What changed in this filing

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Item 9A. Controls and Procedures

2021-02-17 compared with 2020-02-19 · 315 added, 612 removed, 1114 unchanged (45% of the section changed)

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Management’s Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") as of the end of the period covered by this report.

We carried out an evaluation, under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this report.

Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the information required by Part III (Items 10, 11, 12, 13, and 14) is being incorporated by reference herein from our definitive proxy statement to be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders.

We have adopted a Code of Ethics, which is available on Piedmont’s website at http://www.piedmontreit.com under the “Investor Relations” section.

We have adopted a Code of Ethics, which is available on Piedmont’s website at www.piedmontreit.com under the “Investor Relations” section.

Any amendments to, or waivers of, the Code of Ethics will be disclosed on our website promptly following the date of such amendment or waiver.

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

EXECUTIVE COMPENSATION

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EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The financial statements begin on page F-5 of this Annual Report on Form 10-K, and the list of the

financial statements contained herein is set forth on page F-1 , which is hereby incorporated by reference.

The financial statements begin on page F-4 of this Annual Report on Form 10-K, and the list of the financial statements contained herein is set forth on page F-1 , which is hereby incorporated by reference.

Schedule III—Real Estate Assets and Accumulated Depreciation.

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Director February 17, 2021

/s/ G LENN G.

Director February 17, 2021

/s/ B ARBARA B.

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3.5 Articles of Amendment to the Third Articles of Amendment and Restatement of Piedmont Office Realty Trust, Inc., as supplemented and amended (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on May 23, 2018)

3.6 Amended and Restated By laws of the Company ( incorporated by reference to Exh ibit 3.1 to the Company's C urrent Report on Form 8-K, filed on March 19, 2019)

3.6 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on March 19, 2019)

4.1 Indenture, dated May 9, 2013, by and among Piedmont Operating Partnership, LP (the "Operating Partnership"), the Company and U.S.

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4.5 Form of 4.450% Senior Notes due 2024 (included in Exhibit 4.2 hereto)

4.15 Description of Securities registered pursuant to Section 12 of the Exchange Act

4.6 Supplemental Indenture, dated August 12, 2020, by and among Piedmont Operating Partnership, LP, Piedmont Office Realty Trust, Inc.

Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on August 12, 2020)

4.7 Form of 3.150% Senior Notes due 2030 (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on August 12, 2020)

4.8 Description of Securities registered pursuant to Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 19, 2020)

10.1 Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated January 1, 2000 (incorporated by reference to Exhibit 10.64 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, filed on March 28, 2001)

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10.3 Amendment to Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as Amended and Restated as of January 1, 2000, dated August 8, 2007 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on August 10, 2007)

Index to Financial Statements

10.4 Amended and Restated Dividend Reinvestment Plan of the Company adopted February 24, 2011 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on February 24, 2011)

10.5* Long-Term Incentive Program (as amended and restated effective April 27, 2016) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, filed on August 3, 2016)

Index to Financial Statements

10.6* Long-Term Incentive Program Award Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, filed on November 3, 2011)

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Bowers (incorporated by reference to Exhibit 99.9 to the Company’s Current Report on Form 8-K, filed on April 20, 2007)

10.13* Employment Agreement dated May 14, 2007, by and between the Company and Carroll A.

“Bo” Reddic, IV (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on May 14, 2007)

10.13* Employment Agreement dated May 14, 2007, by and between the Company and Laura P.

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Wiberg (incorporated by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 27, 2013)

10.15* Employment Agreement dated January 1, 2019, by and between the Company and Christopher Kollme (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 20, 2019)

10.16* Retirement Agreement and General Release by and between the Company and Donald A.

Miller (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on March 19, 2019)

10.17* Employment Agreement, dated as of March 19, 2019, between the Company and C.

Brent Smith (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed on March 19, 2019)

10.18* Consulting Agreement, dated as of November 28, 2016, by and between the Company and Raymond L.

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10.20 Amended and Restated Term Loan Agreement Dated as Of September 28, 2018 by and among Piedmont Operating Partnership, LP, as Borrower, Piedmont Office Realty Trust, Inc., as Parent, JPMorgan Chase Bank, N.A., and SunTrust Robinson Humphrey, Inc., as Co-Lead Arrangers and Book Managers, JPMorgan Chase Bank, N.A., as Administrative Agent, SunTrust Bank as Syndication Agent, and the other financial institutions initially signatory thereto and their assignees (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on October 2, 2018)

10.19 Term Loan Agreement, dated as of December 18, 2013, among Piedmont Operating Partnership, LP, as Borrower, Piedmont Office Realty Trust, Inc., as Parent, U.S.

Bank, N.A., and SunTrust Robinson Humphrey, Inc., as Joint Book Runners and Joint Lead Arrangers, U.S.

Bank, N.A., as Agent, SunTrust Bank as Syndication Agent, the other banks signatory thereto as Lenders (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on December 19, 2013)

10.20 Term Loan Agreement, dated as of March 27, 2015, among Piedmont Operating Partnership, LP, as Borrower, Piedmont Office Realty Trust, Inc., as Parent, JP Morgan Securities, LLC, U.S.

Bank National Association and SunTrust Robinson Humphrey, Inc., as Co-Lead Arrangers and Book Managers;

JPMorgan Chase Bank, as Agent;

Bank National Association, as Syndication Agent;

SunTrust Bank, as Documentation Agent;

and the financial institutions initially signatory thereto and their assignees, as Lenders (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 2, 2015)

Index to Financial Statements

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Bank National Association as Administrative Agent dated as of March 29, 2018 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, filed on October 30, 2018)

10.29 Amendment No.

2, dated as of March 3, 2020, to the Term Loan Agreement dated March 29, 2018, between Piedmont Operating Partnership, LP, as Borrower and U.S.

Bank National Association as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, filed on April 29, 2020)

10.30 Revolving Credit Agreement Dated as of September 28, 2018 by and among Piedmont Operating Partnership, LP, as Borrower, Piedmont Office Realty Trust, Inc., as Parent, JPMorgan Chase Bank, N.A., SunTrust Robinson Humphrey, Inc., U.S.

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as Documentation Agents, and the other financial institutions initially signatory thereto and their assignees (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 2, 2018)

10.30* Employment Agreement dated January 1, 2019, by and between the Company and Christopher Kollme (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 20, 2019)

10.31* Retirement Agreement and General Release by and between the Company and Donald A.

Miller (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on March 19, 2019)

10.32* Employment Agreement, dated as of March 19, 2019, between the Company and C.

Brent Smith (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed on March 19, 2019)

10.33* Form of Employee Deferred Stock Award Agreement for Amended and Restated 2007 Omnibus Incentive Plan of the Company effective February 19, 2020

10.34* Form of Director Deferred Stock Award Agreement for Amended and Restated 2007 Omnibus Incentive Plan of the Company effective February 19, 2020

10.31* Form of Employee Deferred Stock Award Agreement for Amended and Restated 2007 Omnibus Incentive Plan of the Company effective February 19, 2020 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 19, 2020)

10.32* Form of Director Deferred Stock Award Agreement for Amended and Restated 2007 Omnibus Incentive Plan of the Company effective February 19, 2020 (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 19, 2020)

10.33 Purchase and Sale Agreement Between SPUS7 Galleria, LP, as Seller and Piedmont Dallas Galleria, LLC, as Purchaser (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed February 12, 2020)

Index to Financial Statements

10.34 Term Loan Agreement, dated February 10, 2020, by and among Piedmont Operating Partnership, LP, as Borrower, Piedmont Office Realty Trust, Inc.

as Parent, Suntrust Robinson Humphrey, Inc., as Lead Arranger and Book Manager, Truist Bank, as Administrative Agent, and the other financial institutions initially signatory hereto and their assignees as Lenders (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 12, 2020)

10.35 Amendment No.

1 to Term Loan Agreement, dated March 24, 2020, by and among Piedmont Operating Partnership, LP, as Borrower, Truist Bank, as administrative agent and lender, and JPMorgan Chase Bank, N.A.

Bank National Association, as new Lenders (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 30, 2020)

10.36* Piedmont Office Realty Trust, Inc.

Long-Term Incentive Program Award Agreement dated May 3, 2019 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, filed on April 29, 2020)

10.37* Amendment No.

4 to Piedmont Office Realty Trust, Inc.'s Long-Term Incentive Program effective March 19, 2020(incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, filed on April 29, 2020)

10.38* Piedmont Office Realty Trust, Inc.

Long-Term Incentive Program Award Agreement effective March 19, 2020 (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, filed on April 29, 2020)

21.1 List of Subsidiaries of the Company

22.1 Subsidiary Issuer of Guaranteed Securities

23.1 Consent of Deloitte & Touche LLP

23.2 Consent of Ernst & Young LLP

Index to Financial Statements

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 C ertification of Ch ief Financial Offi cer pursuant to Section 302 of Sarbanes-Oxley Act of 20 02

31.2 Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Financial Statements Page

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Income for the Years Ended December 31, 2019, 2018, and 2017

Consolidated Statements of Income for the Years December 31, 2020, 2019, and 2018

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018

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We have audited the accompanying consolidated balance sheets of Piedmont Office Realty Trust, Inc.

and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

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Critical Audit Matter Description

Rental and tenant reimbursement income consists of revenue from leases with the Company’s tenants, as well as reimbursements for services prescribed by such leases.

Rental and tenant reimbursement revenue consists of revenue from leases with the Company’s tenants, as well as reimbursements for services prescribed by such leases.

The Company recognizes fixed base rental payments, as well as any fixed portions of reimbursement income, on a straight-line basis over the term of the related lease.

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• We selected a sample of lease agreements and performed the following to evaluate the appropriateness of management’s conclusions regarding the owner of the tenant improvements and the timing and amount of revenue recognition:

◦ Evaluated the reasonableness and consistency of the factors considered by management to determine the owner of the tenant improvements and compared such factors to the terms in the lease agreement or other supporting documents.

◦ Tested tenant improvement costs (including the amounts funded by the Company or the tenant) by reconciling the amounts recorded by the Company to invoices or other supporting documents and evaluated whether the costs were consistent with the terms of the lease agreement and the Company’s ownership determination.

◦ Tested the timing and amounts recognized as rental income, including any amortization of deferred revenue or lease incentives, by independently calculating such rental income amounts to be recognized and comparing it to the amounts recorded by the Company.

◦ Tested the timing and amounts recognized as rental revenue, including any amortization of deferred revenue or lease incentives, by independently calculating such rental revenue amounts to be recognized and comparing it to the amounts recorded by the Company.

/s/ Deloitte & Touche LLP

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Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Piedmont Office Realty Trust, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the year ended December 31, 2017, and the related notes and financial statement schedule listed in the Index at Item 15(a) for the year ended December 31, 2017 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of Piedmont Office Realty Trust, Inc.’s operations and its cash flows for year ended December 31, 2017, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company's auditor from 2002 to 2018.

Atlanta, Georgia

February 21, 2018, except for the reclassifications discussed in Note 2 under Reclassifications during the Year Ended December 31, 2018, specifically Revenue Recognition and Gain/(Loss) on Sale of Real Estate Assets during the Year Ended December 31, 2017, as to which the date is February 20, 2019, and for the reclassifications discussed in Note 2 under Reclassifications during the Year Ended December 31, 2019, specifically for the adoption of ASC 842, as to which the date is February 19, 2020.

Index to Financial Statements

PIEDMONT OFFICE REALTY TRUST, INC.

