(Former name, former address, and former fiscal year, if changed since last report)

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.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~only class~~classes of common stock, as of ~~October 31, 2009: 474,060,916~~May 10, 2010:

Certain statements contained in this Form 10-Q and other written or oral statements made by or on behalf of Piedmont Office Realty Trust, Inc. (“Piedmont”) may constitute forward-looking statements within the meaning of the federal securities laws. In addition, Piedmont, 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 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 within the meaning of these laws. 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, financing, and operating objectives; ~~descriptions of our share redemption program and our ability to purchase additional shares under such program;~~ discussions regarding future dividends; and discussions regarding the potential impact of economic conditions on our portfolio.

These statements are based on beliefs and assumptions of Piedmont’s management, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding the demand for office space in the sectors 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:

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.

The information furnished in the accompanying consolidated balance sheets and related consolidated statements of operations, 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 U.S. generally accepted accounting principles.

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, ~~2008.~~2009. Piedmont’s results of operations for the three months ~~and nine months~~ ended ~~September 30, 2009~~March 31, 2010 are not necessarily indicative of the operating results expected for the full year.


	(Unaudited) September 30, 2009			December 31, 2008			(Unaudited) March 31, 2010			December 31, 2009
Assets:
Real estate assets, at cost:
Land	$	651,876		$	659,637		$	651,876		$	651,876
Buildings and improvements, less accumulated depreciation of $641,960 and $564,940 as of September 30, 2009 and December 31, 2008, respectively		3,012,429			3,098,657
Intangible lease assets, less accumulated amortization of $174,417 and $154,997 as of September 30, 2009 and December 31, 2008, respectively		105,670			130,517
Buildings and improvements, less accumulated depreciation of $689,117 and $665,068 as of March 31, 2010 and December 31, 2009, respectively								2,983,477			2,998,323
Intangible lease assets, less accumulated amortization of $145,242 and $147,043 as of March 31, 2010 and December 31, 2009, respectively								89,780			96,269
Construction in progress		15,483			19,259			12,345			17,059

Total real estate assets		3,785,458			3,908,070			3,737,478			3,763,527
Investments in unconsolidated joint ventures		44,350			48,240			43,482			43,940
Cash and cash equivalents		17,339			20,333			76,994			10,004
Tenant receivables, net of allowance for doubtful accounts of $940 and $969 as of September 30, 2009 and December 31, 2008, respectively		131,677			126,407
Tenant receivables, net of allowance for doubtful accounts of $409 and $559 as of March 31, 2010 and December 31, 2009, respectively								128,316			128,442
Notes receivable		58,523			46,914			59,407			58,739
Due from unconsolidated joint ventures		1,072			1,067			1,202			1,083
Prepaid expenses and other assets		22,220			21,788			18,600			21,456
Goodwill		180,097			180,390			180,097			180,097
Deferred financing costs, less accumulated amortization of $8,588 and $6,499 as of September 30, 2009 and December 31, 2008, respectively		7,901			9,897
Deferred lease costs, less accumulated amortization of $131,767 and $110,967 as of September 30, 2009 and December 31, 2008, respectively		183,214			194,224
Deferred financing costs, less accumulated amortization of $9,981 and $9,285 as of March 31, 2010 and December 31, 2009, respectively								6,509			7,205
Deferred lease costs, less accumulated amortization of $129,869 and $126,678 as of March 31, 2010 and December 31, 2009, respectively								176,325			180,852

Total assets	$	4,431,851		$	4,557,330		$	4,428,410		$	4,395,345

Liabilities:
Line of credit and notes payable	$	1,532,525		$	1,523,625		$	1,402,525		$	1,516,525
Accounts payable, accrued expenses, and accrued capital expenditures		111,345			111,411			83,172			97,747
Deferred income		29,788			24,920			39,079			34,506
Intangible lease liabilities, less accumulated amortization of $72,737 and $63,886 as of September 30, 2009 and December 31, 2008, respectively		64,082			73,196
Intangible lease liabilities, less accumulated amortization of $78,556 and $75,945 as of March 31, 2010 and December 31, 2009, respectively								57,689			60,655
Interest rate swap		5,675			8,957			2,316			3,866

