What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-19 compared with 2024-02-20 · 95 added, 92 removed, 283 unchanged (40% of the section changed)

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Liquidity and Capital Resources

We intend to use cash on hand, cash flow generated from the operation of our properties, net proceeds from the disposition of select properties, and borrowings under our $600 Million Unsecured 2022 Line of Credit as our primary sources of immediate liquidity.

As a result of refinancing activity completed in January 2024 (see Note 3 to our accompanying consolidated financial statements), our only remaining 2024 debt maturity is the $50.2 million outstanding balance of our $400 Million Unsecured Senior Notes due in March 2024, which we intend to repay using our $600 Million Unsecured 2022 Line of Credit.

Our 2025 debt maturities are the remaining $25 million of our $215 Million Unsecured 2023 Term Loan due in January 2025 and the $250 Million Unsecured 2018 Term Loan due in March 2025.

We currently anticipate repaying these amounts using any or a combination of following:

our $600 Million Unsecured 2022 Line of Credit, net proceeds from the disposition of select properties, and other new secured or unsecured borrowings from third party lenders or the public debt market.

The nature and timing of any additional sources of capital will be highly dependent on market conditions.

We believe that we have sufficient liquidity to meet our obligations for the foreseeable future.

We intend to use cash on hand, cash flows generated from the operation of our properties, net proceeds from the disposition of select properties, and borrowings under our $600 Million Unsecured 2022 Line of Credit as our primary sources of immediate liquidity.

On February 13, 2025, we amended our $200 Million Unsecured 2024 Term Loan to increase the principal amount of the loan by $125 million to a total of $325 million principal amount outstanding and to add two six-month extension options for a final maturity date of January 29, 2028, provided that we are not then in default and upon payment of extension fees.

The net proceeds from the increased principal and our $600 Million Unsecured 2022 Line of Credit, along with cash on hand, were used to repay our $250 Million Unsecured 2018 Term Loan that was scheduled to mature in March of 2025.

Also subsequent to December 31, 2024, Piedmont recast the $600 Million Unsecured 2022 Line of Credit to extend the maturity date to June 30, 2028, with two additional one-year extension options, for a final maturity date of June 30, 2030, provided that we are not then in default and upon payment of extension fees.

Consequently, we currently have no debt with a final maturity until 2028;

however, as part of our overall debt management strategies, we may seek other new secured or unsecured borrowings from third party lenders or issue other debt or equity securities as additional sources of capital.

The nature and timing of these additional sources of capital will be highly dependent on market conditions.

As of the date of this filing we had approximately $500 million of capacity available under our $600 Million Unsecured 2022 Line of Credit, and we believe that we have sufficient liquidity to meet our obligations for the foreseeable future.

Our most consistent use of capital has historically been, and we believe will continue to be, to fund capital expenditures for our existing portfolio of properties.

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(1) Of the total amounts paid, approximately $19.9 million and $10.1 million related to soft costs such as capitalized interest, payroll, and other general and administrative expenses for the year ended December 31, 2024 and 2023, respectively.

"Capital expenditures for redevelopment/renovations" during the years ended December 31, 2023 and 2022 primarily related to building upgrades, primarily to the lobbies and the addition of tenant amenities at our 60 Broad Street building in New York City, our Galleria Tower buildings in Dallas, Texas, as well as our 222 South Orange building in Orlando, Florida, and our Galleria on the Park buildings, 1155 Perimeter Center West, and 999 Peachtree Street in Atlanta, Georgia, among others.

"Capital expenditures for redevelopment/renovations" during the years ended December 31, 2024 and 2023 related to building upgrades, primarily to the lobbies and the addition of tenant amenities at certain of our buildings, including:

Galleria Towers in Dallas, Texas;

The Exchange in Orlando, Florida;

999 Peachtree Street and Galleria on the Park in Atlanta, Georgia, and Meridian in suburban Minneapolis, Minnesota, among others, most of which were substantially completed during 2024.

"Other capital expenditures, including building and tenant improvements" include all other capital expenditures during the respective period and are typically comprised of tenant and building improvements necessary to lease, maintain, or provide enhancements, including energy efficient equipment, to our existing portfolio of office properties.

