Piedmont Realty Trust, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES 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 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. Report of Management on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of, the principal executive and principal financial officers, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets; • provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and/or members of the board of directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of human error and the circumvention or overriding of controls, material misstatements may not be prevented or detected on a timely basis. In addition, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate. Accordingly, even internal controls determined to be effective can provide only reasonable assurance that the information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and represented within the time periods required. Our management has assessed the effectiveness of our internal control over financial reporting at December 31, 2020. To make this assessment, we used the criteria for effective internal control over financial reporting described in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management believes that, as of December 31, 2020, our system of internal control over financial reporting was effective. Piedmont’s independent registered public accounting firm has issued an attestation report on the effectiveness of Piedmont’s internal control over financial reporting, which appears in this Annual Report. Changes in Internal Control Over Financial Reporting There have been no significant changes in our internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 51 Table of Contents Index to Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Piedmont Office Realty Trust, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Piedmont Office Realty Trust, Inc. and subsidiaries (the “Company”) 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 (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 17, 2021, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Atlanta, Georgia February 17, 2021 52 Table of Contents Index to Financial Statements ITEM 9B. OTHER INFORMATION None. 53 Table of Contents Index to Financial Statements PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 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 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. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 will be set forth in our definitive proxy statement to be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 will be set forth in our definitive proxy statement to be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by Item 13 will be set forth in our definitive proxy statement to be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020, and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 will be set forth in our definitive proxy statement to be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2020, and is incorporated herein by reference. 54 Table of Contents Index to Financial Statements PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) 1. 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. (a) 2. Schedule III—Real Estate Assets and Accumulated Depreciation. Information with respect to this item begins on page S-1 of this Annual Report on Form 10-K. Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. (b) The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto. (c) See (a) 2. above. 55 Table of Contents Index to Financial Statements SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 17 th day of February, 2021. Piedmont Office Realty Trust, Inc. (Registrant) By: /s/ C. B RENT S MITH C. Brent Smith Chief Executive Officer, Principal Executive Officer, and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity as and on the date indicated. Signature Title Date /s/ F RANK C. M C D OWELL Chairman, and Director February 17, 2021 Frank C. McDowell /s/ D ALE H. T AYSOM Vice-Chairman, and Director February 17, 2021 Dale H. Taysom /s/ K ELLY H. B ARRETT Director February 17, 2021 Kelly H. Barrett /s/ W ESLEY E. C ANTRELL Director February 17, 2021 Wesley E. Cantrell /s/ G LENN G. C OHEN Director February 17, 2021 Glenn G. Cohen /s/ B ARBARA B. L ANG Director February 17, 2021 Barbara B. Lang /s/ J EFFREY L. S WOPE Director February 17, 2021 Jeffrey L. Swope /s/ C. B RENT S MITH Chief Executive Officer and Director February 17, 2021 C. Brent Smith (Principal Executive Officer) /s/ R OBERT E. B OWERS Chief Financial Officer and Executive Vice-President February 17, 2021 Robert E. Bowers (Principal Financial Officer) /s/ L AURA P. M OON Chief Accounting Officer February 17, 2021 Laura P. Moon (Principal Accounting Officer) 56 Table of Contents Index to Financial Statements EXHIBIT INDEX TO 2020 FORM 10-K OF PIEDMONT OFFICE REALTY TRUST, INC. Exhibit Number Description of Document 3.1 Third Articles of Amendment and Restatement of Piedmont Office Realty Trust, Inc. (f/k/a Wells Real Estate Investment Trust, Inc.) (the "Company") (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010) 3.2 Articles of Amendment of the Company effective June 30, 2011 (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on July 6, 2011) 3.3 Articles Supplementary of the Company effective June 30, 2011 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on July 6, 2011) 3.4 Articles Supplementary 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 November 14, 2016) 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 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. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, filed on May 13, 2013) 4.2 Form of 3.40% Senior Notes due 2023 (included in Exhibit 4.1 hereto) 4.3 Indenture, dated March 6, 2014, by and among the Operating Partnership, Piedmont Office Realty Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, filed on March 6, 2014) 4.4 Supplemental Indenture, dated March 6, 2014, by and among the Operating Partnership, Piedmont Office Realty Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K, filed on March 6, 2014) 4.5 Form of 4.450% Senior Notes due 2024 (included in Exhibit 4.2 hereto) 4.6 Supplemental Indenture, dated August 12, 2020, by and among Piedmont Operating Partnership, LP, Piedmont Office Realty Trust, Inc. and U.S. 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) 10.2 Amendment to Agreement of Limited Partnership of the Operating Partnership, as Amended and Restated as of January 1, 2000, dated April 16, 2007 (incorporated by reference to Exhibit 99.8 to the Company’s Current Report on Form 8-K, filed on April 20, 2007) 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) 57 Table of Contents 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) 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) 10.7* The Piedmont Office Realty Trust, Inc. Executive Nonqualified Deferred Compensation Plan dated December 5, 2013 (incorporated by reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 18, 2014) 10.8* The Piedmont Office Realty Trust, Inc. Executive Nonqualified Deferred Compensation Plan Adoption Agreement dated December 5, 2013 (incorporated by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 18, 2014) 10.9* Form of Employee Deferred Stock Award Agreement for 2007 Omnibus Incentive Plan of the Company effective April 28, 2015 (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed on July 29, 2015) 10.10* Employment Agreement dated February 2, 2007, by and between the Company and Donald A. Miller, CFA (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 5, 2007) 10.11* Amendment Number One to Employment Agreement dated February 2, 2007, by and between the Company and Donald A. Miller, CFA (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on September 14, 2011) 10.12* Employment Agreement dated April 16, 2007, by and between the Company and Robert E. 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 Laura P. Moon (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed on May 14, 2007) 10.14* Offer Letter Dated October 17, 2012 among the Company and Robert K. 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. Owens (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 21, 2017) 10.19* Confidential Retirement Agreement and General Release, dated as of November 28, 2016, by and between the Company and Raymond L. Owens (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 21, 2017) 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) 58 Table of Contents Index to Financial Statements 10.21 Loan Agreement dated as of June 23, 2015 between Piedmont 1901 Market LLC, as Borrower and The Prudential Insurance Company of America, as Lender (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 24, 2015) 10.22 First Amendment to the Loan Agreement between Piedmont 1901 Market LLC, as Borrower and The Prudential Insurance Company of America, as Lender (incorporated by reference to Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 2017, filed on February 21, 2018) 10.23 Open-End Mortgage and Security Agreement (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on June 24, 2015) 10.24* Piedmont Office Realty Trust, Inc. Amended and Restated 2007 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Company's Proxy Statement for its 2017 Annual Meeting of Stockholders filed with the Commission on March 22, 2017) 10.25* Amendment Number Three to the Piedmont Office Realty Trust, Inc. Long-Term Incentive Program effective May 2, 2017 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed on August 2, 2017) 10.26* Form of Employee Deferred Stock Award Agreement for Amended and Restated 2007 Omnibus Incentive Plan of the Company effective May 2, 2017 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed on August 2, 2017) 10.27 Term Loan Agreement, dated as of March 29, 2018, by and among Piedmont Operating Partnership, LP, as Borrower, Piedmont Office Realty Trust, Inc., as Parent, U.S. Bank National Association, PNC Capital Markets LLC, and SunTrust Robinson Humphrey, Inc., as Joint Lead Arrangers and Joint Book Runners, U.S. Bank National Association, as Administrative Agent, PNC Bank, National Association and SunTrust Bank as Syndication Agents, and 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 April 3, 2018) 10.28 Amendment No. 1, dated as of September 28, 2018, to the Term Loan Agreement between Piedmont Operating Partnership, LP, as Borrower and U.S. 