Piedmont Realty Trust outlook revised to negative at S&P on refinancing risk

Investing.com -- S&P Global Ratings has revised its outlook on Piedmont Realty Trust to negative from stable, while affirming the company’s ratings, citing potential refinancing risks due to its shorter weighted-average debt maturity.

As of June 30, 2025, Piedmont’s weighted-average debt maturity stands at 3.8 years when excluding extension options. The company’s next debt maturity is a $325 million term loan due in January 2027, which has two six-month extension options that could extend the final maturity to January 2028.

The rating agency highlighted a challenging debt maturity schedule in 2028, when approximately $874 million (about 40%) of Piedmont’s debt matures. This includes $151 million outstanding under its revolving credit facility due in June, $532.7 million of senior unsecured notes due in July, and a $190 million mortgage due in October.

S&P warned that if Piedmont does not proactively address these upcoming maturities, its weighted-average debt maturity could fall below three years over the next 12 months, which would negatively impact the rating agency’s view of its capital structure.

The company also faces challenges with rental abatements. While leased occupancy improved 140 basis points year over year to 88.7% in the second quarter of 2025, economic leased occupancy remained flat at 78%, and same-property cash net operating income declined 2% from the prior year period due to substantial abatement periods.

As of June 30, 2025, signed leases that either haven’t commenced or are under rental abatements represent approximately $71 million in future annual cash rents. S&P noted that the amount of free rent offered to tenants and capital associated with leasing activity has materially increased.

Piedmont suspended its dividend earlier this year, retaining over $60 million in cash flows to help fund near-term capital needs, including those related to recent leasing activity.

For the trailing 12 months ending June 30, 2025, Piedmont’s S&P Global Ratings-adjusted debt to EBITDA increased to 7.7x from 6.8x the prior year, while fixed charge coverage declined to 2.0x from 2.4x due to higher interest expenses and lower EBITDA.

S&P expects adjusted leverage to remain in the high-7x area this year, with potential improvement to the mid-7x area in 2026 as recently executed leases begin paying cash rents. Fixed charge coverage is anticipated to remain around 2x this year.

The rating agency could lower its ratings if operating performance deteriorates, if the debt maturity profile declines below three years, or if adjusted debt to EBITDA remains above 7.5x or fixed charge coverage remains below 2.1x for a prolonged period with no pathway to improvement.

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