Piedmont Office Realty Trust Inc

Previous wording

We intend to use cash on hand, cash flows generated from the operation of our properties, net proceeds from the potential disposition of select properties, and borrowings under our $600 Million Unsecured 2022 Line of Credit as our primary sources of immediate liquidity, including to repay the $250 million Unsecured 2018 Term Loan which is scheduled to mature in March of 2025. Other than the $250 million Unsecured 2018 Term Loan, we currently have no other final debt maturities until 2027. We believe that we have sufficient liquidity to meet our obligations for the foreseeable future.

Current wording

We intend to use cash on hand, cash flows generated from the operation of our properties, net proceeds from the potential disposition of select properties, and our available bank credit as our primary sources of immediate liquidity, including to repay the $250 Million Unsecured 2018 Term Loan which is scheduled to mature in March of 2025. Other than the $250 Million Unsecured 2018 Term Loan, we currently have no other final debt maturities until 2027. We believe that we have sufficient liquidity to meet our obligations for the foreseeable future.

Previous wording

Our most consistent use of capital has historically been, and we believe will continue to be, to fund capital expenditures for our existing portfolio of properties. During the six months ended June 30, 2024 and 2023 we incurred the following types of capital expenditures (in thousands):

Current wording

Our most consistent use of capital has historically been, and we believe will continue to be, to fund capital expenditures for our existing portfolio of properties. During the nine months ended September 30, 2024 and 2023 we incurred the following types of capital expenditures (in thousands):

Previous wording

(1)Of the total amounts paid, approximately $8.2 million and $4.4 million relates to soft costs such as capitalized interest, payroll, and other property operating costs for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(1)Of the total amounts paid, approximately $13.4 million and $7.1 million relates to soft costs such as capitalized interest, payroll, and other property operating costs for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

"Capital expenditures for redevelopment/renovations" during both the six months ended June 30, 2024 and 2023 related to building upgrades, primarily to the lobbies and the addition of tenant amenities at certain of our buildings, including: Galleria Towers in Dallas, Texas; The Exchange in Orlando, Florida; 999 Peachtree Street in Atlanta, Georgia, and 9320 Excelsior Boulevard and One and Two Meridian in suburban Minneapolis, Minnesota, among others, most of which are anticipated to be completed during 2024.

Current wording

"Capital expenditures for redevelopment/renovations" during both the nine months ended September 30, 2024 and 2023 related to building upgrades, primarily to the lobbies and the addition of tenant amenities at certain of our buildings, including: Galleria Towers in Dallas, Texas; The Exchange in Orlando, Florida; 999 Peachtree Street and Galleria on the Park in Atlanta, Georgia, and Meridian in suburban Minneapolis, Minnesota, among others, most of which are anticipated to be completed during 2024.

Previous wording

Given that our operating model frequently results in leases for multiple blocks of space to credit-worthy tenants, our leasing success can result in capital outlays which vary from one reporting period to another based upon the specific leases executed. For leases executed during the six months ended June 30, 2024, we committed to spend approximately $5.85 per square foot per year of lease term for tenant improvement allowances and lease commissions (net of expired lease commitments) as compared to $6.29 (net of expired lease commitments) for the six months ended June 30, 2023. As of June 30, 2024, we had two individually significant unrecorded tenant allowances commitment greater than $10 million.

Current wording

Given that our operating model frequently results in leases for multiple blocks of space to credit-worthy tenants, our leasing success can result in capital outlays which vary from one reporting period to another based upon the specific leases executed. For leases executed during the nine months ended September 30, 2024, we committed to spend approximately $5.71 per square foot per year of lease term for tenant improvement allowances and lease commissions (net of expired lease commitments) as compared to $6.20 (net of expired lease commitments) for the nine months ended September 30, 2023. As of September 30, 2024, we had two individually significant unrecorded tenant allowance commitments greater than $10 million.

Previous wording

Net loss applicable to common stockholders for the three months ended June 30, 2024 was approximately $9.8 million, or $0.08 per diluted share, as compared with net loss applicable to common stockholders of $2.0 million, or $0.02 per diluted share, for the three months ended June 30, 2023. The increase in net loss mainly reflects a $7.5 million increase in interest expense, net of interest income, driven by increased interest rates on our debt during the second quarter of 2024 as compared to the second quarter of 2023.