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. Bank National Association and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Bookrunners, JPMorgan Chase Bank, N.A., as Administrative Agent, SunTrust Bank, U.S. Bank National Association and PNC Bank, National Association, as Syndication Agents, Bank Of America, N.A., BMO Harris Bank, N.A., Branch Banking and Trust Company, Morgan Stanley Senior Funding, Inc., TD Bank, N.A., The Bank Of Nova Scotia and Wells Fargo Bank, N.A. 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) 10.31* 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) 59 Table of Contents 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. and U.S. 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 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 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 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase 104.1 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Identifies each management contract or compensatory plan required to be filed. 60 Table of Contents Index to Financial Statements INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Financial Statements Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 4 Consolidated Statements of Income for the Years December 31, 2020, 2019, and 2018 F- 5 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018 F- 6 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020, 2019, and 2018 F- 7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, and 2018 F- 8 Notes to Consolidated Financial Statements F- 9 Financial Statement Schedule Schedule III - Real Estate Assets and Accumulated Depreciation S- 1 F-1 Table of Contents Index to Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Piedmont Office Realty Trust, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Piedmont Office Realty Trust, Inc. 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. 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. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenues – Refer to Note 2 (Revenue Recognition) to the financial statements Critical Audit Matter Description 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. The timing of rental revenue recognition is largely dependent on whether the Company is the owner of tenant improvements at the leased property. In determining whether the Company or the tenant owns such tenant improvements, the Company considers a number of factors, including, among other things: whether the tenant is obligated by the terms of the lease agreement to construct or install the leasehold improvements as a condition of the lease; whether the landlord can require the lessee to make specified improvements or otherwise enforce its economic rights to those assets; whether the tenant is required to provide the landlord with documentation supporting the cost of tenant improvements prior to reimbursement by the landlord; and whether the leasehold improvements are unique to the tenant or could reasonably be used by other parties. F-2 Table of Contents Index to Financial Statements The determination of whether the Company or its tenant owns the tenant improvements and the timing and amount of revenue recognition requires the exercise of significant judgment by management based on the facts and circumstances of the specific lease arrangement and is not based on any one factor. Auditing management’s conclusions with respect to these matters often is complex and requires subjective judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s determination of the owner of the tenant improvements and the related impact on the timing and amount of revenue recognition, included the following, among others: • We tested the effectiveness of controls over revenue recognition, including the determination of the owner of tenant improvements and the timing and amounts of rental revenues to be recognized over the term of the related lease. • 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 and other supporting documents. ◦ 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 Atlanta, Georgia February 17, 2021 We have served as the Company's auditor since 2018. F-3 Table of Contents Index to Financial Statements PIEDMONT OFFICE REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per-share amounts) December 31, 2020 December 31, 2019 Assets: Real estate assets, at cost: Land $ 484,466 $ 485,560 Buildings and improvements, less accumulated depreciation of $ 767,542 and $ 730,750 as of December 31, 2020 and December 31, 2019, respectively 2,424,225 2,212,935 Intangible lease assets, less accumulated amortization of $ 67,850 and $ 50,766 as of December 31, 2020 and December 31, 2019, respectively 90,594 74,405 Construction in progress 56,749 29,920 Real estate assets held for sale, net — 139,690 Total real estate assets 3,056,034 2,942,510 Cash and cash equivalents 7,331 13,545 Tenant receivables, net of allowance for doubtful accounts of $ 4,553 and $ 0 as of December 31, 2020 and December 31, 2019, respectively 8,448 8,226 Straight-line rent receivables 151,153 132,342 Notes receivable 118,500 — Restricted cash and escrows 1,883 1,841 Prepaid expenses and other assets 23,277 25,427 Goodwill 98,918 98,918 Deferred lease costs, less accumulated amortization of $ 172,619 and $ 147,324 as of December 31, 2020 and December 31, 2019, respectively 274,266 265,747 Other assets held for sale, net — 28,201 Total assets $ 3,739,810 $ 3,516,757 Liabilities: Unsecured debt, net of discount and unamortized debt issuance costs of $ 10,932 and $ 7,626 as of December 31, 2020 and December 31, 2019, respectively $ 1,594,068 $ 1,292,374 Secured debt, inclusive of premiums and unamortized debt issuance costs of $ 326 and $ 343 as of December 31, 2020 and December 31, 2019, respectively 27,936 189,030 Accounts payable, accrued expenses, and accrued capital expenditures 111,997 117,496 Dividends payable 25,683 26,427 Deferred income 36,891 34,609 Intangible lease liabilities, less accumulated amortization of $ 27,344 and $ 19,607 as of December 31, 2020 and December 31, 2019, respectively 35,440 25,069 Interest rate swaps 9,834 5,121 Other liabilities held for sale — 7,657 Total liabilities 1,841,849 1,697,783 Commitments and Contingencies ( Note 8 ) — — Stockholders’ Equity: Shares-in-trust, 150,000,000 shares authorized, none outstanding as of December 31, 2020 or December 31, 2019 — — Preferred stock, no par value, 100,000,000 shares authorized, none outstanding as of December 31, 2020 or December 31, 2019 — — Common stock, $ 0.01 par value; 750,000,000 shares authorized, 123,839,419 shares issued and outstanding as of December 31, 2020; and 125,783,408 shares issued and outstanding at December 31, 2019 1,238 1,258 Additional paid-in capital 3,693,996 3,686,398 Cumulative distributions in excess of earnings ( 1,774,856 ) ( 1,871,375 ) Other comprehensive income/(loss) ( 24,100 ) 967 Piedmont stockholders’ equity 1,896,278 1,817,248 Noncontrolling interest 1,683 1,726 Total stockholders’ equity 1,897,961 1,818,974 Total liabilities and stockholders’ equity $ 3,739,810 $ 3,516,757 See accompanying notes. F-4 Table of Contents Index to Financial Statements PIEDMONT OFFICE REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per-share amounts) Years Ended December 31, 2020 2019 2018 Revenues: Rental and tenant reimbursement revenue $ 519,953 $ 511,905 $ 504,410 Property management fee revenue 2,867 3,398 1,450 Other property related income 12,204 17,875 20,107 535,024 533,178 525,967 Expenses: Property operating costs 214,933 211,380 209,338 Depreciation 110,575 106,015 107,956 Amortization 93,294 76,666 63,295 Impairment loss on real estate assets — 8,953 — General and administrative 27,464 37,895 29,713 446,266 440,909 410,302 Other income (expense): Interest expense ( 54,990 ) ( 61,594 ) ( 61,023 ) Other income 2,587 1,571 1,638 Loss on extinguishment of debt ( 9,336 ) — ( 1,680 ) Gain on sale of real estate assets 205,666 197,010 75,691 143,927 136,987 14,626 Net income 232,685 229,256 130,291 Net loss applicable to noncontrolling interest 3 5 5 Net income applicable to Piedmont $ 232,688 $ 229,261 $ 130,296 Per share information— basic and diluted: Net income applicable to common stockholders $ 1.85 $ 1.82 $ 1.00 Weighted-average shares outstanding—basic 125,730,460 125,709,207 130,161,202 Weighted-average shares outstanding—diluted 126,104,321 126,182,137 130,635,650 See accompanying notes. F-5 Table of Contents Index to Financial Statements PIEDMONT OFFICE REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years Ended December 31, 2020 2019 2018 Net income applicable to Piedmont $ 232,688 $ 229,261 $ 130,296 Other comprehensive income/(loss): Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges (See Note 5 ) ( 26,794 ) ( 5,659 ) 692 Plus/(less): Reclassification of net loss/(gain) included in net income (See Note 5 ) 1,727 ( 1,836 ) ( 300 ) Other comprehensive income/(loss) ( 25,067 ) ( 7,495 ) 392 Comprehensive income applicable to Piedmont $ 207,621 $ 221,766 $ 130,688 See accompanying notes. F-6 Table of Contents Index to Financial Statements PIEDMONT OFFICE REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except per-share amounts) Common Stock Additional Paid-In Capital Cumulative Distributions in Excess of Earnings Other Comprehensive Income/(Loss) Noncontrolling Interest Total Stockholders’ Equity Shares Amount 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 ) Offering costs — — ( 85 ) — — — ( 85 ) Dividends to common stockholders ($ 0.84 per share), stockholders of subsidiaries, and dividends reinvested — — ( 82 ) ( 109,138 ) — ( 45 ) ( 109,265 ) Shares issued and amortized under the 2007 Omnibus Incentive Plan, net of tax 355 3 5,993 — — — 5,996 Net loss applicable to noncontrolling interest — — — — — ( 5 ) ( 5 ) Net income applicable to Piedmont — — — 130,296 — — 130,296 Other comprehensive income — — — — 392 — 392 Balance, December 31, 2018 126,219 1,262 3,683,186 ( 1,982,542 ) 8,462 1,772 1,712,140 Share repurchases as part of announced plan ( 728 ) ( 7 ) — ( 12,475 ) — — ( 12,482 ) Offering costs — — ( 710 ) — — — ( 710 ) Dividends to common stockholders ($ 0.84 per share), stockholders of subsidiaries, and dividends reinvested — — ( 228 ) ( 105,619 ) — ( 41 ) ( 105,888 ) Shares issued and amortized under the 2007 Omnibus Incentive Plan, net of tax 292 3 4,150 — — — 4,153 Net loss applicable to noncontrolling interest — — — — — ( 5 ) ( 5 ) Net income applicable to Piedmont — — — 229,261 — — 229,261 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 ) Dividends to common stockholders ($ 0.84 per share), stockholders of subsidiaries, and dividends reinvested — — ( 5 ) ( 105,520 ) — ( 40 ) ( 105,565 ) Shares issued and amortized under the 2007 Omnibus Incentive