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What changed in Piedmont Realty Trust, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Piedmont Realty Trust, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+211 added−227 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-23)

Top changes in Piedmont Realty Trust, Inc.'s 2023 10-K

211 paragraphs added · 227 removed · 170 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

25 edited+5 added−11 removed26 unchanged
Biggest changeFurther, from time to time we may also selectively enter into strategic joint ventures with third parties to acquire, develop, redevelop or dispose of properties, thereby potentially reducing the amount of our capital required to make investments, diversifying our sources of capital, enabling us to creatively acquire and control targeted properties, or allowing us to reduce our investment concentration in certain properties and/or markets without disrupting our operating performance or local operating capabilities. 5 Table of Contents Index to Financial Statements Proactive Asset and Property Management, Leasing Capabilities, and Management of Portfolio Risk Our proactive approach to asset and property management encompasses a number of strategies designed to maximize occupancy and rental rates while following leading environmentally-conscious business practices and also meeting or exceeding the needs of today's discerning tenants.
Biggest changeFurther, from time to time we may also selectively enter into strategic joint ventures with third parties to acquire, develop, redevelop or dispose of properties, thereby potentially reducing the amount of our capital required to make investments, diversifying our sources of capital, enabling us to creatively acquire and control targeted properties, or allowing us to reduce our investment concentration in certain properties and/or markets without disrupting our operating performance or local operating capabilities.
These filings are available promptly after we file them with, or furnish them to, the SEC. Information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K. 9 Table of Contents Index to Financial Statements
These filings are available promptly after we file them with, or furnish them to, the SEC. Information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K. 8 Table of Contents Index to Financial Statements
As of December 31, 2022, our tenants come from broadly diversified industry sectors and no individual tenant represented more than 5% of our ALR. Other Matters We have contracts with various governmental agencies, exclusively in the form of operating leases in buildings we own. See Item 1A.
As of December 31, 2023, our tenants come from broadly diversified industry sectors and no individual tenant represented more than 5% of our ALR. Other Matters We have contracts with various governmental agencies, exclusively in the form of operating leases in buildings we own. See Item 1A.
Such strategies include: • maintaining local management offices in markets where we have a significant presence; • offering, or being located near, superior amenities that help our tenants attract and retain their employees; • maintaining our high quality properties in an environmentally-friendly manner; • renovating our buildings to maintain their modern appearance and superior operating condition; • building and cultivating our relationships with commercial real estate executives; • using creative leasing approaches such as early extensions, lease wrap-arounds and restructurings; and • utilizing a national buying platform for property management support services to ensure optimal pricing, as well as to consistently implement best practices and achieve sustainability standards.
Such strategies include: • maintaining local management offices in markets where we have a significant presence; • offering, or being located near, superior amenities that help our tenants attract and retain their employees; 5 Table of Contents Index to Financial Statements • maintaining our high quality properties in an environmentally-friendly manner; • renovating our buildings to maintain their modern appearance and superior operating condition; • building and cultivating our relationships with commercial real estate executives; • using creative leasing approaches such as early extensions, lease wrap-arounds and restructurings; and • utilizing a national buying platform for property management support services to ensure optimal pricing, as well as to consistently implement best practices and achieve sustainability standards.
Segment Information As of December 31, 2022, our reportable segments were determined geographically based on the markets in which we have significant investments. We consider geographic location when evaluating our portfolio composition and in assessing the ongoing operations and performance of our properties. See Note 16 , Segment Information, to the accompanying consolidated financial statements.
Segment Information As of December 31, 2023, our reportable segments were determined geographically based on the markets in which we have significant investments. We consider geographic location when evaluating our portfolio composition and in assessing the ongoing operations and performance of our properties. See Note 14 , Segment Information, to the accompanying consolidated financial statements.
BOMA 360 is a program that evaluates a building's operations and management and benchmarks its performance against industry standards. As of December 31, 2022, properties representing approximately 95% of our portfolio (based on square footage) had achieved such a designation, recognizing excellence in building operations and management.
BOMA 360 is a program that evaluates a building's operations and management and benchmarks its performance against industry standards. As of December 31, 2023, properties representing approximately 97% of our portfolio (based on square footage) had achieved such a designation, recognizing excellence in building operations and management.
During 2022, we were named an Energy Star Partner of the Year for the second year in a row, as well as being selected as a 2022 Green Lease Leader by the Institute for Market Transformation and the U.S. Department of Energy's Better Buildings Alliance.
During 2023, we were again named an Energy Star Partner of the Year for the third year in a row, as well as being selected as a 2022 Green Lease Leader by the Institute for Market Transformation and the U.S. Department of Energy's Better Buildings Alliance.
Human Capital and Social Involvement As of December 31, 2022, we had 149 employees, with approximately one-third of our employees working in our corporate office located in Atlanta, Georgia. Our remaining employees work in local management offices located in each of the office markets we serve.
Human Capital and Social Involvement As of December 31, 2023, we had 150 employees, with approximately one-third of our employees working in our corporate office located in Atlanta, Georgia. Our remaining employees work in local management offices located in each of the office markets we serve.
To reduce the risk that increasing stringent building and energy codes could increase construction, capital, and maintenance costs, we continue to update our buildings with energy efficient equipment to stay ahead of anticipated future code 6 Table of Contents Index to Financial Statements changes in both landlord and tenant-controlled spaces.
To reduce the risk that increasing stringent building and energy codes could increase construction, capital, and maintenance costs, we continue to update our buildings with energy efficient equipment to stay ahead of anticipated future code changes in both landlord and tenant-controlled spaces.
References to Piedmont herein shall include Piedmont and all of its subsidiaries, including Piedmont OP and its subsidiaries and joint ventures. Operating Objectives and Strategy As of December 31, 2022, we owned and operated 51 in-service office properties comprised of approximately 16.7 million square feet of primarily Class A office space which were 86.7% leased.
References to Piedmont herein shall include Piedmont and all of its subsidiaries, including Piedmont OP and its subsidiaries and joint ventures. Operating Objectives and Strategy As of December 31, 2023, we owned and operated 51 in-service office properties comprised of approximately 16.6 million square feet of primarily Class A office space which were 87.1% leased.
Our focus on operational excellence, fostering long-term relationships with our high-credit quality, diverse tenant base, and maintaining our portfolio of modern, amenity-rich properties, has resulted in an approximate 67% tenant retention rate over the past ten years. In addition to operational excellence, we also focus on environmental sustainability initiatives at our properties as further detailed below.
Our focus on operational excellence, fostering long-term relationships with our high-credit quality, diverse tenant base, and maintaining our portfolio of modern, amenity-rich properties, has resulted in an approximate 68% tenant retention rate over the past five years. In addition to operational excellence, we also focus on environmental sustainability initiatives at our properties.
Additionally, we have one redevelopment asset comprising 127,000 square feet in Orlando, Florida. Collectively, over two-thirds of our ALR is generated from our properties located in our Sunbelt markets.
Additionally, we have one redevelopment asset comprising 127,000 square feet in Orlando, Florida. Collectively, approximately 70% of our ALR is generated from our properties located in our Sunbelt markets.
No tenant accounts for more than 5% of our ALR. Headquartered in Atlanta, Georgia, with local management offices in each of our markets, Piedmont values operational excellence and is a leading participant among REITs based on the number of buildings owned and managed with Building Owners and Managers Association ("BOMA") 360 designations.
Headquartered in Atlanta, Georgia, with local management offices in each of our markets, Piedmont values operational excellence and is a leading participant among REITs based on the number of buildings owned and managed with Building Owners and Managers Association ("BOMA") 360 designations.
We do not face, however, the same competitors in every market. This competition, along with market-specific vacancy rates and the condition of available, leasable square footage, affects the rental rates and concessions that we negotiate with our tenants.
We do not face, however, the same competitors in every market. This competition, 7 Table of Contents Index to Financial Statements along with market-specific vacancy rates and the condition of available, leasable square footage, affects the rental rates and concessions that we negotiate with our tenants.
Financing Strategy We employ a conservative leverage strategy by maintaining a targeted debt-to-gross assets ratio of between 30% to 40%, and a targeted debt to EBITDA of low 6x or below.
Financing Strategy We employ a conservative leverage strategy by targeting a debt-to-gross assets ratio of between 30% to 40%, and debt to EBITDA ratio of mid 6x or below.
Further details concerning Piedmont's environmental and climate risk management strategy and programs can be found in our annual ESG report located on our website, www.piedmontreit.com under the "ESG" section. The information contained on our website is not incorporated herein by reference.
Further details concerning Piedmont's environmental and climate risk management strategy and programs can be found in our annual ESG report located on our website, www.piedmontreit.com under the "ESG" section.
Piedmont carries an information security risk insurance policy. Competition We compete for tenants for our high-quality assets by fostering strong tenant relationships and by providing quality customer service including: leasing, asset management, property management, and construction management services.
Competition We compete for tenants for our high-quality assets by fostering strong tenant relationships and by providing quality customer service including: leasing, asset management, property management, and construction management services.
Further details concerning our workforce and social and community involvement initiatives can be found in our annual ESG report located on our website, www.piedmontreit.com under the "ESG" section. The information contained on our website is not incorporated herein by reference.
Our employees have partnered together to donate thousands of dollars and hours annually to numerous organizations. Further details concerning our workforce and social and community involvement initiatives can be found in our annual ESG report located on our website, www.piedmontreit.com under the "ESG" section. The information contained on our website is not incorporated herein by reference.
The strategies we employ to achieve these objectives include: Recycling Capital Efficiently We use our proven, disciplined capital recycling capabilities to maximize total return to our stockholders by selectively disposing of non-core assets and assets for which we believe full value potential during our ownership has been achieved, and redeploying the proceeds from those dispositions into new investment opportunities with higher overall return prospects.
The information contained on our website is not incorporated herein by reference. 6 Table of Contents Index to Financial Statements Recycling Capital Efficiently We use our proven capital recycling capabilities to maximize total return to our stockholders by selectively disposing of non-core assets and assets for which we believe full value potential during our ownership has been achieved, and redeploying the proceeds from those dispositions into new investment opportunities with higher overall return prospects.
Approximately half of our portfolio (based on square footage) has achieved and maintains Leadership in Energy and Environmental Design ("LEED") certification and the entire portfolio has been awarded the WELL Health-Safety Rating through the International WELL Building Institute ("IWBI").
Approximately 70% of our portfolio (based on square footage) has achieved and maintains Leadership in Energy and Environmental Design ("LEED") certification.
We are committed to hiring and supporting a diverse workforce that fosters skilled and motivated people working together to deliver results in support of our core business values. We encourage all employees, tenants, and vendors to mutually respect one another's diversity in order to maintain a cohesive work environment that values fairness and equal treatment.
We apply this policy to all of our employees, suppliers, and vendors, regardless of their geographic location. We are committed to hiring and supporting a diverse workforce that fosters skilled and motivated people working together to deliver results in support of our core business values.
We also closely engage with our tenants regarding our environmental initiatives and encourage them to partner with us to reduce energy use within their leased spaces. Additionally, we periodically incorporate the issuance of green bonds to acquire, develop, redevelop, and renovate buildings to reduce operating costs, meet recognized sustainable development standards, and reduce our environmental impact.
We also closely engage with our tenants regarding our environmental initiatives and encourage them to partner with us to reduce energy use within their leased spaces.
We intend to provide an environment that is equitable, unbiased, pleasant, diverse, healthy, comfortable, and free from intimidation, hostilities, or other offenses that might interfere with work performance. We apply this policy to all of our employees, suppliers, and vendors, regardless of their geographic location.
Training programs for our employees, managers, and contractors during 2023 included professional training on workplace harassment and cybersecurity. In addition, employees and managers received diversity, conflict management, collaboration, ethics, and safety training. We intend to provide an environment that is equitable, unbiased, pleasant, diverse, healthy, comfortable, and free from intimidation, hostilities, or other offenses that might interfere with work performance.
In addition to financial contributions through the PWW Foundation, we recognize the value and benefit of employee volunteerism and fully appreciate its positive impact on the community, our employees, and ultimately, our company culture by promoting team building, collaboration, and unity. Our employees have partnered together to donate thousands of dollars and hours annually to numerous organizations.
The scholarships provide renewable, need-based, scholastic support to selected students interested in pursuing a career related to the real estate industry. We recognize the value and benefit of employee volunteerism and fully appreciate its positive impact on the community, our employees, and ultimately, our company culture by promoting team building, collaboration, and unity.
Redevelopment and Repositioning of Properties As circumstances warrant, we may redevelop or reposition properties within our portfolio, including the creation of additional amenities for our tenants to increase tenant satisfaction, occupancy, and rental rates and thereby improve returns on our invested capital, as well as to maintain and enhance the competitive positioning of our properties in their respective marketplaces.
These redevelopment projects have focused on creating additional, or enhancing existing, amenities for our tenants to increase tenant satisfaction, occupancy, and rental rates, thereby supporting our leasing efforts and improving returns on our invested capital.
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During 2022, we continued our training programs for our employees, managers, and contractors including professional training on workplace harassment and cybersecurity. In addition, employees and managers received diversity, communication, ethics, and safety training. Select managers also received individual management development.
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No tenant accounts for more than 5% of our ALR and only a total of three tenants, individually, account for 3% or more of our ALR.