Current wording

Net loss applicable to common stockholders for the three months ended September 30, 2024 was approximately $11.5 million, or $0.09 per diluted share, as compared with net loss applicable to common stockholders of $17.0 million, or $0.14 per diluted share, for the three months ended September 30, 2023. The primary driver of the $5.5 million decrease in net loss was the non-recurrence of an approximately $11.0 million impairment charge recognized during the third quarter of 2023. This decrease was partially offset by increased interest expense, net of interest income, as compared to the third quarter of 2023, as well as the sale of two properties and the expiration of two large leases during 2024.

Previous wording

Rental and tenant reimbursement revenue decreased approximately $0.8 million for the three months ended June 30, 2024, as compared to the same period in the prior year. The decrease was primarily due to the sale of One Lincoln Park completed during first quarter 2024 as well as two large tenant expirations during the six months ended June 30, 2024, largely offset by the roll up of rental rates and new leases commencing during the twelve months ended June 30, 2024.

Current wording

Rental and tenant reimbursement revenue decreased approximately $8.7 million for the three months ended September 30, 2024, as compared to the same period in the prior year. The decrease was primarily due to lost revenues during the downtime between certain large tenant expirations and the commencement or abatement expiration associated with recently executed leases, as well as the dispositions of One Lincoln Park and 750 West John Carpenter Freeway in 2024. The impact of these decreases is partially offset by the roll up of rental rates and new leases commencing during the twelve months ended September 30, 2024.

Previous wording

Property operating costs increased approximately $1.9 million for the six months ended June 30, 2024 as compared to the same period in the prior year. The variance was primarily due to higher recoverable operating expenses such as janitorial, security, repairs and maintenance and other general expenses as tenant utilization increased during the twelve months ended June 30, 2024. These increased costs were partially offset by a decrease in property operating expenses associated with the sale of One Lincoln Park in March 2024.

Current wording

Property operating costs decreased approximately $2.3 million for the three months ended September 30, 2024 as compared to the same period in the prior year. The decrease was primarily due to lower property tax expense due to lower tax assessments and successful appeals, as well as property dispositions during 2024 (as discussed above). These decreases were partially offset by higher recoverable operating expenses such as utilities, security, repairs and maintenance and other general expenses as tenant utilization and the overall leased percentage of our portfolio increased during the twelve months ended September 30, 2024.

Previous wording

Amortization expense decreased approximately $3.2 million for the three months ended June 30, 2024 as compared to the same period in the prior year. The decrease was primarily due to amortization expense associated with certain lease intangible assets at our existing projects becoming fully amortized subsequent to April 1, 2023.

Current wording

Amortization expense decreased approximately $3.1 million for the three months ended September 30, 2024 as compared to the same period in the prior year. The decrease was primarily due to amortization expense associated with certain lease intangible assets at our existing projects becoming fully amortized subsequent to July 1, 2023.

Previous wording

Interest expense increased approximately $6.2 million for the three months ended June 30, 2024, as compared to the same period in the prior year primarily driven by increased interest rates on floating-rate debt during the twelve months ended June 30, 2024 as well as the refinancing of maturing debt at higher rates during the latter half of 2023 and first half of 2024. The increase was partially offset by a $1.6 million increase in capitalized interest associated with various redevelopment projects in progress during the three months ended June 30, 2024.

Current wording

Interest expense increased approximately $4.7 million for the three months ended September 30, 2024, as compared to the same period in the prior year primarily driven by increased interest rates on floating-rate debt during the twelve months ended September 30, 2024, as well as refinancing $1.2 billion of maturing debt at higher rates during the latter half of 2023 and first half of 2024. The increase was partially offset by a $1.5 million increase in capitalized interest associated with various redevelopment projects in progress during the three months ended September 30, 2024.