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Given that our operating model frequently results in leases for multiple blocks of space to credit-worthy tenants, our leasing success can result in capital outlays which vary from one reporting period to another based upon the specific leases executed.

For leases executed during the year ended December 31, 2023, we have committed to spend approximately $5.22 per square foot per year of lease term for tenant improvement allowances and lease commissions (net of expired lease commitments) as compared to $5.34 (net of expired lease commitments) for the year ended December 31, 2022.

As of December 31, 2023, we had one individually significant unrecorded tenant allowance commitment greater than $10.0 million.

In addition to the amounts that we have already committed to as a part of executed leases, we also anticipate continuing to incur similar market-based tenant improvement allowances and leasing commissions in conjunction with procuring future leases for our existing portfolio of properties.

Both the timing and magnitude of expenditures related to future leasing activity can vary

For leases executed during the year ended December 31, 2024, we have committed to spend approximately $5.67 per square foot per year of lease term for tenant improvement allowances and lease commissions (net of expired lease commitments) as

Index to Financial Statements

due to a number of factors and are highly dependent on the size of the leased square footage, length of lease term, and the competitive market conditions of the particular office market at the time a lease is being negotiated.

Although repayment of debt is currently our priority, subject to the identification and availability of attractive investment opportunities and our ability to consummate such acquisitions on satisfactory terms, acquiring new assets consistent with our investment strategy could also be a significant use of capital.

compared to $5.22 (net of expired lease commitments) for the year ended December 31, 2023.

As of December 31, 2024, we had two individually significant unrecorded tenant allowance commitments greater than $10 million.

Both the timing and magnitude of expenditures related to future leasing activity can vary due to a number of factors and are highly dependent on the size of the leased square footage, length of the lease term, and the competitive market conditions of the particular office market at the time a lease is being negotiated, in addition to the impact of inflation and rising costs of construction.

Although reducing outstanding debt remains our priority, subject to the identification and availability of a few, select investment opportunities and our ability to consummate such acquisitions on satisfactory terms, acquiring new assets consistent with our investment strategy could also be a significant use of capital.

Additionally, although we have no final debt maturity until 2028, we may use capital to repay debt obligations when we deem it prudent to refinance or reduce various obligations.

We also use capital resources to pay dividends to our stockholders.

Given the significant increase in interest expense during the year ended December 31, 2023 (see Results of Operations below), we reduced our annual dividend from $0.84 per share to $0.50 per share beginning with the third quarter of 2023 which will reduce the cash used to pay the dividend by approximately $40 million on an annual basis.

The amount and form of payment (cash or stock issuance) of future dividends to be paid to our stockholders will continue to be largely dependent upon (i) the amount of cash generated from our operating activities;

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(vi) our ability to continue to access additional sources of capital, including potential sales of our properties;

and (vii) the amount required to be distributed to maintain our status as a REIT.

(vii) our desire to reduce overall leverage;

and (viii) the amount required to be distributed to maintain our status as a REIT.

With the fluctuating nature of cash flows and expenditures, we may periodically borrow funds on a short-term basis to cover timing differences in cash receipts and cash disbursements, including to pay dividends to our stockholders.

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Results of Operations (2024 vs.

Net loss applicable to common stockholders for the year ended December 31, 2023 was approximately $48.4 million, or $0.39 per diluted share, as compared with net income applicable to common stockholders of $146.8 million, or $1.19 per diluted share, for the year ended December 31, 2022.

The decrease in net income reflects:

(i) a decreased gain on sale of real estate assets of $149.8 million;

(ii) a $35.6 million increase in interest expense in the current period compared to the prior period primarily due to higher interest rates;

(iii) and a $14.8 million increase in depreciation expense due to additional building and tenant improvements acquired and/or placed in service over the two year period.

These decreases were partially offset by continued growth in Property Net Operating Income during the year ended December 31, 2023, as compared to the year ended December 31, 2022.

Net loss applicable to common stockholders for the year ended December 31, 2024 was approximately $79.1 million, or $0.64 per diluted share, as compared with net loss applicable to common stockholders of $48.4 million, or $0.39 per diluted share, for the year ended December 31, 2023.