Total liabilities		1,743,415			1,742,109			1,584,781			1,713,299
Commitments and Contingencies		—			—			—			—
Redeemable Common Stock		61,716			112,927			—			75,164
Stockholders’ Equity:
Common stock, $.01 par value; 900,000,000 shares authorized; 474,644,251 shares issued and outstanding as of September 30, 2009; and 478,900,699 shares issued and outstanding at December 31, 2008		4,746			4,789
Shares-in-trust, 150,000,000 shares authorized, none outstanding as of March 31, 2010 or December 31, 2009								—			—
Preferred stock, no par value, 100,000,000 shares authorized, none outstanding as of March 31, 2010 or December 31, 2009								—			—
Class A common stock, $.01 par value; 600,000,000 shares authorized; 53,479,332 shares issued and outstanding as of March 31, 2010; and 39,729,201 shares issued and outstanding at December 31, 2009								534			397
Class B-1 common stock, $.01 par value; 50,000,000 shares authorized; 39,679,332 shares issued and outstanding as of March 31, 2010; and 39,729,201 shares issued and outstanding at December 31, 2009								397			397
Class B-2 common stock, $.01 par value; 50,000,000 shares authorized; 39,679,332 shares issued and outstanding as of March 31, 2010; and 39,729,202 shares issued and outstanding at December 31, 2009								397			397
Class B-3 common stock, $.01 par value; 50,000,000 shares authorized; 39,679,332 shares issued and outstanding as of March 31, 2010; and 39,729,202 shares issued and outstanding at December 31, 2009								397			398
Additional paid-in capital		3,458,534			3,488,461			3,659,257			3,477,168
Cumulative distributions in excess of earnings		(774,774	)		(674,326	)		(820,878	)		(798,561	)
Redeemable common stock		(61,716	)		(112,927	)		—			(75,164	)
Other comprehensive loss		(5,675	)		(8,957	)		(2,316	)		(3,866	)

Piedmont stockholders’ equity		2,621,115			2,697,040			2,837,788			2,601,166

Noncontrolling interest		5,605			5,254			5,841			5,716

Total stockholders’ equity		2,626,720			2,702,294			2,843,629			2,606,882

Total liabilities, redeemable common stock, and stockholders’ equity	$	4,431,851		$	4,557,330		$	4,428,410		$	4,395,345


	(Unaudited) Three Months Ended September 30,						(Unaudited) Nine Months Ended September 30,						(Unaudited) Three Months Ended March 31,
	2009			2008			2009			2008			2010			2009
Revenues:
Rental income	$	112,874		$	113,483		$	337,815		$	341,796		$	112,106		$	112,946
Tenant reimbursements		36,924			37,111			113,088			112,844			35,081			40,105
Property management fee revenue		742			746			2,183			2,382			753			697
Other rental income		—			3,955			782			9,527			496			—

		150,540			155,295			453,868			466,549			148,436			153,748
Expenses:
Property operating costs		56,675			53,726			170,421			166,417			55,369			60,131
Asset and property management fees		472			535			1,453			1,491
Depreciation		26,792			25,248			78,983			73,747			26,080			25,630
Amortization		13,991			15,019			41,127			47,148			11,387			13,442
General and administrative		6,172			7,976			22,829			24,292			6,630			7,371
Impairment loss on real estate assets		35,063			—			35,063			—

		139,165			102,504			349,876			313,095			99,466			106,574

Real estate operating income		11,375			52,791			103,992			153,454			48,970			47,174
Other income (expense):
Interest expense		(19,518	)		(20,418	)		(58,255	)		(55,806	)		(19,091	)		(19,343	)
Interest and other income		1,989			1,076			3,944			2,854			969			662
Equity in loss of unconsolidated joint ventures		(1,985	)		(1,438	)		(568	)		(362	)
Equity in income of unconsolidated joint ventures														737			663

		(19,514	)		(20,780	)		(54,879	)		(53,314	)		(17,385	)		(18,018	)

(Loss)/income from continuing operations		(8,139	)		32,011			49,113			100,140
Discontinued operations:
Operating income		—			—			—			10

Income from discontinued operations		—			—			—			10

Net (loss)/income		(8,139	)		32,011			49,113			100,150
Net income														31,585			29,156
Less: Net income attributable to noncontrolling interest		(121	)		(123	)		(359	)		(430	)		(125	)		(118	)

Net (loss)/income attributable to Piedmont	$	(8,260	)	$	31,888		$	48,754		$	99,720
Net income attributable to Piedmont													$	31,460		$	29,038

Per share information – basic and diluted:
(Loss)/income from continuing operations	$	(0.02	)	$	0.07		$	0.10		$	0.21
Income from discontinued operations	$	0.00		$	0.00		$	0.00		$	0.00
Per share information – basic:
Income from continuing operations													$	0.19		$	0.18
Income attributable to noncontrolling interest	$	0.00		$	0.00		$	0.00		$	0.00			0.00			0.00

Net (loss)/income available to common stockholders	$	(0.02	)	$	0.07		$	0.10		$	0.21
Net income available to common stockholders													$	0.19		$	0.18

