Line of Credit and Notes Payable

Replacement of $500 Million Unsecured Facility

During the three months ended September 30, 2012, Piedmont OP entered into a new $500 million unsecured line of credit facility (the “$500 Million Unsecured Line of Credit”) with a consortium of lenders to replace its expiring $500 Million Unsecured Facility. The term of the $500 Million Unsecured Line of Credit is four years with a maturity date of August 19, 2016; however, Piedmont may extend the term for up to one additional year (through two available six month extensions) to a final extended maturity date of August 21, 2017 provided Piedmont is not then in default and subject to payment of extension fees. Additionally, under certain terms of the agreement, Piedmont may increase the new facility by up to an additional $500 million (to an aggregate size of $1.0 billion); however, none of the existing lenders have any obligation to participate in such increase. Piedmont paid customary fees to the lenders in connection with the closing of the new $500 Million Unsecured Line of Credit.

The $500 Million Unsecured Line of Credit has the option to bear interest at varying levels based on (i) the London Interbank Offered Rate (“LIBOR”) or Base Rate, defined as the greater of the prime rate, the federal funds rate plus 0.5%, or LIBOR for a one-month period plus one percent, (ii) the credit rating for Piedmont, and (iii) for LIBOR loans, an interest period selected by Piedmont of one, two, three, or six months, or to the extent available from all lenders in each case, one year or periods of less than one month. The stated interest rate spread over LIBOR can vary from 1.00% to 1.75% based upon the then current credit rating of Piedmont. As of September 30, 2012, the current stated LIBOR spread on the $500 Million Unsecured Line of Credit was 1.175%.

Under the $500 Million Unsecured Line of Credit, Piedmont is subject to certain financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 1.75, an unencumbered leverage ratio of at least 1.60, a fixed charge coverage ratio of at least 1.50, a leverage ratio of no more than 0.60, and a secured debt ratio of no more than 0.40. As of September 30, 2012, Piedmont had met all of the financial covenant requirements.

Other Financing Activity

During the nine months ended September 30, 2012, Piedmont fully repaid its $140 Million mortgage which had been secured by the 500 W. Monroe building and its $45.0 Million loan which had been secured by the 4250 N. Fairfax building.

Additionally, during the nine months ended September 30, 2012, Piedmont incurred net borrowings of approximately $148.5 million on its $500 Million Unsecured Facility prior to its expiration. Piedmont also made interest payments on all debt facilities, including interest rate swap cash settlements related to certain of its debt facilities, totaling approximately $15.7 million and $16.8 million for the three months ended September 30, 2012 and September 30, 2011, respectively, and approximately $47.1 million and $50.1 million for the nine months ended September 30, 2012 and 2011, respectively.

See Note 8 for a description of Piedmont’s estimated fair value of debt as of September 30, 2012.

The following table summarizes the terms of Piedmont’s indebtedness outstanding as of September 30, 2012 and December 31, 2011 (in thousands):



Facility	Collateral	Rate⁽¹⁾			Maturity	Amount Outstanding as of
Facility	Collateral	Rate⁽¹⁾			Maturity	September 30, 2012		December 31, 2011
Secured (Fixed)
$45.0 Million Fixed-Rate Loan	4250 N. Fairfax	5.20	%		6/1/2012	$	—	$	45,000
$200.0 Million Mortgage Note	Aon Center	4.87	%		5/1/2014	200,000		200,000
$25.0 Million Mortgage Note	Aon Center	5.70	%		5/1/2014	25,000		25,000
$350.0 Million Secured Pooled Facility	Nine Property Collateralized Pool ⁽²⁾	4.84	%		6/7/2014	350,000		350,000
$105.0 Million Fixed-Rate Loan	US Bancorp Center	5.29	%		5/11/2015	105,000		105,000
$125.0 Million Fixed-Rate Loan	Four Property Collateralized Pool ⁽³⁾	5.50	%		4/1/2016	125,000		125,000
$42.5 Million Fixed-Rate Loan	Las Colinas Corporate Center I & II	5.70	%		10/11/2016	42,525		42,525
$140.0 Million WDC Mortgage Notes	1201 & 1225 Eye Street	5.76	%		11/1/2017	140,000		140,000
$140.0 Million 500 W. Monroe Mortgage Loan	500 W. Monroe	LIBOR + 1.008%			8/9/2012	—		140,000
Subtotal/Weighted Average ⁽⁴⁾		5.17	%			987,525		1,172,525
Unsecured (Variable)
$300 Million Unsecured Term Loan		LIBOR + 1.45%		⁽⁵⁾	11/22/2016	300,000		300,000
$500 Million Unsecured Line of Credit		1.40	%	⁽⁶⁾	8/19/2016	148,500		—
Subtotal/Weighted Average ⁽⁴⁾		2.26	%			448,500		300,000
Total/ Weighted Average ⁽⁴⁾		4.26	%			$	1,436,025	$	1,472,525


⁽¹⁾	All of Piedmont’s outstanding debt as of September 30, 2012 and December 31, 2011 is interest-only debt.


⁽²⁾	Nine property collateralized pool includes: 1200 Crown Colony Drive, Braker Pointe III, 2 Gatehall Drive, One and Two Independence Square, 2120 West End Avenue, 400 Bridgewater Crossing, 200 Bridgewater Crossing, and Fairway Center II.


⁽³⁾	Four property collateralized pool includes 1430 Enclave Parkway, Windy Point I and II, and 1055 East Colorado Boulevard.


⁽⁴⁾	Weighted average is based on contractual balance of outstanding debt and interest rates in the table as of September 30, 2012.


⁽⁵⁾	The $300 Million Unsecured Term Loan has a stated variable rate; however, Piedmont entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, the rate on this facility to 2.69%.

⁽⁶⁾

Piedmont may select from multiple interest rate options with each draw, including the prime rate and various-length LIBOR locks. All LIBOR selections are subject to an additional spread (1.175% as of September 30, 2012) over the selected rate based on Piedmont’s current credit rating. The outstanding balance as of September 30, 2012 consisted of LIBOR draws at 0.22% (subject to the additional spread mentioned above).