Previous wording

The following table sets forth selected data from our consolidated statements of operations for the six months ended June 30, 2024 and 2023, respectively, as well as each balance as a percentage of total revenues for the same period presented (dollars in millions):

Current wording

The following table sets forth selected data from our consolidated statements of operations for the nine months ended September 30, 2024 and 2023, respectively, as well as each balance as a percentage of total revenues for the same period presented (dollars in millions):

Previous wording

Other property related income increased approximately $1.0 million for the three months ended June 30, 2024 as compared to the same period in the prior year primarily due to higher transient parking at our office projects during the current period, as compared to the prior period.

Current wording

Other property related income increased approximately $1.8 million for the nine months ended September 30, 2024 as compared to the same period in the prior year primarily due to increased occupancy and utilization at our properties and higher transient parking at our office projects during the current period, as compared to the prior period.

Previous wording

Depreciation expense increased approximately $2.3 million for the three months ended June 30, 2024 as compared to the same period in the prior year. The increase was primarily due to additional building and tenant improvements placed in service subsequent to April 1, 2023.

Current wording

Depreciation expense increased approximately $6.3 million for the nine months ended September 30, 2024 as compared to the same period in the prior year. The increase was primarily due to additional building and tenant improvements placed in service subsequent to January 1, 2023.

Previous wording

Amortization expense decreased approximately $7.2 million for the six months ended June 30, 2024 as compared to the same period in the prior year. The decrease in amortization expense is associated with certain lease intangible assets at our existing projects becoming fully amortized subsequent to January 1, 2023.

Current wording

Amortization expense decreased approximately $10.2 million for the nine months ended September 30, 2024 as compared to the same period in the prior year. The decrease in amortization expense is associated with certain lease intangible assets at our existing projects becoming fully amortized subsequent to January 1, 2023.

Previous wording

During the six months ended June 30, 2024, we recognized a non-cash impairment charge of approximately $18.4 million primarily related to shortening the projected hold period for one property during the quarter. See Note 6 to our accompanying consolidated financial statements for further details.

Current wording

During the nine months ended September 30, 2024, we recognized a non-cash impairment charge of approximately $18.4 million primarily related to shortening the projected hold period for one property. During the nine months ended September 30, 2023, we reduced the carrying amount of goodwill resulting in the recognition of a non-cash impairment charge of approximately $11.0 million. See Note 6 to our accompanying consolidated financial statements for further details.

Previous wording

Interest expense increased approximately $13.8 million for the six months ended June 30, 2024 as compared to the same period in the prior year primarily driven by increased interest rates on floating-rate debt during the twelve months ended June 30, 2024 as well as the refinancing of maturing debt at higher rates during the latter half of 2023 and first half of 2024. The increase was partially offset by a $3.2 million increase in capitalized interest associated with various redevelopment projects in progress during the six months ended June 30, 2024.

Current wording

Interest expense increased approximately $18.6 million for the nine months ended September 30, 2024 as compared to the same period in the prior year primarily driven by increased interest rates on floating-rate debt during the twelve months ended September 30, 2024 as well as refinancing $1.2 billion of maturing debt at higher rates during the latter half of 2023 and first half of 2024. The increase was partially offset by a $4.7 million increase in capitalized interest associated with various redevelopment projects in progress during the nine months ended September 30, 2024.

Previous wording

Other income decreased approximately $1.5 million for the three months ended June 30, 2024 as compared to the same period in the prior year due to lower average invested cash balances during the second quarter of 2024 as compared to the second quarter of 2023.

Current wording

Other income decreased approximately $1.1 million for the nine months ended September 30, 2024 as compared to the same period in the prior year due to lower average invested cash balances in the current period.

Previous wording

NOI increased due to several leases commencing at our Galleria on the Park project during the six months ended June 30, 2024 as compared to the same period in the prior year.

Current wording

NOI increased due to several leases commencing at our Galleria on the Park and 999 Peachtree Street projects during the nine months ended September 30, 2024 as compared to the same period in the prior year.

Previous wording

NOI decreased primarily due to the expiration of the leases associated with the sole tenants at two projects: 9320 Excelsior Boulevard, and One and Two Meridian. Both projects have been designated as redevelopment assets during the first half of 2024.