Per share information – diluted:
Income from continuing operations													$	0.19		$	0.18
Income attributable to noncontrolling interest														0.00			0.00

Net income available to common stockholders													$	0.19		$	0.18

Weighted-average common shares outstanding – basic		472,808,175			473,964,303			475,473,616			479,733,105			164,992,477			159,705,275

Weighted-average common shares outstanding – diluted		473,280,767			474,357,292			475,871,169			480,065,677			165,200,184			159,878,267

AND FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2009~~MARCH 31, 2010 (UNAUDITED)


	Common Stock					Additional Paid-In Capital				Cumulative Distributions in Excess of Earnings			Redeemable Common Stock				Other Comprehensive Loss				Noncontrolling Interest				Total Stockholders’ Equity			Class A Common Stock						Class B Common Stock							Additional Paid-In Capital			Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Other Comprehensive Loss			Non-controlling Interest			Total Stockholders’ Equity
	Shares		Amount																																						Additional Paid-In Capital			Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Other Comprehensive Loss			Non-controlling Interest			Total Stockholders’ Equity
Balance, December 31, 2007	488,974		$	4,890		Additional Paid-In Capital			$	Cumulative Distributions in Excess of Earnings	3,568,801		Redeemable Common Stock			$	Other Comprehensive Loss			(526,337	Noncontrolling Interest			)	Total Stockholders’ Equity			$	(166,809	)			—		$	6,546			$	2,887,091
Issuance of common stock	17,085			170			143,002				—			—				—				—				143,172
Redemptions of common stock	(27,422	)		(274	)		(229,530	)			—			—				—				—				(229,804	)
Redeemable common stock	—			—			—				—			53,882				—				—				53,882
Dividends ($0.5868 per share)	—			—			—				(279,303	)		—				—				(115	)			(279,418	)
Premium on stock sales	—			—			2,725				—			—				—				—				2,725
Incremental purchase of 35 W. Wacker Building	—			—			—				—			—				—				(1,723	)			(1,723	)
Shares issued under the 2007 Omnibus Incentive Plan, net of tax	264			3			3,463				—			—				—				—				3,466
Net income attributable to noncontrolling interest	—			—			—				—			—				—				546				546
Components of comprehensive income:
Net income attributable to Piedmont	—			—			—				131,314			—				—				—				131,314
Change in value of interest rate swap	—			—			—				—			—				(8,957	)			—				(8,957	)

Comprehensive income																										122,357
																												Shares			Par Amount			Shares			Par Amount				Additional Paid-In Capital			Cumulative Distributions in Excess of Earnings			Redeemable Common Stock			Other Comprehensive Loss			Non-controlling Interest			Total Stockholders’ Equity
Balance, December 31, 2008	478,901			4,789			3,488,461				(674,326	)		(112,927	)			(8,957	)			5,254				2,702,294		39,908			$	399		119,725			$	1,197									Redeemable Common Stock			Other Comprehensive Loss			Non-controlling Interest			Total Stockholders’ Equity
Issuance of common stock	9,740			97			81,523				—			—				—				—				81,620		1,071				11		3,213				32			Additional Paid-In Capital			Cumulative Distributions in Excess of Earnings	107,657			—			—			—			—		107,700
Redemptions of common stock	(14,310	)		(143	)		(119,771	)			—			—				—				—				(119,914	)	(1,276	)			(13	)	(3,829	)			(38	)			(128,293	)		—			—			—			—			(128,344	)
Redeemable common stock	—			—			—				—			51,211				—				—				51,211		—				—		—				—				—			—			37,763			—			—			37,763
Dividends ($0.3150 per share)	—			—			—				(149,202	)		—				—				(8	)			(149,210	)
Dividends ($1.2600 per share)																												—				—		—				—				—			(198,935	)		—			—			(16	)		(198,951	)
Premium on stock sales	—			—			6,430				—			—				��				—				6,430		—				—		—				—				3,585			—			—			—			—			3,585
Shares issued under the 2007 Omnibus Incentive Plan, net of tax	313			3			1,891				—			—				—				—				1,894		26				—		79				1				2,565			—			—			—			—			2,566
Net income attributable to noncontrolling interest	—			—			—				—			—				—				359				359		—				—		—				—				—			—			—			—			478			478
Components of comprehensive income:
Net income attributable to Piedmont	—			—			—				48,754			—				—				—				48,754
Change in value of interest rate swap	—			—			—				—			—				3,282				—				3,282
Net income																												—				—		—				—				—			74,700			—			—			—			74,700
Loss on interest rate swap																												—				—		—				—				—			—			—			5,091			—			5,091