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The Piedmont Wayne Woody ("PWW") Foundation, which was established in memory of our first independent Chairman of the Board, W. Wayne Woody, distributes charitable contributions to nonprofit organizations that fit our charitable giving criteria, demonstrate fiscal and administrative stability, and are not discriminatory or political.
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The strategies we employ to achieve these objectives include: Redevelopment and Repositioning of Properties We have recently redeveloped the majority of the properties within our portfolio to maintain and enhance the competitive positioning of our properties in their respective marketplaces.
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The PWW Foundation, in partnership with two Historically Black Colleges and Universities, also provides funding for the Piedmont Office Realty Trust Scholarship Program which provides renewable, need-based, scholastic support to selected students interested in pursuing a career related to the real estate industry.
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Proactive Asset and Property Management, Leasing Capabilities, and Management of Portfolio Risk Our proactive, hospitality-minded approach to asset and property management encompasses a number of strategies designed to maximize occupancy and rental rates while following leading environmentally-conscious business practices and also meeting or exceeding the needs of today's discerning tenants.
Removed
Cyber Risk Oversight The Audit Committee of the board of directors, comprised of three independent members, all of whom have information security experience, oversees our management of cyber risk and is briefed quarterly on information technology and information security matters. Any significant issues identified would be reported to the board on a quarterly basis as well.
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We encourage all employees, tenants, and vendors to mutually respect one another's diversity in order to maintain a cohesive work environment that values fairness and equal treatment. During 2023, we continued our partnership with two Historically Black Colleges and Universities, by providing funding for the Piedmont Office Realty Trust Scholarship Program.
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Certain members of the board of directors also have significant cyber security experience. Although we have never experienced an information security breach or incurred any expenses related to an information security breach, we take a proactive approach to managing information security risk.
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Risk Factors which follow for further discussion of the risks associated with these contracts.
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During the year ended December 31, 2022, we engaged an external accounting firm to update our Information Technology Cybersecurity Risk Assessment. The results of the assessment were reported to the Audit Committee and the board of directors. Additionally, an annual audit focusing on entity-level, application and information technology general computer controls is performed by an external audit firm.
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Vulnerability and penetration tests are also performed annually by a third party. We have an information security training and compliance program, in which all employees are 7 Table of Contents Index to Financial Statements required to participate on a formal basis at least annually, with cybersecurity updates, notices, reminders, and simulated cyber-attacks emailed to all employees bi-weekly.
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Risk Factors which follow for further discussion of the risks associated with these contracts. 8 Table of Contents Index to Financial Statements Information Regarding Disclosures Presented ALR is calculated by multiplying (i) current rental payments (defined as base rent plus operating expense reimbursements, if payable by the tenant on a monthly basis under the terms of a lease that has been executed, but excluding (a) rental abatements and (b) rental payments related to executed but not commenced leases for space that was covered by an existing lease), by (ii) 12.
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In instances in which contractual rents or operating expense reimbursements are collected on an annual, semi-annual, or quarterly basis, such amounts are multiplied by a factor of 1, 2, or 4, respectively, to calculate the annualized figure.
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For leases that have been executed but not commenced relating to unleased space, ALR is calculated by multiplying (i) the monthly base rental payment (excluding abatements) plus any operating expense reimbursements for the initial month of the lease term, by (ii) 12.
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Unless stated otherwise, this measure excludes revenues associated with development properties and properties taken out of service for redevelopment, if any.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

67 edited+11 added−17 removed206 unchanged
Biggest changeDeficiencies, including any material weakness, in our internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in the trading price of our common stock, or otherwise materially adversely affect our business, reputation, results of operations, financial condition, or liquidity. 19 Table of Contents Index to Financial Statements Risks Related to Our Organization and Structure Our organizational documents contain provisions that may have an anti-takeover effect, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or otherwise benefit our stockholders.
Biggest changeRisks Related to Our Organization and Structure Our organizational documents contain provisions that may have an anti-takeover effect, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or otherwise benefit our stockholders.
You should also refer to the other information contained in our periodic reports, including the Cautionary Note Regarding Forward-Looking Statements, our consolidated financial statements and the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for a further discussion of the risks, uncertainties, and assumptions relating to our business.
You should also refer to the other information contained in our periodic reports, including the Cautionary Note Regarding Forward-Looking Statements, our consolidated financial statements and the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for a further discussion of risks, uncertainties, and assumptions relating to our business.
Risks Related to Our Business and Operations Economic, regulatory, socio-economic or technology changes that impact the real estate market generally, or that could affect patterns of use of commercial office space, may cause our operating results to suffer and decrease the value of our real estate properties.
Risks Related to Our Business and Operations Economic, regulatory, socio-economic or technology changes that impact the real estate market generally, or that could affect patterns of use of commercial office space, may cause our operating results to suffer and decrease the value of our properties.
The following factors, among others, may adversely affect the operating performance and long- or short-term value of our properties: • changes in the national, regional, or local economic climate, particularly in markets in which we have a concentration of properties; • local office market conditions such as employment rates and changes in the supply of, or demand for, space in properties similar to those that we own within a particular area; • changes in the patterns of office or parking garage use due to work-from-home arrangements, or remote work technology (e.g.
The following factors, among others, may adversely affect the operating performance and long- or short-term value of our properties: • changes in the national, regional, or local economic climate, particularly in markets in which we have a concentration of properties; • local office market conditions such as employment rates and changes in the supply of, or demand for, space in properties similar to those that we own within a particular area; • changes in the patterns of office or parking garage use due to work-from-home arrangements, remote work technology (e.g.
Lease agreements with these federal government agencies contain certain provisions required by federal law, which require, among other things, that the lessor or the owner of the property complies with certain rules and regulations, rules and regulations related to anti-kickback procedures, examination of records, audits and records, equal opportunity provisions, prohibitions against segregated facilities, certain executive orders, subcontractor costs or pricing data, and certain provisions intended to assist small businesses.
Lease agreements with these federal government agencies contain certain provisions required by federal law, which require, among other things, that the lessor or the owner of the property complies with certain rules and regulations related to anti-kickback procedures, examination of records, audits and records, equal opportunity provisions, prohibitions against segregated facilities, certain executive orders, subcontractor costs or pricing data, and certain provisions intended to assist small businesses.
Our portfolio of properties is primarily located in the following major metropolitan areas: Atlanta, Dallas, Washington, D.C./Northern Virginia, Boston, Orlando, Minneapolis, and New York, any of which could be, and some of which have been, the target of terrorist attacks, armed hostilities, or civil unrest.
Our portfolio of properties is primarily located in the following major metropolitan areas: Atlanta, Dallas, Northern Virginia/Washington, D.C., Boston, Orlando, Minneapolis, and New York, any of which could be, and some of which have been, the target of terrorist attacks, armed hostilities, or civil unrest.
To the extent that we engage in acquisition activities, they will pose the following risks, among others: • we may acquire properties or other real estate-related investments that are not initially accretive to our results upon acquisition or accept lower cash flows in anticipation of longer-term appreciation, and we may not successfully manage and lease those properties to meet our expectations; • we may not achieve expected cost savings and operating efficiencies; • we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations; • management attention may be diverted to the integration of acquired properties, which in some cases may turn out to be less compatible with our operating strategy than originally anticipated; • we may not be able to support the acquired property through one of our existing property management offices and may not successfully open new satellite offices to serve additional markets; • the acquired properties may not perform as well as we anticipate due to various factors, including changes in macro-economic conditions and the demand for office space; and • we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, unknown/undisclosed latent structural issues or maintenance problems, claims by tenants, vendors or others against the former owners of the properties, and claims for indemnification by general partners, directors, officers, and others indemnified by the former owners of the properties.
To the extent that we engage in acquisition activities, we will face the following risks, among others: • we may acquire properties or other real estate-related investments that are not initially accretive to our results upon acquisition or accept lower cash flows in anticipation of longer-term appreciation, and we may not successfully manage and lease those properties to meet our expectations; • we may not achieve expected cost savings and operating efficiencies; • we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations; • management attention may be diverted to the integration of acquired properties, which in some cases may turn out to be less compatible with our operating strategy than originally anticipated; • we may not be able to support the acquired property through one of our existing property management offices and may not successfully open new satellite offices to serve additional markets; • the acquired properties may not perform as well as we anticipate due to various factors, including changes in macro-economic conditions and the demand for office space; and • we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, unknown/undisclosed latent structural issues or maintenance problems, claims by tenants, vendors or others against the former owners of the properties, and claims for indemnification by general partners, directors, officers, and others indemnified by the former owners of the properties.
Such joint venture investments involve risks not otherwise present in a wholly-owned property, development, or redevelopment project, including the following: • in these investments, we may not have exclusive control over the development, financing, leasing, management, and other aspects of the project, which may prevent us from taking actions that are opposed by our joint venture partners; • joint venture agreements often restrict the transfer of a co-venturer’s interest or may otherwise restrict our ability to sell the interest when we desire or on advantageous terms; • we may not be in a position to exercise sole decision-making authority regarding the property or joint venture, which could create the potential risk of creating impasses on decisions, such as acquisitions or sales; • such co-venturer may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • such co-venturer may be in a position to take action contrary to our instructions, requests, policies or objectives, including our current policy with respect to maintaining our qualification as a REIT; • the possibility that our co-venturer in an investment might become bankrupt, which would mean that we and any other remaining co-venturers would generally remain liable for the joint venture’s liabilities; • our relationships with our co-venturers are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or assets underlying such relationship or may need to purchase such interests or assets at a premium to the market price to continue ownership; • disputes between us and our co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and board of directors from focusing their time and efforts on our business and could result in subjecting the properties owned by the applicable joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of our co-venturers, and the activities of a joint venture could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.
Such joint venture investments involve risks not otherwise present in a wholly-owned property, development, or redevelopment project, including the following: • in these investments, we may not have exclusive control over the development, financing, leasing, management, and other aspects of the project, which may prevent us from taking actions that are opposed by our joint venture partners; • joint venture agreements often restrict the transfer of a co-venturer’s interest or may otherwise restrict our ability to sell the interest when we desire or on advantageous terms; • we may not be in a position to exercise sole decision-making authority regarding the property or joint venture, which could create the potential risk of creating impasses on decisions, such as acquisitions or sales; 15 Table of Contents Index to Financial Statements • such co-venturer may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • such co-venturer may be in a position to take action contrary to our instructions, requests, policies or objectives, including our current policy with respect to maintaining our qualification as a REIT; • the possibility that our co-venturer in an investment might become bankrupt, which would mean that we and any other remaining co-venturers would generally remain liable for the joint venture’s liabilities; • our relationships with our co-venturers are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or assets underlying such relationship or may need to purchase such interests or assets at a premium to the market price to continue ownership; • disputes between us and our co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and board of directors from focusing their time and efforts on our business and could result in subjecting the properties owned by the applicable joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of our co-venturers, and the activities of a joint venture could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.
We face risks related to the occurrence of cyber incidents, or a deficiency in our cybersecurity, which could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
We face risks related to the occurrence of cybersecurity incidents, or a deficiency in our information systems, which could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
As a result, we are particularly susceptible to adverse market conditions in these markets, including any reduction in demand for office properties, industry slowdowns, civil unrest, natural disasters, governmental cut backs, relocation of businesses, business layoffs or downsizing, and changing demographics. Our operations may also be affected if competing properties are built in any of these markets.
As a result, we are particularly susceptible to adverse conditions in these markets, including any reduction in demand for office properties, industry slowdowns, civil unrest, natural disasters, health crises, governmental cut backs, relocation of businesses, business layoffs or downsizing, and changing demographics. Our operations may also be affected if competing properties are built in any of these markets.
Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce the returns to our investors. Costs of complying with governmental laws and regulations may reduce our net income.
Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce the returns to our investors. Costs of complying with governmental laws and regulations may reduce our net income and cash flows.
Metaverse, Zoom, etc) becoming more prevalent or other changes that reduce the demand for office workers or parking spaces generally; • increased demand for "co-working", open workspaces, or sharing of office space with other companies; • increased supply of office space due to the conversion of other asset classes such as shopping malls and other retail establishments to office space; • the attractiveness of our properties to potential tenants and competition from other available properties; • changes in interest rates and availability of permanent financing sources that may render the sale of a property difficult or unattractive or otherwise reduce returns to stockholders; • changes in market rental rates and related concessions granted to tenants, including free rent and tenant improvement allowances; • the financial stability of our tenants or groups of tenants in specific industry sectors (such as the oil and gas, hospitality, travel, retail, and co-working sectors), including bankruptcies, financial difficulties, or lease defaults by our tenants; • the inability to finance property development or acquisitions on favorable terms; • changes in operating costs and expenses, including costs for maintenance, insurance, and real estate taxes, and our inability to timely adjust rents in light of such changes; • the need to periodically fund the costs to repair, renovate, and re-let space; • earthquakes, tornadoes, hurricanes and other natural disasters, civil unrest, terrorist acts or acts of war, any of which may result in uninsured or under-insured losses; • health crises such as the spread of communicable diseases and governmental or private measures taken to combat such health crises; • changes in, or increased costs of compliance with, governmental regulations, including those governing usage, zoning, the environment, and taxes; and • significant changes in accounting standards and tax laws.