Current wording

NOI decreased primarily due to the expiration of the leases associated with the sole tenants at two projects: 9320 Excelsior Boulevard and Meridian. Both projects have been designated as redevelopment assets during the nine months ended September 30, 2024.

Previous wording

NOI increased due to a tenant's expansion at our 5 & 15 Wayside Road building in the latter half of 2023 as compared to the first six months of the prior year.

Current wording

NOI increased during the nine months ended September 30, 2024 as compared to the prior year due to a tenant's expansion at our 5 & 15 Wayside Road building in the latter half of 2023.

Previous wording

Reconciliations of net loss applicable to common stock to FFO, Core FFO, and AFFO are presented below (in thousands except per share amounts):

Current wording

Reconciliations of net loss applicable to common stock to FFO, Core FFO, and AFFO for the three and nine months ended September 30, 2024 and 2023 are presented below (in thousands except per share amounts):

Previous wording

(1)Core FFO was $0.37 per diluted share for the three months ended June 30, 2024, as compared to $0.45 per diluted share for the three months ended June 30, 2023. Approximately $0.06 of the decrease is due to increased interest expense, net of interest income, with the remaining decrease attributable to a combination of the sale of One Lincoln Park during the first quarter of 2024, as well as the expiration of two large leases during the six months ended June 30, 2024.

Current wording

(1)Core FFO was $0.36 per diluted share for the three months ended September 30, 2024, as compared to $0.43 per diluted share for the three months ended September 30, 2023. Approximately $0.03 of the decrease is due to increased interest expense, net of interest income, with the remaining decrease attributable to a combination of the sale of One Lincoln Park during the first quarter of 2024, the sale of 750 West John Carpenter Freeway during the second quarter of 2024, as well as the expiration of two large leases during the nine months ended September 30, 2024.

Previous wording

(3)Includes potential dilution under the treasury stock method that would occur if our remaining unvested and potential stock awards vested and resulted in additional common shares outstanding. Such shares are not included when calculating net loss per share applicable to Piedmont for the three and six months ended June 30, 2024 and 2023, respectively, as they would reduce the loss per share presented.

Current wording

(3)Includes potential dilution under the treasury stock method that would occur if our remaining unvested and potential stock awards vested and resulted in additional common shares outstanding. Such shares are not included when calculating net loss per share applicable to Piedmont for the three and nine months ended September 30, 2024 and 2023, respectively, as they would reduce the loss per share presented.

Previous wording

(1)We calculate Earnings Before Interest, Taxes, Depreciation, and Amortization- Real Estate ("EBITDAre") in accordance with the current NAREIT definition. NAREIT currently defines EBITDAre as net income (computed in accordance with GAAP) adjusted for gains or losses from sales of property, impairment losses, depreciation on real estate assets, amortization on real estate assets, interest expense and taxes, along with the same adjustments for joint ventures. Some of the adjustments mentioned can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. EBITDAre is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that EBITDAre is helpful to investors as a supplemental performance measure because it provides a metric for understanding our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization) and capitalization and capital structure expenses (such as interest expense and taxes). We also believe that EBITDAre can help facilitate comparisons of operating performance between periods and with other REITs. However, other REITs may not define EBITDAre in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than us; therefore, our computation of EBITDAre may not be comparable to that of such other REITs.

Current wording

(1)We calculate Earnings Before Interest, Taxes, Depreciation, and Amortization- Real Estate ("EBITDAre") in accordance with the current NAREIT definition. NAREIT currently defines EBITDAre as net income (computed in accordance with GAAP) adjusted for gains or losses from sales of property, impairment charges, depreciation on real estate assets, amortization on real estate assets, interest expense and taxes, along with the same adjustments for joint ventures. Some of the adjustments mentioned can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. EBITDAre is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that EBITDAre is helpful to investors as a supplemental performance measure because it provides a metric for understanding our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization) and capitalization and capital structure expenses (such as interest expense and taxes). We also believe that EBITDAre can help facilitate comparisons of operating performance between periods and with other REITs. However, other REITs may not define EBITDAre in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than us; therefore, our computation of EBITDAre may not be comparable to that of such other REITs.

