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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________ 
FORM 10-Q
_______________________________________________________________________________________  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934
For the Quarterly Period Ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934
For the Transition Period From                      To                     
Commission file number 001-34626
Piedmont Office Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
 ____________________________________________________ 
Maryland58-2328421
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

5565 Glenridge Connector Ste. 450
Atlanta, Georgia 30342
(Address of principal executive offices) (Zip Code)
(770) 418-8800
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.01 par valuePDMNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  x No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerxAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No   x
Number of shares outstanding of the Registrant’s
common stock, as of April 27, 2021:
124,029,001 shares



Table of Contents
FORM 10-Q
PIEDMONT OFFICE REALTY TRUST, INC.
TABLE OF CONTENTS
 
 Page No.
PART IFinancial Information
Item 1.
Item 2.
Item 3.
Item 4.
PART II.Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q may constitute forward-looking statements within the meaning of the federal securities laws. In addition, Piedmont Office Realty Trust, Inc. ("Piedmont," "we," "our," or "us"), or its executive officers on Piedmont’s behalf, may from time to time make forward-looking statements in reports and other documents Piedmont files with the Securities and Exchange Commission or in connection with other written or oral statements made to the press, potential investors, or others. Statements regarding future events and developments and Piedmont’s future performance, as well as management’s expectations, beliefs, plans, estimates, or projections relating to the future, are forward-looking statements. Forward-looking statements include statements preceded by, followed by, or that include the words “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Examples of such statements in this report include descriptions of our real estate, financings, and operating objectives; discussions regarding future dividends and share repurchases; discussions regarding the potential uses of capital and means to secure additional sources of capital; and discussions regarding the potential impact of economic conditions on our real estate and lease portfolio, among others.

These statements are based on beliefs and assumptions of Piedmont’s management, which in turn are based on information available at the time the statements are made. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding the demand for office space in the markets in which Piedmont operates, competitive conditions, and general economic conditions. These assumptions could prove inaccurate. The forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond Piedmont’s ability to control or predict. Such factors include, but are not limited to, the following:

Actual or threatened public health epidemics or outbreaks, such as the COVID-19 pandemic that the world is currently experiencing, and governmental and private measures taken to combat such health crises, which may affect our personnel, tenants, tenants' operations and ability to pay lease obligations, demand for office space, and the costs of operating our assets;
The adequacy of our general reserve related to tenant lease-related assets established as a result of the COVID-19 pandemic, as well as the impact of any increase in this reserve or the establishment of any other reserve in the future;
Economic, regulatory, socio-economic changes, and/or technology changes (including accounting standards) that impact the real estate market generally, or that could affect patterns of use of commercial office space;
The impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases;
Changes in the economies and other conditions affecting the office sector in general and specifically the seven markets in which we primarily operate where we have high concentrations of our Annualized Lease Revenue (see definition below);
Lease terminations, lease defaults, or changes in the financial condition of our tenants, particularly by one of our large lead tenants;
Adverse market and economic conditions, including any resulting impairment charges on both our long-lived assets or goodwill resulting therefrom;
The success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions and divestitures;
The illiquidity of real estate investments, including regulatory restrictions to which real estate investment trusts ("REITs") are subject and the resulting impediment on our ability to quickly respond to adverse changes in the performance of our properties;
The risks and uncertainties associated with our acquisition and disposition of properties, many of which risks and uncertainties may not be known at the time of acquisition or disposition;
Development and construction delays and resultant increased costs and risks;
Our real estate development strategies may not be successful;
Future acts of terrorism, civil unrest, or armed hostilities in any of the major metropolitan areas in which we own properties, or future cybersecurity attacks against any of our tenants;
Risks related to the occurrence of cyber incidents, or a deficiency in our cybersecurity, which could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships;
Costs of complying with governmental laws and regulations;
Uninsured losses or losses in excess of our insurance coverage, and our inability to obtain adequate insurance coverage at a reasonable cost;
Additional risks and costs associated with directly managing properties occupied by government tenants, including an increased risk of default by government tenants during periods in which state or federal governments are shut down or on furlough;
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Significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock;
Changes in interest rates and changes in the method pursuant to which the LIBOR rates are determined and the planned phasing out of USD LIBOR after June 2023;
High interest rates which could affect our ability to finance or refinance properties;
The effect of future offerings of debt or equity securities or changes in market interest rates on the value of our common stock;
Uncertainties associated with environmental and other regulatory matters;
Potential changes in the political environment and reduction in federal and/or state funding of our governmental tenants;
Changes in the financial condition of our tenants directly or indirectly resulting from geopolitical developments that could negatively affect international trade, the termination or threatened termination of existing international trade agreements, or the implementation of tariffs or retaliatory tariffs on imported or exported goods;
The effect of any litigation to which we are, or may become, subject;
Additional risks and costs associated with owning properties occupied by tenants in particular industries, such as oil and gas, hospitality, travel, co-working, etc., including risks of default during start-up and during economic downturns;
Changes in tax laws impacting REITs and real estate in general, as well as our ability to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), or otherwise adversely affect our stockholders;
The future effectiveness of our internal controls and procedures; and
Other factors, including the risk factors discussed under Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2020.

Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events.

Information Regarding Disclosures Presented

Annualized Lease Revenue ("ALR"), a non-GAAP measure, is calculated by multiplying (i) current rental payments (defined as base rent plus operating expense reimbursements, if payable by the tenant on a monthly basis under the terms of a lease that has been executed, but excluding (a) rental abatements and (b) rental payments related to executed but not commenced leases for space that was covered by an existing lease), by (ii) 12. In instances in which contractual rents or operating expense reimbursements are collected on an annual, semi-annual, or quarterly basis, such amounts are multiplied by a factor of 1, 2, or 4, respectively, to calculate the annualized figure. For leases that have been executed but not commenced relating to unleased space, ALR is calculated by multiplying (i) the monthly base rental payment (excluding abatements) plus any operating expense reimbursements for the initial month of the lease term, by (ii) 12. Unless stated otherwise, this measure excludes revenues associated with development properties and properties taken out of service for redevelopment, if any.
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PART I.     FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS.