Artificial Intelligence, Zoom, etc) becoming more prevalent, or other changes that reduce the demand for office workers or parking spaces generally; • increased demand for "co-working", open workspaces, or sharing of office space with other companies; • increased supply of office space due to the conversion of other asset classes such as shopping malls and other retail establishments to office space; • the attractiveness of our properties to potential tenants and competition from other available properties; • changes in interest rates and availability of permanent financing sources that may render the sale of a property difficult or unattractive or otherwise reduce returns to stockholders; • changes in market rental rates and related concessions granted to tenants, including free rent and tenant improvement allowances; • the financial stability of our tenants, including bankruptcies, financial difficulties, or lease defaults by our tenants; • the inability to finance property development or acquisitions on favorable terms; • changes in operating costs and expenses, including costs for maintenance, insurance, and real estate taxes, and our inability to timely adjust rents in light of such changes; • the need to periodically fund the costs to repair, renovate, and re-let space; • earthquakes, tornadoes, hurricanes and other natural disasters, civil unrest, terrorist acts or acts of war, any of which may result in uninsured or under-insured losses; • health crises such as the spread of communicable diseases and governmental or private measures taken to combat such health crises; • changes in, or increased costs of compliance with, governmental regulations, including those governing usage, zoning, the environment, and taxes; and • significant changes in accounting standards and tax laws.
Any of the above factors may prevent us from generating sufficient cash flow to operate our business, make distributions to our stockholders, or maintain the value of our real estate properties. 10 Table of Contents Index to Financial Statements We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to the existing leases, or we may expend significant capital in our efforts to re-let space.
Any of the above factors may prevent us from generating sufficient cash flow to operate our business, make distributions to our stockholders, or maintain the value of our properties. 9 Table of Contents Index to Financial Statements We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to the existing leases, and we may expend significant capital in our efforts to re-let space.
Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our common stock include, but are not limited to, the following: • changes in the perceived demand for office space; • actual or anticipated variations in our quarterly operating results; • changes in our earnings estimates or publication of research reports about us or the real estate industry, although no assurance can be given that any research reports about us will be published or the accuracy of such reports; • changes in our dividend policy; • future sales of substantial amounts of our common stock by our existing or future stockholders; • increases in market interest rates, which may lead purchasers of our stock to demand a higher yield; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key personnel; • actions by institutional stockholders; • material, adverse litigation judgments; • speculation in the press or investment community; • general market and economic conditions; and • the realization of any of the other risk factors described in this report.
Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our common stock include, but are not limited to, the following: • changes in the perceived demand for office space; • actual or anticipated variations in our quarterly operating results; • changes in our earnings estimates or publication of research reports about us or the real estate industry, although no assurance can be given that any research reports about us will be published or the accuracy of such reports; • changes in our dividend policy; • future sales of substantial amounts of our common stock by our existing or future stockholders; • increases in market interest rates, which may lead purchasers of our stock to demand a higher yield; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • change in the credit ratings assigned to us, the Operating Partnership or our or their unsecured debt securities; • additions or departures of key personnel; • actions by institutional stockholders; • material, adverse litigation judgments; • speculation in the press or investment community; • general market and economic conditions; and • the realization of any of the other risk factors described in this report.
Risks Associated with Debt Financing We have incurred and are likely to continue to incur mortgage and other indebtedness, which may increase our business risks. As of December 31, 2022, we had total outstanding indebtedness of approximately $2.0 billion, including $197.0 million of mortgage debt.
Risks Associated with Debt Financing We have incurred and are likely to continue to incur mortgage and other indebtedness, which may increase our business risks. As of December 31, 2023, we had total outstanding indebtedness of approximately $2.1 billion, including $197.0 million of mortgage debt.
Further, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for such year, (b) 95% of our net capital gain income for such year, and (c) any undistributed taxable income 22 Table of Contents Index to Financial Statements from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over the sum of (i) the amounts actually distributed by us, plus (ii) retained amounts on which we pay income tax at the corporate level.
Further, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for such year, (b) 95% of our net capital gain income for such year, and (c) any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over the sum of (i) the amounts actually distributed by us, plus (ii) retained amounts on which we pay income tax at the corporate level.
When we engage in development activities, we are subject to risks associated with those activities that could adversely affect our financial condition, results of operations and cash flows, including: • uncertainties associated with zoning, land-use, building, occupancy and other governmental permits and authorizations, as well as, environmental concerns of governmental entities or community groups; • our builders’ ability to build in conformity with plans, specifications, budgeted costs and timetables; • delays in completing construction could give tenants the right to terminate pre-construction leases; • risks associated with making progress payments or other advances to builders before they complete construction; • unanticipated additional costs related to disputes with existing tenants during redevelopment projects; • normal lease-up risks relating to newly constructed projects; • projects with long lead times may increase leasing risk due to changes in market conditions; • development projects in which we have invested may be abandoned and the related investment will be impaired; • we may not be able to obtain land on which to develop; • we may not be able to obtain financing for development projects on favorable terms (if at all); • construction costs of a project may exceed the original estimates or construction may not be concluded on schedule, making the project less profitable than originally estimated or not profitable at all (including the possibility of errors or omissions in the project's design, contract default, contractor or subcontractor default, performance bond surety default, the effects of local weather conditions, the possibility of local or national strikes and the possibility of shortages in materials, building supplies or energy and fuel for equipment); • tenants which pre-lease space or contract with us for a build-to-suit project may default prior to occupying the project; • upon completion of construction, we may not be able to obtain, or obtain on advantageous terms, permanent financing for activities that we financed through construction loans; 14 Table of Contents Index to Financial Statements • we may not achieve sufficient occupancy levels and/or obtain sufficient rents to make a completed project profitable; and • substantial renovation and development activities may require a significant amount of management’s time and attention, diverting their attention from our other operations.
When we engage in development activities, we are subject to risks associated with those activities that could adversely affect our financial condition, results of operations and cash flows, including: • uncertainties associated with zoning, land-use, building, occupancy and other governmental permits and authorizations, as well as, environmental concerns of governmental entities or community groups; • our builders’ ability to build in conformity with plans, specifications, budgeted costs and timetables; • delays in completing construction could give tenants the right to terminate pre-construction leases; • risks associated with making progress payments or other advances to builders before they complete construction; • unanticipated additional costs related to disputes with existing tenants during redevelopment projects; • normal lease-up risks relating to newly constructed projects; • projects with long lead times may increase leasing risk due to changes in market conditions; • development projects in which we have invested may be abandoned and the related investment will be impaired; • we may not be able to obtain land on which to develop; • we may not be able to obtain financing for development projects on favorable terms (if at all); • construction costs of a project may exceed the original estimates or construction may not be concluded on schedule, making the project less profitable than originally estimated or not profitable at all (including the possibility of errors or omissions in the project's design, contract default, contractor or subcontractor default, performance bond surety default, the effects of local weather conditions, the possibility of local or national strikes and the possibility of shortages in materials, building supplies or energy and fuel for equipment); • tenants which pre-lease space or contract with us for a build-to-suit project may default prior to occupying the project; • upon completion of construction, we may not be able to obtain, or obtain on advantageous terms, permanent financing for activities that we financed through construction loans; • we may not achieve sufficient occupancy levels and/or obtain sufficient rents to make a completed project profitable; and • substantial renovation and development activities may require a significant amount of management’s time and attention, diverting their attention from our other operations. 13 Table of Contents Index to Financial Statements Actual or threatened public health epidemics or outbreaks such as the COVID-19 pandemic, as well as governmental and private measures taken to combat such health crises, could have a material adverse effect on our business operations and financial results.
If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for distributions to our stockholders. Property taxes may decrease returns on real estate.
If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for distributions to our stockholders. 22 Table of Contents Index to Financial Statements Property taxes may decrease returns on real estate.
Replacing insurance coverage at unfavorable rates and the potential of uncollectible claims due to carrier insolvency could adversely impact our results of operations and cash flows. 16 Table of Contents Index to Financial Statements Our joint venture investments could be adversely affected by a lack of sole decision-making authority and our reliance on joint venture partners’ financial condition.
Replacing insurance coverage at unfavorable rates and the potential of uncollectible claims due to carrier insolvency could adversely impact our results of operations and cash flows. Our joint venture investments could be adversely affected by a lack of sole decision-making authority and our reliance on joint venture partners’ financial condition.
In particular, the recent COVID-19 pandemic and its associated variants adversely impacted the global economy and the regional U.S. economies in which we operate, and negatively impacted some of our tenants’ ability to pay their rent.
For example, the COVID-19 pandemic and its associated variants adversely impacted the global economy and the regional U.S. economies in which we operate, and negatively impacted some of our tenants’ ability to pay their rent.
Although we make efforts to maintain the security and integrity of these types of information technology networks and related systems, and despite various measures we have implemented to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Although we make efforts to maintain the security and integrity of these types of information technology networks and related systems, and despite various measures we have implemented to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that 14 Table of Contents Index to Financial Statements attempted security breaches or disruptions would not be successful or damaging.
Some of our leases provide tenants with the right to terminate their leases early. Certain of our leases permit our tenants to terminate their leases of all or a portion of the leased premises prior to their stated lease expiration dates under certain circumstances, such as providing notice by a certain date and, in many cases, paying a termination fee.
Certain of our leases permit our tenants to terminate their leases of all or a portion of the leased premises prior to their stated lease expiration dates under certain circumstances, such as providing notice by a certain date and, in many cases, paying a termination fee.
In addition, the time and resources that may be required to obtain market knowledge or integrate such properties into our existing portfolio could divert our management’s attention from our existing business or other attractive opportunities. The illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.
In addition, the time and resources that may be required to obtain market knowledge or integrate such properties into our existing portfolio could divert our management’s attention from our existing business or other attractive opportunities. 12 Table of Contents Index to Financial Statements The illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.
Climate change has also been identified as a potential source of reputational risk tied to changing customer or community perceptions of an organization's contribution to or detraction from the transition to a lower-carbon economy. We depend on key personnel, each of whom would be difficult to replace.
Climate change has also been identified as a potential source of 17 Table of Contents Index to Financial Statements reputational risk tied to changing customer or community perceptions of an organization's contribution to or detraction from the transition to a lower-carbon economy. We depend on key personnel, each of whom would be difficult to replace.
In addition, we may be obligated to fund the defense costs incurred by our board of directors and officers (as well as by our employees and agents) in some cases. 21 Table of Contents Index to Financial Statements Risks Related to Tax Matters Our failure to qualify as a REIT could adversely affect our operations and our ability to make distributions.
In addition, we may be obligated to fund the defense costs incurred by our board of directors and officers (as well as by our employees and agents) in some cases. Risks Related to Tax Matters Our failure to qualify as a REIT could adversely affect our operations and our ability to make distributions.
This restriction may have the effect of delaying, deferring, or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for our common stock or otherwise be in the best interest of our stockholders.
Such preferred stock also could have the effect of delaying, deferring, or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for our common stock, or otherwise be in the best interest of our stockholders.
Risks that could directly result from the occurrence of a cyber incident include physical harm to occupants of our buildings, physical damage to our buildings, actual cash loss, operational interruption, damage to our relationship and reputation with our tenants, potential errors from misstated financial reports, violations of loan covenants, missed reporting deadlines, and private data exposure, among others.
Risks that could directly result from the occurrence of a cybersecurity incident include physical harm to occupants of our buildings, physical damage to our buildings, actual cash loss, operational interruption, regulatory investigations, fines and orders, litigation, damage to our relationship and reputation with our tenants, potential errors from misstated financial reports, violations of loan covenants, missed reporting deadlines, and private data exposure, among others.
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. 12 Table of Contents Index to Financial Statements Adverse market and economic conditions could cause us to recognize impairment charges on our goodwill.
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. Adverse market and economic conditions could cause us to recognize impairment charges on our goodwill.
We may acquire properties in new markets, where we may face risks associated with investing in an unfamiliar market. We may acquire properties located in markets in which we do not have an established presence.
We may acquire properties in new markets, where we may face risks associated with investing in an unfamiliar market. We have in the past and may in the future acquire properties located in markets in which we do not have an established presence.
As a result, these provisions currently will not apply to a business combination or control share acquisition involving our company. However, our board of directors still has the ability to opt into the business combination provisions and the control share provisions of Maryland law in the future.
As a result, these provisions currently will not apply to a business combination or 19 Table of Contents Index to Financial Statements control share acquisition involving our company. However, our board of directors still has the ability to opt into the business combination provisions and the control share provisions of Maryland law in the future.
This concentration exposes us to the risk of economic downturns in the office sector to a greater extent than if our portfolio also included other sectors of the real estate industry. Collectively, over two-thirds of our ALR is generated from our properties located in our Sunbelt markets as of December 31, 2022.
This concentration exposes us to the risk of economic downturns in the office sector to a greater extent than if our portfolio also included other sectors of the real estate industry. Collectively, approximately 70% of our ALR is generated from our properties located in our Sunbelt markets as of December 31, 2023.
We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our shares or our industry, or the stock of any of our competitors, the price of our shares could decline.
Furthermore, if one or more of the analysts who do cover us downgrades our shares or our industry, or the stock of any of our competitors, the price of our shares could decline.
If the market price of our common stock declines significantly, 26 Table of Contents Index to Financial Statements stockholders may be unable to resell their shares at or above their purchase price. We cannot assure stockholders that the market price of our common stock will not fluctuate or decline significantly in the future.
If the market price of our common stock declines significantly, stockholders may be unable to resell their shares at or above their purchase price. We cannot assure stockholders that the market price of our common stock will not fluctuate or decline significantly in the future.