Previous wording

(2)We calculate Core Earnings Before Interest, Taxes, Depreciation, and Amortization ("Core EBITDA") as net income (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and incrementally removing any impairment losses, gains or losses from sales of property and other significant infrequent items that create volatility within our earnings and make it difficult to determine the earnings generated by our core ongoing business. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that Core EBITDA is helpful to investors as a supplemental performance measure because it provides a metric for understanding the performance of our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization), as well as items that are not part of normal day-to-day operations of our business. Other REITs may not define Core EBITDA in the same manner as us; therefore, our computation of Core EBITDA may not be comparable to that of other REITs.

Current wording

(2)We calculate Core Earnings Before Interest, Taxes, Depreciation, and Amortization ("Core EBITDA") as net income (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and incrementally removing any impairment charges, gains or losses from sales of property and other significant infrequent items that create volatility within our earnings and make it difficult to determine the earnings generated by our core ongoing business. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that Core EBITDA is helpful to investors as a supplemental performance measure because it provides a metric for understanding the performance of our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization), as well as items that are not part of normal day-to-day operations of our business. Other REITs may not define Core EBITDA in the same manner as us; therefore, our computation of Core EBITDA may not be comparable to that of other REITs.

Previous wording

(4)Dispositions include One Lincoln Park in Dallas, Texas, sold in the first quarter of 2024.

Current wording

(4)Dispositions include One Lincoln Park in Dallas, Texas, sold in the first quarter of 2024, and 750 West John Carpenter Freeway in Irving, Texas, sold in the second quarter of 2024.

Previous wording

(5)Other investments include active or recently completed out-of-service redevelopment projects and land. The operating results from a portion of The Exchange in Orlando, Florida, as well as One and Two Meridian and 9320 Excelsior Boulevard in suburban Minneapolis, Minnesota are included in this line item.

Current wording

(5)Other investments include active or recently completed out-of-service redevelopment projects and land. The operating results from a portion of The Exchange in Orlando, Florida, as well as Meridian and 9320 Excelsior Boulevard in suburban Minneapolis, Minnesota are included in this line item.

Previous wording

The following table sets forth a reconciliation of net loss calculated in accordance with GAAP to EBITDAre, Core EBITDA, Property NOI, and Same Store NOI, on both a cash and accrual basis, for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table sets forth a reconciliation of net loss calculated in accordance with GAAP to EBITDAre, Core EBITDA, Property NOI, and Same Store NOI, on both a cash and accrual basis, for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

(1)We calculate Earnings Before Interest, Taxes, Depreciation, and Amortization- Real Estate ("EBITDAre") in accordance with the current NAREIT definition. NAREIT currently defines EBITDAre as net income/(loss) (computed in accordance with GAAP) adjusted for gains or losses from sales of property, impairment losses, depreciation on real estate assets, amortization on real estate assets, interest expense and taxes, along with the same adjustments for joint ventures. Some of the adjustments mentioned can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. EBITDAre is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that EBITDAre is helpful to investors as a supplemental performance measure because it provides a metric for understanding our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization) and capitalization and capital structure expenses (such as interest expense and taxes). We also believe that EBITDAre can help facilitate comparisons of operating performance between periods and with other REITs. However, other REITs may not define EBITDAre in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than us; therefore, our computation of EBITDAre may not be comparable to that of such other REITs.

Current wording

(1)We calculate Earnings Before Interest, Taxes, Depreciation, and Amortization- Real Estate ("EBITDAre") in accordance with the current NAREIT definition. NAREIT currently defines EBITDAre as net income/(loss) (computed in accordance with GAAP) adjusted for gains or losses from sales of property, impairment charges, depreciation on real estate assets, amortization on real estate assets, interest expense and taxes, along with the same adjustments for joint ventures. Some of the adjustments mentioned can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. EBITDAre is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that EBITDAre is helpful to investors as a supplemental performance measure because it provides a metric for understanding our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization) and capitalization and capital structure expenses (such as interest expense and taxes). We also believe that EBITDAre can help facilitate comparisons of operating performance between periods and with other REITs. However, other REITs may not define EBITDAre in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than us; therefore, our computation of EBITDAre may not be comparable to that of such other REITs.