The increase in net loss reflects increased interest expense, net of interest income, as compared to the prior year, as well as the sale of two properties and downtime between the expiration of a few large leases during the year ended December 31, 2024, before newly executed leases commence.

Additionally, we recognized approximately $4.8 million of executive separation costs during the year ended December 31, 2024.

Comparison of the accompanying consolidated statements of operations for the year ended December 31, 2024 vs.

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Gain on sale of real estate assets (0.4) — % 1.9 — % (2.3)

Net income/(loss) $ (48.4) (8) % $ 146.8 26 % $ (195.2)

Rental and tenant reimbursement revenue increased approximately $9.6 million for the year ended December 31, 2023 as compared to the prior year.

The increase was primarily due to capital recycling activity during the year ended December 31, 2022 and higher tenant reimbursements as a result of higher recoverable operating expenses during the current year as tenant utilization of our buildings increased during 2023 as compared to the prior year.

Other property related income increased approximately $4.3 million for the year ended December 31, 2023 as compared to the prior year primarily due to higher transient parking at our buildings during the current year.

Additionally, parking revenue associated with the 1180 Peachtree Street building acquired during the third quarter of 2022 also contributed to the increase.

Net loss $ (79.1) (14) % $ (48.4) 8 % $ (30.7)

Rental and tenant reimbursement revenue decreased approximately $11.2 million for the year ended December 31, 2024 as compared to the prior year.

The decrease was primarily due to lost revenues during the downtime between certain large tenant expirations and the commencement or abatement expiration associated with recently executed leases, as well as the disposition of two properties in 2024.

The impact of these decreases is partially offset by the roll up of rental rates and new leases commencing during the year ended December 31, 2024.

Other property related income increased approximately $3.8 million for the year ended December 31, 2024 as compared to the prior year primarily due to increased occupancy and utilization at our properties and higher transient parking at our office projects during the current period, as compared to the prior period.

Index to Financial Statements

Property operating costs increased approximately $9.0 million for the year ended December 31, 2023 as compared to the prior year.

The variance was primarily due to higher recoverable operating expenses such as janitorial, security, and utilities resulting from higher tenant utilization during the current period, and capital recycling activity during the year ended December 31, 2022.

Property operating costs decreased approximately $1.0 million for the year ended December 31, 2024 as compared to the prior year.

The variance was primarily due to a decrease in property operating expenses associated with the sale of two properties in 2024 as well as lower property taxes associated with favorable tax assessments.

These decreased costs were partially offset by higher recoverable operating expenses such as janitorial, security, repairs and maintenance and other general expenses as tenant utilization increased during the year ended December 31, 2024.

Depreciation expense increased approximately $8.5 million for the year ended December 31, 2024 compared to the prior year.

The increase was primarily due to additional building and tenant improvements acquired and/or placed in service subsequent to January 1, 2022, as well as the acquisition of 1180 Peachtree Street mentioned above.

The increase was primarily due to additional building and tenant improvements acquired and/or placed in service subsequent to January 1, 2023.

Amortization expense decreased approximately $18.0 million for the year ended December 31, 2024 compared to the prior year.

The decrease in amortization expense associated with certain lease intangible assets at our existing properties becoming fully amortized subsequent to January 1, 2022 was largely offset by additional amortization associated with the acquisition of 1180 Peachtree Street mentioned above, as well as accelerated amortization associated with lease terminations.

During the years ended December 31, 2023 and 2022, we reduced the carrying amount of goodwill resulting in the recognition of non-cash impairment charges of approximately $29.4 million and $16.0 millions, respectively.

The decrease in amortization expense is associated with certain lease intangible assets at our existing projects becoming fully amortized subsequent to January 1, 2023.

During the year ended December 31, 2024, we recognized a non-cash impairment charge of approximately $33.8 million related to a change in hold period assumptions at certain properties in our portfolio.

Two of these projects, the One Lincoln Park building and 750 West John Carpenter Freeway building were subsequently sold during the year ended December 31, 2024.

During the year ended December 31, 2023, we reduced the carrying amount of goodwill resulting in the recognition of non-cash impairment charges of approximately $29.4 million.

See Note 6 to our accompanying consolidated financial statements for further details.

During the year ended December 31, 2022, we also recognized a non-cash impairment loss on real estate assets of approximately $10.0 million related to a change in hold period assumptions for one of our Minneapolis properties.