The revenues generated by the properties that any of our lead tenants occupy are substantially dependent upon the financial condition of these tenants and, accordingly, any event of bankruptcy, insolvency, or 11 Table of Contents Index to Financial Statements a general downturn in the business of any of these tenants may result in the failure or delay of such tenant’s rental payments, which may have a substantial adverse effect on our operating performance.
The revenues generated by the properties that any of our lead tenants occupy are substantially dependent upon the financial condition of these tenants and, accordingly, any event of bankruptcy, insolvency, or a general downturn in the business of any of these tenants may result in the failure or delay of such tenant’s rental payments, which may have a substantial adverse effect on our operating performance. 10 Table of Contents Index to Financial Statements Some of our leases provide tenants with the right to terminate their leases early.
Any or all of the preceding risks could have a material adverse effect on our results of operations, financial condition and cash flows. Insider or employee cyber and security threats are increasingly a concern for all companies, including ours. In addition, social engineering and phishing are a particular concern for companies with employees.
Any or all of the preceding risks could have a material adverse effect on our results of operations, financial condition and cash flows. Insider or employee cyber and security threats, including as a result of social engineering and phishing attempts, are increasingly a concern for all companies, including ours.
We may be adversely affected by trends in the office real estate industry. Businesses have increasingly implemented remote work and flexible work arrangements. There has also been a trend of businesses utilizing open workspaces and “co-working” spaces. These practices enable businesses to reduce their space requirements.
We may be adversely affected by trends in the office real estate industry. Businesses have increasingly implemented remote work and flexible work arrangements. There has also been a trend of businesses utilizing open workspaces and “co-working” spaces.
We are continuously working to install new 15 Table of Contents Index to Financial Statements networks and to upgrade our existing networks, building operating and information technology systems, and to train employees against phishing, malware and other cyber risks to ensure that we are protected, to the greatest extent possible, against cyber risks and security breaches.
We are continuously working to install new networks and to upgrade our existing networks, building operating and information technology systems, and to train employees against phishing, malware and other cyber risks to ensure that we are protected, to the greatest extent possible, against cybersecurity risks and incidents.
We may face risks associated 13 Table of Contents Index to Financial Statements with a lack of market knowledge or understanding of the local economy, acquiring additional properties in the new market and achieving economies of scale, forging new business relationships in the area and unfamiliarity with local government and permitting procedures.
To the extent we acquire any such properties, we will face risks associated with a lack of market knowledge or understanding of the local economy, acquiring additional properties in the new market and achieving economies of scale, forging new business relationships in the area and unfamiliarity with local government and permitting procedures.
Over time, these conditions could result in physical damage 18 Table of Contents Index to Financial Statements to our buildings or a decline in demand for office space in our buildings.
Over time, these conditions could result in physical damage to our buildings or a decline in demand for office space in our buildings.
Our board of directors can take many actions without stockholder approval. Our board of directors has overall authority to oversee our operations and determine our major corporate policies. This authority includes significant flexibility.
Our board of directors has overall authority to oversee our operations and determine our major corporate policies. This authority includes significant flexibility.
While we have not experienced any material cyber incidents in the past, the risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
While we have not experienced any material cybersecurity incidents in the past, the risk of such an incident, including as a result of computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
Among other effects, any restrictions put in place to combat public health epidemics or outbreaks could cause some of our tenants to close or operate at reduced capacity for an extended period of time, in some cases causing such tenants to default on their leases, or could result in technological and social changes that reduce the long-term necessity for office space among companies generally.
Among other effects, any restrictions put in place to combat public health epidemics or outbreaks could cause some of our tenants to close or operate at reduced capacity for an extended period of time, in some cases causing such tenants to default on their leases.
Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things our financial condition, results of operations and market conditions at the time; and restrictions in the agreements governing our indebtedness.
Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things our financial condition, results of operations and market conditions at the time; and restrictions in the agreements governing our indebtedness. As a result, we may not be able to refinance our indebtedness on commercially reasonable terms, or at all.
Although we believe that our properties are currently in material compliance with these regulatory requirements, we have not conducted an audit or investigation of all of our properties to determine our compliance, and we cannot predict the ultimate cost of compliance.
Although we believe that our properties are currently in material compliance with these regulatory requirements, we have not conducted an audit or investigation of all of our properties to determine our compliance, and we cannot predict the ultimate cost of compliance. Any material expenditures, liabilities, fines, or damages we must pay will reduce our net income and cash flows.
If any of the credit rating agencies that have rated our unsecured debt securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations.
If any of the credit rating agencies that have rated us, the Operating Partnership or our or their unsecured debt securities downgrades or lowers these credit ratings, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs (including by increasing interest expense as a result of increases in the state interest rate spreads over reference rates or increased interest rate step-ups on certain of our or the Operating Partnership's debt instruments) and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows and our ability to satisfy our debt service obligations.
The potential termination or renegotiation of the terms of the interest rate derivative contracts as a result of changing counterparties through insolvency or merger could result in an adverse impact on our results of operations and cash flows. 25 Table of Contents Index to Financial Statements The replacement of LIBOR with SOFR may adversely affect our results of operations.
The potential termination or renegotiation of the terms of the interest rate derivative contracts as a result of changing counterparties through insolvency or merger could result in an adverse impact on our results of operations and cash flows.
If securities analysts do not publish research or reports about our business or if they downgrade our common stock or our sector, the price of our common stock could decline. The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business.
The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts.
Distributions are authorized and determined by our board of directors in its sole discretion and depend upon a number of factors, including: • cash available for distribution; • our results of operations and anticipated future results of operations; • our financial condition, especially in relation to our anticipated future capital needs of our properties; • the level of reserves we establish for future capital expenditures; • the distribution requirements for REITs under the Code; • the level of distributions paid by comparable listed REITs; • our operating expenses; and • other factors our board of directors deems relevant.
Distributions are authorized and determined by our board of directors in its sole discretion and depend upon a number of factors, including: • cash available for distribution; • our results of operations and anticipated future results of operations; • our financial condition, especially in relation to our anticipated future capital needs of our properties; • the level of reserves we establish for future capital expenditures; • the distribution requirements for REITs under the Code; • the level of distributions paid by comparable listed REITs; • our operating expenses; and • other factors our board of directors deems relevant. 24 Table of Contents Index to Financial Statements We expect to continue to pay quarterly distributions to our stockholders; however, we bear all expenses incurred by our operations, and our funds generated by operations, after deducting these expenses, may not be sufficient to cover desired levels of distributions to our stockholders.
This strategy requires us to identify suitable acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategy. We may not be successful in identifying suitable properties or other assets that meet our acquisition criteria or in consummating acquisitions on satisfactory terms, if at all. Failure to identify or consummate acquisitions could slow our growth.
We may not be successful in identifying suitable properties or other assets that meet our acquisition criteria or in consummating acquisitions on satisfactory terms, if at all. Failure to identify or consummate acquisitions could slow our growth. Likewise, we may incur costs pursuing acquisitions that we are ultimately unsuccessful in completing.
Such preferred stock also could have the effect of delaying, deferring, or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for our common stock, or otherwise be in the best interest of our stockholders. 20 Table of Contents Index to Financial Statements Our board of directors could elect for us to be subject to certain Maryland law limitations on changes in control that could have the effect of preventing transactions in the best interest of our stockholders.
This restriction may have the effect of delaying, deferring, or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price for our common stock or otherwise be in the best interest of our stockholders. 18 Table of Contents Index to Financial Statements Our board of directors can take many actions without stockholder approval.
For instance, if interest rates continue to rise, it is possible that the market price of our common stock will decrease, because potential investors may require a higher dividend yield on our common stock as market rates on interest-bearing securities, such as bonds, rise.
For instance, if interest rates continue to rise, it is possible that the market price of our common stock will decrease, because potential investors may require a higher dividend yield on our common stock as market rates on interest-bearing securities, such as bonds, rise. 25 Table of Contents Index to Financial Statements If securities analysts do not publish research or reports about our business or if they downgrade our common stock or our sector, the price of our common stock could decline.
In addition, failure to meet any of these covenants, including the financial coverage ratios, could cause an event of default under or accelerate some or all of our indebtedness, which would have a material adverse effect on us.
In addition, failure to meet any of these covenants, including the financial coverage ratios, could cause an event of default under or accelerate some or all of our indebtedness, which would have a material adverse effect on us. 23 Table of Contents Index to Financial Statements Increases in interest rates would cause the amount of our variable-rate debt payments to also increase and could limit our ability to make distributions to our stockholders.
Our tenants' inability to pay rent under our leases and any declines in demand for office space could adversely affect our own liquidity and operating results. Future terrorist attacks, armed hostilities, or civil unrest in the major metropolitan areas in which we own properties could significantly impact the demand for, and value of, our properties.
Future terrorist attacks, armed hostilities, or civil unrest in the major metropolitan areas in which we own properties could significantly impact the demand for, and value of, our properties.
Under H.R. 1, federal net operating losses incurred in taxable years beginning after December 31, 2017 can be carried forward indefinitely. Net operating losses of a REIT may not be carried back to any taxable year, regardless of whether the taxpayer qualified as a REIT in such taxable year.
Net operating losses of a REIT may not be carried back to any taxable year, regardless of whether the taxpayer qualified as a REIT in such taxable year.
Our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control.
Our ability to make payments on our indebtedness and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future. Our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in non-REIT corporations that make distributions, particularly after the scheduled expiration of the 20% deduction applicable to qualified REIT dividends on December 31, 2025. 23 Table of Contents Index to Financial Statements A recharacterization of transactions undertaken by our operating partnership may result in lost tax benefits or prohibited transactions, which would diminish cash distributions to our stockholders, or even cause us to lose REIT status.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in non-REIT corporations that make distributions, particularly after the scheduled expiration of the 20% deduction applicable to qualified REIT dividends on December 31, 2025.
In addition, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants.
In addition, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants. 16 Table of Contents Index to Financial Statements Some of our properties are adjacent to or near other properties that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances.
This could cause us to recognize taxable income prior to the receipt of the associated cash. H.R. 1 also includes limitations on the deductibility of certain compensation paid to our executives, certain interest payments, and certain net operating loss carryforwards, each of which could potentially increase our taxable income and our required distributions.
H.R. 1 also includes limitations on the deductibility of certain compensation paid to our executives, certain interest payments, and certain net operating loss carryforwards, each of which could potentially increase our taxable income and our required distributions. Under H.R. 1, federal net operating losses incurred in taxable years beginning after December 31, 2017 can be carried forward indefinitely.
Any of these occurrences could materially and adversely affect our borrowing costs, business and results of operations. A downgrade in our credit rating could materially adversely affect our business and financial condition. The credit ratings assigned to our unsecured debt securities could change based upon, among other things, our results of operations and financial condition.
The credit ratings assigned to us, to the Operating Partnership and to our and their unsecured debt securities could change based upon, among other things, our results of operations and financial condition.
This treatment would reduce our net earnings available for investment or distribution to our stockholders because of the additional tax liability to us for the years involved. As a result of such additional tax liability, we might need to borrow funds or liquidate certain investments on terms that may be disadvantageous to us in order to pay the applicable tax.
As a result of such additional tax liability, we might need to borrow funds or liquidate certain investments on terms that may be disadvantageous to us in order to pay the applicable tax. 20 Table of Contents Index to Financial Statements Failure of our operating partnership to be treated as a disregarded entity or a partnership would have serious adverse consequences to our stockholders.
Any material expenditures, liabilities, fines, or damages we must pay will reduce our net income and cash flows. 17 Table of Contents Index to Financial Statements As the present or former owner or operator of real property, we could become subject to liability for environmental contamination, regardless of whether we caused such contamination.
As the present or former owner or operator of real property, we could become subject to liability for environmental contamination, regardless of whether we caused such contamination.
We depend on tenants for our revenue, and accordingly, lease terminations or tenant defaults, particularly by one of our significant lead tenants, could adversely affect the income produced by our properties. The success of our investments materially depends on the financial stability of our tenants, any of whom may experience a change in their business at any time.
The success of our investments materially depends on the financial stability of our tenants, any of whom may experience a change in their business at any time.
Our earnings growth will partially depend upon future acquisitions of properties, and we may not be successful in identifying and consummating suitable acquisitions that meet our investment criteria. Our business strategy primarily involves the acquisition of high-quality office properties in selected markets.
See Note 6 to our accompanying consolidated financial statements for more information. 11 Table of Contents Index to Financial Statements Our earnings growth will partially depend upon future acquisitions of properties, and we may not be successful in identifying and consummating suitable acquisitions that meet our investment criteria.
We may incur additional indebtedness to acquire properties or other real estate-related investments, to fund property improvements, and other capital expenditures or for other corporate purposes, such as to repurchase shares of our common stock through repurchase programs that our board of directors have authorized or to fund future distributions to our stockholders.
We may incur additional indebtedness to acquire properties or other real estate-related investments, to fund property improvements, and other capital expenditures or for other corporate purposes. Significant borrowings by us increase the risks of investors' willingness to make an investment in us.
If one or more of these analysts ceases coverage of our company, we could lose attention in the market, which in turn could cause the price of our common stock to decline. 27 Table of Contents Index to Financial Statements ITEM 1B. UNRESOLVED STAFF COMMENTS There were no unresolved SEC staff comments as of December 31, 2022.
