Debt

9 Months Ended

Sep. 30, 2020

During the three months ended September 30, 2020, Piedmont issued, through its wholly owned operating partnership, Piedmont OP, $300 million in aggregate principal amount of 3.15% Senior Notes due 2030 (the “$300 Million Unsecured Senior Notes”), which mature on August 15, 2030. Upon issuance of the $300 Million Unsecured Senior Notes, Piedmont OP received proceeds of approximately $297.7 million, reflecting a discount of approximately $2.3 million which will be amortized as interest expense under the effective interest method over the ten-year term of the $300 Million Unsecured Senior Notes. In addition, in conjunction with the issuance, Piedmont settled four forward starting rate swaps, consisting of notional amounts of $200 million. These swaps were settled at a loss of approximately $19.9 million that was recorded as accumulated other comprehensive income and is being amortized as an increase in interest expense over the ten-year term of the $300 Million Unsecured Senior Notes. See Note 5 for further detail. The proceeds from the $300 Million Unsecured Senior Notes were used to fully repay the $300 Million Unsecured 2020 Term Loan that was obtained for the purchase of the Dallas Galleria Office Towers.

Additionally, during the nine months ended September 30, 2020, Piedmont amended the $250 Million Unsecured 2018 Term Loan to reduce the applicable interest rate spread from LIBOR plus 160 basis points to LIBOR plus 95 basis points, based on Piedmont's current credit rating.

Interest on the $300 Million Unsecured Senior Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2021. The $300 Million Unsecured Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by Piedmont. Piedmont OP may, at its option, redeem the $300 Million Unsecured Senior Notes, in whole or in part, prior to May 15, 2030, at a redemption price equal to the greater of (i) 100% of the principal amount of the $300 Million Unsecured Senior Notes to be redeemed and (ii) a “make-whole” amount, plus any unpaid accrued interest. In addition, at any time on or after May 15, 2030, Piedmont OP may, at its option, redeem the $300 Million Unsecured Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the $300 Million Unsecured Senior Notes to be redeemed plus unpaid accrued interest. The $300 Million Unsecured Senior Notes are subject to certain typical covenants that, subject to certain exceptions: (a) limit the ability of Piedmont and Piedmont OP to, among other things, incur additional secured and unsecured indebtedness; (b) limit the ability of Piedmont and Piedmont OP to merge, consolidate, sell, lease or otherwise dispose of their properties and assets substantially as an entirety; and (c) require Piedmont to maintain a pool of unencumbered assets. The $300 Million Unsecured Senior Notes are also subject to customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the $300 Million Unsecured Senior Notes to become or to be declared due and payable.

Finally, during the nine months ended September 30, 2020, Piedmont sold the 1901 Market Street building (see Note 8 for further details) and used the majority of the net sale proceeds to repay the $160 Million Fixed-Rate Loan that was secured by the property and all remaining outstanding borrowings under the $500 Million Unsecured 2018 Line of Credit. As a result of repaying the $160 Million Fixed-Rate Loan in advance of its stated maturity, Piedmont recognized a $9.3 million loss on early extinguishment of debt comprised of a prepayment penalty and unamortized deferred financing costs.

The following table summarizes the terms of Piedmont’s indebtedness outstanding as of September 30, 2020 and December 31, 2019 (in thousands):


Facility (1)	Stated Rate		Effective Rate (2)			Maturity		Amount Outstanding as of
								September 30, 2020		December 31, 2019
Secured (Fixed)







$35 Million Fixed-Rate Loan (3)	5.55	%	3.75	%		9/1/2021		$	27,976	$	28,687
$160 Million Fixed-Rate Loan (4)	3.48	%	3.58	%		7/5/2022		—		160,000
Net premium and unamortized debt issuance costs								448		343
Subtotal/Weighted Average (5)	5.55	%						28,424		189,030
Unsecured (Variable and Fixed)





Amended and Restated $300 Million Unsecured 2011 Term Loan (6)	LIBOR + 1.00%		1.16	%		11/30/2021		300,000		300,000
$500 Million Unsecured 2018 Line of Credit (6)	LIBOR + 0.90%		—	%		9/30/2022	(7)	—		—
$350 Million Unsecured Senior Notes	3.40	%	3.43	%		6/01/2023		350,000		350,000
$400 Million Unsecured Senior Notes	4.45	%	4.10	%		3/15/2024		400,000		400,000
$250 Million Unsecured 2018 Term Loan	LIBOR + 0.95%		2.08	%	(8)	3/31/2025		250,000		250,000

$300 Million Unsecured Senior Notes	3.15	%	3.90	%	(9)	8/15/2030		300,000		—
Discounts and unamortized debt issuance costs								(11,589)		(7,626)
Subtotal/Weighted Average (5)	2.99	%						1,588,411		1,292,374
Total/Weighted Average (5)	3.03	%						$	1,616,835	$	1,481,404

(1)Other than one mortgage, the $35 Million Fixed-Rate Loan, all of Piedmont’s outstanding debt as of September 30, 2020 and December 31, 2019 is interest-only until maturity.

(2)Effective rate after consideration of settled or in-place interest rate swap agreements, issuance premiums/discounts, and/or fair market value adjustments upon assumption of debt.

(3)Collateralized by the 5 Wall Street building in Burlington, Massachusetts.

(4)Previously collateralized by the 1901 Market Street building in Philadelphia, Pennsylvania.

(5)Weighted average is based on contractual balance of outstanding debt and the stated or effectively fixed interest rates as of September 30, 2020.

(6)On a periodic basis, Piedmont may select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating.

(7)Piedmont may extend the term for up to one additional year (through two available six month extensions to a final extended maturity date of September 29, 2023) provided Piedmont is not then in default and upon payment of extension fees.

(8)The facility has a stated variable rate; however, Piedmont has entered into interest rate swap agreements which effectively fix, exclusive of changes to Piedmont's credit rating, $100 million of the principal balance to 3.56% through the maturity date of the loan. For the remaining variable portion of the loan, Piedmont may periodically select from multiple interest rate options, including the prime rate and various-length LIBOR locks on all or a portion of the principal. All LIBOR selections are subject to an additional spread over the selected rate based on Piedmont’s current credit rating. The rate presented is the weighted-average rate for the effectively fixed and variable portions of the debt outstanding as of September 30, 2020 (see Note 5 for more detail).

(9)The $300 Million Unsecured Senior Notes have a fixed coupon rate of 3.15%, however, as a result of the issuance of the notes at a discount, Piedmont recognizes an effective interest rate on this debt issuance of 3.24%. After consideration of the impact of settled interest rate swap agreements, in addition to the issuance discount, the effective interest rate on this debt is 3.90%.

Piedmont made interest payments on all debt facilities, including interest rate swap cash settlements, of approximately $12.8 million and $17.8 million for the three months ended September 30, 2020 and 2019, respectively, and approximately $41.8 million and $49.7 million for the nine months ended September 30, 2020 and 2019, respectively. Also, Piedmont capitalized interest of approximately $0.2 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively, and approximately $0.6 million and $1.6 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, Piedmont believes it was in compliance with all financial covenants associated with its debt instruments.

See Note 6 for a description of Piedmont’s estimated fair value of debt as of September 30, 2020.