Comprehensive income																										52,036		—				—		—				—				—			—			—			—			—			79,791

Balance, September 30, 2009	474,644		$	4,746		$	3,458,534			$	(774,774	)	$	(61,716	)		$	(5,675	)		$	5,605			$	2,626,720
Balance, December 31, 2009																												39,729				397		119,188				1,192				3,477,168			(798,561	)		(75,164	)		(3,866	)		5,716			2,606,882
Net proceeds from issuance of common stock																												13,800				138		—				—				184,335			—			—			—			—			184,473
Redemption of fractional shares of common stock																												(50	)			(1	)	(150	)			(1	)			(2,899	)		—			—			—			—			(2,901	)
Redeemable common stock																												—				—		—				—				—			—			75,164			—			—			75,164
Dividends ($0.3150 per share)																												—				—		—				—				—			(53,777	)		—			—			—			(53,777	)
Amortization of unvested shares granted under the 2007 Omnibus Incentive Plan																												—				—		—				—				653			—			—			—			—			653
Net income attributable to noncontrolling interest																												—				—		—				—				—			—			—			—			125			125
Components of comprehensive income:
Net income																												—				—		—				—				—			31,460			—			—			—			31,460
Loss on interest rate swap																												—				—		—				—				—			—			—			1,550			—			1,550

Comprehensive income																																																									33,010

Balance, March 31, 2010																												53,479			$	534		119,038			$	1,191			$	3,659,257		$	(820,878	)	$	—		$	(2,316	)	$	5,841		$	2,843,629


	(Unaudited) Nine months ended September 30,						(Unaudited) Three months ended March 31,
	2009			2008			2010			2009
Cash Flows from Operating Activities:
Net income	$	49,113		$	100,150		$	31,585		$	29,156
Operating distributions received from unconsolidated joint ventures		3,373			3,572			1,083			1,066
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		78,983			73,747			26,080			25,630
Other amortization		40,464			47,164			11,110			13,174
Impairment loss on real estate assets		35,063			—
Amortization of deferred financing costs and fair market value adjustments on notes payable		2,090			1,209
Amortization of deferred financing costs								696			708
Accretion of notes receivable discount		(1,940	)		(569	)		(667	)		(366	)
Stock compensation expense		2,206			3,033			653			705
Equity in loss of unconsolidated joint ventures		568			362
Equity in income of unconsolidated joint ventures								(737	)		(663	)
Changes in assets and liabilities:
Increase in tenant receivables, net		(5,020	)		(4,189	)
Increase in prepaid expenses and other assets		(6,407	)		(6,796	)
Increase in accounts payable and accrued expenses		9,751			15,920
Decrease (increase) in tenant receivables, net								127			(775	)
(Increase) decrease in prepaid expenses and other assets								(4,339	)		1,267
Decrease in accounts payable and accrued expenses								(5,820	)		(3,142	)
Increase in deferred income		4,868			275			4,573			7,165

Net cash provided by operating activities		213,112			233,878			64,344			73,925
Cash Flows from Investing Activities:
Investment in real estate assets		(23,792	)		(107,612	)
Investment in internalization costs – goodwill		—			(19	)
Investments in real estate assets								(9,815	)		(9,681	)
Investment in mezzanine debt		(10,000	)		(45,645	)		—			(10,000	)
Investment in unconsolidated joint ventures		(57	)		—
Investments in unconsolidated joint ventures								(8	)		—
Deferred lease costs paid		(13,912	)		(17,128	)		(2,917	)		(7,802	)

Net cash used in investing activities		(47,761	)		(170,404	)		(12,740	)		(27,483	)
Cash Flows from Financing Activities:
Deferred financing costs paid		(93	)		(2,069	)		(1	)		(21	)
Proceeds from line of credit and notes payable		171,000			701,500			—			68,000
Repayments of line of credit and notes payable		(162,100	)		(454,009	)		(114,000	)		(76,600	)
Issuance of common stock		68,703			108,975
Redemptions of common stock		(96,645	)		(225,196	)
Net proceeds from issuance of common stock								186,081			23,999
Redemption of fractional shares of common stock								(2,917	)		—
Dividends paid		(149,210	)		(209,714	)		(53,777	)		(50,248	)

Net cash used in financing activities		(168,345	)		(80,513	)
Net cash provided by (used in) financing activities								15,386			(34,870	)

Net decrease in cash and cash equivalents		(2,994	)		(17,039	)
Net increase in cash and cash equivalents								66,990			11,572
Cash and cash equivalents, beginning of period		20,333			65,016			10,004			20,333

