Goodwill Impairment Charge

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill Impairment Charge

Goodwill Impairment Charge

During the three months ended September 30, 2023, Piedmont considered the decline in its stock price to be an indicator of impairment and performed an interim impairment assessment of its goodwill balance. This assessment involved comparing the estimated fair value of each of its reporting units (see Note 11) to the reporting unit’s carrying value, inclusive of the goodwill balance allocated to the reporting unit.

Estimation of the fair value of each reporting unit involved the projection of discounted future cash flows using certain assumptions that are subjective in nature, including assumptions regarding future market rental rates and the number of months it may take to re-lease a property subsequent to the expiration of current lease agreements, as well as future property operating expenses, among other factors. Based on its analysis, Piedmont determined that the only reporting unit where the carrying value exceeded the estimated fair value (inclusive of the assigned goodwill balance) as of September 30, 2023 was the Minneapolis reporting unit. Consequently, Piedmont recorded an approximately $11.0 million goodwill impairment charge equal to the goodwill balance that had been assigned to the Minneapolis reporting unit in the accompanying consolidated statement of operations.

The fair value measurements used in the evaluation described above are considered to be Level 3 valuations within the fair value hierarchy as defined by GAAP as the measurements involve projections of discounted future cash flows, which are derived from unobservable assumptions, the most subjective of which are capitalization rates and discount rates for each respective reporting unit. The range of discount rates and the capitalization rate used in the analysis for the Minneapolis reporting unit were 8.50% to 9.25% and 8.50% to 9.00%, respectively.