General and administrative expense increased approximately $6.2 million for the year ended December 31, 2024 compared to the prior year, primarily as the result of recognizing approximately $4.8 million of executive separation costs that occurred during the fourth quarter of 2024.

The remainder of the increase primarily reflects increased accruals for potential performance-based compensation, largely associated with successful leasing during the year ended 2024.

Other Income (Expense)

Interest expense increased approximately $35.6 million for the year ended December 31, 2023 as compared to the prior year primarily driven by increased interest rates on floating-rate debt during 2023 and on $600 million of refinanced fixed-rate debt, also obtained in 2023.

Other income increased approximately $1.2 million for the year ended December 31, 2023 as compared to the prior year due primarily to interest income earned on cash invested for short periods pending the repayment of debt;

consequently, we do not expect such interest income to recur in future periods.

The loss on early extinguishment of debt for the year ended December 31, 2023 is comprised of the pro-rata write-off of unamortized debt issuance costs and discounts associated with the early repurchase of approximately $350 million aggregate principal amount of the $400 Million Unsecured Senior Notes due 2024, as well as fees paid.

See Note 3 to our accompanying consolidated financial statements for further details.

Gain on sale of real estate assets during the year ended December 31, 2022 includes $49.2 million of gain recognized on the sale of the 225 & 235 Presidential Way buildings, which closed in January 2022, as well as $102.5 million of gain recognized on the sale of the Cambridge Portfolio in December 2022.

Interest expense increased approximately $21.7 million for the year ended December 31, 2024 as compared to the prior year primarily driven by increased interest rates on floating-rate debt during the year ended December 31, 2024 as well as refinancing $1.2 billion of maturing debt at higher rates during the latter half of 2023 and first half of 2024.

The increase was partially offset by a $5.9 million increase in capitalized interest associated with various redevelopment projects in progress during the year ended December 31, 2024.

Results of Operations (2023 vs.

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The Notes are fully and unconditionally guaranteed by Piedmont, the parent entity that consolidates Piedmont OP and all other subsidiaries.

In particular, Piedmont guarantees to each holder of the Notes that the principal and interest will be paid in full when due, whether at the maturity dates of the respective loans, or upon acceleration, upon redemption, or otherwise;

interest on overdue principal and interest on any overdue interest, if any, will also be paid in full when due;

In particular, Piedmont guarantees to each holder of the Notes that the principal and interest on the Notes will be paid in full when due, whether at the maturity dates of the respective loans, or upon acceleration, upon redemption, or otherwise;

interest on overdue principal and interest on any overdue interest, if any, on the Notes will also be paid in full when due;

and all other obligations of the Issuer to the holders of the Notes will be promptly paid in full.

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Net loss $ (117,558)

Index to Financial Statements

Net Operating Income by Geographic Segment

Our President and Chief Executive Officer is our chief operating decision maker ("CODM") who evaluates our portfolio and assesses the ongoing operations and performance of our properties utilizing the following geographic segments:

Our President and Chief Executive Officer is our chief operating decision maker ("CODM"), who evaluates our portfolio and assesses the ongoing operations and performance of our projects utilizing the following geographic segments:

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

These operating segments are also our reportable segments.

Additionally, as of December 31, 2023, we owned two properties in Houston that did 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 we do not maintain a significant presence or anticipate further investment in this market.

Additionally, as of December 31, 2024, we owned two properties in Houston that did 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 we do not maintain a significant presence or anticipate further investment in

Index to Financial Statements

These two properties are included in "Other" below.

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Comparison of the Year Ended December 31, 2024 Versus the Year Ended December 31, 2023

NOI increased primarily due to the acquisition of 1180 Peachtree Street during the third quarter of 2022.

NOI increased due to several large leases commencing at our Galleria on the Park and 999 Peachtree Street projects during the year ended December 31, 2024 as compared to the same period in the prior year.

NOI decreased due to the sales of the One Lincoln Park and 750 West John Carpenter Freeway assets during the year ended December 31, 2024, as compared to the same period in the prior year.

NOI decreased primarily due to the expiration of the lease associated with the sole tenant at 501 West Church.

