vendors to mutually respect one another's diversity in order to maintain a cohesive work environment that values fairness and equal treatment.

During 2023, we continued our partnership with two Historically Black Colleges and Universities, by providing funding for the Piedmont Office Realty Trust Scholarship Program.

The scholarships provide renewable, need-based, scholastic support to selected students interested in pursuing a career related to the real estate industry.

We recognize the value and benefit of employee volunteerism and fully appreciate its positive impact on the community, our employees, and ultimately, our company culture by promoting team building, collaboration, and unity.

Our employees have partnered together to donate thousands of dollars and hours annually to numerous organizations.

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The information contained on our website is not incorporated herein by reference.

Cyber Risk Oversight

The Audit Committee of the board of directors, comprised of three independent members, all of whom have information security experience, oversees our management of cyber risk and is briefed quarterly on information technology and information security matters.

Any significant issues identified would be reported to the board on a quarterly basis as well.

Certain members of the board of directors also have significant cyber security experience.

Although we have never experienced an information security breach or incurred any expenses related to an information security breach, we take a proactive approach to managing information security risk.

During the year ended December 31, 2022, we engaged an external accounting firm to update our Information Technology Cybersecurity Risk Assessment.

The results of the assessment were reported to the Audit Committee and the board of directors.

Additionally, an annual audit focusing on entity-level, application and information technology general computer controls is performed by an external audit firm.

Vulnerability and penetration tests are also performed annually by a third party.

We have an information security training and compliance program, in which all employees are

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required to participate on a formal basis at least annually, with cybersecurity updates, notices, reminders, and simulated cyber-attacks emailed to all employees bi-weekly.

Piedmont carries an information security risk insurance policy.

We compete for tenants for our high-quality assets by fostering strong tenant relationships and by providing quality customer service including:

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We do not face, however, the same competitors in every market.

This competition, along with market-specific vacancy rates and the condition of available, leasable square footage, affects the rental rates and concessions that we negotiate with our tenants.

This competition,

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along with market-specific vacancy rates and the condition of available, leasable square footage, affects the rental rates and concessions that we negotiate with our tenants.

Our competitors, along with these other market factors, also influence the price we pay to acquire properties, and the proceeds we receive when we dispose of a building.

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Risk Factors which follow for further discussion of the risks associated with these contracts.

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Information Regarding Disclosures Presented

ALR is calculated by multiplying (i) current rental payments (defined as base rent plus operating expense reimbursements, if payable by the tenant on a monthly basis under the terms of a lease that has been executed, but excluding (a) rental abatements and (b) rental payments related to executed but not commenced leases for space that was covered by an existing lease), by (ii) 12.

In instances in which contractual rents or operating expense reimbursements are collected on an annual, semi-annual, or quarterly basis, such amounts are multiplied by a factor of 1, 2, or 4, respectively, to calculate the annualized figure.

For leases that have been executed but not commenced relating to unleased space, ALR is calculated by multiplying (i) the monthly base rental payment (excluding abatements) plus any operating expense reimbursements for the initial month of the lease term, by (ii) 12.

Unless stated otherwise, this measure excludes revenues associated with development properties and properties taken out of service for redevelopment, if any.

Website Address

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business