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Cash and cash equivalents 7,331 13,545

Tenant receivables 8,226 10,800

Tenant receivables, net of allowance for doubtful accounts of $ 4,553 and $ 0 as of December 31, 2020 and December 31, 2019, respectively

Straight-line rent receivables 151,153 132,342

Notes receivable 118,500 —

Restricted cash and escrows 1,883 1,841

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Goodwill 98,918 98,918

Interest rate swaps

Deferred lease costs, less accumulated amortization of $ 172,619 and $ 147,324 as of December 31, 2020 and December 31, 2019, respectively

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Cumulative distributions in excess of earnings ( 1,774,856 ) ( 1,871,375 )

Other comprehensive income 967 8,462

Other comprehensive income/(loss) ( 24,100 ) 967

Piedmont stockholders’ equity 1,896,278 1,817,248

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Other income 2,587 1,571 1,638

Equity in income of unconsolidated joint ventures — — 3,845

Loss on extinguishment of debt ( 9,336 ) — ( 1,680 )

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1,727 ( 1,836 ) ( 300 )

Gain on investment in available for sale securities

Other comprehensive income/(loss) ( 25,067 ) ( 7,495 ) 392

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Balance, December 31, 2017 142,359 $ 1,424 $ 3,677,360 $ ( 1,702,281 ) $ 8,164 $ 1,822 $ 1,986,489

Cumulative effect of accounting change (adoption of ASU 2016-01) — — — 94 ( 94 ) — —

Share repurchases as part of announced plan ( 16,495 ) ( 165 ) — ( 301,513 ) — — ( 301,678 )

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Balance, December 31, 2018 126,219 1,262 3,683,186 ( 1,982,542 ) 8,462 1,772 1,712,140

Cumulative effect of accounting change (adoption of ASU 2016-01) — — — 94 ( 94 ) — —

Share repurchases as part of announced plan ( 728 ) ( 7 ) — ( 12,475 ) — — ( 12,482 )

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Net income applicable to Piedmont — — — 229,261 — — 229,261

Other comprehensive income — — — — 392 — 392

Other comprehensive loss — — — — ( 7,495 ) — ( 7,495 )

Balance, December 31, 2019 125,783 1,258 3,686,398 ( 1,871,375 ) 967 1,726 1,818,974

Share repurchases as part of announced plan ( 2,190 ) ( 22 ) — ( 30,649 ) — — ( 30,671 )

Offering costs — — ( 710 ) — — — ( 710 )

Dividends to common stockholders ($ 0.84 per share), stockholders of subsidiaries, and dividends reinvested

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Loss on extinguishment of debt 349 — 1,665

General reserve for uncollectible accounts 4,553 — —

Stock compensation expense 9,718 15,446 9,737

Equity in income of unconsolidated joint ventures — — ( 3,845 )

Gain on sale of real estate assets ( 205,666 ) ( 197,010 ) ( 75,691 )

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823 309 ( 3,095 )

Decrease in accounts payable and accrued expenses

Cash paid upon settlement of interest rate swaps ( 19,930 ) — —

Increase/(decrease) in accounts payable and accrued expenses

6,264 ( 11,251 ) ( 9,092 )

Increase/(decrease) in deferred income

(Decrease)/increase in deferred income

( 1,814 ) 776 ( 898 )

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Capitalized expenditures ( 112,580 ) ( 103,553 ) ( 72,105 )

Net sale proceeds from wholly-owned properties

Sales proceeds from wholly-owned properties

360,094 589,767 575,227

Net sale proceeds received from unconsolidated joint ventures — — 12,334

Investments in unconsolidated joint ventures — — ( 1,162 )

Note receivable issuance

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Deferred lease costs paid ( 28,334 ) ( 25,639 ) ( 27,430 )

Net cash provided by investing activities

Net cash (used in)/provided by investing activities

( 197,876 ) 134,375 323,778

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Repayments of debt ( 1,035,077 ) ( 798,019 ) ( 1,020,455 )

Discount paid due to loan modification ( 525 ) — —

Costs of issuance of common stock — ( 710 ) ( 85 )

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( 1,580 ) ( 333,507 ) ( 529,368 )

Net increase/(decrease) in cash, cash equivalents, and restricted cash and escrows

Net (decrease)/increase in cash, cash equivalents, and restricted cash and escrows

( 6,172 ) 9,352 ( 2,721 )

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(“Piedmont”) (NYSE:

PDM) is a Maryland corporation that operates in a manner so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes and engages in the acquisition, development, redevelopment, management, and ownership of commercial real estate properties located primarily in select sub-markets within seven major Eastern U.S.

office markets, including properties that are under construction, are newly constructed, or have operating histories.

PDM) is a Maryland corporation that operates in a manner so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes and engages in the ownership, management, development, redevelopment, and operation of high-quality, Class A office properties located primarily in select sub-markets within seven major Eastern U.S.

office markets, with a majority of its revenue being generated from the Sunbelt.

Piedmont was incorporated in 1997 and commenced operations in 1998.

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References to Piedmont herein shall include Piedmont and all of its subsidiaries, including Piedmont OP and its subsidiaries and joint ventures.

As of December 31, 2019, Piedmont owned 54 in-service office properties and one redevelopment asset, comprising approximately 487,000 square feet (unaudited), in select sub-markets located within seven major U.S.

As of December 31, 2020, Piedmont owned 54 in-service office properties and one redevelopment asset in select sub-markets located within seven major U.S.

office markets:

Atlanta, Boston, Dallas, Minneapolis, New York, Orlando, and Washington, D.C.

Dallas, Atlanta, Washington, D.C., Minneapolis, Boston, Orlando, and New York.

As of December 31, 2020, Piedmont's 54 in-service office properties comprised approximately 16.4 million square feet (unaudited) of primarily Class A commercial office space and were 86.8 % leased.

Piedmont internally evaluates all of its real estate assets as one operating segment, and accordingly does not report segment information.

Summary of Significant Accounting Policies

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Piedmont owns a majority interest in four properties through three joint ventures.

Two of these joint ventures, 1201 and 1225 Eye Street, NW Associates, which own the 1201 and 1225 Eye Street buildings, respectively, in Washington, D.C.

are consolidated using the method prescribed in accounting for VIEs.

The other joint venture, Piedmont-CNL Towers Orlando, LLC, which owns CNL Center I and II, in Orlando, Florida is an investment consolidated under the voting model.

Two of these joint ventures, 1201 and 1225 Eye Street, NW Associates, own the 1201 and 1225 Eye Street buildings, respectively, in Washington, D.C.

The other joint venture, Piedmont-CNL Towers Orlando, LLC, owns CNL Center I and II, in Orlando, Florida.

All three joint venture investments are consolidated under the voting model.

Accordingly, Piedmont’s consolidated financial statements include the accounts of 1201 Eye Street, NW Associates, LLC, 1225 Eye Street, NW Associates, LLC, and Piedmont-CNL Towers Orlando, LLC.

All inter-company balances and transactions have been eliminated upon consolidation.

Piedmont has formed special purpose entities to acquire and hold real estate.

Further, Piedmont has formed special purpose entities to acquire and hold real estate.

Each special purpose entity is a separate legal entity and consequently the assets of the special purpose entities are not available to all creditors of Piedmont.

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The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes.

Actual results could differ from those estimates.

The most significant of these estimates include the underlying cash flows and holding periods used in assessing impairment, judgements regarding the recoverability of goodwill, and the assessment of the collectibility of receivables.

Future impacts of the COVID-19 pandemic on Piedmont and its tenants may affect these and other estimates used in the preparation of these financial statements.

While Piedmont has made, what it believes to be, appropriate accounting estimates based on the facts and circumstances available as of the reporting date, actual results could materially differ from those estimates.

Real Estate Assets

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Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases.

In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand.

Management also estimates the cost to execute similar leases including leasing commissions, legal, and other related costs.

Index to Financial Statements

estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand.

Management also estimates the cost to execute similar leases including leasing commissions, legal, and other related costs.

The estimated fair values of above-market and below-market in-place leases are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of market rates for the corresponding in-place leases, measured over a period equal to the remaining terms of the leases, taking into consideration the probability of renewals for any below-market leases.

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Intangible Lease Liabilities (Below-Market In-Place Leases) $ 62,784 $ 84,292

For the years ended December 31, 2019, 2018, and 2017, respectively, Piedmont recognized amortization of intangible lease costs as follows (in thousands):

For the years ended December 31, 2020, 2019, and 2018, respectively, Piedmont recognized amortization of intangible lease costs, included as a component of Amortization in the accompanying consolidated statements of income, as follows (in thousands):

2020 2019 2018

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Amortization of Above-Market and Below-Market In-Place Lease intangibles as a net increase to rental revenues $ 12,191 $ 8,322 $ 7,615

Index to Financial Statements

Net intangible assets and liabilities as of December 31, 2020 will be amortized as follows (in thousands):

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(1) Included as a component of Deferred Lease Costs in the accompanying consolidated balance sheets.

Index to Financial Statements

Investments in and Amounts Due from Unconsolidated Joint Ventures

During the year ended December 31, 2017, Piedmont sold its investment in its last remaining unconsolidated joint venture.

Prior to this disposition, Piedmont had accounted for its unconsolidated joint ventures using the equity method of accounting, whereby original investments were recorded at cost and subsequently adjusted for contributions, distributions, net income/(loss), and "other than temporary" impairment losses, if any, attributable to such joint ventures.

All income and distributions were allocated to the joint venture partners in accordance with their respective ownership interests.

Any distributions were classified on the accompanying consolidated statements of cash flow using the nature of distribution approach.

Any distributions of net cash from operations were classified as cash inflows from operating activities, as they were presumed to be returns on Piedmont’s investment in the joint venture.

Any proceeds received as the result of a sale of an asset from an unconsolidated joint venture were considered a return of Piedmont’s investment in the joint venture and classified as cash inflows from investing activities.

Cash and Cash Equivalents

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Tenant receivables are comprised of rental and reimbursement billings due from tenants, and straight-line rent receivables representing the cumulative amount of future adjustments necessary to present rental income on a straight-line basis.

Effective January 1, 2019, Piedmont adopted ASC 842 Leases ("ASC 842") (see Accounting Pronouncements Adopted During the Year Ended December 31, 2019 below for more detail) as well as Accounting Standards Update ("ASU"), ASU No.

2018-19 ("ASU 2018-19") which clarifies that operating lease receivables are within the scope of ASC 842;

Effective January 1, 2019, Piedmont adopted ASC 842 Leases ("ASC 842"), as well as Accounting Standards Update ("ASU"), ASU No.

2018-19 Codification Improvements to Topic 326, Financial Instruments—Credit Losses ("ASU 2018-19") which clarifies that operating lease receivables are within the scope of ASC 842;

therefore, Piedmont has elected to evaluate the collectibility of its operating lease receivables on a tenant/lease-specific basis and, as of January 1, 2019, began recognizing changes in the collectibility assessment of its operating lease receivables as a reduction of rental and tenant reimbursement revenue, rather than as bad debt expense, a component of property operating costs.

Prior to the adoption of ASC 842, during the years ended December 31, 2018 and 2017, Piedmont recognized approximately $ 91,000 and $ 350,000 , respectively, of expense related to uncollectible operating lease receivables as additional property operating costs .

Prior to the adoption of ASC 842, during the year ended December 31, 2018, Piedmont recognized approximately $ 91,000 of expense related to uncollectible operating lease receivables as additional property operating costs.

See further discussion of collectibility assessments of tenant receivables and other lease-related assets due to COVID-19 pandemic during 2020 in Note 8 and in Allowance for Doubtful Accounts below.

Allowance for Doubtful Accounts

As detailed above, Piedmont records contra-revenue adjustments for tenant/lease-specific changes in the collectibility assessments of its operating lease receivables as a reduction of rental and tenant reimbursement revenues in accordance with ASC 842.

These charges reduce tenant and straight-line rent receivable to net realizable value upon recognition.

However, during the year ended December 31, 2020, Piedmont also established a general reserve, with charges related to the establishment of this reserve recorded as a reduction of rental and tenant reimbursement revenues, and the balance of the reserve is disclosed as allowance for doubtful accounts in the accompanying consolidated balance sheets.

Unlike tenant-specific adjustments recorded in accordance with ASC 842, the general reserve is for amounts that may become uncollectible in the future.

Index to Financial Statements

Restricted Cash and Escrows

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Balances without a future economic benefit are expensed as they are identified.

Index to Financial Statements

Goodwill is the excess of cost of an acquired entity over the amounts specifically assigned to assets acquired and liabilities assumed in purchase accounting for business combinations.

Piedmont tests the carrying value of its goodwill for impairment on an annual basis, or on an interim basis if an event occurs or circumstances change that would indicate the carrying amount may be impaired.

In conjunction with Piedmont's change in segment reporting (see Note 17 ), Piedmont has reallocated its goodwill to each of its seven reporting units on the basis of relative fair value of each reporting unit compared to the total of all reporting units.

Piedmont tests the carrying value of the goodwill assigned to each of its seven reporting units for impairment on an annual basis, or on an interim basis if an event occurs or circumstances change that would indicate that a material indicator of impairment exists.

Such interim circumstances may include, but are not limited to, significant adverse changes in legal factors or in the general business climate, adverse action or assessment by a regulator, unanticipated competition, the loss of key personnel, or persistent declines in an entity’s stock price below carrying value of the entity.

Piedmont first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of the reporting unit is less than its carrying amount.

Piedmont internally evaluates its consolidated financial position and all of its operations as one reporting unit.

If Piedmont concludes, after assessing the totality of events and circumstances during the qualitative analysis, that it is more likely than not that the goodwill balance is impaired, then Piedmont will recognize a goodwill impairment loss by the excess of the reporting unit’s carrying amount over its estimated fair value (not to exceed the total goodwill allocated to that reporting unit).

Piedmont first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that a material indicator of impairment exists.

If Piedmont concludes, after assessing the totality of events and circumstances during the qualitative analysis, that a material indicator does exist and that it is more likely than not that the goodwill balance in one or more reporting units is impaired, then Piedmont will recognize a goodwill impairment loss equal to the excess of the reporting unit’s carrying amount over its estimated fair value (not to exceed the total goodwill allocated to that reporting unit).