The entire building has been re-leased to another tenant;

however, the new lease is not expected to commence until late 2025.

Northern Virginia/Washington, D.C.

NOI decreased due to the termination of certain leases at Arlington Gateway in late 2022.

NOI decreased primarily due to the disposition of the 225 and 235 Presidential Way assets in January 2022 and the disposition of the Cambridge Portfolio in December 2022.

NOI decreased primarily due to the termination of two leases at the Arlington Gateway project during the year ended December 31, 2024, as compared to the same period in the prior year.

NOI decreased primarily due to the expiration of the leases associated with the sole tenants at two projects:

9320 Excelsior Boulevard and Meridian.

Both projects have been designated as redevelopment assets during the year ended December 31, 2024.

NOI increased during the year ended December 31, 2024 as compared to the prior year due to a tenant's expansion at our Wayside Office Park project in the latter half of 2023.

Index to Financial Statements

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Reconciliations of net income/(loss) to FFO, Core FFO, and AFFO for the years ended December 31, 2024, 2023, and 2022, respectively, are presented below (in thousands except per share amounts):

2024 2023 2022

GAAP net income/(loss) applicable to common stock $ (79,069) $ (48,387) $ 146,830

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33,832 29,446 25,981

Gain on sale of real estate assets

Loss/(gain) on sale of real estate assets

445 (1,946) (151,729)

NAREIT Funds From Operations applicable to common stock

NAREIT FFO applicable to common stock

$ 180,350 $ 214,399 $ 244,822

Severance costs associated management reorganization — — 2,248 0.02 — —

Executive separation costs 4,831 — 2,248

Loss on early extinguishment of debt

820 0.01 — — — —

Core Funds From Operations applicable to common stock

Core FFO applicable to common stock

$ 185,567 $ 215,219 $ 247,070

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Depreciation of non real estate assets

1,320 847 728

Straight-line effects of lease revenue

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(70,170) (53,690) (53,324)

Adjusted Funds From Operations applicable to common stock

AFFO applicable to common stock

$ 109,239 $ 153,008 $ 178,040

Weighted-average shares outstanding – diluted 124,926 (2)

123,524 124,455 (3)

(1) Based on weighted-average shares outstanding—diluted.

NAREIT FFO per share (diluted) $ 1.44 $ 1.73 $ 1.98

Core FFO per share (diluted) $ 1.49 (3)

(1) We define non-incremental capital expenditures as capital expenditures of a recurring nature related to tenant improvements, leasing commissions, and building capital that do not incrementally enhance the underlying assets' income generating capacity.

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(2) Includes potential dilution under the treasury stock method that would occur if our remaining unvested and potential stock awards vested and resulted in additional common shares outstanding.

Such shares are not included when calculating net loss per diluted share applicable to Piedmont for the years ended December 31, 2023 and 2021 as they would reduce the loss per share presented.

Such shares are not included when calculating net loss per share applicable to Piedmont for the years ended December 31, 2024 and 2023 as they would reduce the loss per share presented.

(3) Core FFO was $1.49 per diluted share for the year ended December 31, 2024, as compared to $1.74 per diluted share for the year ended December 31, 2023.

Approximately $0.17 of the decrease is due to increased interest expense, net of interest income, with the remaining decrease attributable to a combination of the sale of two properties during 2024, as well as downtime between the expiration of a few large leases during the year ended December 31, 2024, before newly executed leases commence.

Index to Financial Statements

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Furthermore, we remove general and administrative expenses, income associated with property management performed by us for other organizations, and other income or expense items, such as interest income from loan investments.

For Property NOI (cash basis), the effects of non-cash general reserve for uncollectible accounts, straight-lined rents and fair value lease revenue are also eliminated;

For Property NOI (cash basis), the effects of the reversal of the non-cash general reserve for uncollectible accounts, straight-lined rents and fair value lease revenue are also eliminated;

while such effects are not adjusted in calculating Property NOI (accrual basis).