If one or more of these analysts ceases coverage of our company, we could lose attention in the market, which in turn could cause the price of our common stock to decline. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.
The recent COVID-19 pandemic also accelerated some company’s adoption of remote work platforms and may result in a longer-term decrease in the need for office space among some companies. While some effects of the COVID-19 pandemic have begun to subside, the rise of additional viral variants could cause a resurgence of the pandemic and its adverse impacts in the future.
The COVID-19 pandemic also accelerated some companies’ adoption of remote work platforms and could result in longer term technological and social changes that reduce the demand for office space among companies generally. Our tenants' inability to pay rent under our leases and any declines in demand for office space could adversely affect our own liquidity and operating results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, functionality, or availability of our information resources and systems. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt building or corporate operations, corrupt data, or steal confidential information.
A cybersecurity incident is considered to be an unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through our information systems that jeopardizes the confidentiality, integrity, or availability of our information systems or any information residing therein.
Removed
These trends, some of which could accelerate as a result of changes in work practices during the COVID-19 pandemic, could erode demand for commercial office space and, in turn, place downward pressure on occupancy, rental rates and property valuations.
Added
These practices enable businesses to reduce their space requirements, thereby eroding demand for commercial office space and, in turn, placing downward pressure on occupancy, rental rates and property valuations. We depend on tenants for our revenue, and accordingly, lease terminations or tenant defaults, particularly by one of our significant lead tenants, could adversely affect the income produced by our properties.
Removed
As of December 31, 2022, our two largest tenants were: US Bancorp (5.0% of ALR) and State of New York (4.6% of ALR).
Added
Our business strategy primarily involves the acquisition of high-quality office properties in selected markets. This strategy requires us to identify suitable acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategy.
Removed
In conjunction with the performance of our goodwill impairment assessment during the year ended December 31, 2022, we recognized an impairment charge related to our goodwill of approximately $16.0 million. See Note 2 to our accompanying consolidated financial statements for more information.
Added
Deficiencies, including any material weakness, in our internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in the trading price of our common stock, or otherwise materially adversely affect our business, reputation, results of operations, financial condition, or liquidity.
Removed
Likewise, we may incur costs pursuing acquisitions that we are ultimately unsuccessful in completing.
Added
Our board of directors could elect for us to be subject to certain Maryland law limitations on changes in control that could have the effect of preventing transactions in the best interest of our stockholders.
Removed
Actual or threatened public health epidemics or outbreaks such as the recent COVID-19 pandemic, as well as governmental and private measures taken to combat such health crises, could have a material adverse effect on our business operations and financial results.
Added
This treatment would reduce our net earnings available for investment or distribution to our stockholders because of the additional tax liability to us for the years involved.
Removed
Some of our properties are adjacent to or near other properties that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances.
Added
This could cause us to recognize taxable 21 Table of Contents Index to Financial Statements income prior to the receipt of the associated cash.
Removed
Failure of our operating partnership to be treated as a disregarded entity or a partnership would have serious adverse consequences to our stockholders.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperty Statistics The following table shows the geographic diversification of our in-service portfolio as of December 31, 2022: Location Annualized Lease Revenue (in thousands) Rentable Square Feet (in thousands) Percentage of Annualized Lease Revenue (%) Percent Leased (%) Atlanta $ 150,082 4,717 27.0 85.4 Dallas 105,775 3,524 19.1 82.0 Washington, D.C./Northern Virginia 67,353 1,620 12.1 79.4 Minneapolis 66,378 2,104 12.0 92.1 Orlando 57,756 1,764 10.4 95.3 New York 47,132 1,045 8.5 86.4 Boston 41,684 1,270 7.5 90.9 Other (1) 19,132 614 3.4 91.2 $ 555,292 16,658 100.0 86.7 (1) Includes 1430 Enclave Parkway and Enclave Place in Houston, Texas. 28 Table of Contents Index to Financial Statements The following table shows lease expirations of our in-service office portfolio as of December 31, 2022 during each of the next twelve years and thereafter, assuming no exercise of renewal options or termination rights: Year of Lease Expiration Annualized Lease Revenue (in thousands) Percentage of Annualized Lease Revenue (%) 2023 40,507 7.3 2024 70,434 12.7 2025 66,082 11.9 2026 59,821 10.8 2027 54,486 9.8 2028 66,743 12.0 2029 39,186 7.1 2030 24,224 4.4 2031 23,070 4.1 2032 22,391 4.0 2033 10,347 1.9 2034 15,581 2.8 Thereafter 62,420 11.2 $ 555,292 100.0 Certain Restrictions Related to our Properties As of December 31, 2022, only 1180 Peachtree Street in Atlanta, Georgia was held as collateral for debt, and there were no properties subject to underlying ground leases.
Biggest changeProperty Statistics The following table shows the geographic diversification of our in-service portfolio as of December 31, 2023: Location Annualized Lease Revenue (in thousands) Rentable Square Feet (in thousands) Percentage of Annualized Lease Revenue (%) Percent Leased (%) Atlanta $ 163,389 4,706 28.4 91.1 Dallas 112,753 3,478 19.6 80.4 Northern Virginia/Washington, D.C. 66,190 1,589 11.5 77.9 Minneapolis 65,381 2,104 11.4 89.6 Orlando 59,582 1,757 10.4 95.0 New York 49,142 1,045 8.5 87.3 Boston 39,301 1,270 6.8 85.0 Other (1) 19,729 614 3.4 91.2 $ 575,467 16,563 100.0 87.1 (1) Includes 1430 Enclave Parkway and Enclave Place in Houston, Texas. 28 Table of Contents Index to Financial Statements The following table shows lease expirations of our in-service office portfolio as of December 31, 2023 during each of the next twelve years and thereafter, assuming no exercise of renewal options or termination rights: Year of Lease Expiration Annualized Lease Revenue (in thousands) Percentage of Annualized Lease Revenue (%) 2023 (1) 8,691 1.5 2024 42,280 7.4 2025 69,771 12.1 2026 64,462 11.2 2027 53,412 9.3 2028 68,122 11.8 2029 56,012 9.7 2030 27,674 4.8 2031 28,655 5.0 2032 23,514 4.1 2033 11,022 1.9 2034 35,649 6.2 2035 19,233 3.4 Thereafter 66,970 11.6 $ 575,467 100.0 (1) Includes leases with an expiration date of December 31, 2023, comprised of approximately 351,000 square feet.
ITEM 2. PROPERTIES Overview As of December 31, 2022, we owned interests in 51 in-service office properties, with over two-thirds of our ALR generated from our properties located primarily in major U.S. Sunbelt markets .
ITEM 2. PROPERTIES Overview As of December 31, 2023, we owned interests in 51 in-service office properties, with approximately 70% of our ALR generated from our properties located in major U.S. Sunbelt markets .
ALR related to our in-service portfolio was $555.3 million, or $38.46 per leased square foot, as of December 31, 2022 as compared with $536.8 million, or $36.81 per leased square foot, as of December 31, 2021.
ALR related to our in-service portfolio was $575.5 million, or $39.89 per leased square foot, as of December 31, 2023 as compared with $555.3 million, or $38.46 per leased square foot, as of December 31, 2022.
As of December 31, 2022 and 2021, our in-service portfolio was 86.7% and 85.5% leased, respectively, with an average lease term remaining as of each period end of approximatel y six years and an average lease size of 15,000 square feet. No tenant accounts for more than 5% of our ALR.
As of December 31, 2023 and 2022, our in-service portfolio was 87.1% and 86.7% leased, respectively, with an average lease term remainin g as of each period end of approximately six years and an average lease size of 15,000 square feet.
Refer to Schedule III listed in the index of Item 15(a) of this report, for further details regarding our properties as of December 31, 2022.
Certain Restrictions Related to our Properties As of December 31, 2023, only 1180 Peachtree Street in Atlanta, Georgia was held as collateral for debt, and there were no properties subject to underlying ground leases. Refer to Schedule III listed in the index of Item 15(a) of this report, for further details regarding our properties as of December 31, 2023.
Removed
These rental rates are presented before consideration of the fact that several of our largest tenants self-perform various aspects of their building management; therefore, we do not count those expenses in our gross rent calculations.
Added
No tenant accounts for more than 5% of our ALR, and only a total of three tenants, individually, account for 3% or more of our ALR.
Removed
If the costs of these functions are added to these leases, our average gross rent for our in-service portfolio as of December 31, 2022, increases to approximately $38.86 per leased square foot.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of Cumulative Total Return of One or More Companies, Peer Groups, Industry Indices, and/or Broad Markets As of the year ended December 31, 2017 2018 2019 2020 2021 2022 Piedmont Office Realty Trust, Inc. $ 100.00 $ 90.90 $ 123.55 $ 94.55 $ 112.15 $ 59.72 FTSE NAREIT Equity Office $ 100.00 $ 85.50 $ 112.36 $ 91.65 $ 111.81 $ 69.75 FTSE NAREIT Equity REITs $ 100.00 $ 95.38 $ 120.17 $ 110.56 $ 158.36 $ 119.78 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89 The performance graph above is being furnished as part of this Annual Report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish Piedmont’s stockholders with such information and, therefore, is not deemed to be filed with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933, as amended. 31 Table of Contents Index to Financial Statements Purchases of Equity Securities By the Issuer and Affiliated Purchasers (a) There were no unregistered sales of equity securities during the fourth quarter of 2022.
Biggest changeComparison of Cumulative Total Return of One or More Companies, Peer Groups, Industry Indices, and/or Broad Markets As of the year ended December 31, 2018 2019 2020 2021 2022 2023 Piedmont Office Realty Trust, Inc. $ 100.00 $ 135.92 $ 104.01 $ 123.38 $ 65.70 $ 56.04 FTSE NAREIT Equity Office $ 100.00 $ 131.42 $ 107.19 $ 130.77 $ 81.58 $ 83.23 FTSE NAREIT Equity REITs $ 100.00 $ 126.00 $ 115.92 $ 166.04 $ 125.58 $ 142.83 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 The performance graph above is being furnished as part of this Annual Report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish Piedmont’s stockholders with such information and, therefore, is not deemed to be filed with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933, as amended. 31 Table of Contents Index to Financial Statements Sales of Unregistered Equity Securities There were no unregistered sales of equity securities during the fourth quarter of 2023.
The amount of distributions to common stockholders is determined by our board of directors and is dependent upon a number of factors, including funds deemed available for distribution, based principally on our current and future projected operating cash flows reduced by capital requirements necessary to maintain our existing portfolio, our future capital needs, our future sources of liquidity, and the annual distribution requirements necessary to maintain our status as a REIT under the Code.
The amount of distributions to common stockholders is determined by our board of directors and is dependent upon a number of factors, including funds deemed available for distribution, based principally on our current and future projected operating cash flows reduced by outstanding debt service and capital requirements necessary to maintain our existing portfolio, our future capital needs, our future sources of liquidity, and the annual distribution requirements necessary to maintain our status as a REIT under the Code.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock is listed on the New York Stock Exchange under the symbol “PDM.” As of February 22, 2023, there were 7,771 common stockholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock is listed on the New York Stock Exchange under the symbol “PDM.” As of February 16, 2024, there were 7,277 common stockholders of record of our common stock.
Our board of directors declared a quarterly dividend of $0.21 per common share for each of the four quarters in the year ended December 31, 2022. 30 Table of Contents Index to Financial Statements Performance Graph The following graph compares the cumulative total return of Piedmont’s common stock with the FTSE NAREIT Equity Office Index, the FTSE NAREIT Equity REITs Index, and the S&P 500 Index for the period beginning on December 31, 2017 through December 31, 2022.
As of December 31, 2023, approximately $150.5 million of share repurchase capacity remained; however, this plan expired in February 2024 with no additional purchases. 30 Table of Contents Index to Financial Statements Performance Graph The following graph compares the cumulative total return of Piedmont’s common stock with the FTSE NAREIT Equity Office Index, the FTSE NAREIT Equity REITs Index, and the S&P 500 Index for the period beginning on December 31, 2018 through December 31, 2023.
(b) Not applicable. (c) There were no repurchases of shares of our common stock during the fourth quarter of 2022. As of December 31, 2022 approximately $150.5 million remains available under our board-authorized stock repurchase program to make share repurchases through February 2024, at the discretion of management.
Purchases of Equity Securities By the Issuer and Affiliated Purchasers There were no repurchases of shares of our common stock during the fourth quarter of 2023. As of December 31, 2023 approximately $150.5 million remains available under our board-authorized stock repurchase program; however, this plan expired in February 2024 with no additional purchases.
Added
Our board of directors declared a quarterly dividend of $0.21 per common share for the first and second quarter of 2023, and a quarterly dividend of $0.125 per common share for the third and fourth quarter of 2023.
Added
During the year ended December 31, 2023, we had a board-authorized stock repurchase program in place that allowed management to repurchase shares of our common stock when they believed such purchases would be a prudent use of capital. No shares were repurchased during the year ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther REITs may not define Same Store NOI in the same manner as we do; therefore, our computation of Same Store NOI may not be comparable to that of other REITs. 41 Table of Contents Index to Financial Statements The following table sets forth a reconciliation from net income/(loss) calculated in accordance with GAAP to EBITDAre, Core EBITDA, Property NOI, and Same Store NOI on both a cash and accrual basis, for the years ended December 31, 2022 and 2021, respectively (in thousands): Cash Basis Accrual Basis December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Net income/(loss) applicable to Piedmont (GAAP basis) $ 146,830 $ (1,153) $ 146,830 $ (1,153) Net loss applicable to noncontrolling interest — (14) — (14) Interest expense 65,656 51,292 65,656 51,292 Depreciation 133,577 120,578 133,577 120,578 Amortization 90,891 85,946 90,891 85,946 Depreciation and amortization attributable to noncontrolling interests 85 84 85 84 Impairment losses 25,981 41,000 25,981 41,000 Gain on sale of real estate assets (151,729) — (151,729) — EBITDAre (1) 311,291 297,733 311,291 297,733 Severance costs associated with fourth quarter 2022 management reorganization 2,248 — 2,248 — Core EBITDA (2) 313,539 297,733 313,539 297,733 General & administrative expenses 26,879 30,252 26,879 30,252 Management fee revenue (3) (1,004) (1,269) (1,004) (1,269) Other income (1,847) (9,089) (1,847) (9,089) Non-cash general reserve/(reversal) for uncollectible accounts (3,000) (553) Straight-line rent effects of lease revenue (11,230) (10,566) Straight-line effects of lease revenue attributable to noncontrolling interests (10) 3 Amortization of lease-related intangibles (13,426) (11,290) Property NOI 309,901 295,221 337,567 317,627 Net operating (income)/loss from: Acquisitions (4) (18,720) (2,460) (27,055) (3,273) Dispositions (5) (10,714) (17,572) (10,826) (18,400) Other investments (6) 763 841 651 1,067 Same Store NOI $ 281,230 $ 276,030 $ 300,337 $ 297,021 Change period over period in Same Store NOI 1.9 % N/A 1.1 % N/A (1) We calculate Earnings Before Interest, Taxes, Depreciation, and Amortization- Real Estate ("EBITDAre") in accordance with the current NAREIT definition.
Biggest changeOther REITs may not define Same Store NOI in the same manner as we do; therefore, our computation of Same Store NOI may not be comparable to that of other REITs. 41 Table of Contents Index to Financial Statements The following table sets forth a reconciliation from net income/(loss) calculated in accordance with GAAP to EBITDAre, Core EBITDA, Property NOI, and Same Store NOI on both a cash and accrual basis, for the years ended December 31, 2023 and 2022, respectively (in thousands): Cash Basis Accrual Basis December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 Net income/(loss) applicable to Piedmont (GAAP basis) $ (48,387) $ 146,830 $ (48,387) $ 146,830 Net income applicable to noncontrolling interest 10 — 10 — Interest expense 101,258 65,656 101,258 65,656 Depreciation 148,417 133,577 148,417 133,577 Amortization 87,717 90,891 87,717 90,891 Depreciation and amortization attributable to noncontrolling interests 80 85 80 85 Impairment charges 29,446 25,981 29,446 25,981 Gain on sale of real estate assets (1,946) (151,729) (1,946) (151,729) EBITDAre (1) 316,595 311,291 316,595 311,291 Loss on early extinguishment of debt 820 — 820 — Severance costs associated management reorganization — 2,248 — 2,248 Core EBITDA (2) 317,415 313,539 317,415 313,539 General & administrative expenses 29,190 26,879 29,190 26,879 Management fee revenue (3) (1,004) (1,004) (1,004) (1,004) Other income (3,256) (1,847) (3,256) (1,847) Reversal of non-cash general reserve for uncollectible accounts (1,000) (3,000) Straight-line rent effects of lease revenue (7,268) (11,230) Straight-line effects of lease revenue attributable to noncontrolling interests (10) (10) Amortization of lease-related intangibles (13,879) (13,426) Property NOI 320,188 309,901 342,345 337,567 Net operating (income)/loss from: Acquisitions (4) (22,907) (8,180) (30,167) (11,717) Dispositions (5) 65 (10,714) 65 (10,826) Other investments (6) 790 763 387 651 Same Store NOI $ 298,136 $ 291,770 $ 312,630 $ 315,675 Change period over period in Same Store NOI 2.2 % N/A (1.0) % N/A (1) We calculate Earnings Before Interest, Taxes, Depreciation, and Amortization- Real Estate ("EBITDAre") in accordance with the current NAREIT definition.
NAREIT currently defines FFO as Net income/(loss) (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investment in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, along with appropriate adjustments to those reconciling items for joint ventures, if any.
NAREIT currently defines FFO as Net income/(loss) (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets, goodwill, and investment in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, along with appropriate adjustments to those reconciling items for joint ventures, if any.
In the event of the bankruptcy, liquidation, reorganization or other winding up of Piedmont OP or the Guarantor, assets that secure any of their respective secured indebtedness and other secured obligations will be available to pay their respective obligations under the Notes or the guarantee, as applicable, and their other respective unsecured indebtedness and other unsecured obligations only after all of their respective indebtedness and other obligations secured by those assets have been repaid in full.
In the event of the bankruptcy, liquidation, reorganization or other winding up of Piedmont OP or Piedmont, assets that secure any of their respective secured indebtedness and other secured obligations will be available to pay their respective obligations under the Notes or the guarantee, as applicable, and their other respective unsecured indebtedness and other unsecured obligations only after all of their respective indebtedness and other obligations secured by those assets have been repaid in full.
Consequently, 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, 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.
We calculate Core FFO by starting with FFO, as defined by NAREIT, and adjusting for gains or losses on the extinguishment of swaps and/or debt and any significant non-recurring or infrequent items.
We calculate Core FFO by starting with FFO, as defined by NAREIT, and adjusting for gains or losses on the early extinguishment of swaps and/or debt and any significant non-recurring or infrequent items.
Overview Our portfolio consists of office properties 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, 2022, our average lease was approximately 15,000 square feet with approximately six years of lease term remaining.
Overview Our portfolio consists of office properties 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.
Both the timing and magnitude of expenditures related to future leasing activity can vary 33 Table of Contents Index to Financial Statements due to a number of factors and are highly dependent on the size of the leased square footage and the competitive market conditions of the particular office market at the time a lease is being negotiated.
Both the timing and magnitude of expenditures related to future leasing activity can vary 33 Table of Contents 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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto as of December 31, 2022 and 2021, and for the years ended December 31, 2022, 2021, and 2020, included elsewhere in this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto as of December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022, and 2021, included elsewhere in this Annual Report on Form 10-K.
In particular, the Guarantor 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.
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; and all other obligations of the Issuer to the holders of the Notes will be promptly paid in full.
NAREIT currently defines EBITDAre as net income (computed in accordance with GAAP) adjusted for gains or losses from sales of property, impairment losses, depreciation on real estate assets, amortization on real estate assets, interest expense and taxes, along with the same adjustments for joint ventures.
NAREIT currently defines EBITDAre as net income (computed in accordance with GAAP) adjusted for gains or losses from sales of property, impairment losses, depreciation on real estate assets, amortization on real estate assets, interest expense and taxes, along with the same adjustments for joint ventures, if any.
Liquidity and Capital Resources 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.
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.
Such shares are not included when calculating net loss per diluted share applicable to Piedmont for the year ended December 31, 2021 as they would reduce the loss per share presented. 40 Table of Contents Index to Financial Statements Property and Same Store Net Operating Income Property Net Operating Income ("Property NOI") is a non-GAAP measure which we use to assess our operating results.
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. 40 Table of Contents Index to Financial Statements Property and Same Store Net Operating Income Property Net Operating Income ("Property NOI") is a non-GAAP measure which we use to assess our operating results.
These two properties are included in "Other" below. See Note 16 to the accompanying consolidated financial statements for additional information and a reconciliation of Net income/(loss) applicable to Piedmont to Net Operating Income ("NOI").
These two properties are included in "Other" below. See Note 14 to the accompanying consolidated financial statements for additional information and a reconciliation of Net income/(loss) applicable to Piedmont to Net Operating Income ("NOI").
The Guarantor's guarantee of the Notes is its senior unsecured obligation and ranks equally in right of payment with all of the Guarantor's other existing and future senior unsecured indebtedness and guarantees.
Piedmont's guarantee of the Notes is its senior unsecured obligation and ranks equally in right of payment with all of Piedmont's other existing and future senior unsecured indebtedness and guarantees.
In performing our goodwill impairment assessment, we compare the estimated fair value of each of our reporting units to the reporting unit's carrying value.
In performing our goodwill impairment assessment, we compare the estimated fair value of each of our reporting units to the reporting unit's carrying value, inclusive of allocated goodwill.
The Guarantor’s guarantee of the Notes is effectively subordinated in right of payment to any future mortgage or other secured indebtedness or secured guarantees of the Guarantor (to the extent of the value of the collateral securing such indebtedness and guarantees); and all existing and future indebtedness and other liabilities, whether secured or unsecured, of the Guarantor’s subsidiaries.
Piedmont’s guarantee of the Notes is effectively subordinated in right of payment to any future mortgage or other secured indebtedness or secured guarantees of Piedmont (to the extent of the value of the collateral securing such indebtedness and guarantees); and all existing and future indebtedness and other liabilities, whether secured or unsecured, of Piedmont’s subsidiaries.
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 44 Table of Contents 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.
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.
To the extent the square footage from new leases for currently vacant space exceed or fall short of the square footage associated with non-renewing expirations, such leases would increase or decrease our overall leased percentage, respectively.
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.
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 materially satisfied.
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 45 Table of Contents Index to Financial Statements materially satisfied.
In addition, office leases, both to new tenants and those renewing, often contain upfront rental and/or operating expense abatement periods which delay the cash flow benefits of the lease even after the new lease or renewal has commenced and negatively impact Property NOI and Same Store NOI on a cash basis until such abatements expire.
In addition, office leases for both new and renewing tenants often contain upfront rental and/or operating expense abatement periods which delay the cash flow benefits of the lease even after the new or renewed lease has commenced, negatively impacting Property NOI and Same Store NOI on a cash basis until such abatements expire.
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.
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 44 Table of Contents 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.
Results of Operations (2021 vs. 2020) Please refer to "Item 7.
Results of Operations (2022 vs. 2021) Please refer to "Item 7.
Pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered , the following tables present summarized financial information for Piedmont OP as Issuer and Piedmont Office Realty Trust, Inc. as Guarantor on a combined basis after elimination of (i) intercompany transactions and balances among the Issuer and the Guarantor and (ii) equity in earnings from and investments in any subsidiary that is a non-Guarantor (in thousands): Combined Balances of Piedmont OP and Piedmont Office Realty Trust, Inc. as Issuer and Guarantor, respectively As of December 31, 2022 As of December 31, 2021 Due from non-guarantor subsidiary $ 900 $ 900 Total assets $ 325,884 $ 352,788 Total liabilities $ 1,845,551 $ 1,945,846 For the Year Ended December 31, 2022 Total revenues $ 52,800 Net loss $ (16,149) Net Operating Income by Geographic Segment Our chief operating decision maker ("CODM"), who is our President and Chief Executive Officer, evaluates our portfolio and assesses the ongoing operations and performance of our properties utilizing the following geographic segments: Atlanta, Dallas, Washington, D.C./Northern Virginia, Boston, Orlando, Minneapolis, and New York.
Pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered, the following tables present summarized financial information for Piedmont OP as issuer and Piedmont as guarantor on a combined basis after elimination of (i) intercompany transactions and balances among Piedmont OP and Piedmont and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor (in thousands): Combined Balances of Piedmont OP and Piedmont Office Realty Trust, Inc. as Issuer and Guarantor, respectively As of December 31, 2023 As of December 31, 2022 Due from non-guarantor subsidiary $ 900 $ 900 Total assets $ 285,116 $ 325,884 Total liabilities $ 1,926,434 $ 1,845,551 For the Year Ended December 31, 2023 Total revenues $ 48,429 Net loss $ (115,485) 37 Table of Contents 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: Atlanta, Dallas, Orlando, Northern Virginia/Washington, D.C., Minneapolis, New York, and Boston.
For example, for leases executed during the year ended December 31, 2022, we committed to spend approximately $5.34 per square foot per year of lease term for tenant improvement allowances and lease commissions (net of expired lease commitments) as compared to $4.25 (net of expired lease commitments) for the year ended December 31, 2021.
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.
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 subsequent to January 1, 2021. Depreciation expense increased approximately $13.0 million for the year ended December 31, 2022 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. Depreciation expense increased approximately $14.8 million for the year ended December 31, 2023 compared to the prior year.
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. 34 Table of Contents Index to Financial Statements Results of Operations (2022 vs. 2021) Overview Piedmont recognized net income applicable to common stockholders for the year ended December 31, 2022 of $146.8 million, or $1.19 per diluted share, as compared with net loss applicable to common stockholders of $1.2 million, or $0.01 per diluted share, for the year ended December 31, 2021.
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. 34 Table of Contents Index to Financial Statements Results of Operations (2023 vs. 2022) Overview 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.
During the year ended December 31, 2022, we 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. See Note 7 to our accompanying consolidated financial statements for additional 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.