There were no changes in the carrying amount of Piedmont's goodwill during the year ended December 31, 2020.

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Further, Piedmont classifies cash flows from the settlement of hedging derivative instruments in the same category as the underlying exposure which is being hedged.

Settlements resulting from the hedge of Piedmont's exposure to interest rate changes are classified as operating cash flows in the accompanying consolidated statements of cash flows.

Settlements resulting from the hedge of

Index to Financial Statements

Piedmont's exposure to interest rate changes are classified as operating cash flows in the accompanying consolidated statements of cash flows.

Deferred Lease Costs

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In addition to direct costs, deferred lease costs also include intangible lease origination costs related to in-place leases acquired as part of a property acquisition.

Prior to the adoption of ASC 842 on January 1, 2019, Piedmont capitalized direct payroll costs incurred related to negotiating and executing specific leases of approximately $ 0.3 million for both the years ended December 31, 2018, and 2017.

Prior to the adoption of ASC 842, Piedmont capitalized direct payroll costs incurred related to negotiating and executing specific leases of approximately $ 0.3 million for the year ended December 31, 2018.

ASC 842 prohibited the capitalization of such costs beginning January 1, 2019.

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If there is no remaining lease term and no other obligation to provide the tenant space in the property, then any unamortized tenant-specific costs are recognized immediately upon termination.

Index to Financial Statements

When mortgage debt is assumed upon the acquisition of real property, Piedmont adjusts the loan to relative fair value with a corresponding adjustment to building and other intangible assets assumed as part of the purchase.

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Piedmont records premiums and discounts on debt issuances as an increase/decrease to the principal amount of the loan in the accompanying consolidated balance sheets, and amortizes such premiums or discounts as a component of interest expense over the life of the underlying loan facility using the effective interest method.

Piedmont recorded discount amortization of approximately $ 0.2 million for each of the years ended December 31, 2019, 2018, and 2017, respectively.

Piedmont recorded discount amortization of approximately $ 0.3 million, $ 0.2 million and $ 0.2 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Piedmont presents all debt issuance costs as an offset to the principal amount of debt in the accompanying consolidated balance sheets.

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Tenant improvement allowance overages paid by the tenant, where Piedmont owns all of the underlying improvements, are recorded as deferred income and amortized on a straight-line basis into rental and tenant reimbursement revenue over the term of the respective leases.

Index to Financial Statements

Shares-in-trust

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Piedmont’s board of directors may determine the relative rights, preferences, and privileges of any class or series of preferred stock that may be issued, and can be more beneficial than the rights, preferences, and privileges attributable to Piedmont’s common stock.

Index to Financial Statements

Under Piedmont’s charter, it has authority to issue a total of 750,000,000 shares of common stock with a par value of $ 0.01 per share.

Each share of common stock is entitled to one vote and participates in distributions equally.

During the year ended December 31, 2018, the board of directors of Piedmont re-authorized the stock repurchase program under which Piedmont may repurchase its own shares from time to time, in accordance with applicable securities laws, in the open market or in privately negotiated transactions.

In February 2020, the board of directors re-authorized the stock repurchase program for up to $ 200 million in share repurchases under which Piedmont may repurchase its own shares from time to time, in accordance with applicable securities laws, in the open market or in privately negotiated transactions.

The timing of repurchases is dependent upon market conditions and other factors, and repurchases may be commenced or suspended from time to time in Piedmont's discretion, without prior notice.

As of December 31, 2019, Piedmont had approximately $ 74.1 million in remaining capacity under the program which may be used for share repurchases through February 2020.

On February 19, 2020, Piedmont's Board of Directors extended the authorization for up to $ 200 million in share repurchases through February 2022, at the discretion of management.

As of December 31, 2020, Piedmont had approximately $ 169.3 million of remaining capacity under the program which may be used for share repurchases through February 2022.

Equity Securities Issued At-The-Market

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Historically, Piedmont sponsored a dividend reinvestment plan ("DRP") pursuant to which common stockholders could elect (if their brokerage agreements allowed) to reinvest an amount equal to the dividends declared on their common shares into additional shares of Piedmont’s common stock in lieu of receiving cash dividends.

Under the DRP, Piedmont has the option to either issue shares purchased in the open market or issue shares directly from Piedmont's authorized but unissued shares, in both cases at a 2 % discount for the stockholder.

Such election took place at the settlement of each quarterly and/or special dividend in which there were participants in the DRP.

On February 19, 2020, the Board of Directors suspended the company-funded DRP offered through our transfer agent effective March 21, 2020.

During the year ended December 31, 2020, the board of directors terminated the company-funded DRP offered through its transfer agent.

Noncontrolling Interest

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Earnings allocated to such noncontrolling partners are recorded as income applicable to noncontrolling interest in the accompanying consolidated statements of income.

Index to Financial Statements

Revenue Recognition

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All of Piedmont's leases where Piedmont is the lessor are for the lessee's use of space in Piedmont's commercial office properties and are classified as operating leases.

Index to Financial Statements

In most lease arrangements, Piedmont finances improvements to leased space and is deemed the owner of the tenant improvements.

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Examples of such income include parking revenue and income from licenses with unrelated third-parties to place antennae and/or fiber optic cables in or on Piedmont's buildings.

These services also represent a performance obligation that is satisfied over the length of the contract, not at any specific point in time, and has the same measure of transfer (time elapsed);

These services also represent a performance obligation that is satisfied over the length of

Index to Financial Statements

the contract, not at any specific point in time, and has the same measure of transfer (time elapsed);

therefore, revenue related to these licenses is also recognized over time.

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Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale.

Index to Financial Statements

In circumstances where Piedmont extends seller financing as part of a sale of real estate assets, Piedmont assesses the collectibility of the notes receivable as of each reporting period end.

Notes receivable that are deemed to be uncollectible or fully in default are reduced to their net realizable value, which approximates their fair value.

Stock-based Compensation

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Such investments are included in cash equivalents due to their short-term, liquid nature, with the corresponding liability included in accounts payable, accrued expenses, and accrued capital expenditures in the accompanying consolidated balance sheets.

Index to Financial Statements

Net Income Available to Common Stockholders Per Share

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Further, Piedmont is subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in general and administrative expenses in the accompanying consolidated financial statements.

Accounting Pronouncements Adopted during the Year Ended December 31, 2019

During the year ended December 31, 2019, Piedmont adopted ASU No.

2016-02, Leases (Topic 842) , as well as various associated updates and amendments, which together comprise the requirements for lease accounting under ASC 842.

ASC 842 fundamentally changed the definition of a lease, as well as the accounting for operating leases, by requiring lessees to recognize

Index to Financial Statements

a liability to make lease payments and a right-of-use asset representing the right to use the leased asset over the term of the lease.

ASC 842 also prohibits the capitalization of internal direct salary costs associated with negotiating and executing leases.

Accounting for leases by lessors is substantially unchanged from prior practice as lessors continue to recognize lease revenue on a straight-line basis.

In conjunction with the adoption of ASC 842, Piedmont adopted the following optional practical expedients, transition amendments, or made accounting policy elections as follows:

• a package of optional practical expedients which precluded:

(1) the reassessment of any expired or existing contracts to determine if they contain a lease or to determine lease classification;

and (2) the write-off of any unamortized, previously capitalized, initial direct costs for any existing leases;

• an optional practical transition expedient provided by ASU No.

2018-01 which allowed Piedmont to exclude certain land easements in place as of January 1, 2019 from the new guidance;

• an optional practical expedient provided by ASU No.

2018-11 which allowed certain non-lease operating expense reimbursements which are included in the underlying stated lease rate to be accounted for as part of an operating lease where Piedmont is the lessor;

• a transitional amendment which allowed for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), effectively allowing for an initial adoption of ASC 842 (the new leasing guidance) on January 1, 2019 (the "Comparatives Under ASC 840 Option");

• an accounting policy election allowed by ASC 842 related to a recognition and measurement exception for short-term leases (defined as leases which are 12 months or less in duration) where Piedmont is the lessee.

Piedmont's short-term lease expense reasonably reflects its lease commitments under such leases;

• an accounting policy election allowed by ASU No.

2018-20 which permits Piedmont to exclude sales and other similar taxes from analysis to ascertain whether they are Piedmont's primary obligation (as lessor), and instead exclude such costs from revenue and account for them as costs of the lessee.

The nature of Piedmont's change in accounting principle relates primarily to its accounting for operating leases where Piedmont is a lessee for office space, as prescribed by ASC 842.

Due to the adoption of the practical expedients outlined above, Piedmont has not adjusted prior-period information retrospectively, and there is a negligible decrease in net income attributable to Piedmont as a result of accounting for leases where Piedmont is the lessee under ASC 842 as compared to prior operating lease accounting.

As required under the Comparatives Under ASC 840 Option described above, Piedmont's future minimum rental income from lessees under non-cancelable operating leases where Piedmont was the lessor as of December 31, 2018 is presented below (in thousands):

Years ending December 31:

2019 $ 370,495

Thereafter 1,247,649

Total $ 2,925,199

Stock Compensation to Non-employees

During the year ended December 31, 2019, Piedmont adopted ASU No.

2018-07, Stock Compensation (Topic 718), Improvements to Non-employee Share-Based Payment Accounting ("ASU 2018-07").

The provisions of ASU 2018-07 align accounting for stock based compensation for non-employees for goods and services with existing accounting for similar compensation for employees.

ASU 2018-07 requires an entity to remeasure liability-classified awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of January 1, 2019.

Piedmont's only awards affected by ASU 2018-07 are equity-classified award grants to its independent board of directors, which have been historically recognized in the same

Index to Financial Statements

manner prescribed by the newly adopted standard.

As such, there was no cumulative effect adjustment recognized upon adoption.

Reclassifications

Although Piedmont has adopted the transitional amendment under ASC 842 described above, Piedmont has combined the presentation of rental income and tenant reimbursements in the accompanying consolidated statements of income for the prior periods to conform to the current period financial presentation under presentation guidance detailed in ASC 205 Presentation of Financial Statements.

These amounts included the presentation of approximately $ 411.7 million of rental income and $ 92.7 million of tenant reimbursements for the year ended December 31, 2018 as rental and tenant reimbursement revenue of $ 504.4 million.

Additionally, Piedmont presents approximately $ 455.1 million of rental income and $ 98.2 million of tenant reimbursements for the year ended December 31, 2017 as rental and tenant reimbursement revenue of $ 553.3 million.

Further, the subtotal of Revenues less Expenses was removed within the accompanying consolidated statements of income for the years ended December 31, 2018 and 2017, respectively, to correct the prior period presentation.

Finally, certain prior period amounts presented in the accompanying consolidated statements of income for the year ended December 31, 2017 were reclassified during the year ended December 31, 2018 to conform to the current period financial statement presentation.

These amounts included:

(i) the reclassification of approximately $ 19.2 million of parking, antennae license and fiber income that was previously included in rental and tenant reimbursement revenue into other property related income, as well as certain other miscellaneous revenue into rental and tenant reimbursement revenue and/or property management fee revenue in conjunction with the adoption of ASC 606 Revenue from Contracts with Customers ;

and (ii) the reclassification of $ 1.8 million of expense related to certain regional employees who are primarily engaged in the operation and management of properties that was previously included in general and administrative expense to property operating costs.

Other Recent Accounting Pronouncements

The FASB has issued ASU No.

Certain prior period amounts presented in the accompanying consolidated balance sheets have been reclassified as of December 31, 2019 to conform to the current period financial statement presentation related to the 1901 Market Street building, which was classified as held for sale as of March 31, 2020, and sold on June 25, 2020.

(see Note 13 ).

Accounting Pronouncements and Amendments Adopted during the year ended December 31, 2020

Reference Rate Reform Relief

Accounting Standards Update No.

2020-04, Reference Rate Reform (Topic 848) ("ASU 2020-04"), was issued in March 2020.

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

During the year ended December 31, 2020, Piedmont elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

Piedmont continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Financial Instruments- Credit Loss Amendments

On January 1, 2020, Piedmont adopted ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , as well as ASU No.

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The provisions of the Credit Loss Amendments replace the "incurred loss" approach with an "expected loss" model for impairing trade and other receivables, held-to-maturity debt securities, net investment in leases, and off-balance-sheet credit exposures, which will generally result in earlier recognition of allowances for credit losses.

Additionally, the provisions change the classification of credit losses related to available-for-sale securities to an allowance, rather than a direct reduction of the amortized cost of the securities.

Further, the FASB has issued ASU No.

2018-19 Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which is effective concurrent with the Credit Loss Amendments, and excludes receivables arising from operating leases from the scope of the Credit Loss Amendments.