Plan, net of tax 246 2 7,603 — — — 7,605 Net loss applicable to noncontrolling interest — — — — — ( 3 ) ( 3 ) Net income applicable to Piedmont — — — 232,688 — — 232,688 Other comprehensive loss — — — — ( 25,067 ) — ( 25,067 ) Balance, December 31, 2020 123,839 $ 1,238 $ 3,693,996 $ ( 1,774,856 ) $ ( 24,100 ) $ 1,683 $ 1,897,961 See accompanying notes. F-7 Table of Contents Index to Financial Statements PIEDMONT OFFICE REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2020 2019 2018 Cash Flows from Operating Activities: Net income $ 232,685 $ 229,256 $ 130,291 Operating distributions received from unconsolidated joint ventures — — 10 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 110,575 106,015 107,956 Amortization of debt issuance costs net of favorable settlement of interest rate swaps 2,080 87 ( 250 ) Other amortization 84,534 71,609 58,330 Impairment loss on real estate assets — 8,953 — Loss on extinguishment of debt 349 — 1,665 General reserve for uncollectible accounts 4,553 — — Stock compensation expense 9,718 15,446 9,737 Gain on sale of real estate assets ( 205,666 ) ( 197,010 ) ( 75,691 ) Changes in assets and liabilities: Increase in tenant and straight-line rent receivables ( 30,887 ) ( 15,706 ) ( 16,094 ) Decrease/(increase) in prepaid expenses and other assets 823 309 ( 3,095 ) Cash paid upon settlement of interest rate swaps ( 19,930 ) — — Increase/(decrease) in accounts payable and accrued expenses 6,264 ( 11,251 ) ( 9,092 ) (Decrease)/increase in deferred income ( 1,814 ) 776 ( 898 ) Net cash provided by operating activities 193,284 208,484 202,869 Cash Flows from Investing Activities: Acquisition of real estate assets and intangibles ( 417,056 ) ( 326,200 ) ( 151,914 ) Capitalized expenditures ( 112,580 ) ( 103,553 ) ( 72,105 ) Sales proceeds from wholly-owned properties 360,094 589,767 575,227 Note receivable issuance — — ( 3,200 ) Note receivable repayment — — 3,200 Deferred lease costs paid ( 28,334 ) ( 25,639 ) ( 27,430 ) Net cash (used in)/provided by investing activities ( 197,876 ) 134,375 323,778 Cash Flows from Financing Activities: Debt issuance and other costs paid ( 1,363 ) ( 151 ) ( 1,040 ) Proceeds from debt 1,174,383 592,000 977,062 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 ) Value of shares withheld for payment of taxes related to employee stock compensation ( 2,703 ) ( 3,295 ) ( 2,219 ) Repurchases of common stock as part of announced plan ( 29,986 ) ( 16,899 ) ( 298,538 ) Dividends paid and discount on dividend reinvestments ( 106,309 ) ( 106,433 ) ( 184,093 ) Net cash used in financing activities ( 1,580 ) ( 333,507 ) ( 529,368 ) Net (decrease)/increase in cash, cash equivalents, and restricted cash and escrows ( 6,172 ) 9,352 ( 2,721 ) Cash, cash equivalents, and restricted cash and escrows, beginning of year 15,386 6,034 8,755 Cash, cash equivalents, and restricted cash and escrows, end of year $ 9,214 $ 15,386 $ 6,034 See accompanying notes. F-8 Table of Contents Index to Financial Statements PIEDMONT OFFICE REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2020, 2019, AND 2018 1. Organization Piedmont Office Realty Trust, Inc. (“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 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. Piedmont conducts business primarily through Piedmont Operating Partnership, L.P. (“Piedmont OP”), a Delaware limited partnership, as well as performing the management of its buildings through two wholly-owned subsidiaries, Piedmont Government Services, LLC and Piedmont Office Management, LLC. Piedmont owns 99.9 % of, and is the sole general partner of, Piedmont OP and as such, possesses full legal control and authority over the operations of Piedmont OP. The remaining 0.1 % ownership interest of Piedmont OP is held indirectly by Piedmont through its wholly-owned subsidiary, Piedmont Office Holdings, Inc. ("POH"), the sole limited partner of Piedmont OP. Piedmont OP owns properties directly, through wholly-owned subsidiaries, and through various joint ventures which it controls. 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, 2020, Piedmont owned 54 in-service office properties and one redevelopment asset in select sub-markets located within seven major U.S. office markets: 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. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The consolidated financial statements of Piedmont are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Piedmont, Piedmont’s wholly-owned subsidiaries, any variable interest entity ("VIE") of which Piedmont or any of its wholly-owned subsidiaries is considered to have the power to direct the activities of the entity and the obligation to absorb losses/right to receive benefits, or any entity in which Piedmont or any of its wholly-owned subsidiaries owns a controlling interest. In determining whether Piedmont or Piedmont OP has a controlling interest, the following factors, among others, are considered: equity ownership, voting rights, protective rights of investors, and participatory rights of investors. Piedmont owns a majority interest in four properties through three joint ventures. 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. 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. The assets owned by these special purpose entities are being reported on a consolidated basis with Piedmont’s assets for financial reporting purposes only. F-9 Table of Contents Index to Financial Statements Use of Estimates 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. 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 Piedmont classifies its real estate assets as long-lived assets held for use or as long-lived assets held for sale. Held for use assets are stated at cost, as adjusted for any impairment loss, less accumulated depreciation. Held for sale assets are carried at lower of depreciated cost or estimated fair value, less estimated costs to sell. Piedmont generally reclassifies assets as held for sale once a sales contract has been executed and earnest money has become non-refundable. Amounts capitalized to real estate assets consist of the cost of acquisition or construction, any tenant improvements or major improvements, betterments that extend the useful life of the related asset, and transaction costs associated with the acquisition of an individual asset that does not qualify as a business combination. All repairs and maintenance are expensed as incurred. Additionally, Piedmont capitalizes interest while the development, or redevelopment, of a real estate asset is in progress. Piedmont’s real estate assets are depreciated or amortized using the straight-line method over the following useful lives: Buildings 40 years Building improvements 5 - 25 years Land improvements 20 - 25 years Tenant allowances Lease term Furniture, fixtures, and equipment 3 - 10 years Intangible lease assets Lease term Piedmont continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate and related intangible assets of either operating properties or properties under construction in which Piedmont has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered from the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition for assets held for use, or from the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values and recognizes an impairment loss. Estimated fair values are calculated based on the following information, depending upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated sales value (which is based on key assumptions such as estimated market rents, lease-up periods, estimated lease terms, and capitalization and discount rates) less estimated selling costs. Fair Value of Assets and Liabilities of Acquired Properties Upon the acquisition of real properties, Piedmont records the fair value of properties (plus any related acquisition costs) allocated based on relative fair value as tangible assets, consisting of land and building, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases, based on their estimated fair values. Substantially all of Piedmont's property acquisitions qualify as asset acquisitions under Accounting Standards Codification ("ASC") 805, Business Combinations . The estimated fair values of the tangible assets of an acquired property are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and building based on management’s determination of the estimated fair value of these assets. Management relies on a sales comparison approach using closed land sales and listings in determining the land value, and determines the as-if-vacant estimated fair value of a property using methods similar to those used by independent appraisers. 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 F-10 Table of Contents 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. The capitalized above-market and below-market lease values are recorded as intangible lease assets or liabilities and amortized as an adjustment to rental revenues over the remaining terms of the respective leases. The estimated fair values of in-place leases include an estimate of the direct costs associated with obtaining the acquired or "in place" tenant, estimates of opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease. The amount capitalized as direct costs associated with obtaining a tenant include commissions, tenant improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. These direct lease origination costs are included in deferred lease costs in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These lease intangibles are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases. Gross intangible assets and liabilities, inclusive of amounts classified as real estate assets held for sale, recorded at acquisition as of December 31, 2020 and 2019, respectively, are as follows (in thousands): December 31, 2020 December 31, 2019 Intangible Lease Assets: Above-Market In-Place Lease Assets $ 2,167 $ 2,082 In-Place Lease Valuation $ 156,277 $ 157,101 Intangible Lease Origination Costs (included as component of Deferred Lease Costs) $ 250,367 $ 256,627 Intangible Lease Liabilities (Below-Market In-Place Leases) $ 62,784 $ 84,292 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 Amortization of Intangible Lease Origination Costs and In-Place Lease Valuation included in amortization expense $ 77,000 $ 62,413 $ 48,940 Amortization of Above-Market and Below-Market In-Place Lease intangibles as a net increase to rental revenues $ 12,191 $ 8,322 $ 7,615 F-11 Table of Contents Index to Financial Statements Net intangible assets and liabilities as of December 31, 2020 will be amortized as follows (in thousands): Intangible