The information presented in the accompanying consolidated balance sheets and related consolidated statements of income, comprehensive income/(loss), stockholders’ equity, and cash flows reflects all adjustments that are, in management’s opinion, necessary for a fair and consistent presentation of financial position, results of operations, and cash flows in accordance with GAAP.
The accompanying financial statements should be read in conjunction with the notes to Piedmont’s financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report on Form 10-Q and with Piedmont’s Annual Report on Form 10-K for the year ended December 31, 2020. Piedmont’s results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results expected for the full year.
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PIEDMONT OFFICE REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except for share and per share amounts)
March 31,
2021
December 31,
2020
Assets:
Real estate assets, at cost:
Land
$484,467 $484,466 
Buildings and improvements, less accumulated depreciation of $793,064 and $767,542 as of March 31, 2021 and December 31, 2020, respectively
2,446,135 2,424,225 
Intangible lease assets, less accumulated amortization of $72,475 and $67,850 as of March 31, 2021 and December 31, 2020, respectively
83,159 90,594 
Construction in progress
47,498 56,749 
Total real estate assets3,061,259 3,056,034 
Cash and cash equivalents10,689 7,331 
Tenant receivables, net of allowance for doubtful accounts of $4,965 and $4,553 as of March 31, 2021 and December 31, 2020, respectively
4,545 8,448 
Straight-line rent receivables156,257 151,153 
Note receivable118,500 118,500 
Restricted cash and escrows1,741 1,883 
Prepaid expenses and other assets22,647 23,277 
Goodwill98,918 98,918 
Deferred lease costs, less accumulated amortization of $182,435 and $172,619 as of March 31, 2021 and December 31, 2020, respectively
263,318 274,266 
Total assets$3,737,874 $3,739,810 
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs of $10,181 and $10,932 as of March 31, 2021 and December 31, 2020, respectively
$1,633,819 $1,594,068 
Secured debt, net of premiums and unamortized debt issuance costs of $204 and $326 as of March 31, 2021 and December 31, 2020, respectively
27,628 27,936 
Accounts payable, accrued expenses and accrued capital expenditures92,183 111,997 
Dividends payable 25,683 
Deferred income56,638 36,891 
Intangible lease liabilities, less accumulated amortization of $29,665 and $27,344 as of March 31, 2021 and December 31, 2020, respectively
32,607 35,440 
Interest rate swaps7,654 9,834 
Total liabilities1,850,529 1,841,849 
Commitments and Contingencies (Note 6)
  
Stockholders’ Equity:
Shares-in-trust, 150,000,000 shares authorized; none outstanding as of March 31, 2021 or December 31, 2020
  
Preferred stock, no par value, 100,000,000 shares authorized; none outstanding as of March 31, 2021 or December 31, 2020
  
Common stock, $0.01 par value, 750,000,000 shares authorized; 124,029,001 and 123,839,419 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
1,240 1,238 
Additional paid-in capital3,697,801 3,693,996 
Cumulative distributions in excess of earnings(1,791,558)(1,774,856)
Other comprehensive loss(21,813)(24,100)
Piedmont stockholders’ equity1,885,670 1,896,278 
Noncontrolling interest1,675 1,683 
Total stockholders’ equity1,887,345 1,897,961 
Total liabilities and stockholders’ equity$3,737,874 $3,739,810 
See accompanying notes
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PIEDMONT OFFICE REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except for share and per share amounts)
 
Three Months Ended
 March 31,
 20212020
Revenues:
Rental and tenant reimbursement revenue$125,912 $132,154 
Property management fee revenue758 773 
Other property related income2,587 4,244 
129,257 137,171 
Expenses:
Property operating costs51,424 53,190 
Depreciation28,103 27,884 
Amortization22,912 23,631 
General and administrative
7,251 8,643 
109,690 113,348 
Other income (expense):
Interest expense(12,580)(15,264)
Other income2,356 149 
Gain on sale of real estate assets 3 
(10,224)(15,112)
Net income9,343 8,711 
Net loss/(income) applicable to noncontrolling interest
1 (2)
Net income applicable to Piedmont$9,344 $8,709 
Per share information – basic and diluted:
Net income applicable to common stockholders$0.08 $0.07 
Weighted-average common shares outstanding – basic123,945,972 125,862,086 
Weighted-average common shares outstanding – diluted124,449,731 126,360,003 
See accompanying notes
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PIEDMONT OFFICE REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (UNAUDITED)
(in thousands)

Three Months Ended
 March 31,
 20212020
Net income applicable to Piedmont$9,344 $8,709 
Other comprehensive income/(loss):
Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges (See Note 4)
1,561 (21,937)
Plus/(less): Reclassification of net loss/(gain) included in net income (See Note 4)
726 (6)
Other comprehensive income/(loss)2,287 (21,943)
Comprehensive income/(loss) applicable to Piedmont
$11,631 $(13,234)

See accompanying notes
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PIEDMONT OFFICE REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(in thousands, except per share amounts)

Common StockAdditional Paid-In CapitalCumulative Distributions in Excess of EarningsOther Comprehensive Income/(Loss)Non- controlling InterestTotal Stockholders’ Equity
SharesAmount
Balance, December 31, 2020123,839 $1,238 $3,693,996 $(1,774,856)$(24,100)$1,683 $1,897,961 
Dividends to common stockholders ($0.21 per share) and stockholders of subsidiaries
   (26,046) (7)(26,053)
Shares issued and amortized under the 2007 Omnibus Incentive Plan, net of tax190 2 3,805    3,807 
Net loss applicable to noncontrolling interest     (1)(1)
Net income applicable to Piedmont   9,344   9,344 
Other comprehensive income    2,287  2,287 
Balance, March 31, 2021124,029 $1,240 $3,697,801 $(1,791,558)$(21,813)$1,675 $1,887,345 