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2024 December 31,

Net income/(loss) applicable to Piedmont (GAAP basis) $ (48,387) $ 146,830 $ (48,387) $ 146,830

Net loss applicable to Piedmont (GAAP basis) $ (79,069) $ (48,387) $ (79,069) $ (48,387)

Net income applicable to noncontrolling interest

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33,832 29,446 33,832 29,446

Gain on sale of real estate assets

Loss/(gain) on sale of real estate assets

445 (1,946) 445 (1,946)

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Loss on early extinguishment of debt

Severance costs associated management reorganization — 2,248 — 2,248

386 820 386 820

Executive separation costs 4,831 — 4,831 —

Core EBITDA (2)

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Net operating (income)/loss from:

Acquisitions (4)

(22,907) (8,180) (30,167) (11,717)

Dispositions (4)

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

(4) Acquisitions include 1180 Peachtree Street in Atlanta, Georgia, purchased during the third quarter of 2022.

(5) Dispositions include Two Pierce Place in Itasca, Illinois and 225 and 235 Presidential Way in Woburn, Massachusetts, all sold during the first quarter of 2022, and One Brattle Square and 1414 Massachusetts Avenue in Cambridge, Massachusetts, sold in the fourth quarter of 2022.

(6) Other investments consist of active redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current and/or prior year reporting periods.

The operating results from 222 South Orange Avenue in Florida are included in this line item.

Our portfolio consists of office properties located within identified growth submarkets in large metropolitan cities concentrated primarily in the Sunbelt.

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

(5) Other investments include active or recently completed out-of-service redevelopment projects and land.

The operating results from a portion of The Exchange in Orlando, Florida, as well as Meridian and 9320 Excelsior Boulevard in suburban Minneapolis, Minnesota are included in this line item.

Our portfolio consists of office projects located within identified growth submarkets in large metropolitan cities concentrated primarily in the Sunbelt.

We typically lease space to creditworthy corporate or governmental tenants on a long-term basis.

As of December 31, 2023, our average lease was approximately 15,000 square feet with approximately six years of lease term remaining.

As of December 31, 2024, our average lease was approximately 14,000 square feet with six years of lease term remaining.

Leased percentage, as well as rent roll ups and roll downs, which we experience as a result of re-leasing, can fluctuate widely between buildings and between tenants, depending on when a particular lease is scheduled to commence or expire.

Leased Percentage

The leased percentage of our portfolio increased approximately 40 basis points during the year ended December 31, 2023, from 86.7% leased as of December 31, 2022 to 87.1% leased as of December 31, 2023.

The increase was attributable to the completion of approximately 830,000 of new tenant leases during the year ended December 31, 2023, representing the largest annual amount of new tenant leasing since 2018.

Additionally, we renewed approximately 1.4 million square feet of expiring leases, resulting in approximately 2.2 million square feet of total leasing for the year ended December 31, 2023.

Scheduled lease expirations for 2024 represent approximately 1.2 million square feet, or 7.4% of our ALR, some portion of which may renew.

Our historical retention rate is approximately 68% over the past five years.

To the extent the square footage from new leases for currently vacant space exceeds or falls short of the square footage associated with non-renewing expirations, such leases would increase or decrease our overall leased percentage, respectively.

The leased percentage of our in-service portfolio increased to 88.4% leased as of December 31, 2024, from 87.1% leased as of December 31, 2023.

During the year ended December 31, 2024, we completed approximately 2.4 million square feet of leasing, including approximately a million square feet of new tenant leases which contributed to the increase in our in-service leased percentage as compared to December 31, 2023.

As of December 31, 2024, scheduled lease expirations for the portfolio for the next twelve months represent less than 9% of our ALR, some portion of which have already renewed.

To the extent the square footage from new leases for currently vacant space in our in-service portfolio exceeds or falls short of the square footage associated with non-renewing expirations, such leases would increase or decrease our in-service leased percentage, respectively.

As of December 31, 2024, three projects, 222 South Orange Avenue in Orlando, Florida, and 9320 Excelsior Boulevard and Meridian, both in suburban Minneapolis, Minnesota, were classified as out of service as they undergo redevelopment.

Impact of Downtime, Abatement Periods, and Rental Rate Changes

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If we are unable to replace expiring leases with new or renewal leases at rental rates equal to or greater than the expiring rates, rental rate roll downs could occur and negatively impact Property NOI and Same Store NOI comparisons.

As mentioned above, our diverse portfolio and the magnitude of some of our tenants' leased spaces can result in rent roll ups and roll downs that can fluctuate widely on a building-by-building and a quarter-to-quarter basis.