Lease Assets Above-Market In-place Lease Assets In-Place Lease Valuation Intangible Lease Origination Costs (1) Below-Market In-place Lease Liabilities For the year ending December 31: 2021 $ 420 $ 27,520 $ 38,659 $ 10,899 2022 300 20,662 30,447 8,422 2023 103 13,922 21,019 5,139 2024 70 9,140 14,462 3,238 2025 6 5,657 10,069 2,072 Thereafter 18 12,776 24,881 5,670 $ 917 $ 89,677 $ 139,537 $ 35,440 Weighted-Average Amortization Period (in years) 3 5 5 5 (1) Included as a component of Deferred Lease Costs in the accompanying consolidated balance sheets. Cash and Cash Equivalents Piedmont considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include cash and short-term investments. The majority of Piedmont’s cash and cash equivalents are held at major commercial banks and at times may exceed the Federal Deposit Insurance Corporation limit of $250,000. Short-term investments consist of investments in money market accounts stated at cost, which approximates estimated fair value, and available-for-sale securities resulting from Piedmont's non-qualified deferred compensation program carried at estimated fair value. Tenant Receivables and Straight-line Rent Receivables 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"), 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 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. F-12 Table of Contents Index to Financial Statements Restricted Cash and Escrows Restricted cash and escrows principally relate to the following types of items: • escrow accounts held by lenders to pay future real estate taxes, insurance, debt service, and tenant improvements; • net sales proceeds from property sales held by qualified intermediary for potential Section 1031 exchange; • earnest money paid in connection with future acquisitions; and • security and utility deposits paid by tenants per the terms of their respective leases. Restricted cash and escrows are generally reclassified to other asset or liability accounts upon being used to purchase assets, satisfy obligations, or settle tenant obligations. Prepaid Expenses and Other Assets Prepaid expenses and other assets are primarily comprised of the following items: • prepaid property taxes, insurance and operating costs; • receivables which are unrelated to tenants, for example, insurance proceeds receivable from insurers related to casualty losses; and • equipment, furniture and fixtures, and tenant improvements for Piedmont’s corporate office and property management office space, net of accumulated depreciation. Prepaid expenses and other assets will be expensed as utilized or depreciated in the case of Piedmont's corporate assets. Balances without a future economic benefit are expensed as they are identified. Goodwill 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. 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 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. Interest Rate Derivatives Piedmont periodically enters into interest rate derivative agreements to hedge its exposure to changing interest rates. As of December 31, 2020 and 2019, all of Piedmont's interest rate derivatives were designated as effective cash flow hedges and carried on the balance sheet at estimated fair value. Piedmont reassesses the effectiveness of its derivatives designated as cash flow hedges on a regular basis to determine if they continue to be highly effective and if the forecasted transactions remain highly probable. Piedmont does not use derivatives for trading or speculative purposes. The changes in estimated fair value of interest rate swap agreements designated as effective cash flow hedges are recorded in other comprehensive income (“OCI”), and subsequently reclassified to earnings when the hedged transactions occur. The estimated fair value of the interest rate derivative agreement is recorded as interest rate derivative asset or as interest rate derivative liability in the accompanying consolidated balance sheets. Amounts received or paid under interest rate derivative agreements are recorded as reductions or additions to interest expense in the consolidated statements of income as incurred. Additionally, when Piedmont settles forward starting swap agreements, any gain or loss is recorded as accumulated other comprehensive income and is amortized to interest expense over the term of the respective notes on a straight line basis (which approximates the effective interest method). 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 F-13 Table of Contents 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 Deferred lease costs are comprised of costs and incentives incurred to acquire operating leases. 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, 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. Deferred lease costs are amortized on a straight-line basis over the terms of the related underlying leases in the accompanying consolidated statements of income as follows: • Approximately $ 60.2 million, $ 50.3 million, and $ 43.6 million of deferred lease costs for the years ended December 31, 2020, 2019, and 2018, respectively, are included in amortization expense; and • Approximately $ 3.4 million, $ 3.2 million, and $ 2.6 million, of deferred lease costs related to lease incentives granted to tenants for the years ended December 31, 2020, 2019, and 2018, respectively, was included as an offset to rental and tenant reimbursement revenue. Upon receipt of a lease termination notice, Piedmont adjusts the amortization of any unamortized deferred lease costs to be recognized ratably over the revised remaining term of the lease after giving effect to the termination notice. 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. Debt 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. The fair value adjustment is amortized to interest expense over the term of the loan using the effective interest method. Amortization of such fair value adjustments was approximately $ 0.5 million for each of the years ended December 31, 2020, 2019, and 2018, respectively. 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 $ 0.3 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. Piedmont amortizes these costs to interest expense on a straight-line basis (which approximates the effective interest rate method) over the terms of the related financing arrangements. Piedmont recognized amortization of such costs for the years ended December 31, 2020, 2019, and 2018 of approximately $ 3.0 million, $ 2.4 million, and $ 2.4 million, respectively. Deferred income Deferred income is primarily comprised of the following items: • prepaid rent from tenants; • tenant reimbursements related to operating expense or property tax expenses which may be due to tenants as part of an annual operating expense reconciliation; and • tenant improvement allowance overages where Piedmont owns the underlying improvements. Deferred income related to prepaid rents from tenants will be recognized as income in the period it is earned. Amounts related to operating expense reconciliations or property tax expense are relieved when the tenant's reconciliation is completed in accordance with the underlying lease, and payment is issued to the tenant. 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. F-14 Table of Contents Index to Financial Statements Shares-in-trust To date, Piedmont has not issued any shares-in-trust; however, under Piedmont’s charter, it has authority to issue a total of 150,000,000 shares-in-trust, which would be issued only in the event that there is a purported transfer of, or other change in or affecting the ownership of, Piedmont’s capital stock that would result in a violation of the ownership limits that are included in Piedmont’s charter to protect its REIT status. Preferred Stock To date, Piedmont has not issued any shares of preferred stock; however, Piedmont is authorized to issue up to 100,000,000 shares of one or more classes or series of preferred stock. 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. Common Stock 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. 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, 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 Under Piedmont's at-the-market stock offering program ("ATM program"), Piedmont may offer and sell shares of its common stock from time to time in “at-the-market” offerings with an aggregate gross sales price of up to $ 250 million. In connection with the ATM Program, Piedmont may, at its discretion, enter into forward equity sale agreements. The use of a forward equity sale agreement would allow Piedmont to lock in a share price on the sale of shares of its common stock at the time the agreement is executed, but defer receiving the proceeds from the sale of shares until a later date, allowing Piedmont to better align such funding with its capital needs. Sales of shares of Piedmont’s common stock through its banking relationships, if any, will be made in amounts and at times to be determined by Piedmont from time to time, but Piedmont has no obligation to sell any of the shares in the offering and may suspend sales in connection with the offering at any time. Sales of Piedmont's common stock under forward equity sale agreements, if undertaken, meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments based on the following assessments: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for Piedmont's own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to Piedmont's own stock. Underwriting commissions and offering costs incurred in connection with all common equity offerings, including any potential issuances under Piedmont's ATM Program, are reflected as a reduction of additional paid-in capital. Dividends As a REIT, Piedmont is required by the Internal Revenue Code of 1986, as amended (the “Code”), to make distributions to stockholders each taxable year equal to at least 90% of its annual taxable income, computed without regard to the dividends-paid deduction and by excluding net capital gains attributable to stockholders (“REIT taxable income”). 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. During the year ended December 31, 2020, the board of directors terminated the company-funded DRP offered through its transfer agent. Noncontrolling Interest Noncontrolling interest is the equity interest of consolidated entities that is not owned by Piedmont. Noncontrolling interest is adjusted for the noncontrolling partners' share of contributions, distributions, and earnings (losses) in accordance with the respective partnership agreement. Earnings allocated to such noncontrolling partners are recorded as income applicable to noncontrolling interest in the accompanying consolidated statements of income. F-15 Table of Contents Index to Financial Statements Revenue Recognition Piedmont's revenues consist of the following: Rental and tenant reimbursement income - consists of revenue from leases with Piedmont's tenants, as well as reimbursements for services prescribed by such leases. Piedmont evaluates contracts at commencement to determine if the contract contains a lease. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating, sales-type, or a direct financing lease. 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. In most lease arrangements, Piedmont finances improvements to leased space and is deemed the owner of the tenant improvements. The determination of who owns the improvements, whether payments to tenants constitute lease incentives or tenant improvements, and the timing of revenue recognition requires the exercise of significant judgment based on the facts and circumstances of the specific lease arrangement and is not based on any one factor. When evaluating whether Piedmont or its tenant owns the improvements, management considers a number of factors, including, among other things: • whether the tenant is obligated by the terms of the lease agreement to construct or install the leasehold improvements as a condition of the lease; • whether the landlord can require the lessee to make specified improvements or otherwise enforce its economic rights to those assets; • whether the tenant is required to provide the landlord with documentation supporting the cost of tenant improvements prior to reimbursement by the landlord; • whether the landlord is obligated to fund cost overruns for the construction of leasehold improvements; • whether the leasehold improvements are unique to the tenant or could reasonably be used by other parties; and • whether the estimated economic life of the leasehold improvements is long enough to allow for a significant residual value that could benefit the landlord at the end of the lease term. These tenant improvements are recorded as capital assets by Piedmont and depreciated, typically over the lease term. Payments made by the tenants for tenant improvements owned by Piedmont are treated as deferred revenues and amortized into rental and tenant reimbursement revenue over the lease term. The timing of rental revenue recognition is largely dependent on our conclusion as to whether Piedmont, or its tenant, is the owner of tenant improvements at the leased property. When Piedmont owns the tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the finished space, which is typically when the improvements being recorded as Piedmont's asset are substantially complete. In some instances, Piedmont may cede control of the leased space to the tenant to be responsible for tenant-owned improvements for the space. In such arrangements, payments made by Piedmont to its tenant are treated as lease incentives, amortized as a reduction to rental and tenant reimbursement revenue over the lease term, which typically begins once the tenant takes possession of the unimproved space. Lease payments are typically comprised of both fixed base rental payments and separately billed variable lease payments for reimbursement of services performed by Piedmont for the tenant as prescribed by the lease. Fixed base rental payments, as well as any fixed portion of reimbursement income, are recognized on a straight-line basis over the lease term. Tenant reimbursements are recognized as revenue in the period that the related operating cost is incurred. Rents and tenant reimbursements collected in advance are recorded as deferred income in the accompanying consolidated balance sheets. Property management fee revenue - consists of revenue earned by Piedmont related to operating and managing office properties owned by other third-parties. Such income is within the scope of ASC 606, Revenue from Contracts with Customers ("ASC 606"). Because property management services represent a performance obligation that are satisfied over the length of the contract, not at any specific point in time, and have the same measure of transfer (time elapsed), property management fee revenue is recognized over time. Any variable consideration transferred as part of these management agreements is recognized in the quarter that the underlying cash receipts are collected, consistent with the allocation objective of allocating the transaction price in an amount that depicts the amount of consideration to which Piedmont expects to be entitled in exchange for transferring the promised service to the customer. Other property related income - consists of all other property related income from Piedmont's customers (tenants) that is not derived from a contract meeting the definition of a lease and is therefore also within the scope of ASC 606. 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 F-16 Table of Contents 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. Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that Piedmont identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where Piedmont contracts to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. 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 Piedmont has issued stock-based compensation in the form of restricted stock to its employees and directors. For employees, such compensation has been issued pursuant to Piedmont's Long-term Incentive Compensation ("LTIC") program. The LTIC program is comprised of an annual restricted stock grant component (the "Restricted Stock Award" program) and a multi-year performance share component (the "Performance Share" program). Awards granted pursuant to the Restricted Stock Award and Performance Share programs, as well as director's awards, are classified as equity awards or liability awards based on the underlying terms of the program agreement. Awards classified as equity awards are expensed straight-line over the vesting period, with issuances recorded as a reduction to additional paid in capital. Forfeitures are recorded when they occur. Awards classified as liability awards are remeasured at each reporting period over the service period, with issuances recorded as a reduction to accrued expense. The compensation expense recognized related to both of these award types is recorded as property operating costs for those employees whose job is related to property operations and as general and administrative expense for all other employees and directors in the accompanying consolidated statements of income. Non-qualified Deferred Compensation Plan Piedmont previously offered a non-qualified deferred compensation plan ("NQDC Plan") to certain employees which allowed the employee to elect to defer receipt of compensation, including both cash and stock-based compensation, until future taxable years. As of December 31, 2019, Piedmont suspended the NQDC Plan so that no additional amounts may be deferred. Amounts deferred prior to the suspension of the NQDC Plan are invested in trading securities held in a "rabbi trust" and are measured using quoted market prices as of the reporting date, with changes in fair value recognized in net income. As of December 31, 2020 and 2019, Piedmont held approximately $ 0.8 million and $ 0.6 million, respectively, of these trading securities. 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. F-17 Table of Contents Index to Financial Statements Net Income Available to Common Stockholders Per Share 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 the dilutive effect of nonvested restricted stock. The dilutive effect of nonvested restricted stock is calculated using the treasury stock method to determine the number of additional common shares that would become outstanding if the remaining unvested restricted stock awards vested. Further, Piedmont has elected to use the "end of the reporting period" convention when using the treasury stock method to calculate the dilutive effect of any shares issued pursuant to forward equity sale agreements in connection with Piedmont's ATM Program described above. Under this methodology, the assumed sale proceeds are calculated using the closing price of Piedmont's stock as of the end of the respective reporting period. Income Taxes Piedmont has elected to be taxed as a REIT under the Code, and has operated as such, beginning with its taxable year ended December 31, 1998. To qualify as a REIT, Piedmont must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income. As a REIT, Piedmont is generally not subject to federal income taxes, subject to fulfilling, among other things, its taxable income distribution requirement. However, Piedmont is subject to federal income taxes related to the operations conducted by its taxable REIT subsidiary, POH, which have been provided for in the financial statements. Accordingly, the only provision for federal income taxes in the accompanying consolidated financial statements relates to POH. POH does not have significant tax provisions or deferred income tax items. These operations resulted in approximately $ 4,000 , $ 160,000 , and $( 97,000 ) in income tax expense/(recoveries) for the years ended December 31, 2020, 2019, and 2018, respectively, as a component of other income/(expense) in the accompanying consolidated statements of income. 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. Reclassifications 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. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU No. 2019-05, Financial Instruments- Credit Losses: Targeted Transition Relief (collectively the "Credit Loss Amendments"). 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. However, the Financial Accounting Standards Board (the "FASB") also 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 and affirms that such receivables should be evaluated for collectibility as prescribed by ASC 842 Leases . As s ubstantially all of Piedmont's receivables are operating lease receivables there was no F-18 Table of Contents 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. 