Cash and cash equivalents, end of period	$	17,339		$	47,977		$	76,994		$	31,905


Supplemental Disclosures of Significant Noncash Investing and Financing Activities:
Reduction in goodwill related to return of common stock used to acquire Piedmont’s former advisor							$	—		$	(292	)
Change in accrued offering costs							$	1,608		$	—
Accrued capital expenditures and deferred lease costs							$	894		$	1,087
Discounts applied to issuance of common stock, net of return of common stock used to acquire Piedmont’s former advisor							$	—		$	4,601
Redeemable common stock							$	75,164		$	23,999

Piedmont Office Realty Trust, Inc. (“Piedmont”) 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 acquisition and ownership of commercial real estate properties throughout the United States, including properties that are under construction, are newly constructed, or have operating histories. Piedmont was incorporated in 1997 and commenced operations on June 5, 1998. Piedmont conducts business primarily through Piedmont Operating Partnership, LPL.P. (“Piedmont OP”), a Delaware limited partnership, as well as performing the management of its buildings through two wholly-owned subsidiaries, Piedmont Government Services, LLC and Piedmont Office Management, LLC. Piedmont is the sole general partner of Piedmont OP and possesses full legal control and authority over the operations of Piedmont OP. Piedmont OP owns ~~a majority of its~~ properties directly, through ~~wholly owned~~wholly-owned subsidiaries, and ~~a limited number~~ through both consolidated and unconsolidated joint ~~ventures with real estate limited partnerships with other third parties.~~ventures. References to Piedmont herein shall include Piedmont and all of its subsidiaries, including Piedmont OP and its subsidiaries and ~~consolidated~~ joint ventures.

As of ~~September 30, 2009,~~March 31, 2010, Piedmont owned interests in ~~76 buildings, excluding 8~~73 office properties, plus eight buildings owned through unconsolidated joint ventures ~~which~~and two industrial buildings. Piedmont’s 73 office properties are located in ~~20 states and~~19 metropolitan areas across the ~~District of Columbia. Piedmont’s wholly-owned buildings~~United States. These office properties comprise approximately 2120 million square feet of primarily ofClass A commercial office space and ~~are~~were approximately ~~90% leased.~~

~~The combined proceeds from such offerings are approximately $5.8 billion. From these proceeds, Piedmont has paid costs related to the offerings~~89.6% leased as of (1) approximately $171.1 million in acquisition and advisory fees and reimbursements of acquisition expenses; (2) approximately $453.9 million in commissions and discounts on stock sales and related dealer-manager fees; and (3) approximately $62.7 million in organization and other offering costs. In addition, since inception, Piedmont has used approximately $989.0 million to redeem shares pursuant to Piedmont’s share redemption program or to repurchase shares. The remaining net offering proceeds of approximately $4.1 billion are invested in real estate.

Although Piedmont qualifies as a “public company” under the Securities Exchange Act of 1934, Piedmont’s stock is not listed or actively traded on a national exchange. As such, Piedmont’s charter requires Piedmont to announce a plan of orderly liquidation or a liquidity event to its stockholders by July 30, 2009 (the “Liquidation Date”). On July 21, 2009, as allowed by its charter, the board of directors unanimously determined to extend the Liquidation Date to January 30, 2011.March 31, 2010.

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 U.S. generally accepted accounting principles (“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.~~results and certain prior period amounts have been reclassified to conform to the current period financial statement presentation. Piedmont’s consolidated financial statements include the accounts of Piedmont, Piedmont OP, and certain entities in which Piedmont or Piedmont OP has a controlling financial interest. 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, ~~2008.~~2009.

Further, Piedmont has formed numerous special purpose entities to acquire and hold real estate including the entities listed on Exhibit 21 (List of Subsidiaries of the Company) to Piedmont’s Annual Report on Form 10-K for the year ended December 31, ~~2008.~~2009. Each special purpose entity is a separate legal entity and is the sole owner of its assets and liabilities. The assets of the special purpose entities are not available to pay, or otherwise satisfy obligations to, the creditors of any owner or affiliate of the special purpose entity, except to the extent that any such assets may be made available by any such special purpose entity pursuant to Piedmont’s cash management system. The assets owned by these special purpose entities are being reported on a consolidated basis with Piedmont’s assets for financial reporting purposes only.

