Line of Credit and Notes Payable

3 Months Ended

Mar. 31, 2011

Line of Credit and Notes Payable

Line of Credit and Notes Payable

5. Line of Credit and Notes Payable

During the three months ended March 31, 2011, Piedmont became the primary beneficiary of the VIE containing the 500 W. Monroe Building, a $140.0 million first mortgage loan secured by the building, and a $45.0 million mezzanine loan participation collateralized by an equity ownership interest in the borrower under the first mortgage loan (collectively, the two loans are referred to as the "500 W. Monroe Loans"). As a result, in accordance with GAAP, Piedmont recorded the 500 W. Monroe Loans in its consolidated financial statements as of March 31, 2011 at their estimated fair market value, resulting in discounts of approximately $1.4 million which will be amortized to interest expense over the period through the stated maturity date of the loans of August 9, 2011.

The $140.0 million first mortgage loan bears interest at a rate of LIBOR plus 1.008% per annum and the mezzanine loan participation bears interest at a rate of LIBOR plus 1.45% per annum. The 500 W. Monroe Loans are subject to interest rate cap agreements which limit Piedmont's exposure to potential increases in the LIBOR rate to 1% and both of the loans mature August 9, 2011. Either or both loans may be extended to August 9, 2012 provided the following conditions are met:

1. Payment of a 0.25% annual extension fee;

2. Funding of required reserves for tenant improvements, leasing commissions and rollover/replacement costs;

3. Funding of any projected debt service shortfalls into a debt service reserve; and

4. Purchase of interest rate caps.

The 500 W. Monroe Loans may not be accelerated or increased by the lenders except if they are not paid by maturity or on the occurrence of any event of default, as defined in the loan agreements. The loans may be paid off at Piedmont's option prior to the maturity date without incurring a defeasance or yield maintenance penalty.

During the periods presented, Piedmont made interest payments on all debt facilities, including interest rate swap cash settlements related to Piedmont's $250 Million Unsecured Term Loan, totaling approximately $15.9 million and $17.9 million for the three months ended March 31, 2011 and 2010, respectively.

See Note 8 below for a description of Piedmont's estimated fair value of debt as of March 31, 2011.

The following table summarizes the terms of Piedmont's indebtedness outstanding as of March 31, 2011 and December 31, 2010 (in thousands):

Facility	Property		Rate(1)	Maturity			Amount Outstanding as of
							March 31, 2011			December 31, 2010
Secured
$45.0 Million Fixed-Rate Loan		4250 N. Fairfax	5.20%		6/1/2012		$	45,000		$	45,000
35 West Wacker Building Mortgage Note		35 West Wacker Drive	5.10%		1/1/2014			120,000			120,000
Aon Center Chicago Mortgage Note		Aon Center	4.87%		5/1/2014			200,000			200,000
Aon Center Chicago Mortgage Note		Aon Center	5.70%		5/1/2014			25,000			25,000
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
WDC Mortgage Notes		1201 & 1225 Eye Street	5.76%		11/1/2017			140,000			140,000
500 W. Monroe Mortgage Loan		500 W. Monroe	LIBOR +  1.008%(4)(6)		8/9/2011	(7)		139,602			—
500 W. Monroe Mezzanine I Loan- A Participation		500 W. Monroe	LIBOR +  1.45%(5)(6)		8/9/2011	(7)		43,985			—
Subtotal/Weighted Average(8)			4.96%					1,336,112			1,152,525
Unsecured
$250 Million Unsecured Term Loan		$250 Million Term Loan	LIBOR +  1.50%(9)		6/28/2011			250,000			250,000
$500 Million Unsecured Facility		$500 Million Revolving Facility	3.25%(10)		8/30/2011	(11)		15,000	(12)		—
Subtotal/Weighted Average(8)			2.41%					265,000			250,000
Total/ Weighted Average(8)			4.54%				$	1,601,112		$	1,402,525

⁽¹⁾ All of Piedmont's outstanding debt as of March 31, 2011 and December 31, 2010 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⁾ Effectively LIBOR + 2%, including the amortization of a $0.4 million discount associated with recording the debt at estimated fair market value upon the consolidation of the 500 W. Monroe Building. This discount will be amortized to interest expense over the remaining contractual term of the debt.

⁽⁵⁾ Effectively LIBOR + 8%, including the amortization of a $1.0 million discount associated with recording the debt at estimated fair market value upon the consolidation of the 500 W. Monroe Building. This discount will be amortized to interest expense over the remaining contractual term of the debt.

⁽⁶⁾ Subject to interest rate cap agreements, which limit Piedmont's exposure to potential increases in the LIBOR rate to 1%.

⁽⁷⁾ May be extended to August 9, 2012 if certain conditions are met.

⁽⁸⁾ Weighted average is based on contractual balance outstanding and effective interest rate at March 31, 2011.

⁽⁹⁾ Subject to an interest rate swap agreement which effectively fixes the rate at 2.36% through June 28, 2011.

⁽¹⁰⁾ 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 (0.475% as of March 31, 2011) over the selected rate based on Piedmont's current credit rating. The outstanding balance as of March 31, 2011 is subject to the prime rate which was 3.25% as of that date.

⁽¹¹⁾ Piedmont may extend the term for one additional year provided Piedmont is not then in default and upon the payment of a 15 basis point extension fee.

⁽¹²⁾ Paid off subsequent to March 31, 2011.