3. Acquisitions 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) 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) 49,177 Lease acquisition costs, net of tenant credits received from seller (1) 1,344 Intangible lease origination costs (1) 55,060 Intangible lease liabilities (1) ( 22,169 ) Total purchase price $ 396,846 (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. F-19 Table of Contents Index to Financial Statements 4. Debt 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. F-20 Table of Contents 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): Facility (1) Stated Rate Effective Rate (2) Maturity Amount Outstanding as of 2020 2019 Secured (Fixed) $ 35 Million Fixed-Rate Loan (3) 5.55 % 3.75 % 9/1/2021 $ 27,610 $ 28,687 $ 160 Million Fixed-Rate Loan (4) 3.48 % 3.58 % 7/5/2022 — 160,000 Net premium and unamortized debt issuance costs 326 343 Subtotal/Weighted Average (5) 5.55 % 27,936 189,030 Unsecured (Variable and Fixed) Amended and Restated $ 300 Million Unsecured 2011 Term Loan LIBOR + 1.00 % 1.16 % 11/30/2021 300,000 300,000 $ 500 Million Unsecured 2018 Line of Credit (6) LIBOR + 0.90 % 1.05 % 9/30/2022 (7) 5,000 — $ 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 LIBOR + 0.95 % 2.08 % (8) 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 ( 10,932 ) ( 7,626 ) Subtotal/Weighted Average (5) 2.98 % 1,594,068 1,292,374 Total/Weighted Average (5) 3.03 % $ 1,622,004 $ 1,481,404 (1) Other than the $ 35 Million Fixed-Rate Loan, all of Piedmont’s outstanding debt as of December 31, 2020 and 2019 is interest-only until maturity. (2) Effective rate after consideration of settled or in-place interest rate swap agreements, issuance premiums/discounts, and/or fair market value adjustments upon assumption of debt. (3) Collateralized by the 5 Wall Street building in Burlington, Massachusetts. (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. (6) On a periodic basis, Piedmont may select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating. (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, $ 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. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating. 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 %. F-21 Table of Contents 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 2022 5,000 2023 350,000 2024 400,000 2025 250,000 Thereafter 300,000 Total $ 1,632,610 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. Also, Piedmont capitalized interest of approximately $ 1.0 million, $ 2.1 million, and $ 1.4 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, Piedmont believes it was in compliance with all financial covenants associated with its debt instruments. See Note 6 for a description of Piedmont’s estimated fair value of debt as of December 31, 2020. 5. Derivative Instruments Risk Management Objective of Using Derivatives In addition to operational risks which arise in the normal course of business, Piedmont is exposed to economic risks such as interest rate, liquidity, and credit risk. In certain situations, Piedmont has entered into derivative financial instruments such as interest rate swap agreements and other similar agreements to manage interest rate risk exposure arising from current or future variable rate debt transactions. Interest rate swap agreements involve the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Piedmont’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. Cash Flow Hedges of Interest Rate Risk 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. 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 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. 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. F-22 Table of Contents Index to Financial Statements A detail of Piedmont’s interest rate derivatives outstanding as of December 31, 2020 is as follows: Interest Rate Derivatives: Number of Swap Agreements Associated Debt Instrument Notional Amount (in millions) Effective Date Maturity Date Interest rate swaps 2 $ 250 Million Unsecured 2018 Term Loan $ 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. A detail of Piedmont’s interest rate derivatives on a gross and net basis as of December 31, 2020 and 2019, respectively, is as follows (in thousands): Interest rate swaps classified as: December 31, 2020 December 31, 2019 Gross derivative assets $ — $ — Gross derivative liabilities ( 9,834 ) ( 5,121 ) 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: 2020 2019 2018 Amount of gain/(loss) recognized in OCI $ ( 26,794 ) $ ( 5,659 ) $ 692 Amount of previously recorded gain/(loss) reclassified from OCI into Interest Expense $ ( 1,727 ) $ 1,836 $ 1,558 Amount of loss recognized on derivatives reclassified from OCI into Loss on Extinguishment of Debt $ — $ — $ ( 1,258 ) Total amount of Interest Expense presented in the consolidated statements of income $ ( 54,990 ) $ ( 61,594 ) $ ( 61,023 ) Total amount of Loss on Extinguishment of Debt presented in the consolidated statements of income $ ( 9,336 ) $ — $ ( 1,680 ) 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. Credit-risk-related Contingent Features Piedmont has agreements with its derivative counterparties that contain a provision whereby if Piedmont defaults on any of its indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then Piedmont could also be declared in default on its derivative obligations. If Piedmont were to breach any of the contractual provisions of the derivative contracts, it could be required to settle its liability obligations under the agreements at their termination value of the estimated fair values plus accrued interest, or approximately $ 10.1 million as of December 31, 2020. 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. F-23 Table of Contents Index to Financial Statements 6. Fair Value Measurements 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): December 31, 2020 December 31, 2019 Financial Instrument Carrying Value Estimated Fair Value Level Within Fair Value Hierarchy Carrying Value Estimated Fair Value Level Within Fair Value Hierarchy Assets: Cash and cash equivalents (1) $ 7,331 $ 7,331 Level 1 $ 13,545 $ 13,545 Level 1 Tenant receivables, net (1) $ 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 Liabilities: Accounts payable and accrued expenses (1) $ 45,345 $ 45,345 Level 1 $ 50,049 $ 50,049 Level 1 Interest rate swaps $ 9,834 $ 9,834 Level 2 $ 5,121 $ 5,121 Level 2 Debt, net $ 1,622,004 $ 1,690,377 Level 2 $ 1,481,404 $ 1,536,687 Level 2 (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; however, Piedmont's estimate of its fair value is disclosed in the table above. Piedmont uses widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the debt facilities, including the period to maturity of each instrument, and uses observable market-based inputs for similar debt facilities which have transacted recently in the market. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). Scaling adjustments are made to these inputs to make them applicable to the remaining life of Piedmont's outstanding debt. 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” 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. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). In addition, Piedmont considered both its own and the respective counterparties’ risk of nonperformance in determining the estimated fair value of its derivative financial instruments by estimating the current and potential future exposure under the derivative financial instruments that both Piedmont and the counterparties were at risk for as of the valuation date. The credit risk of Piedmont and its counterparties was factored into the calculation of the estimated fair value of the interest rate swaps; however, as of December 31, 2020 and 2019, this credit valuation adjustment did not comprise a material portion of the estimated fair value. Therefore, Piedmont believes that any unobservable inputs used to determine the estimated fair values of its derivative financial instruments are not significant to the fair value measurements in their entirety, and does not consider any of its derivative financial instruments to be Level 3 assets or liabilities. F-24 Table of Contents Index to Financial Statements 7. Impairment Loss on Real Estate Assets Piedmont recorded the following impairment losses on real estate assets for the years ended December 31, 2020, 2019, and 2018 (in thousands): 2020 2019 2018 The Dupree (1) $ — $ 1,953 $ — 600 Corporate Drive (2) — 7,000 — Total impairment loss on real estate assets $ — $ 8,953 $ — (1) The impairment loss recognized was the result of reducing the asset's carrying value to reflect its fair value, estimated based on the net contract price negotiated with a unrelated, third-party purchaser. (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 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. Key assumptions used in the analysis were a capitalization and discount rate of 14 % and estimated selling costs of 0.75 %. 8. Commitments and Contingencies Commitments Under Existing Lease Agreements As a recurring part of its business, Piedmont is typically required under its executed lease agreements to fund tenant improvements, leasing commissions, and building improvements. In addition, certain agreements contain provisions that require Piedmont to issue corporate or property guarantees to provide funding for capital improvements or other financial obligations. 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. This commitment will be capitalized as the related expenditures are incurred. Contingencies Related to Tenant Audits/Disputes Certain lease agreements include provisions that grant tenants the right to engage independent auditors to audit their annual operating expense reconciliations. 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. 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. F-25 Table of Contents 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. Litigation Piedmont is from time to time a party to legal proceedings, which arise in the ordinary course of its business. None of these ordinary course legal proceedings are reasonably likely to have a material adverse effect on results of operations or financial condition. Piedmont is not aware of any such legal proceedings contemplated by governmental authorities. 9. Related-Party Transactions 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, 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 . 10. Stock Based Compensation Deferred Stock Awards 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. 