During the year ended December 31, 2023, we

As discussed above, our diverse portfolio and the magnitude of some of our tenants' leased spaces can result in rent roll ups and roll downs that can fluctuate widely on a project-by-project and a quarter-to-quarter basis.

During the year ended December 31, 2024, we experienced a 11.9% and 18.9% roll up in cash and accrual rents, respectively, on executed leases related to space vacant one year or less.

Index to Financial Statements

experienced a 4.7% and 12.4% roll up in cash and accrual rents, respectively, on executed leases related to space vacant one year or less.

During the year ended December 31, 2023, Same Store NOI increased by 2.2% on a cash basis and decreased 1.0% on an accrual basis as compared to the prior year.

Cash basis Same Store NOI increased as compared to the prior year primarily due to rental rate roll-ups, as well as new leases commencing or leases with expiring rental or operating expense abatements beginning to outweigh leases that expired during 2023.

Property Net Operating Income on an accrual basis increased approximately $4.8 million, or 1.4%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily as a result of the acquisition of 1180 Peachtree Street during the third quarter of 2022.

After removing the operating results of 1180 Peachtree Street, Same Store NOI on an accrual basis for the year ended December 31, 2023 decreased approximately 1% as compared to the prior year.

During the year ended December 31, 2024, Same Store NOI increased by 2.6% and 1.6% on a cash and accrual basis, respectively, as newly commenced leases or those with expiring abatements outweighed expiring leases.

Same Store NOI comparisons for any given period fluctuate as a result of the mix of net leasing activity in individual properties during the respective period.

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When indicators of potential impairment are present, we assess 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 value, 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

Index to Financial Statements

assets held for sale do not exceed the respective asset carrying value, we adjust such assets to the respective estimated fair values and recognize an impairment loss.

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, we adjust such assets to the respective estimated fair values and recognize an impairment loss.

Projections of expected future cash flows require that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors.

The changing of these assumptions and the subjectivity of assumptions used in the future cash flow analysis, including capitalization and discount rates, could result in a changed assessment or an incorrect assessment of the property’s estimated fair value and, therefore, could result in the misstatement of the carrying value of our real estate and related intangible assets and our reported net income/(loss) attributable to Piedmont.

Index to Financial Statements

misstatement of the carrying value of our real estate and related intangible assets and our reported net income/(loss) attributable to Piedmont.

Valuation of Goodwill

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In addition, adverse economic conditions could also cause us to recognize additional asset impairment charges in the future, which could materially and adversely affect our business, financial condition and results of operations.

See Note 6 to our accompanying consolidated financial statements for more details regarding our goodwill for the years ended December 31, 2023 and 2022.

See Note 2 and Note 6 to our accompanying consolidated financial statements for more details regarding our goodwill.

Rental Revenue Recognition

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• 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.

When we conclude that we are the owner of tenant improvements, we record the cost to construct the tenant improvements as an asset and commence rental revenue recognition when the tenant takes possession of or controls the finished space, which is typically when the improvements being recorded as our asset are substantially complete, and our landlord obligation has been

Index to Financial Statements

materially satisfied.

When we conclude that our tenant is the owner of certain tenant improvements, we record our contribution towards those improvements as a lease incentive, which is amortized as a reduction to rental and tenant reimbursement revenue on a straight-line basis over the term of the related lease, and the recognition of rental revenue begins when the tenant takes possession of or controls the space.

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For these tenant-funded tenant improvements, we record the amount funded or reimbursed by tenants as an asset and deferred revenue.

The asset is depreciated and the deferred revenue is amortized and recognized as rental revenue over the term of the related lease beginning upon substantial completion of the leased premises.

The asset is depreciated and the deferred

Index to Financial Statements

revenue is amortized and recognized as rental revenue over the term of the related lease beginning upon substantial completion of the leased premises.

Consequently, our determination as to whether we, or our tenant, are the owner of tenant improvements for accounting purposes has a significant impact on both the amount and timing of rental revenue that we record related to tenant-funded tenant improvements.

Related-Party Transactions and Agreements

There were no related-party transactions during the three years ended December 31, 2023.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis