Notes Receivable

9 Months Ended

Sep. 30, 2011

Notes Receivable [Abstract]

Notes Receivable

Notes Receivable

Notes receivable as of December 31, 2010 consisted solely of Piedmont’s two investments in mezzanine debt, both of which were secured by pledges of equity interests in the ownership of the 500 W. Monroe Building.

During the year ended December 31, 2010, one of the two notes matured but was not repaid and was therefore declared to be in maturity default. Piedmont initiated foreclosure proceedings and on March 31, 2011, Piedmont was the successful bidder at a UCC foreclosure sale allowing Piedmont to obtain control of the property, resulting in the extinguishment of other third-party loans that were subordinate to the secured position upon which Piedmont foreclosed.

As a result of obtaining control of the property, Piedmont is now considered the primary beneficiary of the variable interest entity (“VIE”) containing the 500 W. Monroe Building, subject to a $140.0 million first mortgage loan secured by the building, and a $45.0 million mezzanine loan collateralized by an equity ownership interest in the borrower under the mezzanine loan. (See Note 5 for information regarding the $140.0 million first mortgage loan and $45.0 million mezzanine loan.) As such, Piedmont recorded the fair value of all of the assets and liabilities associated with the 500 W. Monroe Building, the remaining outstanding debt payable to third party lenders, and the interest rate cap agreements associated with the assumed debt in its consolidated financial statements in March 2011. The consolidation of the VIE resulted in an approximate $1.5 million non-cash gain which is reflected in Piedmont’s results of operations for the nine months endedSeptember 30, 2011. Additionally, Piedmont recognized approximately $2.6 million in other income during the nine months endedSeptember 30, 2011 related to cash representing the building’s operating cash flow during the period between the original default date in August 2010, and the consummation of the foreclosure process on March 31, 2011. Such income had been deferred due to the ownership uncertainties associated with legal actions related to the foreclosure proceedings.