Common StockAdditional Paid-In CapitalCumulative Distributions in Excess of EarningsOther Comprehensive Income/(Loss)Non- controlling InterestTotal Stockholders’ Equity
SharesAmount
Balance, December 31, 2019125,783 $1,258 $3,686,398 $(1,871,375)$967 $1,726 $1,818,974 
Dividends to common stockholders ($0.21 per share), stockholders of subsidiaries, and dividends reinvested
— — (5)(26,443)— (6)(26,454)
Shares issued and amortized under the 2007 Omnibus Incentive Plan, net of tax138 1 4,428 — — — 4,429 
Net income applicable to noncontrolling interest— — — — — 2 2 
Net income applicable to Piedmont— — — 8,709 — — 8,709 
Other comprehensive loss— — — — (21,943)— (21,943)
Balance, March 31, 2020125,921 $1,259 $3,690,821 $(1,889,109)$(20,976)$1,722 $1,783,717 

See accompanying notes
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PIEDMONT OFFICE REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands) 

Three Months Ended
March 31,
20212020
Cash Flows from Operating Activities:
Net income$9,343 $8,711 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation28,103 27,884 
Amortization of debt issuance costs inclusive of settled interest rate swaps
760 206 
Other amortization21,132 21,518 
General reserve for uncollectible accounts412  
Stock compensation expense3,275 3,895 
Gain on sale of real estate assets (3)
Changes in assets and liabilities:
Increase in tenant and straight-line rent receivables(2,561)(10,011)
Decrease in prepaid expenses and other assets224 753 
Decrease in accounts payable and accrued expenses(15,790)(6,941)
Increase in deferred income1,922 785 
Net cash provided by operating activities46,820 46,797 
Cash Flows from Investing Activities:
Acquisition of real estate assets and intangibles (396,846)
Capitalized expenditures(25,759)(32,318)
Net sales proceeds from wholly-owned properties (62)
Deferred lease costs paid(2,054)(19,581)
Net cash used in investing activities(27,813)(448,807)
Cash Flows from Financing Activities:
Debt issuance and other costs paid(21)(146)
Proceeds from debt91,000 792,625 
Repayments of debt(52,185)(341,175)
Discount paid due to loan modification (525)
Value of shares withheld for payment of taxes related to employee stock compensation(2,164)(1,596)
Repurchases of common stock as part of announced plan(685) 
Dividends paid and discount on dividend reinvestments(51,736)(52,881)
Net cash (used in)/provided by financing activities(15,791)396,302 
Net increase/(decrease) in cash, cash equivalents, and restricted cash and escrows3,216 (5,708)
Cash, cash equivalents, and restricted cash and escrows, beginning of period9,214 15,386 
Cash, cash equivalents, and restricted cash and escrows, end of period$12,430 $9,678 

See accompanying notes
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PIEDMONT OFFICE REALTY TRUST, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)

1.    Organization
Piedmont Office Realty Trust, Inc. (“Piedmont”) (NYSE: PDM) is a Maryland corporation that operates in a manner so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes and engages in the ownership, management, development, redevelopment, and operation of high-quality, Class A office properties located primarily in select sub-markets within seven major Eastern U.S. office markets, with a majority of its revenue being generated from the Sunbelt. Piedmont was incorporated in 1997 and commenced operations in 1998. Piedmont conducts business through its wholly-owned subsidiary, Piedmont Operating Partnership, L.P. (“Piedmont OP”), a Delaware limited partnership. Piedmont OP owns properties directly, through wholly-owned subsidiaries, and through various joint ventures which it controls. References to Piedmont herein shall include Piedmont and all of its subsidiaries, including Piedmont OP and its subsidiaries and joint ventures.

As of March 31, 2021, Piedmont owned 54 in-service office properties and one redevelopment asset in select sub-markets located within seven major U.S. office markets: Dallas, Atlanta, Washington, D.C., Minneapolis, Boston, Orlando, and New York. As of March 31, 2021, Piedmont's 54 in-service office properties comprised approximately 16.4 million square feet (unaudited) of primarily Class A commercial office space and were 86.0% leased.

2.    Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation

The consolidated financial statements of Piedmont have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of a full year’s results.

Piedmont’s consolidated financial statements include the accounts of Piedmont, Piedmont’s wholly-owned subsidiaries, any variable interest entity ("VIE") of which Piedmont or any of its wholly-owned subsidiaries is considered to have the power to direct the activities of the entity and the obligation to absorb losses/right to receive benefits, or any entity in which Piedmont or any of its wholly-owned subsidiaries owns a controlling interest. In determining whether Piedmont or Piedmont OP has a controlling interest, the following factors, among others, are considered: equity ownership, voting rights, protective rights of investors, and participatory rights of investors. For further information, refer to the financial statements and footnotes included in Piedmont’s Annual Report on Form 10-K for the year ended December 31, 2020.

All intercompany balances and transactions have been eliminated upon consolidation.

Further, Piedmont has formed special purpose entities to acquire and hold real estate. Each special purpose entity is a separate legal entity. Consequently, the assets of these special purpose entities are not available to all creditors of Piedmont. The assets owned by these special purpose entities are being reported on a consolidated basis with Piedmont’s assets for financial reporting purposes only.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. The most significant of these estimates include the underlying cash flows and holding periods used in assessing impairment, judgements regarding the recoverability of goodwill, and the assessment of the collectibility of receivables. Future impacts of the COVID-19 pandemic on Piedmont and its tenants may affect these and other estimates used in the preparation of these financial statements. While Piedmont has made, what it believes to be, appropriate accounting estimates based on the facts and circumstances available as of the reporting date, actual results could materially differ from those estimates.

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Income Taxes

Piedmont has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and has operated as such, beginning with its taxable year ended December 31, 1998. To qualify as a REIT, Piedmont must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income. As a REIT, Piedmont is generally not subject to federal income taxes, subject to fulfilling, among other things, its taxable income distribution requirement. Piedmont is subject to certain taxes related to the operations of properties in certain locations, as well as operations conducted by its taxable REIT subsidiary which have been provided for in the financial statements.

Operating Leases

Piedmont recognized the following fixed and variable lease payments, which together comprised rental and tenant reimbursement revenue in the accompanying consolidated statements of income for the three months ended March 31, 2021 and 2020, respectively, as follows (in thousands):

Three Months Ended
March 31,
2021
March 31,
2020
Fixed payments$105,170 $111,496 
Variable payments20,742 20,658 
Total Rental and Tenant Reimbursement Revenue
$125,912 $132,154 

Operating leases where Piedmont is the lessee relate primarily to office space in buildings owned by third parties. For both the three months ended March 31, 2021 and 2020, Piedmont recognized approximately $20,000 of operating lease costs related to these office space leases. As of March 31, 2021, the weighted-average lease term of Piedmont's right of use assets is approximately two years, and the weighted-average discount rate is 1.60%.

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3.    Debt

The following table summarizes the terms of Piedmont’s indebtedness outstanding as of March 31, 2021 and December 31, 2020 (in thousands):

Facility (1)
Stated Rate
Effective Rate (2)
MaturityAmount Outstanding as of
March 31, 2021December 31, 2020
Secured (Fixed)
$35 Million Fixed-Rate Loan (3)
5.55 %3.75 %9/1/2021$27,424 $27,610 
Net premium and unamortized debt issuance costs
204 326 
Subtotal/Weighted Average (4)
5.55 %27,628 27,936 
Unsecured (Variable and Fixed)
Amended and Restated $300 Million Unsecured 2011 Term Loan
LIBOR +  1.00%
1.11 %11/30/2021300,000 300,000 
$500 Million Unsecured 2018 Line of Credit (5)
LIBOR + 0.90%
1.01 %9/30/2022
(6)
44,000 5,000 
$350 Million Unsecured Senior Notes
3.40 %3.43 %6/01/2023350,000 350,000 
$400 Million Unsecured Senior Notes
4.45 %4.10 %3/15/2024400,000 400,000 
$250 Million Unsecured 2018 Term Loan
LIBOR + 0.95%
2.06 %
(7)
3/31/2025250,000 250,000 
$300 Million Unsecured Senior Notes
3.15 %3.90 %

8/15/2030300,000 300,000 
Discounts and unamortized debt issuance costs
(10,181)(10,932)
Subtotal/Weighted Average (4)
2.92 %1,633,819 1,594,068 
Total/Weighted Average (4)
2.97 %$1,661,447 $1,622,004 

(1)Other than the $35 Million Fixed-Rate Loan, all of Piedmont’s outstanding debt as of March 31, 2021 and December 31, 2020 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)Weighted average is based on contractual balance of outstanding debt and the stated or effectively fixed interest rates as of March 31, 2021.
(5)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.
(6)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.
(7)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 March 31, 2021 (see Note 4 for more detail).

Piedmont made interest payments on all debt facilities, including interest rate swap cash settlements, of approximately $16.5 million and $15.9 million for the three months ended March 31, 2021 and 2020, respectively. Also, Piedmont capitalized interest of approximately $0.8 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, Piedmont believes it was in compliance with all financial covenants associated with its debt instruments.

See Note 5 for a description of Piedmont’s estimated fair value of debt as of March 31, 2021.
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4.    Derivative Instruments
Risk Management Objective of Using Derivatives

In addition to operational risks which arise in the normal course of business, Piedmont is exposed to economic risks such as interest rate, liquidity, and credit risk. In certain situations, Piedmont has entered into derivative financial instruments such as interest rate swap agreements and other similar agreements to manage interest rate risk exposure arising from current or future variable rate debt transactions. Interest rate swap agreements involve the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Piedmont’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements.

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for Piedmont making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The maximum length of time over which Piedmont is hedging its exposure to the variability in future cash flows for forecasted transactions is 48 months. A detail of Piedmont’s interest rate derivatives outstanding as of March 31, 2021 is as follows:

Interest Rate Derivatives:Number of Swap AgreementsAssociated Debt InstrumentTotal Notional Amount
(in millions)
Effective DateMaturity Date
Interest rate swaps2
$250 Million Unsecured 2018 Term Loan
$100 3/29/20183/31/2025

Piedmont presents its interest rate derivatives on its consolidated balance sheets on a gross basis as interest rate swap assets and interest rate swap liabilities. A detail of Piedmont’s interest rate derivatives on a gross and net basis as of March 31, 2021 and December 31, 2020, respectively, is as follows (in thousands):

Interest rate swaps classified as:March 31,
2021
December 31,
2020
Gross derivative assets$ $ 
Gross derivative liabilities(7,654)(9,834)
Net derivative liability$(7,654)$(9,834)

The gain/(loss) on Piedmont's interest rate derivatives, including previously settled forward swaps, that was recorded in other comprehensive income ("OCI") and the accompanying consolidated statements of income as a component of interest expense for the three months ended March 31, 2021 and 2020, respectively, was as follows (in thousands):

 Three Months Ended
Interest Rate Swaps in Cash Flow Hedging RelationshipsMarch 31,
2021
March 31,
2020
Amount of gain/(loss) recognized in OCI$1,561 $(21,937)
Amount of previously recorded gain/(loss) reclassified from OCI into Interest Expense
$(726)$6 
Total amount of interest expense presented in the consolidated statements of income
$(12,580)$(15,264)

Piedmont estimates that approximately $2.9 million will be reclassified from OCI as an increase in interest expense over the next twelve months. Piedmont recognized no hedge ineffectiveness on its cash flow hedges during the three months ended March 31, 2021 and 2020, respectively.

Additionally, see Note 5 for fair value disclosures of Piedmont's derivative instruments.

Credit-risk-related Contingent Features

Piedmont has agreements with its derivative counterparties that contain a provision whereby if Piedmont defaults on any of its
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indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Piedmont could also be declared in default on its derivative obligations. If Piedmont were to breach any of the contractual provisions of the derivative contracts, it could be required to settle its liability obligations under the agreements at their termination value of the estimated fair values plus accrued interest, or approximately $7.8 million as of March 31, 2021. Additionally, Piedmont has rights of set-off under certain of its derivative agreements related to potential termination fees and amounts payable under the agreements, if a termination were to occur.

5.    Fair Value Measurement of Financial Instruments
Piedmont considers its cash and cash equivalents, tenant receivables, notes receivable, restricted cash and escrows, accounts payable and accrued expenses, interest rate swap agreements, and debt to meet the definition of financial instruments. The following table sets forth the carrying and estimated fair value for each of Piedmont’s financial instruments, as well as its level within the GAAP fair value hierarchy, as of March 31, 2021 and December 31, 2020, respectively (in thousands):

 March 31, 2021December 31, 2020
Financial InstrumentCarrying ValueEstimated
Fair Value
Level Within Fair Value HierarchyCarrying ValueEstimated
Fair Value
Level Within Fair Value Hierarchy
Assets:
Cash and cash equivalents (1)
$10,689 $10,689 Level 1$7,331 $7,331 Level 1
Tenant receivables, net (1)
$4,545 $4,545 Level 1$8,448 $8,448 Level 1
Notes receivable
$118,500 $118,500 Level 2$118,500 $118,500 Level 2
Restricted cash and escrows (1)
$1,741 $1,741 Level 1$1,883 $1,883 Level 1
Liabilities:
Accounts payable and accrued expenses (1)
$8,729 $8,729 Level 1$45,345 $45,345 Level 1
Interest rate swaps$7,654 $7,654 Level 2$9,834 $9,834 Level 2
Debt, net$1,661,447 $1,720,519 Level 2$1,622,004 $1,690,377 Level 2

(1)For the periods presented, the carrying value of these financial instruments, net of applicable allowance, approximates estimated fair value due to their short-term maturity.

Piedmont's notes receivable were carried at book value as of March 31, 2021, and were issued in conjunction with the sale of properties to an unrelated third-party buyer in October 2020. Piedmont has evaluated the facts and circumstances present at the time of issuance of the notes receivable as compared to those same circumstances as of March 31, 2021 and determined that the book value approximates its estimated fair value.

Piedmont's debt was carried at book value as of March 31, 2021 and December 31, 2020; however, Piedmont's estimate of its fair value is disclosed in the table above. Piedmont uses widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the debt facilities, including the period to maturity of each instrument, and uses observable market-based inputs for similar debt facilities which have transacted recently in the market. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). Scaling adjustments are made to these inputs to make them applicable to the remaining life of Piedmont's outstanding debt. Piedmont has not changed its valuation technique for estimating the fair value of its debt.

Piedmont’s interest rate swap agreements presented above, and as further discussed in Note 4, are classified as “Interest rate swap” liabilities in the accompanying consolidated balance sheets and were carried at estimated fair value as of March 31, 2021 and December 31, 2020. The valuation of these derivative instruments was determined using widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the derivatives, including the period to maturity of each instrument, and uses observable market-based inputs, including interest rate curves and implied volatilities. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). In addition, Piedmont considered both its own and the respective counterparties’ risk of nonperformance in determining the estimated fair value of its derivative financial instruments by estimating the current and potential future exposure under the derivative financial instruments that both Piedmont and the counterparties were at risk for as of the valuation date. The credit risk of Piedmont and its counterparties was factored into the calculation of the estimated fair value of the interest rate swaps; however, as of March 31, 2021 and December 31, 2020, this credit valuation adjustment did not comprise a material portion of the estimated fair value. Therefore, Piedmont believes that any unobservable inputs used to determine the estimated fair values
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of its derivative financial instruments are not significant to the fair value measurements in their entirety, and does not consider any of its derivative financial instruments to be Level 3 liabilities.

6.    Commitments and Contingencies

Commitments Under Existing Lease Agreements

As a recurring part of its business, Piedmont is typically required under its executed lease agreements to fund tenant improvements, leasing commissions, and building improvements. In addition, certain agreements contain provisions that require Piedmont to issue corporate or property guarantees to provide funding for capital improvements or other financial obligations. As of March 31, 2021, Piedmont had one individually significant unrecorded tenant allowance commitment of approximately $37.2 million for the approximately 20-year, 520,000 square foot renewal and expansion on behalf of Piedmont's largest tenant, the State of New York at the 60 Broad Street building in New York City. This commitment will be accrued and capitalized as the related expenditures are incurred.

Contingencies Related to Tenant Audits/Disputes

Certain lease agreements include provisions that grant tenants the right to engage independent auditors to audit their annual operating expense reconciliations. Such audits may result in different interpretations of language in the lease agreements from that made by Piedmont, which could result in requests for refunds of previously recognized tenant reimbursement revenues, resulting in financial loss to Piedmont. There were no reductions in rental and reimbursement revenues related to such tenant audits/disputes during the three months ended March 31, 2021 or 2020.

Contingencies Related to the COVID-19 Pandemic

As a result of the COVID-19 pandemic, Piedmont has entered into approximately 70 agreements with various tenants that primarily deferred rent payments until either the fourth quarter of 2020 or into 2021 with interest. As of March 31, 2021, approximately $3.3 million of such deferrals plus interest remains to be paid to Piedmont.

While the long-term impacts of the COVID-19 pandemic remain uncertain, a prolonged economic downturn or recession resulting from the pandemic could adversely affect certain of Piedmont's tenants which could, in turn, adversely impact Piedmont's business, financial condition and results of operations. Piedmont will continue to work closely with our tenants on a case-by-case basis to address any remaining concerns, continuing to seek solutions that address immediate cash flow interruptions while maintaining long term lease obligations.