~~Subject~~Prior to ~~certain limitations,~~the termination of Piedmont’s share redemption program on February 17, 2010, shares of Piedmont’s common stock ~~are~~were contingently redeemable at the option of the ~~stockholder. Such~~stockholder, subject to certain limitations ~~include, but are not limited to, the following: (i) during any calendar year Piedmont may not redeem in excess of 5%~~ of the weighted-average common shares outstanding during the prior calendar year; and (ii) in no event shall the life-to-date aggregate amount paid for redemptions under the Piedmont share redemption program exceed the aggregate amount of proceeds received from the sale of shares pursuant to the DRP. In addition, effective for 2009, the total amount of capital which may be used to redeem all shares in calendar 2009, regardless of type of request, was intended to approximate the estimated proceeds to be received from the dividend reinvestment plan during 2009 (approximately $100.0 million). However, after the pool of shares of ordinary redemptions was exhausted, the board of directors unanimously determined on September 15, 2009 to permit redemptions upon death of stockholders and required minimum distribution redemption requests for the balance of 2009, unless market factors or regulations dictate otherwise, even if such amount exceeds $100.0 million. Further, Piedmont expects total repurchases under the share redemption program, including the additional redemptions upon death of stockholders and required minimum distributions redemption requests, will be approximately $110.0 million.program. Accordingly, Piedmont ~~has~~had recorded redeemable common stock equal to the aggregate fund-to-date amount of proceeds received ~~under the DRP,~~from its dividend reinvestment plan, less the aggregate fund-to-date amount incurred to redeem shares under Piedmont’s share redemption program ~~of approximately $61.7 million and $112.9 million~~ as of ~~September 30, 2009 and~~ December 31, ~~2008, respectively. Further, upon being tendered for~~2009. As a result of the termination of the share redemption byprogram during the ~~holder,~~three months ended March 31, 2010, Piedmont ~~reclassifies redeemable~~is no longer required to reclassify any of its outstanding common ~~shares from~~stock to the mezzanine ~~equity to a liability at settlement value.~~section of its balance sheet.

Piedmont has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), 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. Accordingly, neither a provision nor a benefit for federal income taxes has been made in the accompanying consolidated financial statements. Piedmont is subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in the ~~consolidated~~ financial statements.

Piedmont is party to an interest rate swap agreement to hedge its exposure to changing interest rates on one of its variable rate debt instruments. As required by GAAP, Piedmont records all derivatives on the balance sheet at fair value. Piedmont reassesses the effectiveness of its derivatives designated as cash flow hedges on a regular basis to determine if they continue to be highly effective and also to determine if the forecasted transactions remain highly probable. The changes in fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (“OCI”), and the amounts in OCI will be reclassified to earnings when the hedged transactions occur. Changes in the fair values of derivatives designated as cash flow hedges that do not qualify for hedge accounting treatment are recorded as gain/(loss) on interest rate swap in the consolidated statements of operations. The fair value of the interest rate swap agreement is recorded as prepaid expenses and other assets or as interest rate swap liability in the accompanying consolidated balance sheets. Amounts paid or received under interest rate swap agreements are recorded as increases or decreases, respectively, to interest expense in the consolidated statement of operations as incurred. Currently, Piedmont does not use derivatives for trading or speculative purposes and does not have any derivatives that are not designated as cash flow hedges.

In ~~June 2009,~~January 2010, the Financial Accounting Standards Board (the “FASB”) ~~amended~~clarified previously issued GAAP related to ~~remove~~fair value measurements and disclosures and issued new requirements. The clarification component includes disclosures about inputs and valuation techniques used in determining fair value, and providing fair value measurement information for each class of assets and liabilities. The new requirements relate to disclosures of transfers between the ~~concept of a qualifying special-purpose entity,~~levels in the fair value hierarchy, as well as ~~clarifying derecognition~~the individual components in the rollforward of ~~transferred financial assets. This change~~the lowest level (Level 3) in the fair value hierarchy. These changes in GAAP isare effective for annual periods beginning after ~~November~~December 15, 2009, ~~with early adoption prohibited.~~except for the provision concerning the rollforward of activity of the Level 3 fair value measurement, whose effective date is for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Piedmont does not expect this ~~provision~~amendment to have a material effect on its consolidated financial statements.

On January 20, 2010, Piedmont’s stockholders approved an amendment to its charter that provides for the ~~FASB amended GAAP to require entities to perform ongoing assessments~~conversion of ~~whether an enterprise is the primary beneficiary~~each outstanding share of Piedmont’s common stock into:

This transaction is referred to herein as ~~opposed to~~ the ~~previous standard, which required reconsideration only when specific events occurred. Additionally, this~~“Recapitalization” and was effective upon filing the amendment to ~~GAAP revises certain guidance for determining whether an entity~~Piedmont’s charter with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) on January 22, 2010. The Recapitalization had the effect of a 1-for-3 reverse stock split and all prior period share and per share amounts have been retroactively restated to reflect the reverse stock split.