The following table sets forth selected data from our consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively, as well as each balance as a percentage of total revenues for the years presented (dollars in millions): December 31, 2022 % of Revenues December 31, 2021 % of Revenues Variance Revenue: Rental and tenant reimbursement revenue $ 545.7 $ 514.6 $ 31.1 Property management fee revenue 1.7 2.5 (0.8) Other property related income 16.4 11.6 4.8 Total revenues 563.8 100 % 528.7 100 % 35.1 Expense: Property operating costs 226.1 40 % 210.9 40 % 15.2 Depreciation 133.6 24 % 120.6 23 % 13.0 Amortization 90.9 16 % 86.0 16 % 4.9 Impairment losses 26.0 4 % 41.0 8 % (15.0) General and administrative 29.1 5 % 30.3 5 % (1.2) 505.7 488.8 16.9 Other income (expense): Interest expense (65.7) 12 % (51.3) 10 % (14.4) Other income 2.7 — % 10.2 2 % (7.5) Gain on sale of real estate assets 151.7 27 % — — % 151.7 Net income/(loss) $ 146.8 26 % $ (1.2) — % $ 148.0 Revenue Rental and tenant reimbursement revenue increased approximately $31.1 million for the year ended December 31, 2022 as compared to the prior year.
The following table sets forth selected data from our consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively, as well as each balance as a percentage of total revenues for the years presented (dollars in millions): December 31, 2023 % of Revenues December 31, 2022 % of Revenues Variance Revenue: Rental and tenant reimbursement revenue $ 555.3 $ 545.7 $ 9.6 Property management fee revenue 1.7 1.7 — Other property related income 20.7 16.4 4.3 Total revenues 577.7 100 % 563.8 100 % 13.9 Expense: Property operating costs 235.1 41 % 226.1 40 % 9.0 Depreciation 148.4 26 % 133.6 24 % 14.8 Amortization 87.7 15 % 90.9 16 % (3.2) Impairment charges 29.4 4 % 26.0 4 % 3.4 General and administrative 29.2 5 % 29.1 5 % 0.1 529.8 505.7 24.1 Other income (expense): Interest expense (101.3) 18 % (65.7) 12 % (35.6) Other income 3.9 1 % 2.7 — % 1.2 Loss on early extinguishment of debt (0.8) — % — — % (0.8) Gain on sale of real estate assets 1.9 — % 151.7 27 % (149.8) Net income/(loss) $ (48.4) (8) % $ 146.8 26 % $ (195.2) Revenue Rental and tenant reimbursement revenue increased approximately $9.6 million for the year ended December 31, 2023 as compared to the prior year.
"Capital expenditures for redevelopment/renovations" during the years ended December 31, 2022 and 2021 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 Galleria buildings and 999 Peachtree Street in Atlanta, Georgia, among others.
"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.
The Notes are fully and unconditionally guaranteed by Piedmont Office Realty Trust, Inc. (the "Guarantor"), the parent entity that consolidates Piedmont OP and all other subsidiaries.
The Notes are fully and unconditionally guaranteed by Piedmont, the parent entity that consolidates Piedmont OP and all other subsidiaries.
As of December 31, 2022, we had approximately 1.14 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $33 million of additional annual cash revenue.
As of December 31, 2023, we had approximately 1.1 million square feet of executed leases for vacant space yet to commence or under rental abatement, representing approximately $35 million of future additional annual cash rents.
We calculate Same Store Net Operating Income ("Same Store NOI") as Property NOI attributable to the properties (excluding undeveloped land parcels) that were (i) owned by us during the entire span of the current and prior year reporting periods; (ii) that were not being developed or redeveloped during those periods; and (iii) for which no operating expenses were capitalized during those periods.
We calculate Same Store Net Operating Income ("Same Store NOI") as Property NOI attributable to the properties (excluding undeveloped land parcels) that were (i) owned by us during the entire span of the current and prior year reporting periods; and (ii) that were not out of service for development or redevelopment during those periods.
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 45 Table of Contents Index to Financial Statements of the leased premises.
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.
These operating segments are also Piedmont’s reportable segments.
These operating segments are also our reportable segments.
Additionally, as of December 31, 2022, Piedmont 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 Piedmont does not maintain a significant presence or anticipate 37 Table of Contents Index to Financial Statements further investment in these markets.
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.
Other REITs may not define AFFO in the same manner as us; therefore, our computation of AFFO may not be comparable to the computation of other REITs. 39 Table of Contents Index to Financial Statements Reconciliations of net income/(loss) to FFO, Core FFO, and AFFO for the years ended December 31, 2022, 2021, and 2020, respectively, are presented below (in thousands except per share amounts): 2022 Per Share (1) 2021 Per Share (1) 2020 Per Share (1) GAAP net income/(loss) applicable to common stock $ 146,830 $ 1.19 $ (1,153) $ (0.01) $ 232,688 $ 1.85 Depreciation of real assets 132,849 1.07 119,629 0.96 109,326 0.86 Amortization of lease-related costs 90,891 0.74 85,946 0.69 93,242 0.74 Impairment losses 25,981 0.21 41,000 0.33 — — Gain on sale of real estate assets (151,729) (1.23) — — (205,666) (1.63) NAREIT Funds From Operations applicable to common stock $ 244,822 $ 1.98 $ 245,422 $ 1.97 $ 229,590 $ 1.82 Adjustments: Severance costs associated with fourth quarter 2022 management reorganization 2,248 0.02 — — — — Loss on extinguishment of debt — — — — 9,336 0.07 Core Funds From Operations applicable to common stock $ 247,070 $ 2.00 $ 245,422 $ 1.97 $ 238,926 $ 1.89 Adjustments: Amortization of debt issuance costs, fair market adjustments on notes payable, and discounts on debt 3,389 2,857 2,833 Depreciation of non real estate assets 728 949 1,216 Straight-line effects of lease revenue (11,230) (10,566) (22,601) Stock-based compensation adjustments 4,833 7,924 7,014 Amortization of lease-related intangibles (13,426) (11,290) (12,284) Non-incremental capital expenditures (2) (53,324) (75,162) (77,682) Adjusted Funds From Operations applicable to common stock $ 178,040 $ 160,134 $ 137,422 Weighted-average shares outstanding – diluted 123,524 124,455 (3) 126,104 (1) Based on weighted-average shares outstanding—diluted.
Other REITs may not define AFFO in the same manner as us; therefore, our computation of AFFO may not be comparable to the computation of other REITs. 39 Table of Contents Index to Financial Statements Reconciliations of net income/(loss) to FFO, Core FFO, and AFFO for the years ended December 31, 2023, 2022, and 2021, respectively, are presented below (in thousands except per share amounts): 2023 Per Share (1) 2022 Per Share (1) 2021 Per Share (1) GAAP net income/(loss) applicable to common stock $ (48,387) $ (0.39) $ 146,830 $ 1.19 $ (1,153) $ (0.01) Depreciation of real assets 147,569 1.19 132,849 1.07 119,629 0.96 Amortization of lease-related costs 87,717 0.71 90,891 0.74 85,946 0.69 Impairment charges 29,446 0.24 25,981 0.21 41,000 0.33 Gain on sale of real estate assets (1,946) (0.02) (151,729) (1.23) — — NAREIT Funds From Operations applicable to common stock $ 214,399 $ 1.73 $ 244,822 $ 1.98 $ 245,422 $ 1.97 Adjustments: Severance costs associated management reorganization — — 2,248 0.02 — — Loss on early extinguishment of debt 820 0.01 — — — — Core Funds From Operations applicable to common stock $ 215,219 $ 1.74 $ 247,070 $ 2.00 $ 245,422 $ 1.97 Adjustments: Amortization of debt issuance costs, fair market adjustments on notes payable, and discounts on debt 5,442 3,389 2,857 Depreciation of non real estate assets 847 728 949 Straight-line effects of lease revenue (7,268) (11,230) (10,566) Stock-based compensation adjustments 6,337 4,833 7,924 Amortization of lease-related intangibles (13,879) (13,426) (11,290) Non-incremental capital expenditures (2) (53,690) (53,324) (75,162) Adjusted Funds From Operations applicable to common stock $ 153,008 $ 178,040 $ 160,134 Weighted-average shares outstanding – diluted 123,702 (3) 123,524 124,455 (3) (1) Based on weighted-average shares outstanding—diluted.
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 of 2022, as well as $102.6 million of gain recognized on the sale of the 1414 Massachusetts Avenue building and the One Brattle Square building in December of 2022.
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.
Other REITs may not define Core EBITDA in the same manner as us; therefore, our computation of Core EBITDA may not be comparable to that of other REITs. (3) Presented net of related operating expenses incurred to earn such management fee revenue.
Other REITs may not define Core EBITDA in the same manner as us; therefore, our computation of Core EBITDA may not be comparable to that of other REITs. (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.
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.
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.
The timing of rental revenue recognition is largely dependent on our conclusion as to whether we, or our tenant, are the owner of tenant improvements at the leased property. The determination of whether we, or our tenant, are the owner of tenant improvements for accounting purposes is subject to significant judgment.
Rental Revenue Recognition Rental income for office properties is our principal source of revenue. The timing of rental revenue recognition is largely dependent on our conclusion as to whether we, or our tenant, are the owner of tenant improvements at the leased property.
During the years ended December 31, 2022 and 2021, we incurred the following types of capital expenditures (in thousands): December 31, 2022 December 31, 2021 Capital expenditures for redevelopment/renovations $ 57,788 $ 53,790 Other capital expenditures, including building and tenant improvements 63,571 68,836 Total capital expenditures (1) $ 121,359 $ 122,626 (1) Of the total amounts paid, approximately $7.2 million and $6.3 million related to soft costs such as capitalized interest, payroll, and other general and administrative expenses for the year ended December 31, 2022 and 2021, respectively.
During the years ended December 31, 2023 and 2022, we incurred the following types of capital expenditures (in thousands): December 31, 2023 December 31, 2022 Capital expenditures for redevelopment/renovations $ 57,630 $ 59,435 Other capital expenditures, including building and tenant improvements 100,561 61,924 Total capital expenditures (1) $ 158,191 $ 121,359 (1) Of the total amounts paid, approximately $10.1 million and $7.2 million related to soft costs such as capitalized interest, payroll, and other general and administrative expenses for the year ended December 31, 2023 and 2022, respectively.
Impact of Downtime, Abatement Periods, and Rental Rate Changes Commencement of a lease associated with a new tenant in the property typically occurs 6-18 months after the lease execution date, after refurbishment of the space is completed.
Impact of Downtime, Abatement Periods, and Rental Rate Changes Commencement of a lease associated with a new tenant typically occurs 6-18 months after the lease execution date, after refurbishment of the space is completed. The downtime between a lease expiration and the new lease's commencement can negatively impact Property NOI and Same Store NOI comparisons (both accrual and cash basis).
Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations (2021 vs. 2020)" in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 17, 2022, for a discussion of the results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020. . 36 Table of Contents Index to Financial Statements Issuer and Guarantor Financial Information Piedmont, through its wholly-owned subsidiary Piedmont OP (the "Issuer"), has issued senior unsecured notes payable of $350 million that mature in 2023, $400 million that mature in 2024, and two separate issuances of $300 million, that mature in 2030 and 2032 respectively, (collectively, the "Notes").
Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations (2022 vs. 2021)" in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 22, 2023, for a discussion of the results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021. 36 Table of Contents Index to Financial Statements Issuer and Guarantor Financial Information As of December 31, 2023, Piedmont, through its wholly-owned subsidiary Piedmont OP, had four separate issuances totaling approximately $1.3 billion of senior unsecured notes payable outstanding that mature in 2024, 2028, 2030 and 2032 (see Note 3 to our accompanying consolidated financial statements for additional details regarding each of these issuances) (collectively, the "Notes").
During the year ended December 31, 2022, we experienced a 9.7% and 17.2% 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, we 43 Table of Contents 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.
The increase was primarily due to additional building and tenant improvements acquired and/or placed in service subsequent to January 1, 2021. Amortization expense increased approximately $4.9 million for the year ended December 31, 2022 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. Amortization expense decreased approximately $3.2 million for the year ended December 31, 2023 compared to the prior year.
The following table presents accrual-basis NOI by geographic segment (in thousands): Years Ended December 31, 2022 2021 Atlanta $ 82,878 $ 62,772 Dallas 62,444 66,155 Washington, D.C./Northern Virginia 39,994 36,914 Boston 39,101 45,587 Orlando 35,327 33,449 Minneapolis 31,886 32,538 New York 31,252 30,049 Total reportable segments 322,882 307,464 Other 14,685 10,163 Total NOI $ 337,567 $ 317,627 Comparison of the Year Ended December 31, 2022 Versus the Year Ended December 31, 2021 Atlanta NOI increased primarily due to the acquisition of 999 Peachtree Street during the fourth quarter of 2021 and 1180 Peachtree Street during the third quarter of 2022.
The following table presents accrual-basis NOI by geographic segment (in thousands): Years Ended December 31, 2023 2022 Atlanta $ 103,475 $ 82,878 Dallas 64,566 62,444 Orlando 36,639 35,327 Northern Virginia/Washington, D.C. 36,334 39,994 Minneapolis 33,302 31,886 New York 29,357 31,252 Boston 25,703 39,101 Total reportable segments 329,376 322,882 Other 12,969 14,685 Total NOI $ 342,345 $ 337,567 Comparison of the Year Ended December 31, 2023 Versus the Year Ended December 31, 2022 Atlanta NOI increased primarily due to the acquisition of 1180 Peachtree Street during the third quarter of 2022.
In making that determination, we consider numerous factors and perform an evaluation of each individual lease. No one factor is determinative in reaching a conclusion.
The determination of whether we, or our tenant, are the owner of tenant improvements for accounting purposes is subject to significant judgment. In making that determination, we consider numerous factors and perform an evaluation of each individual lease. No one factor is determinative in reaching a conclusion.