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. The long-term equity incentives for these certain employees, as well as the peer group, is predetermined by the Board of Directors, advised by an outside compensation consultant. Any shares earned are awarded at the end of the multi-year performance period and vest upon award. The fair values of the multi-year performance share awards are estimated using a Monte Carlo valuation method. F-26 Table of Contents Index to Financial Statements A rollforward of Piedmont's equity based award activity for the year ended December 31, 2020 is as follows: Shares Weighted-Average Grant Date Fair Value Unvested and Potential Stock Awards as of December 31, 2019 1,045,020 $ 25.15 Deferred Stock Awards Granted 242,586 $ 22.39 Increase in Estimated Potential Share Awards based on TSR Performance 111,545 $ 26.97 Performance Stock Awards Vested ( 153,368 ) $ 30.45 Deferred Stock Awards Vested ( 229,274 ) $ 21.05 Deferred Stock Awards Forfeited ( 6,979 ) $ 21.82 Unvested and Potential Stock Awards as of December 31, 2020 1,009,530 $ 24.37 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): 2020 2019 2018 Weighted-Average Grant Date Fair Value of Deferred Stock Granted During the Period $ 22.39 $ 21.02 $ 17.84 Total Grant Date Fair Value of Deferred Stock Vested During the Period $ 4,826 $ 8,658 $ 6,378 Share-based Liability Awards Paid During the Period (1) $ 4,116 $ 6,683 $ 2,947 (1) Amounts reflect the issuance of performance share awards related to the 2017-19, 2016-18, and 2015-17 Performance Share Plans during the years ended December 31, 2020, 2019, and 2018 respectively, as well as performance share award liabilities settled in cash in July 2019 for retirement and separation associated with the senior management transition on June 30, 2019. F-27 Table of Contents Index to Financial Statements 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 Granted (1) Grant Date Fair Value Vesting Schedule Unvested and Potential Shares as of December 31, 2020 May 17, 2018 Deferred Stock Award 250,627 $ 17.84 Of the shares granted, 25 % vested on the date of grant, and 25 % vested or will vest on May 17, 2019, 2020, and 2021, respectively. 52,740 May 17, 2018 Fiscal Year 2018-2020 Performance Share Program — $ 23.52 Shares awarded, if any, will vest immediately upon determination of award in 2021. 200,674 (2) May 3, 2019 Deferred Stock Award 274,904 $ 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. 133,900 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. 224,900 (2) 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. 143,605 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. 207,931 (2) May 13, 2020 Deferred Stock Award-Board of Directors 45,780 $ 13.76 Of the shares granted, 100 % will vest by May 13, 2021. 45,780 Total 1,009,530 (1) Amounts reflect the total grant to employees and independent directors, net of shares surrendered upon vesting to satisfy required minimum tax withholding obligations through December 31, 2020. (2) Estimated based on Piedmont's cumulative TSR for the respective performance period through December 31, 2020. Share estimates are subject to change in future periods based upon Piedmont's relative performance compared to its peer group of office REITs' TSR. 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, 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 . 11. Earnings Per Share There are no adjustments to “Net income applicable to Piedmont” for the diluted earnings per share computations. 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 restricted stock awards. Diluted weighted average number of common shares reflects the potential dilution F-28 Table of Contents Index to Financial Statements 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): 2020 2019 2018 Weighted-average common shares—basic 125,730 125,709 130,161 Plus: Incremental weighted-average shares from time-vested deferred and performance stock awards 374 473 475 Weighted-average common shares—diluted 126,104 126,182 130,636 12. Operating Leases Piedmont’s real estate assets are leased to tenants under operating leases for which the terms vary, including certain provisions to extend the lease term, options for early terminations subject to specified penalties, and other terms and conditions as negotiated. Piedmont retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant; however, generally they are not significant. Exposure to credit risk is limited to the extent that tenant receivables exceed this amount. Security deposits liabilities related to tenant leases are included in accounts payable, accrued expenses, and accrued capital expenditures in the accompanying consolidated balance sheets. The future minimum rental income from Piedmont’s investment in real estate assets under non-cancelable operating leases as of December 31, 2020 is presented below (in thousands): Years ending December 31: 2021 $ 378,807 2022 367,261 2023 331,195 2024 290,377 2025 244,376 Thereafter 1,134,705 Total $ 2,746,721 Piedmont recognized the following fixed and variable lease payments, which together comprised rental and tenant reimbursement revenue in the accompanying consolidated statements of income for the years ended December 31, 2020, 2019, and 2018, respectively, as follows (in thousands): 2020 2019 2018 Fixed payments $ 433,841 $ 418,245 $ 411,667 Variable payments 86,112 93,660 92,743 Total Rental and Tenant Reimbursement Revenue $ 519,953 $ 511,905 $ 504,410 Operating leases where Piedmont is the lessee relat e primarily to office space in buildings owned by third parties. 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 %. F-29 Table of Contents Index to Financial Statements 13. Property Dispositions and Assets Held for Sale Property Dispositions None of Piedmont's property dispositions during the three years ended December 31, 2020 met the criteria to be reported as discontinued operations. The operational results and gain on sale of real estate assets are presented as continuing operations in the accompanying consolidated statements of income, unless otherwise indicated below. Details of such properties sold are presented below (in thousands): Buildings Sold Location Date of Sale Gain on Sale of Real Estate Assets Net Sales Proceeds 2017 Disposition Portfolio Various (1) January 4, 2018 $ 45,275 $ 419,644 (2) 800 North Brand Boulevard Glendale, California November 29, 2018 $ 30,416 $ 155,583 One Independence Square Washington, D.C. February 28, 2019 $ 33,176 $ 163,623 The Dupree Atlanta, Georgia September 4, 2019 $ — (3) $ 12,631 500 West Monroe Street Chicago, Illinois October 28, 2019 $ 157,739 $ 408,851 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: Desert Canyon 300 in Phoenix, Arizona; Windy Point I & II in Schaumburg, Illinois; 2300 Cabot Drive in Lisle, Illinois; 1075 West Entrance Drive in Auburn Hills, Michigan; Auburn Hills Corporate Center in Auburn Hills, Michigan; 5301 Maryland Way in Brentwood, Tennessee; Suwanee Gateway One in Suwanee, Georgia; 5601 Hiatus Road in Tamarac, Florida; Piedmont Pointe I & II in Bethesda, Maryland; 1200 Crown Colony Drive in Quincy, Massachusetts; 2001 N.W. 64th Street in Fort Lauderdale, Florida, and 2120 West End Avenue in Nashville, Tennessee. (2) Piedmont accepted a secured $ 3.2 million promissory note from the buyer for a portion of the sales price, which was subsequently paid in full by the borrower. (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 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. F-30 Table of Contents Index to Financial Statements Details of amounts held for sale as of December 31, 2020 and 2019 are presented below (in thousands): December 31, 2020 December 31, 2019 Real estate assets held for sale, net: Land $ — $ 20,829 Building and improvements, less accumulated depreciation of $ 0 and $ 66,823 as of December 31, 2020, and 2019, respectively — 112,287 Intangible lease assets, less accumulated amortization of $ 0 and $ 27,438 as of December 31, 2020 and 2019, respectively — 6,574 Total real estate assets held for sale, net $ — $ 139,690 Other assets held for sale, net: Straight-line rent receivables $ — $ 18,776 Deferred lease costs, less accumulated amortization of $ 0 and $ 34,957 as of December 31, 2020 and 2019, respectively — 9,425 Total other assets held for sale, net $ — $ 28,201 Other liabilities held for sale, net: Intangible lease liabilities, less accumulated amortization of $ 0 and $ 31,959 as of December 31, 2020 and 2019, respectively $ — $ 7,657 14. Supplemental Disclosures for the Statement of Consolidated Cash Flows Certain noncash investing and financing activities for the years ended December 31, 2020, 2019, and 2018 (in thousands) are outlined below: 2020 2019 2018 Accrued capital expenditures and deferred lease costs $ 20,103 $ 38,366 $ 10,854 Change in accrued dividends and discount on dividend reinvestments $ ( 744 ) $ ( 545 ) $ ( 74,828 ) Change in accrued share repurchases as part of an announced plan $ 685 $ ( 4,417 ) $ 3,140 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): 2020 2019 2018 Cash and cash equivalents, beginning of period $ 13,545 $ 4,571 $ 7,382 Restricted cash and escrows, beginning of period 1,841 1,463 1,373 Total cash, cash equivalents, and restricted cash and escrows shown in the consolidated statement of cash flows, beginning of period $ 15,386 $ 6,034 $ 8,755 Cash and cash equivalents, end of period $ 7,331 $ 13,545 $ 4,571 Restricted cash and escrows, end of period 1,883 1,841 1,463 Total cash, cash equivalents, and restricted cash and escrows shown in the consolidated statement of cash flows, end of period $ 9,214 $ 15,386 $ 6,034 Amounts in restricted cash and escrows typically represent escrow accounts for the payment of real estate taxes which are required under certain of Piedmont's debt agreements; earnest money deposited by a buyer to secure the purchase of one of our properties; or security or utility deposits held for tenants as a condition of their lease agreement. F-31 Table of Contents Index to Financial Statements 15. Income Taxes Piedmont’s income tax basis net income for the years ended December 31, 2020, 2019, and 2018, is calculated as follows (in thousands): 2020 2019 2018 GAAP basis financial statement net income $ 232,688 $ 229,261 $ 130,296 Increase/(decrease) in net income resulting from: Depreciation and amortization expense recognized for financial reporting purposes in excess of amounts recognized for income tax purposes 73,784 10,381 54,420 Rental income accrued for income tax purposes less than amounts for financial reporting purposes ( 25,726 ) ( 34,804 ) ( 9,681 ) Net amortization of above/below-market lease intangibles for income tax purposes in excess of amounts for financial reporting purposes ( 11,625 ) ( 7,698 ) ( 7,453 ) Gain on disposal of property for financial reporting purposes less than/(in excess of) amounts for income tax purposes ( 222,037 ) ( 85,463 ) ( 36,241 ) Taxable income or loss of Piedmont Washington Properties, Inc., in excess of/(less than) amount for financial reporting purposes 1,345 411 ( 2,089 ) Other expenses, including impairment loss on real estate assets, for financial reporting purposes in excess of/ (less than) amounts for income tax purposes 10,970 23,127 ( 37,394 ) Taxable income for POH in excess of/(less than) amount for financial reporting purposes 1,499 175 ( 64 ) Income tax basis net income, prior to dividends paid deduction $ 60,898 $ 135,390 $ 91,794 For income tax purposes, dividends to common stockholders are characterized as ordinary income, capital gains, or as a return of a stockholder’s invested capital. The composition of Piedmont’s distributions per common share is presented below: 2020 2019 2018 Ordinary income 91.91 % 29.82 % 100.00 % Return of capital 8.09 % — % — % Capital gains — % 70.18 % — % 100 % 100 % 100 % 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. 