Previous wording

(2)We calculate Core Earnings Before Interest, Taxes, Depreciation, and Amortization ("Core EBITDA") as Net loss (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and removing any impairment losses, gains or losses from sales of property and other significant infrequent items that create volatility within our earnings and make it difficult to determine the earnings generated by our core ongoing business. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that Core EBITDA is helpful to investors as a supplemental performance measure because it provides a metric for understanding the performance of our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization), as well as items that are not part of normal day-to-day operations of our business. Other REITs may not define Core EBITDA in the same manner as us; therefore, our computation of Core EBITDA may not be comparable to that of other REITs.

Current wording

(2)We calculate Core Earnings Before Interest, Taxes, Depreciation, and Amortization ("Core EBITDA") as Net loss (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and removing any impairment charges, gains or losses from sales of property and other significant infrequent items that create volatility within our earnings and make it difficult to determine the earnings generated by our core ongoing business. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that Core EBITDA is helpful to investors as a supplemental performance measure because it provides a metric for understanding the performance of our results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization), as well as items that are not part of normal day-to-day operations of our business. Other REITs may not define Core EBITDA in the same manner as us; therefore, our computation of Core EBITDA may not be comparable to that of other REITs.

Previous wording

(5)Other investments include active or recently completed out-of-service redevelopment projects and land. The operating results from a portion of the The Exchange in Orlando, Florida, as well as One and Two Meridian and 9320 Excelsior Boulevard in suburban Minneapolis, Minnesota are included in this line item.

Current wording

(5)Other investments include active or recently completed out-of-service redevelopment projects and land. The operating results from a portion of The Exchange in Orlando, Florida, as well as Meridian and 9320 Excelsior Boulevard in suburban Minneapolis, Minnesota are included in this line item.

Previous wording

Our portfolio consists of office projects located within identified growth submarkets in large metropolitan cities concentrated primarily in the Sunbelt. We typically lease space to creditworthy corporate or governmental tenants on a long-term basis. As of June 30, 2024, our average lease was approximately 14,000 square feet with over six years of lease term remaining. Leased percentage, as well as rent roll ups and roll downs, which we experience as a result of re-leasing, can fluctuate widely between buildings and between tenants, depending on when a particular lease is scheduled to commence or expire.

Current wording

Our portfolio consists of office projects located within identified growth submarkets in large metropolitan cities concentrated primarily in the Sunbelt. We typically lease space to creditworthy corporate or governmental tenants on a long-term basis. As of September 30, 2024, our average lease was approximately 14,000 square feet with six years of lease term remaining. Leased percentage, as well as rent roll ups and roll downs, which we experience as a result of re-leasing, can fluctuate widely between buildings and between tenants, depending on when a particular lease is scheduled to commence or expire.

Previous wording

The leased percentage of our in-service portfolio increased slightly to 87.3% leased as of June 30, 2024, as compared to 87.1% leased as of December 31, 2023. During the six months ended June 30, 2024, we completed over 1.5 million square feet of leasing, including approximately 730,000 square feet of new tenant leases which increased our in-service leased percentage, despite the sale of the One Lincoln Park building during the first quarter of 2024. Scheduled lease expirations for the portfolio for the rest of 2024 are low, representing approximately 3.4% of our ALR, some portion of which may renew. To the extent the square footage from new leases for currently vacant space in our in-service portfolio exceeds or falls short of the square footage associated with non-renewing expirations, such leases would increase or decrease our in-service leased percentage, respectively. As of June 30, 2024, three projects, 222 South Orange Avenue in Orlando, Florida, and 9320 Excelsior Boulevard and One and Two Meridian, both in suburban Minneapolis, Minnesota, were classified as out of service as they undergo redevelopment.