There are other uses of capital that may arise as part of our typical operations. 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.
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. We also use capital resources to pay dividends to our stockholders.
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. Rental Revenue Recognition Rental income for office properties is our principal source of revenue.
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.
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.
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. 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.
Also, during the year ended December 31, 2022, due to the decline of the stock market and our stock price, we recognized a non-cash impairment loss related to goodwill of approximately $16.0 million for the year ended December 31, 2022. See Note 2 to our accompanying consolidated financial statements for further details.
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. See Note 6 to our accompanying consolidated financial statements for further details.
Other property related income increased approximately $4.8 million for the year ended December 31, 2022 as compared to the prior year primarily due to higher transient parking at our buildings during the current year, as compared to the prior year, and additional parking revenue associated with properties acquired subsequent to January 1, 2021. 35 Table of Contents Index to Financial Statements Expense Property operating costs increased approximately $15.2 million for the year ended December 31, 2022 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.
Other NOI increased primarily due to the expiration of rental and operating expense abatements associated with the Transocean lease at our Enclave Place building in Houston, Texas during the second quarter of 2021. 38 Table of Contents Index to Financial Statements Funds From Operations ("FFO"), Core Funds From Operations ("Core FFO"), and Adjusted Funds From Operations (“AFFO”) Net income/(loss) calculated in accordance with GAAP is the starting point for calculating FFO, Core FFO, and AFFO.
Boston 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. 38 Table of Contents Index to Financial Statements Funds From Operations ("FFO"), Core Funds From Operations ("Core FFO"), and Adjusted Funds From Operations (“AFFO”) Net income/(loss) calculated in accordance with GAAP is the starting point for calculating FFO, Core FFO, and AFFO.
The increase was primarily due to capital recycling activity subsequent to January 1, 2021, rental rate increases associated with recent leasing activity across the portfolio, and higher tenant reimbursements as a result of higher recoverable operating expenses 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 Income (Expense) Interest expense increased approximately $14.4 million for the year ended December 31, 2022 as compared to the prior year primarily driven by a higher average debt balance outstanding during the current year as a result of the purchase of the 1180 Peachtree Street building, as well as increased interest rates on our variable rate debt.
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.
The increase was primarily due to additional amortization associated with property acquisitions subsequent to January 1, 2021, partially offset by certain lease intangible assets at our existing properties becoming fully amortized during the same period.
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.
The primary drivers of the increases in both metrics were increased rental rates and the expiration of abatements at certain properties. Property NOI and 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.
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. 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.
Removed
In addition, on January 31, 2023, we entered into a new $215 million, floating-rate, unsecured term loan facility, the proceeds from which we intend to use to repay the majority of our $350 Million Unsecured Senior Notes that mature on June 1, 2023.
Added
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.
Removed
The remaining balance of the $350 Million Unsecured Senior Notes due 2023 will be repaid from a combination of cash on hand, proceeds from select property dispositions and/or borrowings under our $600 Million Unsecured 2022 Line of Credit.
Added
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.
Removed
When necessary, 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.
Added
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.
Removed
As of December 31, 2022, we had the full $600 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.
Added
As of December 31, 2023, we had one individually significant unrecorded tenant allowance commitment greater than $10.0 million.
Removed
Commitments per square foot per year of lease term for tenant improvement allowances and lease commissions for the year ended December 31, 2021 were unusually low as they reflected the 330,000 square foot, five-year extension of the New York City lease at our 60 Broad Street asset, which did not include a tenant improvement allowance.
Added
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.
Removed
We may also use capital resources to repurchase additional shares of our common stock under our stock repurchase program when we believe such purposes would be a prudent use of capital. As of December 31, 2022, we had approximately $150.5 million of board-authorized share repurchase capacity under the program which may be used for share repurchases through February 2024.
Added
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.
Removed
Finally, other than our $350 Million Unsecured Senior Notes due 2023 discussed above, we have no other debt maturing until 2024; however, we may use capital to repay debt obligations when we deem it prudent to refinance various obligations. We may also use capital resources to pay dividends to our stockholders.
Added
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. Comparison of the accompanying consolidated statements of operations for the year ended December 31, 2023 vs. the year ended December 31, 2022.
Removed
The year ended December 31, 2022 included approximately $151.7 million of gain on the sales of real estate assets as well as increased revenues due to rental rate increases across the portfolio, offset by $26.0 million in non-cash impairment charges related to reductions in our carrying value of goodwill and one real estate asset.
Added
Additionally, parking revenue associated with the 1180 Peachtree Street building acquired during the third quarter of 2022 also contributed to the increase. 35 Table of Contents Index to Financial Statements Expense Property operating costs increased approximately $9.0 million for the year ended December 31, 2023 as compared to the prior year.
Removed
The year ended December 31, 2021 included a $41.0 million non-cash impairment charge related to the subsequent sale of our last remaining Chicago asset (see Note 7 to our accompanying consolidated financial statements). Comparison of the accompanying consolidated statements of operations for the year ended December 31, 2022 vs. the year ended December 31, 2021.
Added
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.
Removed
Property management fee revenue decreased approximately $0.8 million for the year ended December 31, 2022 as compared to the prior year. Such fees fluctuate from period to period due to the variability of construction activity as well as the commencement or termination of property management agreements we may enter into with unrelated third-party owners.
Added
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.
Removed
During the year ended December 31, 2022, one multi-year property management agreement with a third-party terminated in Chicago, Illinois.
Added
See Note 3 to our accompanying consolidated financial statements for further details.
Removed
During the year ended December 31, 2021, we recognized a non-cash impairment loss on real estate assets of approximately $41.0 million related to a change in hold period assumptions for our last remaining Chicago asset, which was subsequently sold during the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+4 added−4 removed3 unchanged
Biggest changeThe facility has a stated variable rate; however, Piedmont's interest rate swap agreements as of December 31, 2022 effectively fix, exclusive of changes to Piedmont's credit rating, the full principal balance to 4.54% through the maturity date of the loan. 46 Table of Contents Index to Financial Statements The estimated fair value of our debt above as of December 31, 2022 and 2021 was approximately $1.8 billion and $1.9 billion, respectively.
Biggest changeThe facility has a stated variable rate; however, Piedmont's interest rate swap agreements as of December 31, 2023 effectively fix, exclusive of changes to Piedmont's credit rating, the full principal balance to 4.79% through the maturity date of the loan. 46 Table of Contents Index to Financial Statements (4) Piedmont may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of June 30, 2027) provided Piedmont is not in default and upon payment of extension fees.
A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio but has no impact on interest incurred or cash flows for that portfolio. As of December 31, 2022, we had no outstanding balance on our $600 Million Unsecured 2022 Line of Credit.
A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio but has no impact on interest incurred or cash flows for that portfolio. As of December 31, 2023, we had a $59.0 million outstanding balance on our $600 Million Unsecured 2022 Line of Credit.
As of December 31, 2022, our total outstanding debt subject to fixed, or effectively fixed, interest rates totaling approximately $1.8 billion has an average effective interest rate of approximately 3.72% per annum with expirations ranging from 2023 to 2032.
As of December 31, 2023, our total outstanding debt subject to fixed, or effectively fixed, interest rates totaling approximately $1.7 billion has an average effective interest rate of approximately 5.63% per annum with expirations ranging from 2024 to 2032.
Additionally, a 1.0% increase in variable interest rates on our existing outstanding borrowings as of December 31, 2022 would increase interest expense approximately $2.0 million on a per annum basis.
Additionally, a 1.0% increase in variable interest rates on our outstanding borrowings as of December 31, 2023 would increase interest expense approximately $3.7 million on a per annum basis.
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 LIBOR rates and SOFR rates are determined.
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 $600 Million Unsecured 2022 Line of Credit currently has a stated rate of Adjusted SOFR plus 0.85% per annum (based on our current corporate credit rating). Our $200 Million Unsecured Term Loan Facility has a stated rate of Adjusted SOFR plus 1.00% per annum (based on our current corporate credit rating), resulting in a total interest rate of 5.42%.
Our $600 Million Unsecured 2022 Line of Credit currently has a stated rate of Adjusted SOFR plus 1.04% per annum (based on our current corporate credit rating), resulting in a total interest rate of 6.45%.
As of December 31, 2022, our potential for exposure to market risk includes interest rate fluctuations in connection with borrowings under our $600 Million Unsecured 2022 Line of Credit and the $200 Million Unsecured 2022 Term Loan Facility. As a result, the primary market risk to which we believe we are exposed is interest rate risk.
As of December 31, 2023, our potential for exposure to market risk includes interest rate fluctuations in connection with borrowings under our $600 Million Unsecured 2022 Line of Credit, the remaining $100 million outstanding on the $200 Million 2022 Unsecured Term Loan Facility, and the $215 Million Unsecured 2023 Term Loan.
As such, all of our debt as of December 31, 2022, other than the $600 Million Unsecured 2022 Line of Credit and our $200 Million Unsecured Term Loan Facility, is currently based on fixed or effectively-fixed interest rates to hedge against volatility in the credit markets.
As such, all of our debt as of December 31, 2023, other than those variable rate facilities mentioned above, is currently based on fixed or effectively-fixed interest rates to hedge against volatility in the credit markets.
To the extent that we borrow funds in the future under the $600 Million Unsecured 2022 Line of Credit or potential future variable-rate lines of credit, we would have exposure to increases in interest rates, which would potentially increase our cost of debt.
Our $215 Million Unsecured 2023 Term Loan had a stated rate of Adjusted SOFR plus 1.30% per annum (based on our current corporate credit rating), resulting in a total interest rate of 6.71%.To the extent that we borrow funds in the future under the $600 Million Unsecured 2022 Line of Credit or potential future variable-rate lines of credit, we would have exposure to increases in interest rates, which would potentially increase our cost of debt.
Our interest rate swap agreements in place as of December 31, 2022 carried a notional amount of $250 million and a weighted-average fixed interest rate of 4.54%, whereas the interest rate swap agreements in place as of December 31, 2021 carried a notional amount totaling $100 million and a weighted-average fixed interest rate of 3.56%.
Our interest rate swap agreements in place as of December 31, 2023 and December 31, 2022, respectively, carried a notional amount of $250 million and a weighted-average fixed interest rate of 3.49%, exclusive of our corporate credit rating spread.
As of December 31, 2022, our consolidated principal outstanding for aggregate debt maturities consisted of the following (in thousands): 2023 2024 2025 2026 2027 Thereafter Total Maturing debt: Variable rate repayments $ — $ 200,000 (2) $ — $ — $ — $ — $ 200,000 Variable rate average interest rate (1) — % 5.42 % — % — % — % — % 5.42 % Fixed rate repayments $ 350,000 $ 400,000 $ 250,000 (3) $ — $ — $ 797,000 $ 1,797,000 Fixed rate average interest rate (1) 3.40 % 4.45 % 4.54 % — % — % 3.23 % 3.72 % (1) See Note 4 to our accompanying consolidated financial statements for further details on our debt structure.
As of December 31, 2023, our consolidated principal outstanding for aggregate debt maturities consisted of the following (in thousands): 2024 2025 2026 2027 2028 Thereafter Total Maturing debt: Variable rate repayments $ 315,000 (2) $ — $ 59,000 (4) $ — $ — $ — $ 374,000 Variable rate average interest rate (1) 6.71 % — % 6.45 % — % — % — % 6.67 % Fixed rate repayments $ 53,317 $ 253,588 (3) $ 3,738 $ 3,895 $ 781,495 $ 600,000 $ 1,696,033 Fixed rate average interest rate (1) 4.43 % 4.78 % 4.10 % 4.10 % 8.05 % 2.95 % 5.63 % (1) See Note 3 to our accompanying consolidated financial statements for further details on our debt structure.
Removed
Furthermore, the United Kingdom Financial Conduct Authority, which regulates LIBOR, has announced that USD LIBOR will no longer by published after June 30, 2023.
Added
(2) Includes a balance of $100 million on the $200 Million Unsecured Term Loan Facility which was repaid on January 30, 2024. Also includes the $215 Million Unsecured 2023 Term Loan, $190 million of which was repaid on January 30, 2024, with the remaining $25 million extended to January 31, 2025.
Removed
Piedmont has completed an evaluation of its credit agreements which reference LIBOR and determined that each of these agreements already contain "fallback" language allowing for the establishment of an alternate rate of interest that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the U.S. at that time by Piedmont and the respective agent, as defined in the respective agreements.
Added
See Note 3 to our accompanying consolidated financial statements for more details. (3) Includes the $250 Million Unsecured 2018 Term Loan.
Removed
In addition, all new unsecured debt agreements entered into during the year ended December 31, 2022 utilize SOFR as the reference rate.
Added
The estimated fair value of our debt above as of December 31, 2023 and 2022 was approximately $2.0 billion and $1.8 billion, respectively.
Removed
(2) We may extend the term for six additional months to a final extended maturity date of June 18, 2025, provided we are not then in default and all representations and warranties are true and correct in all material respects and upon payment of extension fees. (3) Includes the $250 Million Unsecured 2018 Term Loan.
Added
Our $200 Million Unsecured Term Loan Facility had a stated rate of Adjusted SOFR plus 1.25% per annum (based on our current corporate credit rating), resulting in a total interest rate of 6.70%.

Other PDM 10-K year-over-year comparisons