16. Quarterly Results (unaudited) A summary of the unaudited quarterly financial information for the years ended December 31, 2020 and 2019, is presented below (in thousands, except per-share data): 2020 First Second Third Fourth Revenues $ 137,171 $ 134,631 $ 131,693 $ 131,529 Gain/(loss) on sale of real estate assets $ 3 $ 191,369 $ ( 340 ) $ 14,634 Net income $ 8,711 $ 192,426 $ 8,940 $ 22,608 Net income applicable to Piedmont $ 8,709 $ 192,427 $ 8,943 $ 22,609 Basic earnings per share $ 0.07 $ 1.53 $ 0.07 $ 0.18 Diluted earnings per share $ 0.07 $ 1.52 $ 0.07 $ 0.18 Dividends declared per share $ 0.21 $ 0.21 $ 0.21 $ 0.21 F-32 Table of Contents Index to Financial Statements 2019 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 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 17. 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 Dallas $ 101,727 $ 55,346 $ 54,382 Atlanta 95,403 75,699 62,282 Washington, D.C. 59,760 64,481 68,404 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 F-33 Table of Contents Index to Financial Statements The following table presents NOI by geographic reportable segments (in thousands): Years Ended December 31, 2020 2019 2018 Dallas $ 59,845 $ 29,438 $ 29,286 Atlanta 60,276 47,287 38,660 Washington, D.C. 36,696 41,167 41,565 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 ) 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 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 ) 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. 18. Subsequent Events Declaration of Dividend for the First Quarter 2021 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. F-34 Table of Contents Index to Financial Statements Piedmont Office Realty Trust, Inc. Schedule III - Real Estate and Accumulated Depreciation December 31, 2020 (dollars in thousands) Initial Cost to Piedmont Gross Amount of Which Carried at December 31, 2020 Description (1) Location Ownership Percentage Encumbrances Land Buildings and Improvements Total (2) Costs Capitalized Subsequent to Acquisition (3) Land Buildings and Improvements Total (4) Accumulated Depreciation and Amortization Date of Construction Date Acquired Life on which Depreciation and Amortization in Latest Statements of Comprehensive Income is Computed (in years) (5) 1430 ENCLAVE PARKWAY Houston, TX 100 % None 7,100 37,915 45,015 6,473 5,506 45,982 51,488 21,321 1994 12/21/2000 0 - 40 CRESCENT RIDGE II Minnetonka, MN 100 % None 7,700 45,154 52,854 12,363 8,021 57,196 65,217 28,532 2000 12/21/2000 0 - 40 90 CENTRAL STREET Boxborough, MA 100 % None 3,642 29,497 33,139 2,794 3,642 32,291 35,933 14,670 2001 5/3/2002 0 - 40 6031 CONNECTION DRIVE Irving, TX 100 % None 3,157 43,656 46,813 8,454 3,157 52,110 55,267 22,979 1999 8/15/2002 0 - 40 6021 CONNECTION DRIVE Irving, TX 100 % None 3,157 42,662 45,819 11,562 3,157 54,224 57,381 25,875 2000 8/15/2002 0 - 40 6011 CONNECTION DRIVE Irving, TX 100 % None 3,157 29,034 32,191 18,524 3,157 47,558 50,715 15,583 1999 8/15/2002 0 - 40 US BANCORP CENTER Minneapolis, MN 100 % None 11,138 175,629 186,767 31,142 11,138 206,771 217,909 91,546 2000 5/1/2003 0 - 40 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 - 40 400 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 4250 NORTH FAIRFAX DRIVE Arlington, VA 100 % None 13,636 70,918 84,554 16,725 13,636 87,643 101,279 36,852 1998 11/19/2003 0 - 40 1225 EYE STREET Washington, DC 98.1 % None 21,959 47,602 69,561 9,758 21,959 57,360 79,319 25,963 1986 11/19/2003 0 - 40 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 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 1414 MASSACHUSETTS AVENUE Cambridge, MA 100 % None 4,210 35,821 40,031 ( 8,031 ) 4,365 27,635 32,000 11,819 1873 1/8/2004 0 - 40 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 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 S-1 Table of Contents Index to Financial Statements Initial Cost Gross Amount of Which Carried at December 31, 2020 Description (1) Location Ownership Percentage Encumbrances Land Buildings and Improvements Total (2) Costs Capitalized Subsequent to Acquisition (3) Land Buildings and Improvements Total (4) Accumulated Depreciation and Amortization Date of Construction Date Acquired Life on which Depreciation and Amortization in Latest Statements of Comprehensive Income is Computed (in years) (5) 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 ONE MERIDIAN CROSSINGS Richfield, MN 100 % None 2,919 24,398 27,317 621 2,919 25,019 27,938 7,170 1997 10/1/2010 0 - 40 TWO MERIDIAN CROSSINGS Richfield, MN 100 % None 2,661 25,742 28,403 839 2,661 26,581 29,242 7,636 1998 10/1/2010 0 - 40 THE MEDICI Atlanta, GA 100 % None 1,780 11,510 13,290 5,632 1,780 17,142 18,922 6,325 2008 6/7/2011 0 - 40 225 PRESIDENTIAL WAY Boston, MA 100 % None 3,626 36,916 40,542 ( 5,419 ) 3,612 31,511 35,123 7,363 2001 9/13/2011 0 - 40 235 PRESIDENTIAL WAY Boston, MA 100 % None 4,154 44,048 48,202 ( 6,851 ) 4,138 37,213 41,351 8,659 2000 9/13/2011 0 - 40 400 TOWNPARK Lake Mary, FL 100 % None 2,570 20,555 23,125 5,634 2,570 26,189 28,759 8,063 2008 11/10/2011 0 - 40 ARLINGTON GATEWAY Arlington, VA 100 % None 36,930 129,070 166,000 917 36,930 129,987 166,917 27,497 2005 3/4/2013 0 - 40 5 & 15 WAYSIDE ROAD Burlington, MA 100 % None 7,190 55,445 62,635 6,463 7,190 61,908 69,098 14,471 1999 / 2001 3/22/2013 0 - 40 6565 MACARTHUR BOULEVARD Irving, TX 100 % None 4,820 37,767 42,587 726 4,820 38,493 43,313 8,203 1998 12/5/2013 0 - 40 ONE LINCOLN PARK Dallas, TX 100 % None 6,640 44,810 51,450 2,469 6,640 47,279 53,919 10,939 1999 12/20/2013 0 - 40 161 CORPORATE CENTER Irving, TX 100 % None 2,020 10,680 12,700 ( 467 ) 2,020 10,213 12,233 2,786 1998 12/30/2013 0 - 40 5 WALL STREET Burlington, MA 100 % 27,610 9,560 50,276 59,836 ( 2,212 ) 9,560 48,064 57,624 8,813 2008 6/27/2014 0 - 40 1155 PERIMETER CENTER WEST Atlanta, GA 100 % None 5,870 66,849 72,719 5,879 5,870 72,728 78,598 12,934 2000 8/28/2014 0 - 40 500 TOWNPARK Lake Mary, FL 100 % None 2,147 21,925 24,072 4,092 2,147 26,017 28,164 3,522 2016 N/A 0 - 40 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 S-2 Table of Contents Index to Financial Statements Initial Cost Gross Amount of Which Carried at December 31, 2020 Description (1) Location Ownership Percentage Encumbrances Land Buildings and Improvements Total (2) Costs Capitalized Subsequent to Acquisition (3) Land Buildings and Improvements Total (4) Accumulated Depreciation and Amortization Date of Construction Date Acquired Life on which Depreciation and Amortization in Latest Statements of Comprehensive Income is Computed (in years) (5) 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 CNL CENTER I Orlando, FL 99 % None 6,470 77,858 84,328 ( 20 ) 6,470 77,838 84,308 11,639 1999 8/1/2016 0 - 40 CNL CENTER II Orlando, FL 99 % None 4,550 55,609 60,159 862 4,550 56,471 61,021 9,869 2006 8/1/2016 0 - 40 ONE WAYSIDE ROAD Boston, MA 100 % None 6,240 57,124 63,364 ( 4,471 ) 6,240 52,653 58,893 6,455 1997 / 2008 8/10/2016 0 - 40 GALLERIA 200 Atlanta, GA 100 % None 6,470 55,825 62,295 9,738 6,470 65,563 72,033 8,642 1984 10/7/2016 0 - 40 750 WEST JOHN CARPENTER FREEWAY Irving, TX 100 % None 7,860 36,303 44,163 2,914 7,860 39,217 47,077 8,445 1999 11/30/2016 0 - 40 NORMAN POINTE I Bloomington, MN 100 % None 4,358 22,322 26,680 3,917 4,360 26,237 30,597 3,384 2000 12/28/2017 0 - 40 501 WEST CHURCH STREET Orlando, FL 100 % None 2,805 28,119 30,924 — 2,805 28,119 30,924 3,396 2003 2/23/2018 0 - 40 9320 EXCELSIOR BOULEVARD Hopkins, MN 100 % None 3,760 35,289 39,049 ( 553 ) 3,707 34,789 38,496 4,531 2010 10/25/2018 0 - 40 25 BURLINGTON MALL ROAD Burlington, MA 100 % None 10,230 54,787 65,017 ( 2,543 ) 10,230 52,244 62,474 5,942 1987 12/12/2018 0 - 40 GALLERIA 100 Atlanta, GA 100 % None 7,285 72,449 79,734 488 7,285 72,937 80,222 7,238 1982 5/6/2019 0 - 40 GALLERIA 400 Atlanta, GA 100 % None 5,687 92,915 98,602 698 5,687 93,613 99,300 5,605 1999 8/23/2019 0 - 40 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 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) Various 100 % None 44,509 — 44,509 363 41,620 3,252 44,872 446 N/A Various N/A 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. (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. (4) The net carrying value of Piedmont’s total assets for federal income tax purposes is approximately $ 3.3 billion. S-3 Table of Contents 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. Generally, Tenant Improvements and Lease Intangibles are amortized over the lease term. 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) Undeveloped Land Parcels includes land parcels that Piedmont may develop in the future. Piedmont Office Realty Trust, Inc. Schedule III - Real Estate and Accumulated Depreciation December 31, 2020 (dollars in thousands) 2020 2019 2018 Real Estate: Balance at the beginning of the year $ 3,818,287 $ 3,924,531 $ 4,438,209 Additions to/improvements of real estate 493,760 406,832 206,442 Assets disposed ( 393,231 ) ( 452,672 ) ( 675,692 ) Assets impaired (1) — ( 8,953 ) — Write-offs of intangible assets (2) ( 15,891 ) ( 36,428 ) ( 33,067 ) Write-offs of fully depreciated/amortized assets ( 11,499 ) ( 15,023 ) ( 11,361 ) Balance at the end of the year $ 3,891,426 $ 3,818,287 $ 3,924,531 Accumulated Depreciation and Amortization: Balance at the beginning of the year $ 875,777 $ 907,937 $ 1,053,467 Depreciation and amortization expense 142,762 132,600 128,456 Assets disposed ( 155,757 ) ( 113,309 ) ( 229,558 ) Write-offs of intangible assets (2) ( 15,891 ) ( 36,428 ) ( 33,067 ) Write-offs of fully depreciated/amortized assets ( 11,499 ) ( 15,023 ) ( 11,361 ) Balance at the end of the year $ 835,392 $ 875,777 $ 907,937 (1) Piedmont recognized an impairment loss on the Dupree building, as well as the 600 Corporate Drive building (see Note 7 ). (2) Consists of write-offs of intangible lease assets related to lease restructurings, amendments, and terminations. S-4