7.    Stock Based Compensation
The Compensation Committee of Piedmont's Board of Directors has annually granted deferred stock award units to all of Piedmont's employees which are generally based upon Piedmont's financial performance of the previous year measured against board approved operating goals and objectives, executed leasing goals, and certain other financial and operational metrics. Annually granted deferred stock award units to independent directors are for services rendered. Most employee awards vest ratably over a multi-year period and independent director awards vest over one year.

Certain management employees' long-term equity incentive programs are split equally between the deferred stock award units and a multi-year performance share program whereby actual awards are contingent upon Piedmont's total stockholder return ("TSR") performance relative to the TSR of a peer group of office REITs. The target incentives for these certain employees, as well as the peer group to be used for comparative purposes, are predetermined by the Board of Directors, advised by an outside compensation consultant. Any shares earned are awarded at the end of the multi-year performance period and vest upon award. The grant date fair value of the multi-year performance share awards are estimated using a Monte Carlo valuation method.

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A rollforward of Piedmont's equity based award activity for the three months ended March 31, 2021 is as follows:

SharesWeighted-Average Grant Date Fair Value
Unvested and Potential Stock Awards as of December 31, 2020
1,009,530 $24.37 
Deferred Stock Awards Granted
296,277 $17.15 
Increase in Estimated Potential Share Award based on TSR Performance
187,464 $23.66 
Performance Stock Awards Vested
(200,674)$23.52 
Deferred Stock Awards Vested
(122,667)$19.99 
Deferred Stock Awards Forfeited
(5,913)$19.57 
Unvested and Potential Stock Awards as of March 31, 20211,164,017 $23.05 

The following table provides additional information regarding stock award activity during the three months ended March 31, 2021 and 2020, respectively (in thousands, except per share amounts):

Three Months Ended
March 31,
2021
March 31,
2020
Weighted-Average Grant Date Fair Value per share of Deferred Stock Granted During the Period
$17.15 $24.40 
Total Grant Date Fair Value of Deferred Stock Vested During the Period
$2,452 $1,216 
Share-based Liability Awards Paid During the Period (1)
$3,610 $4,116 

(1)Amounts reflect the issuance during the three months ended March 31, 2021 and 2020, respectively, of performance share awards to certain management employees related to the multi-year 2018-20 and 2017-19 Performance Share Plans.

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A detail of Piedmont’s outstanding stock awards and programs as of March 31, 2021 is as follows:

Date of grantType of Award
Net Shares
Granted (1)
Grant
Date Fair
Value
Vesting ScheduleUnvested Shares
May 17, 2018Deferred Stock Award250,584 $17.84 
Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 17, 2019, 2020, and 2021, respectively.
52,227 
May 3, 2019Deferred Stock Award274,840 $21.04 
Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on May 3, 2020, 2021, and 2022, respectively.
132,678 
May 3, 2019Fiscal Year 2019-2021 Performance Share Program $29.43 Shares awarded, if any, will vest immediately upon determination of award in 2022.224,900 
(2)
February 19, 2020Deferred Stock Award159,157 $24.41 
Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on February 19, 2021, 2022, and 2023, respectively.
94,351 
March 19, 2020Fiscal Year 2020-2022 Performance Share Program $25.83 Shares awarded, if any, will vest immediately upon determination of award in 2023.249,518 
(2)
May 13, 2020Deferred Stock Award-Board of Directors45,780 $13.76 
Of the shares granted, 100% will vest by May 13, 2021.
45,780 
February 17, 2021Deferred Stock Award266,469 $17.15 
Of the shares granted, 25% vested on the date of grant, and 25% vested or will vest on February 17, 2022, 2023, and 2024, respectively.
218,686 
February 18, 2021Fiscal Year 2021-2023 Performance Share Program $23.04 Shares awarded, if any, will vest immediately upon determination of award in 2024.145,877 
(2)
Total1,164,017 

(1)Amounts reflect the total original grant to employees and independent directors, net of shares surrendered upon vesting to satisfy required minimum tax withholding obligations through March 31, 2021.
(2)Estimated based on Piedmont's cumulative TSR for the respective performance period through March 31, 2021. Share estimates are subject to change in future periods based upon Piedmont's relative performance compared to its peer group of office REITs' TSR.

During the three months ended March 31, 2021 and 2020, Piedmont recognized approximately $3.3 million and $3.9 million, respectively, of compensation expense related to stock awards of which $2.0 million and $2.7 million, respectively, is related to the amortization of unvested and potential stock awards, as well as the fair value adjustment for liability awards. During the three months ended March 31, 2021, a net total of 189,582 shares were issued to employees. As of March 31, 2021, approximately $11.9 million of unrecognized compensation cost related to unvested and potential stock awards remained, which Piedmont will record in its consolidated statements of income over a weighted-average vesting period of approximately one year.

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8.    Supplemental Disclosures for the Statement of Consolidated Cash Flows

Certain non-cash investing and financing activities for the three months ended March 31, 2021 and 2020, (in thousands) are outlined below:

Three Months Ended
March 31,
2021
March 31,
2020
Accrued capital expenditures and deferred lease costs$19,974 $16,408 
Change in accrued dividends and discount on dividend reinvestments
$(25,683)$(26,427)
Change in accrued share repurchases as part of an announced plan$(686)$ 
Accrued deferred financing costs$5 $76 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash and escrows as presented in the accompanying consolidated statements of cash flows for the three months ended March 31, 2021 and 2020, to the consolidated balance sheets for the respective period (in thousands):

20212020
Cash and cash equivalents as of January 1, 2021 and 2020, respectively$7,331 $13,545 
Restricted cash and escrows as of January 1, 2021 and 2020, respectively1,883 1,841 
Cash, cash equivalents, and restricted cash and escrows, beginning of period, as presented in the accompanying consolidated statement of cash flows
$9,214 $15,386 
Cash and cash equivalents as of March 31, 2021 and 2020, respectively
$10,689 $7,920 
Restricted cash and escrows as of March 31, 2021 and 2020, respectively
1,741 1,758 
Cash, cash equivalents, and restricted cash and escrows, end of period, as presented in the accompanying consolidated statement of cash flows
$12,430 $9,678 

Amounts in restricted cash and escrows typically represent: escrow accounts required for future property repairs; escrow accounts for the payment of real estate taxes as required under certain of Piedmont's debt agreements; earnest money deposited by a buyer to secure the purchase of one of Piedmont's properties; or security or utility deposits held for tenants as a condition of their lease agreement.