Piedmont refers to Class B-1 common stock, Class B-2 common stock and Class B-3 common stock collectively as “Class B” common stock. Piedmont listed its Class A common stock on the New York Stock Exchange (the “NYSE”) on February 10, 2010. Piedmont’s Class B common stock is identical to its Class A common stock except that (i) Piedmont does not intend to list its Class B common stock on a ~~VIE. This change~~national securities exchange and (ii) shares of its Class B common stock will convert automatically into shares of Class A common stock at specified times, as follows:

In conjunction with ~~early adoption prohibited.~~the listing of its Class A common stock on the NYSE during the three months ended March 31 2010, Piedmont ~~will continue~~offered and subsequently issued 13,800,000 shares of its common stock which resulted in $184.5 million in net offering proceeds to ~~assess the provisions and evaluate the financial impact of this amendment on its consolidated financial statements.~~

Notes receivable as of ~~September 30, 2009~~March 31, 2010 and December 31, ~~2008 consist~~2009 consists solely of ~~the following (in thousands):~~

Piedmont’s investments in mezzanine debt. Piedmont recognized interest income for its two investments in mezzanine debt of approximately $1.0 million and ~~$0.8~~$0.7 million for the three months ended ~~September 30,~~March 31, 2010 and 2009, ~~and 2008, respectively, and $2.9 million and $1.7 million for the nine months ended September 30, 2009 and 2008,~~ respectively. Piedmont’s maximum exposure to loss as a result of its ~~investment~~investments in mezzanine debt is approximately ~~$58.4~~$59.4 million as of ~~September 30, 2009.~~March 31, 2010. See Note 67 below for a description of Piedmont’s estimated fair value of investments in mezzanine debt as of ~~September 30, 2009.~~March 31, 2010.

AsThe following table summarizes the terms of ~~September 30, 2009~~Piedmont’s indebtedness outstanding as of March 31, 2010 and December 31, ~~2008, Piedmont had a line of credit and notes payable outstanding as follows~~2009 (in thousands):


							Amount Outstanding as of
Facility	Fixed-rate (F) or Variable rate (V)		Rate⁽¹⁾	Term Debt (T) Revolving (R)	Maturity		September 30, 2009		December 31, 2008		Property		Rate⁽¹⁾		Maturity			Amount Outstanding as of
Secured Pooled Facility	F		4.84%	T	6/7/2014		$	350,000	$	350,000
Facility											Property	Property	Rate⁽¹⁾		Maturity		Rate⁽¹⁾		Maturity		March 31, 2010⁽²⁾			December 31, 2009
Facility																	Rate⁽¹⁾		Maturity
$45.0 Million Fixed-Rate Loan											4250 N. Fairfax	Property		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	F		4.87%	T	5/1/2014			200,000		200,000	Aon Center		4.87%		5/1/2014				200,000			200,000
Aon Center Chicago Mortgage Note	F		5.70%	T	5/1/2014			25,000		25,000	Aon Center		5.70%		5/1/2014				25,000			25,000
Secured Pooled Facility											Nine Property Collateralized Pool⁽³⁾		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	F		5.50%	T	4/1/2016			125,000		125,000	Four Property Collateralized Pool⁽⁴⁾		5.50%		4/1/2016				125,000			125,000
35 W. Wacker Building Mortgage Note	F		5.10%	T	1/1/2014			120,000		120,000
$42.5 Million Fixed-Rate Loan											Las Colinas Corporate Center I & II		5.70%		10/11/2016				42,525			42,525
WDC Mortgage Notes	F		5.76%	T	11/1/2017			140,000		140,000	1201 & 1225 Eye Street		5.76%		11/1/2017				140,000			140,000
$105.0 Million Fixed-Rate Loan	F		5.29%	T	5/11/2015			105,000		105,000
$45.0 Million Fixed-Rate Loan	F		5.20%	T	6/1/2012			45,000		45,000
$42.5 Million Fixed-Rate Loan	F		5.70%	T	10/11/2016			42,525		42,525
$250 Million Unsecured Term Loan	V	⁽²⁾	LIBOR + 1.50%⁽²⁾	T	6/28/2010	⁽⁴⁾		250,000		250,000
$500 Million Unsecured Facility	V		1.52% ⁽³⁾	R	8/30/2011	⁽⁵⁾		130,000		121,100