Both ASU 2018-19 and the Credit Loss Amendments are effective in the first quarter of 2020, with early adoption permitted as of January 1, 2019.

Piedmont is currently evaluating the potential impact of adoption;

however, substantially all of Piedmont's receivables are operating lease receivables and as such, Piedmont does not anticipate any material impact to its consolidated financial statements as a result of adoption of the Credit Loss Amendments and ASU 2018-19.

During the year ended December 31, 2019, Piedmont acquired the following separately identifiable assets using proceeds available as a result of dispositions (see Note 13 ), proceeds from the $ 500 Million Unsecured 2018 Line of Credit, and cash on hand, as noted below:

Property Metropolitan Statistical Area Date of Acquisition Ownership Percentage Acquired Rentable Square Feet (Unaudited) Percentage Leased as of Acquisition (Unaudited) Net Contractual Purchase Price

However, the Financial Accounting Standards Board (the "FASB") also issued ASU No.

As s ubstantially all of Piedmont's receivables are operating lease receivables there was no

Index to Financial Statements

material impact to Piedmont's accompanying consolidated financial statements or disclosures as a result of adoption of the Credit Loss Amendments.

During the year December 31, 2020, the FASB issued a Staff Q&A on Topic 842 and Topic 840 (lease accounting guidance):

Accounting for lease concessions related to the effects of the COVID-19 pandemic .

Generally, changes to payment terms not contemplated by the lease contract should be accounted for under Topic 842 as a lease modification.

The FASB staff has provided relief from this modification guidance through an accounting policy election, provided that changes to the payment terms do not result in a substantial increase in the rights of either the lessee or the lessor under the lease.

Piedmont has elected not to apply the relief provided by the FASB Staff, and has instead accounted for all rent relief agreements as result of COVID-19 as lease modifications.

See further details concerning rent relief agreements with Piedmont's tenants in Note 8 below.

During the year ended December 31, 2020, Piedmont acquired three properties and adjacent developable land (collectively the "Dallas Galleria Office Towers"), as well as the 222 South Orange Avenue building, using cash on hand and available funds from the $ 500 Million Unsecured 2018 Line of Credit, as noted below:

Property Metropolitan Statistical Area Date of Acquisition Ownership Percentage Acquired Rentable Square Feet Percentage Leased as of Acquisition Net Contractual Purchase Price

(in millions)

Atlanta, Georgia May 6, 2019 100 % 414,293 91 % $ 95.1

Galleria 400 and 600

Atlanta, Georgia August 23, 2019 100 % 863,623 84 % (2)

(1) Price for both acquisitions includes the purchase of adjacent parcels of developable land, totaling approximately 11.7 acres.

(2) Represents weighted-average leased percentage at acquisition of the Galleria 400 and 600 buildings.

Dallas Galleria Office Towers Dallas, Texas February 12, 2020 100 % 1,435,466 95 % $ 396.2 (1)

222 South Orange Avenue Orlando, Florida October 29, 2020 100 % 127,248 — % $ 20.0 (2)

(1) Dallas Galleria Office Towers price includes the purchase of an adjacent parcel of approximately 1.9 acres of developable land.

(2) Piedmont allocated the purchase price amongst land of approximately $ 1.9 million and building of approximately $ 18.1 million.

The purchase price of the Dallas Galleria Office Towers and undeveloped land, inclusive of approximately $ 0.6 million of closing costs, was allocated as follows (in thousands):

Dallas Galleria Office Towers and Undeveloped Land

Land $ 19,674

Building and improvements 293,760

Intangible lease assets (1)

Lease acquisition costs, net of tenant credits received from seller (1)

Intangible lease origination costs (1)

Intangible lease liabilities (1)

Total purchase price

(1) Amortization of in-place lease intangibles and lease acquisition costs are recognized using the straight-line method over approximately 5.2 years, the average remaining life of in-place leases.

Index to Financial Statements

During the year ended December 31, 2020, Piedmont issued, through Piedmont OP, $ 300 million in aggregate principal amount of 3.15 % Senior Notes due 2030 (the “$ 300 Million Unsecured Senior Notes”), which mature on August 15, 2030.

Upon issuance of the $ 300 Million Unsecured Senior Notes, Piedmont OP received proceeds of approximately $ 297.7 million, reflecting a discount of approximately $ 2.3 million which will be amortized as interest expense under the effective interest method over the ten-year term of the $ 300 Million Unsecured Senior Notes.

In addition, in conjunction with the issuance, Piedmont settled four forward starting interest rate swaps, consisting of notional amounts of $ 200 million.

These swaps were settled at a loss of approximately $ 19.9 million that was recorded as accumulated other comprehensive income and is being amortized as an increase in interest expense over the ten-year term of the $ 300 Million Unsecured Senior Notes.

See Note 5 for further detail.

The proceeds from the $ 300 Million Unsecured Senior Notes were used to fully repay the $ 300 Million Unsecured 2020 Term Loan that was obtained earlier during the year ended December 31, 2020 to provide interim financing for the purchase of the Dallas Galleria Office Towers.

Additionally, during the year ended December 31, 2020, Piedmont amended the $ 250 Million Unsecured 2018 Term Loan to reduce the applicable interest rate spread from LIBOR plus 160 basis points to LIBOR plus 95 basis points, based on Piedmont's current credit rating.

Interest on the $ 300 Million Unsecured Senior Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2021.

The $ 300 Million Unsecured Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by Piedmont.

Piedmont OP may, at its option, redeem the $ 300 Million Unsecured Senior Notes, in whole or in part, prior to May 15, 2030, at a redemption price equal to the greater of (i) 100 % of the principal amount of the $ 300 Million Unsecured Senior Notes to be redeemed and (ii) a “make-whole” amount, plus any unpaid accrued interest.

In addition, at any time on or after May 15, 2030, Piedmont OP may, at its option, redeem the $ 300 Million Unsecured Senior Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the $ 300 Million Unsecured Senior Notes to be redeemed plus unpaid accrued interest.

The $ 300 Million Unsecured Senior Notes are subject to certain typical covenants that, subject to certain exceptions:

(a) limit the ability of Piedmont and Piedmont OP to, among other things, incur additional secured and unsecured indebtedness;

(b) limit the ability of Piedmont and Piedmont OP to merge, consolidate, sell, lease or otherwise dispose of their properties and assets substantially as an entirety;

and (c) require Piedmont to maintain a pool of unencumbered assets.

The $ 300 Million Unsecured Senior Notes are also subject to customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the $ 300 Million Unsecured Senior Notes to become or to be declared due and payable.

Finally, during the year ended December 31, 2020, Piedmont sold the 1901 Market Street building for a substantial gain (see Note 13 for further details) and used the majority of the net sales proceeds to repay the $ 160 Million Fixed-Rate Loan that was secured by the property and all remaining outstanding borrowings under the $ 500 Million Unsecured 2018 Line of Credit.

As a result of repaying the $ 160 Million Fixed-Rate Loan in advance of its stated maturity, Piedmont recognized a $ 9.3 million loss on early extinguishment of debt comprised of a prepayment penalty and the write-off of unamortized debt issuance costs and discounts associated with the loan.

Index to Financial Statements

The following table summarizes the terms of Piedmont’s indebtedness outstanding as of December 31, 2020 and 2019, including net discounts/premiums and unamortized debt issuance costs (in thousands):

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Unsecured (Variable and Fixed)

Amended and Restated $300 Million Unsecured 2011 Term Loan LIBOR + 1.00% 3.20 % (7)

Amended and Restated $ 300 Million Unsecured 2011 Term Loan

LIBOR + 1.00 %

11/30/2021 300,000 300,000

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LIBOR + 0.90 %

1.05 % 9/30/2022 (7)

$ 350 Million Unsecured Senior Notes

3.40 % 3.43 % 6/01/2023 350,000 350,000

$ 400 Million Unsecured Senior Notes

4.45 % 4.10 % 3/15/2024 400,000 400,000

$ 250 Million Unsecured 2018 Term Loan

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3/31/2025 250,000 250,000

$ 300 Million Unsecured Senior Notes

3.15 % 3.90 % (9)

8/15/2030 300,000 —

Discounts and unamortized debt issuance costs

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(3) Collateralized by the 5 Wall Street building in Burlington, Massachusetts.

(4) Collateralized by the 1901 Market Street building in Philadelphia, Pennsylvania.

(4) Previously collateralized by the 1901 Market Street building in Philadelphia, Pennsylvania.

(5) Weighted average is based on contractual balance of outstanding debt and the stated or effectively fixed interest rates as of December 31, 2020.

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Piedmont’s current credit rating.

(7) The facility has a stated variable rate;

however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes in Piedmont's credit rating, the rate to that shown as the effective rate through the maturity date of the interest rate swap agreements (see Note 5 for more detail).

(7) Piedmont may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of September 29, 2023) provided Piedmont is not then in default and upon payment of extension fees.

(8) The facility has a stated variable rate;

however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, $ 150 million of the principal balance to 4.11 % through March 29, 2020, and $ 100 million of the principal balance to 4.21 % from March 30, 2020 through the maturity date of the loan.

however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, $ 100 million of the principal balance to 3.56 % through the maturity date of the loan.

For the remaining variable portion of the loan, Piedmont may periodically select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal.

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The rate presented is the weighted-average rate for the effectively fixed and variable portions of the debt outstanding as of December 31, 2020 (see Note 5 for more detail).

(9) The $ 300 Million Unsecured Senior Notes have a fixed coupon rate of 3.15 %, however, as a result of the issuance of the notes at a discount, Piedmont recognizes an effective interest rate on this debt issuance of 3.24 %.

After consideration of the impact of settled interest rate swap agreements, in addition to the issuance discount, the effective interest rate on this debt is 3.90 %.

Index to Financial Statements

A summary of Piedmont's consolidated principal outstanding for aggregate debt maturities of its indebtedness as of December 31, 2020, is provided below (in thousands):

2021 $ 327,610

Thereafter 300,000

Total $ 1,632,610

Piedmont’s weighted-average interest rate as of December 31, 2019 and 2018, for the aforementioned borrowings was approximately 3.76 % in both periods.

Piedmont’s weighted-average interest rate as of December 31, 2020 and 2019, for the aforementioned borrowings was approximately 3.03 % and 3.76 %, respectively.

Piedmont made interest payments on all indebtedness, including interest rate swap cash settlements, of approximately $ 50.7 million, $ 64.0 million, and $ 63.1 million during the years ended December 31, 2020, 2019, and 2018, respectively.

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Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for Piedmont making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

In January 2018, Piedmont repaid the $ 300 Million Unsecured 2013 Term Loan in advance of its maturity without penalty.

During the year ended December 31, 2020, Piedmont entered into and subsequently settled four forward starting interest rate swap agreements with a total notional value of $ 200 million to hedge the risk of changes in the interest-related cash flows associated with the issuance of the $ 300 Million Unsecured Senior Notes (see Note 4 ).

The settlement resulted in a loss of approximately $ 19.9 million, which was recorded as accumulated OCI and is being amortized as additional interest expense over the ten-year term of the $ 300 Million Unsecured Senior Notes.

During the year ended December 31, 2018, Piedmont repaid the $ 300 Million Unsecured 2013 Term Loan in advance of its maturity without penalty.

In connection with this early debt prepayment, six interest rate swap agreements which were identified as cash flow hedges were also terminated, resulting in a receipt of approximately $ 0.8 million from Piedmont's counterparties for the settlement of the swaps.

These proceeds were recorded in accumulated other comprehensive income/(loss) ("OCI") and were amortized as an offset to interest expense in the consolidated statement of income over the original term of the terminated interest rate swaps through January 2019.

These proceeds were recorded in accumulated OCI and were amortized as an offset to interest expense in the consolidated statement of income over the original term of the terminated interest rate swaps through January 2019.

In connection with this termination Piedmont also recognized a non-cash loss of approximately $ 1.3 million due to it becoming probable that the hedged forecasted transactions would not occur, offset by a mark-to-market gain on these cash flow hedges of approximately $ 0.1 million for the year ended December 31, 2018.

As of December 31, 2019, Piedmont was party to interest rate swap agreements, all of which are designated as effective cash flow hedges and fully hedge the variable cash flows covering the entire outstanding balance of the Amended and Restated $ 300 Million Unsecured 2011 Term Loan, and $ 150 million of the $ 250 Million Unsecured 2018 Term Loan.

The maximum length of time over which Piedmont is hedging its exposure to the variability in future cash flows for forecasted transactions is 63 months.

Finally, as of December 31, 2020, Piedmont was party to two other interest rate swap agreements, which are designated as effective cash flow hedges and hedge the variable cash flows covering $ 100 million of the $ 250 Million Unsecured 2018 Term Loan.

The maximum length of time over which Piedmont is hedging its exposure to the variability in future cash flows related to these interest rate swap agreements is 51 months.