9.    Earnings Per Share

There are no adjustments to “Net income applicable to Piedmont” for the diluted earnings per share computations.

Net income per share-basic is calculated as net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Net income per share-diluted is calculated as net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during the period, including unvested deferred stock awards. Diluted weighted average number of common shares reflects the potential dilution under the treasury stock method that would occur if the remaining unvested and potential stock awards vested and resulted in additional common shares outstanding. Unvested and potential stock awards which are determined to be anti-dilutive are not included in the calculation of diluted weighted average common shares. For the three months ended March 31, 2021 and 2020, Piedmont calculated and excluded weighted average outstanding anti-dilutive shares of 182,745 and 67,915, respectively.
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The following table reconciles the denominator for the basic and diluted earnings per share computations shown on the consolidated statements of income for the three months ended March 31, 2021 and 2020, respectively (in thousands):

 Three Months Ended
 March 31, 2021March 31, 2020
Weighted-average common shares – basic123,946125,862
Plus: Incremental weighted-average shares from time-vested deferred and performance stock awards
504498
Weighted-average common shares – diluted124,450126,360


10.    Segment Information

Piedmont's President and Chief Executive Officer has been identified as Piedmont's chief operating decision maker ("CODM"), as defined by GAAP. The CODM evaluates Piedmont's portfolio and assesses the ongoing operations and performance of its properties utilizing the following geographic segments: Dallas, Atlanta, Washington, D.C., Minneapolis, Boston, Orlando, and New York. These operating segments are also Piedmont’s reportable segments. As of March 31, 2021, Piedmont also owned two properties in Houston and one property in Chicago that do not meet the definition of an operating or reportable segment as the CODM does not regularly review these properties for purposes of allocating resources or assessing performance. Further, Piedmont does not maintain a significant presence or anticipate further investment in these markets. These three properties are included in "Corporate and other" below. During the periods presented, there have been no material inter segment transactions. The accounting policies of the reportable segments are the same as Piedmont's accounting policies.

Accrual-based net operating income ("NOI") by geographic segment is the primary performance measure reviewed by Piedmont's CODM to assess operating performance and consists only of revenues and expenses directly related to real estate rental operations. NOI is calculated by deducting property operating costs from lease revenues and other property related income. NOI reflects property acquisitions and dispositions, occupancy levels, rental rate increases or decreases, and the recoverability of operating expenses. Piedmont's calculation of NOI may not be directly comparable to similarly titled measures calculated by other REITs.

Asset value information and capital expenditures by segment are not reported because the CODM does not use these measures to assess performance.

The following table presents accrual-based lease revenue and other property related income included in NOI by geographic reportable segment (in thousands):

Three Months Ended
March 31, 2021March 31, 2020
Dallas$27,494 $20,958 
Atlanta22,705 23,902 
Washington, D.C.14,313 15,531 
Minneapolis15,265 15,837 
Boston15,509 15,532 
Orlando15,477 14,231 
New York13,188 19,447 
Total reportable segments123,951 125,438 
Corporate and other5,306 11,733 
Total Revenues$129,257 $137,171 

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The following table presents NOI by geographic reportable segment (in thousands):

Three Months Ended
March 31, 2021March 31, 2020
Dallas$16,877 $12,490 
Atlanta14,996 14,912 
Washington, D.C.8,573 10,129 
Minneapolis8,155 8,699 
Boston10,824 10,697 
Orlando10,350 8,976 
New York7,296 11,114 
Total reportable segments77,071 77,017 
Corporate and other587 6,785 
Total NOI$77,658 $83,802 

A reconciliation of Net income applicable to Piedmont to NOI is presented below (in thousands):

Three Months Ended
March 31, 2021March 31, 2020
Net income applicable to Piedmont$9,344 $8,709 
Management fee revenue (1)
(390)(395)
Depreciation and amortization51,015 51,515 
General and administrative expenses7,251 8,643 
Interest expense12,580 15,264 
Other (income)/expense(2,141)67 
Gain on sale of real estate assets (3)
Net (loss)/income applicable to noncontrolling interests(1)2 
NOI$77,658 $83,802 

(1)Presented net of related operating expenses incurred to earn such management fee revenue. Such operating expenses are a component of property operating costs in the accompanying consolidated statements of income.

11.    Subsequent Events

Second Quarter Dividend Declaration

On April 28, 2021, the Board of Directors of Piedmont declared a dividend for the second quarter of 2021 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on May 28, 2021. Such dividend will be paid on June 18, 2021.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto of Piedmont Office Realty Trust, Inc. (“Piedmont,” "we," "our," or "us"). See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I, as well as the consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Given our low-leverage operating model of long-term leases to creditworthy tenants, to date the COVID-19 pandemic has not materially impacted our financial condition, our overall liquidity position and outlook, or caused material impairments in our portfolio of operating properties. However, the pandemic related slowdown of leasing activity during 2020 has impacted our occupancy, rental rate growth, and overall earnings. During the three months ended March 31, 2021, all of our properties remained open and fully operational for tenants to utilize as they deemed appropriate and we collected over 99% of our monthly billed contractual rents. Additionally, as of March 31, 2021, we have approximately $3.3 million of deferred rent receivables plus interest which remains to be paid to us.

While the impact of the COVID-19 pandemic on our business has not been severe to date, the long-term impact of the pandemic on our tenants and the global economy is uncertain and will depend on the scope, severity and duration of the pandemic. A prolonged economic downturn or recession resulting from the pandemic could adversely affect many of our tenants which could, in turn, adversely impact our business, financial condition and results of operations. We will continue to work closely with our impacted tenants and address their concerns on a case-by-case basis, seeking solutions that address immediate cash flow interruptions while maintaining long term lease obligations.