Current wording

The leased percentage of our in-service portfolio increased to 88.8% leased as of September 30, 2024, as compared to 87.1% leased as of December 31, 2023. During the nine months ended September 30, 2024, we completed approximately 2.0 million square feet of leasing, including approximately 938,000 square feet of new tenant leases which contributed to the increase in our in-service leased percentage as compared to December 31, 2023. As of September 30, 2024, scheduled lease expirations for the portfolio for the next twelve months represent less than 9% of our ALR, some portion of which have already renewed. To the extent the square footage from new leases for currently vacant space in our in-service portfolio exceeds or falls short of the square footage associated with non-renewing expirations, such leases would increase or decrease our in-service leased percentage, respectively. As of September 30, 2024, three projects, 222 South Orange Avenue in Orlando, Florida, and 9320 Excelsior Boulevard and Meridian, both in suburban Minneapolis, Minnesota, were classified as out of service as they undergo redevelopment.

Previous wording

Commencement of a lease associated with a new tenant typically occurs 6-18 months after the lease execution date, after refurbishment of the space is completed. The downtime between a lease expiration and the new lease's commencement can negatively impact Property NOI and Same Store NOI comparisons (both accrual and cash basis). In addition, office leases for both new and renewing tenants often contain upfront rental and/or operating expense abatement periods which delay the cash flow benefits of the lease even after the new or renewed lease has commenced, negatively impacting Property NOI and Same Store NOI on a cash basis until such abatements expire. As of June 30, 2024, we had approximately 1.6 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $51 million of future additional annual cash rents.

Current wording

Commencement of a lease associated with a new tenant typically occurs 6-18 months after the lease execution date, after refurbishment of the space is completed. The downtime between a lease expiration and the new lease's commencement can negatively impact Property NOI and Same Store NOI comparisons (both accrual and cash basis). In addition, office leases for both new and renewing tenants often contain upfront rental and/or operating expense abatement periods which delay the cash flow benefits of the lease even after the new or renewed lease has commenced, negatively impacting Property NOI and Same Store NOI on a cash basis until such abatements expire. As of September 30, 2024, we had approximately 1.5 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $48 million of future additional annual cash rents.

Previous wording

If we are unable to replace expiring leases with new or renewal leases at rental rates equal to or greater than the expiring rates, rental rate roll downs could occur and negatively impact Property NOI and Same Store NOI comparisons. As mentioned above, our diverse portfolio and the magnitude of some of our tenants' leased spaces can result in rent roll ups and roll downs that can fluctuate widely on a project-by-project and a quarter-to-quarter basis. During the three months ended June 30, 2024, we experienced an 15.2% and 23.0% roll up in cash and accrual rents, respectively, on executed leases related to space vacant one year or less.

Current wording

If we are unable to replace expiring leases with new or renewal leases at rental rates equal to or greater than the expiring rates, rental rate roll downs could occur and negatively impact Property NOI and Same Store NOI comparisons. As discussed above, our diverse portfolio and the magnitude of some of our tenants' leased spaces can result in rent roll ups and roll downs that can fluctuate widely on a project-by-project and a quarter-to-quarter basis. During the three months ended September 30, 2024, we experienced an 4.0% and 8.5% roll up in cash and accrual rents, respectively, on executed leases related to space vacant one year or less.

Previous wording

During the three months ended June 30, 2024, Same Store NOI increased by 5.7% and 3.7% on a cash and accrual basis, respectively, as compared to the same period in the prior year, as newly commenced leases or those with expiring abatements outweighed expiring leases. Same Store NOI comparisons for any given period fluctuate as a result of the mix of net leasing activity in individual properties during the respective period.

Current wording

During the three months ended September 30, 2024, Same Store NOI decreased by (0.8)% and (2.1)% on a cash and accrual basis, respectively, as compared to the same period in the prior year, due to timing differences between lease expirations and the commencement, or expiration of abatements, associated with recently executed leases. Same Store NOI comparisons for any given period fluctuate as a result of the mix of net leasing activity in individual properties during the respective period.

Previous wording

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus, resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. Refer to our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our critical accounting policies and estimates. There have been no material changes to these policies during the six months ended June 30, 2024.

Current wording

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus, resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. Refer to our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our critical accounting policies and estimates. There have been no material changes to these policies during the nine months ended September 30, 2024.