Index to Financial Statements

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(in millions) Effective Date Maturity Date

Interest rate swaps 3 Amended and Restated $300 Million Unsecured 2011 Term Loan $ 300 11/22/2016 1/15/2020

Interest rate swaps 2 $ 250 Million Unsecured 2018 Term Loan

Interest rate swaps 1 $250 Million Unsecured 2018 Term Loan 50 3/29/2018 3/29/2020

$ 100 3/29/2018 3/31/2025

Piedmont presents its interest rate derivatives on its consolidated balance sheets on a gross basis as interest rate swap assets and interest rate swap liabilities.

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Gross derivative liabilities ( 9,834 ) ( 5,121 )

Net derivative asset/(liability) $ ( 5,121 ) $ 360

The gain/(loss) on Piedmont's interest rate derivatives, including previously settled forward swaps, that was recorded in OCI and the accompanying consolidated statements of income as a component of interest expense for the years ended December 31, 2019, 2018, and 2017, respectively, was as follows (in thousands):

Net derivative liability $ ( 9,834 ) $ ( 5,121 )

The gain/(loss) on Piedmont's interest rate derivatives, including previously settled forward starting interest rate swaps, that was recorded in OCI and the accompanying consolidated statements of income as a component of interest expense for the years ended December 31, 2020, 2019, and 2018, respectively, was as follows (in thousands):

Interest Rate Swaps in Cash Flow Hedging Relationships:

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$ ( 9,336 ) $ — $ ( 1,680 )

(1) Includes the write-off of approximately $ 0.4 million of discounts and unamortized debt issuance costs associated with the repayment of the $ 300 Million Unsecured 2013 Term Loan in January 2018.

Piedmont estimates that approximately $ 0.3 million will be reclassified from OCI as a reduction to interest expense over the next twelve months.

Piedmont estimates that approximately $ 2.9 million will be reclassified from OCI as an increase to interest expense over the next twelve months.

Piedmont did not recognize any hedge ineffectiveness on its cash flow hedges during the three years ended December 31, 2020.

See Note 6 for fair value disclosures of Piedmont's derivative instruments.

Index to Financial Statements

Credit-risk-related Contingent Features

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Additionally, Piedmont has rights of set-off under certain of its derivative agreements related to potential termination fees and amounts payable under the agreements, if a termination were to occur.

Index to Financial Statements

Fair Value Measurements of Financial Instruments

Piedmont considers its cash and cash equivalents, tenant receivables, restricted cash and escrows, accounts payable and accrued expenses, interest rate swap agreements, and debt to meet the definition of financial instruments.

Piedmont considers its cash and cash equivalents, tenant receivables, notes receivable, restricted cash and escrows, accounts payable and accrued expenses, interest rate swap agreements, and debt to meet the definition of financial instruments.

The following table sets forth the carrying and estimated fair value for each of Piedmont’s financial instruments, as well as its level within the GAAP fair value hierarchy, as of December 31, 2020 and 2019, respectively (in thousands):

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$ 8,448 $ 8,448 Level 1 $ 8,226 $ 8,226 Level 1

Notes receivable

$ 118,500 $ 118,500 Level 2 $ — $ — Level 1

Restricted cash and escrows (1)

$ 1,883 $ 1,883 Level 1 $ 1,841 $ 1,841 Level 1

Interest rate swaps $ — $ — Level 2 $ 1,199 $ 1,199 Level 2

Accounts payable and accrued expenses (1)

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(1) For the periods presented, the carrying value of these financial instruments approximates estimated fair value due to its short-term maturity.

Piedmont's notes receivable were carried at book value as of December 31, 2020, and were issued in conjunction with the sale of properties to an unrelated third-party buyer on October 28, 2020 (see Note 13 ).

Piedmont has evaluated the facts and circumstances present at the time of issuance of the notes receivable as compared to those same circumstances as of December 31, 2020 and determined that the book value approximates its estimated fair value.

Piedmont's debt was carried at book value as of December 31, 2020 and 2019;

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Piedmont has not changed its valuation technique for estimating the fair value of its debt.

Piedmont’s interest rate swap agreements presented above, and as further discussed in Note 5 , are classified as “Interest rate swap” assets and liabilities in the accompanying consolidated balance sheets and were carried at estimated fair value as of December 31, 2019 and 2018.

Piedmont’s interest rate swap agreements presented above, and as further discussed in Note 5 , are classified as “Interest rate swap” liabilities in the accompanying consolidated balance sheets and were carried at estimated fair value as of December 31, 2020 and 2019.

The valuation of these derivative instruments was determined using widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the derivatives, including the period to maturity of each instrument, and uses observable market-based inputs, including interest rate curves and implied volatilities.

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600 Corporate Drive (2)

Disposal Group of 13 Assets (1)

Total impairment loss on real estate assets

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(2) Management shortened the intended hold period for the property, and in doing so determined that the carrying value would not be recovered from the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition.

As a result, Piedmont recognized a loss on impairment calculated as the difference between the carrying value of the asset and the estimated fair value.

As a result, Piedmont recognized a loss on impairment calculated as the difference between the carrying value of the asset and the estimated fair value less costs to sell.

The estimated fair value was determined using widely available market quotations for similar properties, as well as discounted cash flow analysis.

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As of December 31, 2020, Piedmont had one individually significant unrecorded tenant allowance commitment of approximately $ 38.2 million for the approximately 20-year , approximately 520,000 square foot renewal and expansion on behalf of Piedmont's largest tenant, the State of New York at the 60 Broad Street building in New York City.

These commitments will be accrued and capitalized as the related expenditures are incurred.

This commitment will be capitalized as the related expenditures are incurred.

Contingencies Related to Tenant Audits/Disputes

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Such audits may result in different interpretations of language in the lease agreements from that made by Piedmont, which could result in requests for refunds of previously recognized tenant reimbursement revenues, resulting in financial loss to Piedmont.

Piedmont recorded net recoveries of previously recognized reductions in rental and reimbursement revenues of $ 0.6 million related to tenant audits/disputes during the year ended December 31, 2019 and approximately $ 0.5 million and $ 0.3 million of reductions in rental and reimbursement revenues related to such tenant audits/disputes during the years ended December 31, 2018, and 2017, respectively.

There were no reductions in rental and reimbursement revenues related to such tenant audits/disputes during the year ended December 31, 2020.

However, Piedmont recorded net recoveries of previously recognized reductions in rental and reimbursement revenues of $ 0.6 million related to tenant audits/disputes during the year ended December 31, 2019, and approximately $ 0.5 million of reductions in rental and reimbursement revenues related to such tenant audits/disputes during the years ended December 31, 2018.

Contingencies Related to the COVID-19 Pandemic

During the year ended December 31, 2020, Piedmont continued to experience the repercussions of the COVID-19 pandemic including forced closures and other restrictions that have had a material adverse effect on the global economy and the regional U.S.

economies in which Piedmont operates.

Specifically, the pandemic and its impact on the U.S., as well as the global economy, has negatively impacted the trading price of Piedmont's common stock and some of Piedmont's tenants' ability to pay their rent.

We have entered into approximately 70 agreements with various tenants that primarily deferred approximately $ 7.1 million of 2020 rent payments into fourth quarter of 2020 or the year ending December 31, 2021.

Piedmont has already collected approximately $ 1.3 million of the $ 7.1 million deferred.

Nonetheless, Piedmont has established an approximately $ 4.6 million general reserve for potential collectibility issues.

There can be no assurances that this amount will be sufficient to cover any future losses of rental income should these tenants be unable to pay back deferred rents when such rents become due.

Piedmont’s financial statements as of and for the year ended December 31, 2020 have been prepared in light of these circumstances.

Piedmont has continued to follow the policies described in Note 2 above, including those related to impairment of real estate assets and goodwill and estimates of the likelihood of collectibility of amounts due from tenants.

Index to Financial Statements

While the long-term impacts of the COVID-19 pandemic remain unknown, a prolonged economic downturn or recession resulting from the pandemic could adversely affect many of Piedmont's tenants which could, in turn, adversely impact Piedmont's business, financial condition and results of operations.

Piedmont will continue to work closely with its tenants and address their concerns on a case-by-case basis, seeking solutions that address immediate cash flow interruptions while maintaining long term lease obligations.

Piedmont is from time to time a party to legal proceedings, which arise in the ordinary course of its business.

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During the year ended December 31, 2019, Piedmont entered into employment or retirement agreements with certain of its current and former executive officers as more fully described in its Definitive Proxy Statement and Current Report on Form 8-K filed on March 19, 2019.

Further, during the years ended December 31, 2019, 2018, and 2017, Piedmont recognized approximately $ 0.2 million, $ 0.3 million, and $ 0.1 million, respectively, of expense related to a consulting agreement with its

Index to Financial Statements

former Chief Investment Officer.

Further, during the years ended December 31, 2020, 2019, and 2018, Piedmont recognized approximately $ 0.1 million, $ 0.2 million, and $ 0.3 million, respectively, of expense related to a consulting agreement with its former Chief Investment Officer.

There were no other related-party transactions during the three years ended December 31, 2020 .

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The Compensation Committee of Piedmont's Board of Directors has periodically granted deferred stock award units to all of Piedmont's employees and independent directors.

Employee awards typically vest ratably over a multi-year period and independent director awards vest over one year.

Most employee awards are time-vested and typically vest ratably over a multi-year period and independent director awards vest over one year .

Certain management employees' long-term equity incentive program is split equally between the time-vested award units and a multi-year performance share program whereby the actual awards are contingent upon Piedmont's total stockholder return ("TSR") relative to a peer group of office REITs' TSR.

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The fair values of the multi-year performance share awards are estimated using a Monte Carlo valuation method.

Index to Financial Statements

A rollforward of Piedmont's equity based award activity for the year ended December 31, 2020 is as follows:

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242,586 $ 22.39

Increase in Estimated Potential Share Awards based on Performance

Increase in Estimated Potential Share Awards based on TSR Performance

111,545 $ 26.97

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1,009,530 $ 24.37

(1) Includes performance share and deferred stock awards that were settled in cash in July 2019 in conjunction with the senior

management transition that occurred on June 30, 2019.

The following table provides additional information regarding stock award activity during the years ended 2020, 2019, and 2018 (in thousands except for per share amounts):

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Index to Financial Statements

A detail of Piedmont’s outstanding employee deferred stock awards as of December 31, 2019 is as follows:

A detail of Piedmont’s outstanding employee restricted stock awards as of December 31, 2020 is as follows:

Date of grant Type of Award Net Shares

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May 3, 2019 Fiscal Year 2019-2021 Performance Share Program — $ 29.43 Shares awarded, if any, will vest immediately upon determination of award in 2022.

February 19, 2020 Deferred Stock Award 178,181 $ 24.41 Of the shares granted, 25 % vested on the date of grant, and 25 % vested or will vest on February 19, 2021, 2022, and 2023, respectively.

March 19, 2020 Fiscal Year 2020-2022 Performance Share Program — $ 25.83 Shares awarded, if any, will vest immediately upon determination of award in 2023.

May 13, 2020 Deferred Stock Award-Board of Directors 45,780 $ 13.76 Of the shares granted, 100 % will vest by May 13, 2021.

May 3, 2019 Deferred Stock Award 300,825 $ 21.04 Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 3, 2020, 2021, and 2022, respectively.

May 3, 2019 Fiscal Year 2019-2021 Performance Share Program — $ 29.43 Shares awarded, if any, will vest immediately upon determination of award in 2022.

Total 1,009,530

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During the years ended December 31, 2020, 2019, and 2018, Piedmont recognized approximately $ 9.7 million, $ 15.1 million and $ 9.7 million of compensation expense related to stock awards, of which approximately $ 8.5 million, $ 13.6 million and $ 8.6 million, related to the amortization of unvested shares, respectively.

During the year ended December 31, 2019, a total of 292,675 shares were issued to employees.

As of December 31, 2019, approximately $ 3.5 million of unrecognized compensation cost related to unvested, annual deferred stock awards remained, which Piedmont will record in its consolidated statements of income over a weighted-average vesting period of approximately one year.

During the year ended December 31, 2020, a total of 245,875 shares were issued to employees, net of shares surrendered for income tax obligations.

As of December 31, 2020, approximately $ 6.1 million of unrecognized compensation cost related to unvested, annual restricted stock awards remained, which Piedmont will record in its consolidated statements of income over a weighted-average vesting period of approximately one year .

Earnings Per Share

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Net income per share-basic is calculated as net income available to common stockholders divided by the weighted average number of common shares outstanding during the period.

Net income per share-diluted is calculated as net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during the period, including unvested deferred stock awards.

Diluted weighted average number of common shares reflects the potential dilution under the treasury stock method that would occur if the remaining unvested deferred stock awards vested and resulted in additional common shares outstanding.

Unvested deferred stock awards which are determined to be anti-dilutive are not

Diluted weighted average number of common shares reflects the potential dilution

Index to Financial Statements

included in the calculation of diluted weighted average common shares.

For each of the years ended December 31, 2019, 2018, and 2017, Piedmont excluded approximately 0.1 million of such anti-dilutive shares.

under the treasury stock method that would occur if the remaining unvested restricted stock awards vested and resulted in additional common shares outstanding.

Unvested restricted stock awards which are determined to be anti-dilutive are not included in the calculation of diluted weighted average common shares.

For each of the years ended December 31, 2020, 2019, and 2018, Piedmont excluded approximately 289,681 , 156,317 , and 170,128 of such anti-dilutive shares, respectively.

The following table reconciles the denominator for the basic and diluted earnings per share computations shown on the consolidated statements of income for the years ended December 31, 2020, 2019, and 2018, respectively (in thousands):

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Operating leases where Piedmont is the lessee relat e primarily to office space in buildings owned by third parties.

Upon adoption of ASC 842 on January 1, 2019, Piedmont recorded a right to use asset and corresponding lease liability of approximately $ 0.2 million using Piedmont's incremental borrowing rate as the lease discount rate.

For the year ended December 31, 2019, Piedmont recognized approximately $ 0.1 million of operating lease costs.

As of December 31, 2019, the weighted-average lease term of Piedmont's right of use assets is two years, and the weighted-average discount rate is 3.35 %.

For both the years ended December 31, 2020 and December 31, 2019, Piedmont's right to use asset and corresponding lease liability is approximately $ 0.2 million, using Piedmont's incremental borrowing rate as the lease discount rate.

For both the years ended December 31, 2020 and December 31, 2019, Piedmont recognized approximately $ 0.1 million of operating lease costs.

As of December 31, 2020, the weighted-average lease term of Piedmont's right of use assets is 2 years, and the weighted-average discount rate is 1.60 %.

Index to Financial Statements

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Buildings Sold Location Date of Sale Gain on Sale of Real Estate Assets Net Sales Proceeds

Sarasota Commerce Center II Sarasota, Florida June 16, 2017 $ 6,493 $ 23,090

Two Independence Square Washington, D.C.

July 5, 2017 $ 109,381 (1)

8560 Upland Drive Denver, Colorado July 27, 2017 $ 3,683 $ 12,334 (2)

2017 Disposition Portfolio

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500 West Monroe Street Chicago, Illinois October 28, 2019 $ 157,739 $ 408,851

(1) Gain on sale of real estate assets during the year ended December 31, 2019 reflects an approximately $ 6.1 million adjustment of the gain on sale for the Two Independence Square building related to the reimbursement of certain previously disputed tenant improvement overages.

(2) Property was owned as part of an unconsolidated joint venture.

As such, the gain on sale is presented as equity in income of unconsolidated joint ventures in the accompanying consolidated statement of income.

Amounts shown above reflect Piedmont's approximately 72 % ownership.

1901 Market Street Philadelphia, Pennsylvania June 25, 2020 $ 191,030 $ 350,805

New Jersey Portfolio Various (4)

October 28, 2020 $ 14,636 $ 9,289 (5)

(1) The 2017 Disposition Portfolio is comprised of the following properties:

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(3) As discussed in Note 7 above, Piedmont recognized an impairment loss prior to the sale of the property.

(4) The New Jersey Portfolio is comprised of the following three properties:

200 Bridgewater Crossing in Bridgewater, New Jersey;

400 Bridgewater Crossing in Bridgewater, New Jersey;

and 600 Corporate Drive in Lebanon, New Jersey.

(5) Piedmont accepted a secured $ 102.8 million promissory note from the buyer, which matures on October 31, 2023 and bears interest at 6 % per annum.

The note may not be prepaid without penalty until January 2022, and may be extended for three available one-year periods upon payment of applicable extension fees.

Further, Piedmont also accepted a mezzanine note for $ 15.7 million, bearing interest at 13.55 % per annum, which may be repaid any time before the October 31, 2023 maturity without penalty.

Assets Held for Sale

No properties met the criteria to be classified as held for sale as of December 31, 2019.

However, during the fourth quarter of 2018, Piedmont entered into a binding, non-refundable contract with an unrelated third party buyer to sell the One Independence Square building, resulting in its reclassification as held for sale as of December 31, 2018.

The sale closed on February 28, 2019.

Additionally, during the year ended December 31, 2019, Piedmont reclassified the 500 West Monroe Street building as held for sale before its ultimate disposition on October 28, 2019.

Therefore, the appropriate real estate related assets and liabilities related to One Independence Square and 500 West Monroe Street are classified as held for sale in the accompanying consolidated balance sheet as of December 31, 2018.

As of December 31, 2020, no properties met the criteria for held for sale classification;

however, as of March 31, 2020, the 1901 Market Street building in Philadelphia, Pennsylvania, which sold June 2020, met the criteria for held for sale classification.

Consequently its assets and liabilities as of December 31, 2019 were presented as held for sale for comparability in the accompanying consolidated balance sheets.

Index to Financial Statements

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Building and improvements, less accumulated depreciation of $ 0 and $ 66,823 as of December 31, 2020, and 2019, respectively

Construction in progress

Intangible lease assets, less accumulated amortization of $ 0 and $ 27,438 as of December 31, 2020 and 2019, respectively

Total real estate assets held for sale, net

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Straight-line rent receivables

Prepaid expenses and other assets

Deferred lease costs, less accumulated amortization of $ 0 and $ 34,957 as of December 31, 2020 and 2019, respectively

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Other liabilities held for sale, net:

Accrued expenses

Intangible lease liabilities, less accumulated amortization of $ 0 and $ 31,959 as of December 31, 2020 and 2019, respectively

Supplemental Disclosures for the Statement of Consolidated Cash Flows

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Change in accrued share repurchases as part of an announced plan $ 685 $ ( 4,417 ) $ 3,140

Investment in consolidated joint venture $ — $ — $ 63,026

Notes receivable issued in conjunction with property dispositions $ 118,500 $ — $ —

The following table provides a reconciliation of cash, cash equivalents, and restricted cash and escrows as presented in the accompanying consolidated statement of cash flows for the years ended December 31, 2020, 2019, and 2018 to the consolidated balance sheets for the respective period (in thousands):

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100 % 100 % 100 %

As of December 31, 2019 and 2018, the tax basis carrying value of Piedmont’s total assets was approximately $ 3.3 billion and $ 3.6 billion, respectively.

Approximately $ 1.0 million and $ 2.4 million of accrued interest and penalties related to uncertain tax positions was included in accounts payable, accrued expenses, and accrued capital expenditures in the accompanying consolidated balance sheets as of December 31, 2019 and 2018, respectively.

Piedmont recognized approximately $ 1.4 million of recoveries of previously recorded estimated accrued interest and penalties for both of the years ended December 31, 2019 and 2018, and $ 0.1 million of recoveries for the year ended December 31, 2017, related to such positions.

Piedmont has $ 0 and approximately $ 1.0 million of uncertain tax positions included in accounts payable, accrued expenses, and accrued capital expenditures in the accompanying consolidated balance sheets as of December 31, 2020 and 2019, respectively.

Piedmont recognized approximately $ 1.0 million of recoveries of previously recorded estimated accrued interest and penalties for the year ended December 31, 2020, and approximately $ 1.4 million of such recoveries for both the years ended December 31, 2019 and 2018.

The tax years 2017 to 2019 remain open to examination by various federal and state taxing authorities.

Index to Financial Statements

Quarterly Results (unaudited)

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Revenues $ 137,171 $ 134,631 $ 131,693 $ 131,529

Gain on sale of real estate assets $ 37,887 $ 1,451 $ 32 $ 157,640

Net income $ 50,209 $ 8,152 $ 8,419 $ 162,476

Net income applicable to Piedmont $ 50,208 $ 8,153 $ 8,422 $ 162,478

Basic and diluted earnings per share $ 0.40 $ 0.06 $ 0.07 $ 1.29

Dividends declared per share $ 0.21 $ 0.21 $ 0.21 $ 0.21

First Second Third Fourth

Revenues $ 129,900 $ 129,174 $ 129,708 $ 137,185

Gain/(loss) on sale of real estate assets $ 3 $ 191,369 $ ( 340 ) $ 14,634

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Index to Financial Statements

Guarantor and Non-Guarantor Financial Information

The following condensed consolidating financial information for Piedmont (the "Parent", "Guarantor", and/or "Consolidated"), Piedmont OP (the "Issuer"), and the other directly and indirectly owned subsidiaries of Piedmont as the Guarantor (the "Non-Guarantors") is provided pursuant to the requirements of Rule 3-10 of Regulation S-X regarding financial statements of guarantors and issuers of guaranteed registered securities.

The Issuer is a wholly-owned subsidiary of the Guarantor, and all guarantees by the Guarantor of securities issued by the Issuer are full and unconditional.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Non-Guarantor Subsidiaries.

Condensed Consolidated Balance Sheets

As of December 31, 2019

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Real estate assets, at cost:

Land $ — $ 36,094 $ 470,295 $ — $ 506,389

Buildings and improvements, less accumulated depreciation

— 177,798 2,147,724 ( 300 ) 2,325,222

Intangible lease assets, less accumulated amortization

— — 80,979 — 80,979

Construction in progress — 2,412 27,508 — 29,920

Total real estate assets

— 216,304 2,726,506 ( 300 ) 2,942,510

Cash and cash equivalents 150 9,674 3,721 — 13,545

Tenant and straight-line receivables, net

— 16,450 142,894 — 159,344

Investment in subsidiaries 1,845,797 2,810,875 161 ( 4,656,833 ) —

Notes receivable — 810 144,500 ( 145,310 ) —

Prepaid expenses, restricted cash, escrows, interest rate swaps, and other assets

— 6,180 21,112 ( 24 ) 27,268

Goodwill — 98,918 — — 98,918

Deferred lease costs, net

— 16,249 258,923 — 275,172

$ 1,845,947 $ 3,175,460 $ 3,297,817 $ ( 4,802,467 ) $ 3,516,757

Debt, net $ — $ 1,292,334 $ 334,380 $ ( 145,310 ) $ 1,481,404

Accounts payable, accrued expenses, dividends payable, interest rate swaps and accrued capital expenditures

26,973 21,069 101,026 ( 24 ) 149,044

Deferred income — 3,505 31,104 — 34,609

Intangible lease liabilities, net

— — 32,726 — 32,726

Total liabilities

26,973 1,316,908 499,236 ( 145,334 ) 1,697,783

Total stockholders’ equity

1,818,974 1,858,552 2,798,581 ( 4,657,133 ) 1,818,974

Total liabilities and stockholders’ equity

$ 1,845,947 $ 3,175,460 $ 3,297,817 $ ( 4,802,467 ) $ 3,516,757

Index to Financial Statements

Condensed Consolidated Balance Sheets

As of December 31, 2018

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Real estate assets, at cost:

Land $ — $ 36,094 $ 434,338 $ — $ 470,432

Buildings and improvements, less accumulated depreciation

— 176,927 1,944,943 ( 300 ) 2,121,570

Intangible lease assets, less accumulated amortization

— — 77,676 — 77,676

Construction in progress — 5,708 10,140 — 15,848

Real estate assets held for sale, net — — 331,068 — 331,068

Total real estate assets

— 218,729 2,798,165 ( 300 ) 3,016,594

Cash and cash equivalents

150 — 4,939 ( 518 ) 4,571

Tenant and straight-line rent receivables

— 16,143 131,419 — 147,562

Investment in subsidiaries 1,744,122 2,704,337 166 ( 4,448,625 ) —

Notes receivable — 810 144,500 ( 145,310 ) —

Prepaid expenses, restricted cash, escrows, interest swaps, and other assets

42 5,682 21,653 ( 24 ) 27,353

Goodwill — 98,918 — — 98,918

Deferred lease costs, net

— 15,158 221,040 — 236,198

Other assets held for sale, net — — 61,233 — 61,233

$ 1,744,314 $ 3,059,777 $ 3,383,115 $ ( 4,594,777 ) $ 3,592,429

Debt, net $ — $ 1,495,065 $ 335,717 $ ( 145,310 ) $ 1,685,472

Accounts payable, accrued expenses, dividends payable, interest rate swaps, and accrued capital expenditures

32,174 15,382 74,536 ( 542 ) 121,550

Deferred income — 2,274 26,505 — 28,779

Intangible lease liabilities, net

— — 35,708 — 35,708

Other liabilities held for sale — — 8,780 — 8,780

Total liabilities

32,174 1,512,721 481,246 ( 145,852 ) 1,880,289

Total stockholders’ equity

1,712,140 1,547,056 2,901,869 ( 4,448,925 ) 1,712,140

Total liabilities and stockholders’ equity

$ 1,744,314 $ 3,059,777 $ 3,383,115 $ ( 4,594,777 ) $ 3,592,429

Index to Financial Statements

Condensed Consolidated Statements of Income

For the year ended December 31, 2019

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Rental and tenant reimbursement revenue

$ — $ 46,669 $ 468,070 $ ( 2,834 ) $ 511,905

Property management fee revenue

— — 19,362 ( 15,964 ) 3,398

Other property related income

— 158 17,717 — 17,875

— 46,827 505,149 ( 18,798 ) 533,178

Property operating costs

— 21,314 208,864 ( 18,798 ) 211,380

— 12,171 93,844 — 106,015

— 1,940 74,726 — 76,666

Impairment loss on real estate assets

— 7,000 1,953 — 8,953

General and administrative

218 6,716 30,961 — 37,895

218 49,141 410,348 ( 18,798 ) 440,909

Other income (expense):

Interest expense

— ( 54,721 ) ( 14,408 ) 7,535 ( 61,594 )

Other income/(expense)

— 188 8,918 ( 7,535 ) 1,571

First Second Third Fourth

Revenues $ 132,936 $ 130,668 $ 135,421 $ 134,153

Gain on sale of real estate assets $ 37,887 $ 1,451 $ 32 $ 157,640

— 113 196,897 — 197,010

— ( 54,420 ) 191,407 — 136,987

Income/(loss) before consolidated subsidiaries ( 218 ) ( 56,734 ) 286,208 — 229,256

Income from subsidiaries

229,479 255,325 — ( 484,804 ) —

Net income $ 50,209 $ 8,152 $ 8,419 $ 162,476

Net loss applicable to noncontrolling interest

Net income applicable to Piedmont $ 50,208 $ 8,153 $ 8,422 $ 162,478

Index to Financial Statements

Condensed Consolidated Statements of Income

For the year ended December 31, 2018

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Rental and tenant reimbursement revenue

$ — $ 44,710 $ 462,173 $ ( 2,473 ) $ 504,410

Property management fee revenue

— — 17,118 ( 15,668 ) 1,450

Other property related income

— 130 19,977 — 20,107

— 44,840 499,268 ( 18,141 ) 525,967

Property operating costs

— 19,583 207,896 ( 18,141 ) 209,338

— 11,514 96,442 — 107,956

— 1,990 61,305 — 63,295

General and administrative

289 6,576 22,848 — 29,713

289 39,663 388,491 ( 18,141 ) 410,302

Other income (expense):

Interest expense

— ( 54,095 ) ( 14,558 ) 7,630 ( 61,023 )

Other income/(expense)

— 144 9,124 ( 7,630 ) 1,638

Loss on extinguishment of debt

— ( 1,680 ) — — ( 1,680 )

Gain on sale of real estate assets

— 1,417 74,274 — 75,691

Basic and diluted earnings per share $ 0.40 $ 0.06 $ 0.07 $ 1.29

Dividends declared per share $ 0.21 $ 0.21 $ 0.21 $ 0.21

Segment Information

Piedmont’s accelerated disposition program has narrowed the geographic footprint of the portfolio, with a concentration on Sunbelt properties.

During the year ended December 31, 2020, Piedmont disposed of its only asset in Philadelphia, Pennsylvania and its remaining assets in New Jersey (see Note 13 ).

As a result of this concentration of Piedmont's portfolio, the chief operating decision maker ("CODM"), who is Piedmont's President and Chief Executive Officer, began to evaluate Piedmont's portfolio and assess the ongoing operations and performance of its properties utilizing the following geographic segments:

Dallas, Atlanta, Washington, D.C., Minneapolis, Boston, Orlando, and New York.

These operating segments are also Piedmont’s reportable segments.

Additionally, as of December 31, 2020, Piedmont owns two properties in Houston and one property in Chicago that do not meet the definition of an operating or reportable segment as the CODM does not regularly review these properties for purposes of allocating resources or assessing performance, and Piedmont does not maintain a significant presence or anticipate further investment in these markets.

These three properties are included in "Corporate and other" below.

During the periods presented, there have been no material intersegment transactions.

The accounting policies of the reportable segments are the same as Piedmont.

NOI by geographic segment is the primary performance measure reviewed by the CODM to assess operating performance and is calculated by deducting operating expenses from revenues.

Revenues include lease revenues and other property income;

and operating expenses include property operating costs.

The NOI consists only of revenues and expenses directly related to real estate rental operations.

NOI reflects property acquisitions and dispositions, occupancy levels, rental rate increases or decreases, and the recoverability of operating expenses.

NOI, as Piedmont calculates it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs.

Asset value information and capital expenditures by segment are not reported because the CODM does not use these measures to assess performance.

The following table presents revenues included in NOI by geographic reportable segments (in thousands):

Years Ended December 31,

2020 2019 2018

Income/(loss) before consolidated subsidiaries ( 289 ) ( 49,037 ) 179,617 — 130,291

Income from subsidiaries

Dallas $ 101,727 $ 55,346 $ 54,382

Atlanta 95,403 75,699 62,282

Washington, D.C.

59,760 64,481 68,404

Net income 130,296 129,611 179,617 ( 309,233 ) 130,291

Net loss applicable to noncontrolling interest

Net income applicable to Piedmont $ 130,296 $ 129,611 $ 179,622 $ ( 309,233 ) $ 130,296

Minneapolis 61,465 64,318 57,711

Boston 61,338 64,739 54,648

Orlando 54,886 57,084 55,440

New York 69,827 75,587 71,733

Total reportable segments 504,406 457,254 424,600

Corporate and other 30,618 75,924 101,367

Total Revenues $ 535,024 $ 533,178 $ 525,967

Index to Financial Statements

Condensed Consolidated Statements of Income

For the year ended December 31, 2017

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Rental and tenant reimbursement revenue

$ — $ 54,109 $ 501,420 $ ( 2,265 ) $ 553,264

Property management fee revenue

— — 18,205 ( 16,470 ) 1,735

Other property related income

— 144 19,030 — 19,174

— 54,253 538,655 ( 18,735 ) 574,173

Property operating costs

— 22,805 218,371 ( 18,735 ) 222,441

— 12,995 106,293 — 119,288

The following table presents NOI by geographic reportable segments (in thousands):

Years Ended December 31,

2020 2019 2018

Impairment loss

Dallas $ 59,845 $ 29,438 $ 29,286

Atlanta 60,276 47,287 38,660

Washington, D.C.

36,696 41,167 41,565

General and administrative

Minneapolis 33,588 35,610 30,402

Boston 41,722 44,016 37,887

Orlando 34,427 35,433 35,067

New York 38,990 44,036 40,622

Total reportable segments 305,544 276,987 253,489

Corporate and other 13,915 43,637 63,649

Total NOI $ 319,459 $ 320,624 $ 317,138

A reconciliation of Net income applicable to Piedmont to NOI is presented below (in thousands):

Years Ended December 31,

2020 2019 2018

Net income applicable to Piedmont $ 232,688 $ 229,261 $ 130,296

Management fee revenue (1)

( 1,495 ) ( 2,518 ) ( 712 )

Other income (expense):

Depreciation and amortization 203,869 182,682 171,252

Impairment loss on real estate assets — 8,953 —

General and administrative expenses 27,464 37,895 29,713

Interest expense 54,990 61,594 61,023

— ( 56,769 ) ( 26,715 ) 15,360 ( 68,124 )

Other income/(expense)

— 9,168 6,849 ( 15,360 ) 657

Equity in income of unconsolidated joint ventures

— 3,845 — — 3,845

Other income ( 1,724 ) ( 228 ) ( 418 )

Loss on extinguishment of debt 9,336 — 1,680

Gain on sale of real estate assets ( 205,666 ) ( 197,010 ) ( 75,691 )

— 6,431 109,443 — 115,874

— ( 37,325 ) 89,577 — 52,252

Net income/(loss) ( 347 ) ( 28,451 ) 162,347 — 133,549

Net loss applicable to noncontrolling interest

Net income/(loss) applicable to Piedmont $ ( 347 ) $ ( 28,451 ) $ 162,362 $ — $ 133,564

Index to Financial Statements

Consolidating Statements of Comprehensive Income

For the Year Ended December 31, 2019

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Net income $ 229,261 $ 198,591 $ 286,213 $ ( 484,804 ) $ 229,261

Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges

( 5,659 ) ( 5,659 ) — 5,659 ( 5,659 )

Reclassification of net (gain)/loss included in net income

( 1,836 ) ( 1,836 ) — 1,836 ( 1,836 )

Other comprehensive income ( 7,495 ) ( 7,495 ) — 7,495 ( 7,495 )

Comprehensive income $ 221,766 $ 191,096 $ 286,213 $ ( 477,309 ) $ 221,766

Consolidating Statements of Comprehensive Income

For the Year Ended December 31, 2018

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Net income $ 130,296 $ 129,611 $ 179,622 $ ( 309,233 ) $ 130,296

Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges

692 692 — ( 692 ) 692

Reclassification of net (gain)/loss included in net income

( 300 ) ( 300 ) — 300 ( 300 )

Other comprehensive income 392 392 — ( 392 ) 392

Comprehensive income $ 130,688 $ 130,003 $ 179,622 $ ( 309,625 ) $ 130,688

Index to Financial Statements

Condensed Consolidated Statements of Cash Flows

For the year ended December 31, 2019

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Net Cash Provided By Operating Activities $ 236,214 $ 220,068 $ 236,477 $ ( 484,275 ) $ 208,484

Cash Flows from Investing Activities:

Investment in real estate assets and intangibles

— ( 16,020 ) ( 413,733 ) — ( 429,753 )

Net sales proceeds from wholly-owned properties

— 113 589,654 — 589,767

Deferred lease costs paid

— ( 3,220 ) ( 22,419 ) — ( 25,639 )

Distributions from subsidiaries

( 108,918 ) 19,287 — 89,631 —

Net cash provided by/(used in) investing activities

( 108,918 ) 160 153,502 89,631 134,375

Cash Flows from Financing Activities:

Debt issuance costs paid

— ( 151 ) — — ( 151 )

Proceeds from debt

— 592,000 — — 592,000

Repayments of debt

— ( 797,000 ) ( 1,019 ) — ( 798,019 )

Costs of issuance of common stock

( 710 ) — — — ( 710 )

Value of shares withheld to pay tax obligations related to employee stock compensation

( 3,295 ) — — — ( 3,295 )

Repurchases of common stock as part of announced plan

( 16,899 ) — — — ( 16,899 )

Distributions

( 106,392 ) ( 5,420 ) ( 389,783 ) 395,162 ( 106,433 )

Net cash used in financing activities

( 127,296 ) ( 210,571 ) ( 390,802 ) 395,162 ( 333,507 )

Net increase/(decrease) in cash, cash equivalents, and restricted cash and escrows — 9,657 ( 823 ) 518 9,352

Cash, cash equivalents, and restricted cash and escrows, beginning of year 150 34 6,368 ( 518 ) 6,034

Cash, cash equivalents, and restricted cash and escrows, end of year $ 150 $ 9,691 $ 5,545 $ — $ 15,386

Index to Financial Statements

Condensed Consolidated Statements of Cash Flows

For the year ended December 31, 2018

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Net Cash Provided By Operating Activities $ 135,755 $ 141,293 $ 235,562 $ ( 309,741 ) $ 202,869

Cash Flows from Investing Activities:

Investment in real estate assets and intangibles

— ( 14,479 ) ( 209,540 ) — ( 224,019 )

Intercompany note receivable

— 88,000 — ( 88,000 ) —

Net sales proceeds from wholly-owned properties

— 36,572 538,655 — 575,227

Note receivable issuance

— — ( 3,200 ) — ( 3,200 )

Note receivable payment

— — 3,200 — 3,200

Deferred lease costs paid

— ( 3,090 ) ( 24,340 ) — ( 27,430 )

Distributions from subsidiaries

349,135 5,405 — ( 354,540 ) —

Net cash provided by investing activities

349,135 112,408 304,775 ( 442,540 ) 323,778

Cash Flows from Financing Activities:

Debt issuance costs paid

— ( 1,040 ) — — ( 1,040 )

Proceeds from debt

— 977,062 — — 977,062

Repayments of debt

— ( 1,019,000 ) ( 1,455 ) — ( 1,020,455 )

Intercompany note payable

— — ( 88,000 ) 88,000 —

Costs of issuance of common stock

( 85 ) — — — ( 85 )

Value of shares withheld to pay tax obligations related to employee stock compensation

( 2,219 ) — — — ( 2,219 )

Repurchases of common stock as part of announced plan

( 298,538 ) — — — ( 298,538 )

Distributions

( 184,048 ) ( 214,596 ) ( 449,212 ) 663,763 ( 184,093 )

Net cash used in financing activities

( 484,890 ) ( 257,574 ) ( 538,667 ) 751,763 ( 529,368 )

Net increase/(decrease) in cash, cash equivalents, and restricted cash and escrows

— ( 3,873 ) 1,670 ( 518 ) ( 2,721 )

Cash, cash equivalents, and restricted cash and escrows, beginning of year 150 3,907 4,698 — 8,755

Cash, cash equivalents, and restricted cash and escrows, end of year $ 150 $ 34 $ 6,368 $ ( 518 ) $ 6,034

Index to Financial Statements

Condensed Consolidated Statements of Cash Flows

For the year ended December 31, 2017

(in thousands) Piedmont

(Guarantor) Piedmont OP

(the Issuer) Non-Guarantors Eliminations Consolidated

Net Cash Provided/(Used In) by Operating Activities $ 5,497 $ ( 18,989 ) $ 256,297 $ — $ 242,805

Cash Flows from Investing Activities:

Investment in real estate assets, consolidated joint venture, and real estate related intangibles, net

— ( 1,614 ) ( 113,479 ) — ( 115,093 )

Intercompany note receivable

— 100 ( 48,710 ) 48,610 —

Net sales proceeds from wholly-owned properties

— 23,028 352,490 — 375,518

Net sales proceeds received from unconsolidated joint ventures

— 12,334 — — 12,334

Investments in unconsolidated joint ventures

— ( 1,162 ) — — ( 1,162 )

Deferred lease costs paid

— ( 4,081 ) ( 26,904 ) — ( 30,985 )

Net cash provided by investing activities

— 28,605 163,397 48,610 240,612

Cash Flows from Financing Activities:

Debt issuance costs paid

— ( 132 ) — — ( 132 )

Proceeds from debt

— 180,000 — — 180,000

Repayments of debt

— ( 335,000 ) ( 141,401 ) — ( 476,401 )

Intercompany note payable

— ( 14,289 ) 62,899 ( 48,610 ) —

Costs of issuance of common stock

( 182 ) — — — ( 182 )

Value of shares withheld to pay tax obligations related to employee stock compensation

( 3,403 ) — — — ( 3,403 )

Repurchases of common stock as part of announced plan

( 60,474 ) — — — ( 60,474 )

(Distributions to)/repayments from affiliates

180,791 160,019 ( 340,810 ) — —

Dividends paid and discount on dividend reinvestments

( 122,229 ) — ( 45 ) — ( 122,274 )

Net cash used in financing activities

( 5,497 ) ( 9,402 ) ( 419,357 ) ( 48,610 ) ( 482,866 )

Net increase in cash, cash equivalents, and restricted cash and escrows

— 214 337 — 551

Cash, cash equivalents, and restricted cash and escrows, beginning of year 150 3,693 4,361 — 8,204

Cash, cash equivalents, and restricted cash and escrows, end of year $ 150 $ 3,907 $ 4,698 $ — $ 8,755

Index to Financial Statements

Net loss applicable to noncontrolling interests ( 3 ) ( 5 ) ( 5 )

NOI $ 319,459 $ 320,624 $ 317,138

(1) Presented net of related operating expenses incurred to earn such management fee revenue.

Such operating expenses are a component of property operating costs in the accompanying consolidated statements of income.

Subsequent Events

Declaration of Dividend for the First Quarter 2021

On February 4, 2020, the board of directors of Piedmont declared a dividend for the first quarter 2020 in the amount of $ 0.21 per share on its common stock to stockholders of record as of the close of business on February 28, 2020, payable on March 20, 2020.

$150 Million Term Loan

On February 10, 2020, Piedmont entered into an agreement with Truist Bank whereby Truist will extend Piedmont a $ 150 million term loan at LIBOR plus 95 basis points.

The loan was unfunded at closing and can be funded in up to four draws at Piedmont’s discretion.

The original term of the commitment period is six months, with the option to extend for two additional three month periods upon payment of applicable extension fees.

Acquisition of The Galleria Office Towers

On February 12, 2020, Piedmont purchased three Class A office towers in Dallas, Texas (the “Dallas Galleria Office Towers”) totaling approximately 1.4 million square feet of office space, associated parking garages, and a 1.9 -acre land parcel located within a 3.7 million square foot mixed-use development that includes the Galleria Dallas retail destination, encompassing over 30 dining options and 1.5 million square feet of shopping, along with the 448 -room Westin Galleria Hotel, for a net purchase price of $ 396 million, or approximately $ 275 per square foot.

The acquisition was initially funded with cash on hand and borrowings under the Company's $ 500 Million Unsecured 2018 Line of Credit;

however, Piedmont anticipates ultimately funding the majority of the acquisition using proceeds from the anticipated sale of 1901 Market in Philadelphia, Pennsylvania.

On February 2, 2021, the board of directors declared a dividend for the first quarter 2021 in the amount of $ 0.21 per share on its common stock to stockholders of record as of the close of business on February 26, 2021, payable on March 19, 2021.

Index to Financial Statements

26 unchanged sentences

GLENRIDGE HIGHLANDS TWO Atlanta, GA 100 % None 6,662 69,031 75,693 ( 15,253 ) 6,662 53,778 60,440 26,802 2000 8/1/2003 0 - 40

200 BRIDGEWATER CROSSING Bridgewater, NJ 100 % None 8,182 84,160 92,342 ( 11,288 ) 8,328 72,726 81,054 30,985 2002 8/14/2003 0 - 40

400 VIRGINIA AVE Washington, DC 100 % None 22,146 49,740 71,886 2,375 22,146 52,115 74,261 21,865 1985 11/19/2003 0 - 40

2 unchanged sentences

1201 EYE STREET Washington, DC 98.6 % None 31,985 63,139 95,124 9,768 31,985 72,907 104,892 29,381 2001 11/19/2003 0 - 40

1901 MARKET STREET Philadelphia,

PA 100 % 160,000 13,584 166,683 180,267 53,684 20,829 213,122 233,951 94,261 1987 12/18/2003 0 - 40

60 BROAD STREET New York, NY 100 % None 32,522 168,986 201,508 43,190 60,708 183,990 244,698 62,826 1962 12/31/2003 0 - 40

1 unchanged sentence

ONE BRATTLE SQUARE Cambridge, MA 100 % None 6,974 64,940 71,914 ( 23,111 ) 7,113 41,690 48,803 18,286 1991 2/26/2004 0 - 40

600 CORPORATE DRIVE Lebanon, NJ 100 % None 3,934 — 3,934 9,281 3,934 9,281 13,215 8,775 2005 3/16/2004 0 - 40

3100 CLARENDON BOULEVARD Arlington, VA 100 % None 11,700 69,705 81,405 48,835 11,791 118,449 130,240 38,772 1987 12/9/2004 0 - 40

LAS COLINAS CORPORATE CENTER I Irving, TX 100 % None 3,912 18,830 22,742 ( 3,316 ) 2,543 16,883 19,426 6,775 1998 8/31/2006 0 - 40

LAS COLINAS CORPORATE CENTER II Irving, TX 100 % None 4,496 29,881 34,377 ( 2,047 ) 2,543 29,787 32,330 12,272 1998 8/31/2006 0 - 40

Index to Financial Statements

14 unchanged sentences

(in years) (5)

400 BRIDGEWATER CROSSING Bridgewater, NJ 100 % None 10,400 71,052 81,452 ( 14,328 ) 10,400 56,724 67,124 19,542 2002 2/17/2006 0 - 40

LAS COLINAS CORPORATE CENTER I Irving, TX 100 % None 3,912 18,830 22,742 ( 3,459 ) 2,543 16,740 19,283 6,961 1998 8/31/2006 0 - 40

LAS COLINAS CORPORATE CENTER II Irving, TX 100 % None 4,496 29,881 34,377 ( 3,484 ) 2,543 28,350 30,893 11,032 1998 8/31/2006 0 - 40

TWO PIERCE PLACE Itasca, IL 100 % None 4,370 70,632 75,002 12,528 8,156 79,374 87,530 25,018 1991 12/7/2006 0 - 40

14 unchanged sentences

PARK PLACE ON TURTLE CREEK Dallas, TX 100 % None 4,470 38,048 42,518 4,117 4,470 42,165 46,635 7,564 1986 1/16/2015 0 - 40

80 CENTRAL STREET Boxborough, MA 100 % None 1,980 8,930 10,910 3,731 1,980 12,661 14,641 2,050 1988 7/24/2015 0 - 40

ENCLAVE PLACE Houston, TX 100 % None 1,890 60,094 61,984 35,319 1,890 95,413 97,303 10,591 2015 N/A 0 - 40

200 SOUTH ORANGE AVENUE Orlando, FL 100 % None 11,660 139,015 150,675 20,653 11,660 159,668 171,328 22,127 1988 11/4/2015 0 - 40

GALLERIA 300 Atlanta, GA 100 % None 4,000 73,554 77,554 6,799 4,000 80,353 84,353 14,130 1987 11/4/2015 0 - 40

Index to Financial Statements

14 unchanged sentences

(in years) (5)

80 CENTRAL STREET Boxborough, MA 100 % None 1,980 8,930 10,910 3,021 1,980 11,951 13,931 1,250 1988 7/24/2015 0 - 40

ENCLAVE PLACE Houston, TX 100 % None 1,890 60,094 61,984 35,631 1,890 95,725 97,615 7,078 2015 N/A 0 - 40

SUNTRUST CENTER Orlando, FL 100 % None 11,660 139,015 150,675 6,612 11,660 145,627 157,287 18,244 1988 11/4/2015 0 - 40

GALLERIA 300 Atlanta, GA 100 % None 4,000 73,554 77,554 5,145 4,000 78,699 82,699 12,434 1987 11/4/2015 0 - 40

GLENRIDGE HIGHLANDS ONE Atlanta, GA 100 % None 5,960 50,013 55,973 3,381 5,960 53,394 59,354 8,796 1998 11/24/2015 0 - 40

11 unchanged sentences

GALLERIA 600 Atlanta, GA 100 % None 5,418 81,003 86,421 9 5,418 81,012 86,430 5,135 2002 8/23/2019 0 - 40

PIEDMONT POWER, LLC (6)

Bridgewater, NJ 100 % None — 79 79 2,740 — 2,819 2,819 960 N/A 12/20/2011 0 - 40

ONE GALLERIA TOWER Dallas, TX 100 % None 5,286 107,767 113,053 982 5,286 108,749 114,035 5,933 1982 2/12/2020 0 40

TWO GALLERIA TOWER Dallas, TX 100 % None 3,835 109,605 113,440 545 3,836 110,149 113,985 6,061 1985 2/12/2020 0 40

THREE GALLERIA TOWER Dallas, TX 100 % None 6,541 125,490 132,031 312 6,541 125,802 132,343 5,895 1991 2/12/2020 0 40

222 SOUTH ORANGE AVENUE Orlando, FL 100 % None 1,899 18,417 20,316 157 1,899 18,574 20,473 — 1959 10/29/2020 0 40

UNDEVELOPED LAND PARCELS (6)

1 unchanged sentence

Total—All Properties $ 459,673 $ 3,143,299 $ 3,602,972 $ 288,454 $ 484,466 $ 3,406,960 $ 3,891,426 $ 835,392

(1) All of Piedmont's properties are office buildings, except for the separately described Undeveloped Land Parcels and solar equipment labeled Piedmont Power, LLC.

(1) All of Piedmont's properties are office buildings, except for the separately described Undeveloped Land Parcels.

(2) Total initial cost excludes purchase price allocated to intangible lease origination costs and intangible lease liabilities.

(3) Includes improvements and carrying costs capitalized subsequent to acquisition, as well as reductions related to write-offs of fully depreciated/amortized capitalized assets and impairment losses on real estate assets.

Index to Financial Statements

(4) The net carrying value of Piedmont’s total assets for federal income tax purposes is approximately $ 3.3 billion.

Index to Financial Statements

(5) Piedmont’s assets are depreciated or amortized using the straight-line method over the useful lives of the assets by class.

1 unchanged sentence

Generally, Building Improvements are depreciated over 5 - 25 years, Land Improvements are depreciated over 20 - 25 years, and Buildings are depreciated over 40 years.

(6) Represents solar panels at the 400 Bridgewater Crossing building.

(6) Undeveloped Land Parcels includes land parcels that Piedmont may develop in the future.

21 unchanged sentences

Balance at the end of the year $ 835,392 $ 875,777 $ 907,937

(1) Includes the disposition of the 8560 Upland Drive property, Piedmont's last remaining investment in an unconsolidated joint venture.

(2) Piedmont recognized an impairment loss on a disposal group of real estate assets as part of the 2017 Disposition Portfolio (see Note 7 ).

(1) Piedmont recognized an impairment loss on the Dupree building, as well as the 600 Corporate Drive building (see Note 7 ).

1 unchanged sentence

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 9A. Controls and Procedures