Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows, and estimated fair values of our financial instruments depend in part upon prevailing market interest rates. Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, and equity prices. As of December 31, 2025, our potential for exposure to market risk includes interest rate fluctuations in connection with any future borrowings under our $600 Million Unsecured 2022 Line of Credit. As a result, the primary market risk to which we believe we are exposed is interest rate risk. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to interest rate risk, including changes in the method pursuant to which SOFR rates are determined.
Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flow primarily through a low-to-moderate level of overall borrowings, as well as managing the variability in rate fluctuations on our outstanding debt. As such, all of our debt as of December 31, 2025, other than the $600 Million Unsecured 2022 Line of Credit, is currently based on fixed or effectively-fixed interest rates to hedge against volatility in the credit markets. See Note 4 to our accompanying consolidated financial statements for further details. We do not enter into derivative or interest rate transactions for speculative purposes, as such all of our debt and derivative instruments were entered into for purposes other than trading purposes.
Our financial instruments consist of both fixed and variable-rate debt. As of December 31, 2025, our consolidated principal outstanding for aggregate debt maturities consisted of the following (in thousands):
2026 2027 2028 2029 2030 Thereafter Total
Maturing debt:
Variable rate repayments $ — $ — $ 47,000 $ — $ — $ — $ 47,000
Variable rate average interest rate (2)
— % — % 4.92 % — % — % — % 4.92 %
Fixed rate repayments $ 3,433 $ 328,894 (1)
$ 468,753 $ 400,000 $ 300,000 $ 700,000 $ 2,201,080
Fixed rate average interest rate (2)
4.10 % 5.36 % (1)
7.26 % 6.88 % 3.15 % 5.13 % 5.43 %
(1) Includes the $325 Million Unsecured 2024 Term Loan which has a stated variable rate; however, Piedmont's interest rate swap agreements as of December 31, 2025 effectively fix the full principal balance to 5.38% through February 1, 2026. Upon expiration of the interest rate swap agreements, the interest rate will revert to a variable rate based on SOFR, plus 1.30%.
(2) See Note 3 to our accompanying consolidated financial statements for further details on our debt structure.
The estimated fair value of our debt above as of December 31, 2025 and 2024 was approximately $2.3 billion and $2.2 billion, respectively. Our interest rate swap agreements in place as of December 31, 2025 carried a notional amount of $325 million and a weighted-average fixed interest rate of 5.38%, and our interest swap agreements as of December 31, 2024 carried a notional amount totaling $450 million with a weighted-average fixed interest rate of 5.07%.
As of December 31, 2025, our total outstanding debt subject to fixed, or effectively fixed, interest rates totaling approximately $2.2 billion has an average effective interest rate of approximately 5.43% per annum with expirations ranging from 2027 to 2033.
As of December 31, 2025, we had a $47.0 million outstanding balance on our $600 Million Unsecured 2022 Line of Credit which has a stated rate of SOFR plus 1.05% per annum (based on our current corporate credit rating), resulting in a total interest rate of 4.92%. Additionally, a 1.0% increase in variable interest rates on our outstanding borrowings as of December 31, 2025 would increase interest expense approximately $0.5 million on a per annum basis.
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