Liquidity and Capital Resources

We intend to use cash on hand, cash flows generated from the operation of our properties, net proceeds from the disposition of select properties, and proceeds from our $500 Million Unsecured 2018 Line of Credit as our primary sources of immediate liquidity. We have $460 million of capacity on our $500 million line of credit available as of the date of this filing. When necessary, we may seek new secured or unsecured borrowings from third party lenders or issue securities as additional sources of capital. The nature and timing of these additional sources of capital will be highly dependent on market conditions.

Our most consistent use of capital has historically been, and we believe will continue to be, to fund capital expenditures for our existing portfolio of properties. During the three months ended March 31, 2021 and 2020 we incurred the following types of capital expenditures (in thousands):

Three Months Ended
March 31, 2021March 31, 2020
Capital expenditures for redevelopment/renovations$11,235 $8,539 
Other capital expenditures, including building and tenant improvements14,524 23,779 
Total capital expenditures (1)
$25,759 $32,318 

(1)Of the total amounts paid, approximately $1.4 million and $0.2 million relates to soft costs such as capitalized interest, payroll, and other general and administrative expenses for the three months ended March 31, 2021 and 2020, respectively.

"Capital expenditures for redevelopment/renovations" during both the three months ended March 31, 2021 and three months ended March 31, 2020 related to our build out related to the 520,000 square foot, 20-year renewal and expansion of the State of New York at the 60 Broad Street building in New York City, a redevelopment project to upgrade amenities at our 200 South Orange building in Orlando, Florida, as well as a redevelopment master plan project to upgrade common areas, amenities, and parking, at our Galleria buildings in Atlanta, Georgia.

"Other capital expenditures, including building and tenant improvements" include all other capital expenditures during the period and are typically comprised of tenant and building improvements necessary to lease, maintain, or provide enhancements to our existing portfolio of office properties.

Given that our operating model frequently results in leases for large blocks of space to credit-worthy tenants, our leasing success can result in capital outlays which vary from one reporting period to another based upon the specific leases executed. For example, for leases executed during the three months ended March 31, 2021, we committed to spend approximately $3.40
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per square foot per year of lease term for tenant improvement allowances and lease commissions (net of expired lease commitments) as compared to $5.58 (net of expired lease commitments) for the three months ended March 31, 2020. As of March 31, 2021, we had one individually significant unrecorded tenant allowance commitment outstanding of approximately $37.2 million related to the State of New York's lease at our 60 Broad Street building mentioned above.

In addition to the amounts that we have already committed to as a part of executed leases, we also anticipate continuing to incur similar market-based tenant improvement allowances and leasing commissions in conjunction with procuring future leases for our existing portfolio of properties. Both the timing and magnitude of expenditures related to future leasing activity can vary due to a number of factors, including being highly dependent on the competitive market conditions at the time of lease negotiations of the particular office market within which a given lease is signed. For example, depending on the length of the lease term, the renewal of a majority of the City of New York's 313,000 square foot lease at our 60 Broad Street building may require significant capital outlays for market-based tenant improvement allowances and leasing commissions.

There are other uses of capital that may arise as part of our typical operations. Subject to the identification and availability of attractive investment opportunities and our ability to consummate such acquisitions on satisfactory terms, acquiring new assets consistent with our investment strategy could also be a significant use of capital. We may also use capital resources to repurchase additional shares of our common stock under our stock repurchase program when we believe the stock is trading disparately from our peers and at a significant discount to net asset value. As of March 31, 2021, we had approximately $169.3 million of board-authorized capacity remaining for future stock repurchases. Finally, we may use capital to repay debt obligations when we deem it prudent to refinance various obligations.

The amount and form of payment (cash or stock issuance) of future dividends to be paid to our stockholders will continue to be largely dependent upon (i) the amount of cash generated from our operating activities; (ii) our expectations of future cash flows; (iii) our determination of near-term cash needs for debt repayments, development projects, and selective acquisitions of new properties; (iv) the timing of significant expenditures for tenant improvements, leasing commissions, building redevelopment projects, and general property capital improvements; (v) long-term dividend payout ratios for comparable companies; (vi) our ability to continue to access additional sources of capital, including potential sales of our properties; and (vii) the amount required to be distributed to maintain our status as a REIT. With the fluctuating nature of cash flows and expenditures, we may periodically borrow funds on a short-term basis to cover timing differences in cash receipts and cash disbursements.

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Results of Operations

Overview

Net income applicable to common stockholders for the three months ended March 31, 2021 was $9.3 million, or $0.08 per diluted share, as compared with net income applicable to common stockholders of $8.7 million, or $0.07 per diluted share, for the three months ended March 31, 2020. The increase in net income for the three months ended March 31, 2021 as compared to the same period in the prior year was primarily a result of interest expense savings due to lower interest rates and debt outstanding, interest income earned on notes receivable associated with seller financing of our New Jersey Portfolio in October 2020, and a reduction in certain property operating costs as a result of reduced building utilization across our portfolio due to the COVID-19 pandemic. These increases in net income were largely offset by a reduction in transient parking revenue as a result of the COVID-19 pandemic and lower rental and tenant reimbursement revenue primarily as a result of capital transaction activity subsequent to January 1, 2020.

Comparison of the accompanying consolidated statements of income for the three months ended March 31, 2021 versus the three months ended March 31, 2020

The following table sets forth selected data from our consolidated statements of income for the three months ended March 31, 2021 and 2020, respectively, as well as each balance as a percentage of total revenues for the same period presented (dollars in millions):

March 31,
2021
% of RevenuesMarch 31,
2020
% of RevenuesVariance
Revenue:
Rental and tenant reimbursement revenue$125.9 $132.2 $(6.3)
Property management fee revenue0.8 0.8 —