Total indebtedness							$	1,532,525	$	1,523,625
Subtotal/Weighted Average⁽⁵⁾													5.16%						1,152,525			1,152,525
Unsecured (Variable)
$250 Million Unsecured Term Loan⁽⁶⁾											$250 Million Term Loan		LIBOR + 1.50%⁽⁶⁾		6/28/2010	⁽⁷⁾			250,000			250,000
$500 Million Unsecured Facility⁽⁸⁾											$500 Million Revolving Facility		—⁽⁹⁾		8/30/2011	⁽¹⁰⁾			—			114,000

Subtotal/Weighted Average⁽⁵⁾													4.97%						250,000			364,000

Total/ Weighted Average⁽⁵⁾													5.13%					$	1,402,525		$	1,516,525

⁽¹⁾All of Piedmont’s outstanding debt as of ~~September 30, 2009~~March 31, 2010 and December 31, ~~2008~~2009 is interest-only debt.

⁽²⁾ Balance outstanding at maturity is the same as that on March 31, 2010, except for the $500 Million Unsecured Facility.

⁽³⁾ Nine property collateralized pool includes: 1200 Crown Colony Drive, Braker Pointe III, 2 Gatehall Drive, One and Two Independence Square, 2120 West End Avenue, 111 Sylvan Drive, 200 Bridgewater Crossing, and Fairway Center II.

⁽⁴⁾ Four property collateralized pool includes 1430 Enclave Parkway, Windy Point I and II, and 1055 East Colorado Boulevard .

⁽⁵⁾ Weighted average is based on balance outstanding and interest rate at March 31, 2010.

⁽⁶⁾ The $250 Million Unsecured Term Loan has a stated variable rate; however, Piedmont entered into an interest rate swap agreement which effectively fixes the rate on this loan to 4.97%. through June 28, 2010. During the three months ended March 31, 2010, Piedmont entered into four forward interest rate swap agreements to effectively fix the rate on the $250 Million Unsecured Term Loan to 2.36% during the one-year extension period described in Note 7 below.

⁽³⁷⁾ ~~Rate is equal~~During the three months ended March 31, 2010, Piedmont notified the administrative agent of its intent to extend the ~~weighted-average interest rate on all~~loan to June 28, 2011 as permitted under the terms of the loan agreement.

⁽⁸⁾ All of Piedmont’s outstanding ~~draws~~debt as of ~~September 30, 2009.~~March 31, 2010 and December 31, 2009 is term debt with the exception of the $500 Million Unsecured Facility.

⁽⁹⁾ Piedmont may select from multiple interest rate options with each draw, including the prime rate and ~~various~~various- length LIBOR locks. All selections are subject to an additional spread (0.475% as of ~~September 30, 2009)~~March 31, 2010) over the selected rate based on Piedmont’s current credit rating.

⁽⁴⁾⁽ ~~Piedmont may extend the term for one additional year provided Piedmont is not then in default and upon the payment of a 25 basis point extension fee.~~¹⁰

⁽⁵⁾⁾ 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.

During the ~~nine~~three months ended ~~September 30, 2009, Piedmont’s net borrowings under~~March 31, 2010, Piedmont paid in full the balance of $114.0 million on its $500 Million Unsecured ~~Facility totaled approximately $8.9 million.~~ Facility. In addition, Piedmont notified its administrative agent of its intent to extend the $250 Million Term Loan to June 28, 2011 as permitted under the terms of the loan agreement and entered into four forward interest rate swap agreements to effectively fix the rate on the $250 Million Unsecured Term Loan at 2.36% during the one-year extension period.

Piedmont made interest payments on all debt facilities totaling approximately ~~$16.8~~$15.9 million and ~~$19.7~~$16.4 million for the three months ended ~~September 30,~~March 31, 2010 and 2009, ~~and 2008, respectively, and $49.9 million and $53.6 million for the nine months ended September 30, 2009 and 2008,~~ respectively. Additionally, Piedmont recorded interest rate swap cash settlements related to its $250 Million Unsecured Term Loan as interest expense in the accompanying consolidated statements of operations of approximately $2.0 million and ~~$0.6~~$1.9 million for the three months ended ~~September 30,~~March 31, 2010 and 2009, ~~and 2008, respectively, and approximately $5.8 million and $0.6 million for the nine months ended September 30, 2009 and 2008,~~ respectively. Piedmont had no capitalized interest for the ~~nine~~three months ended ~~September 30, 2009~~March 31, 2010 or ~~2008.~~2009. See Note 67 below for a description of Piedmont’s estimated fair value of debt as of ~~September 30, 2009.~~

In addition to operational risks which arise in the normal course of business, Piedmont is exposed to certain risks arising from both its business operations and economic conditions. Piedmont principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Piedmont manages economic risks ~~including~~such as interest rate, liquidity, and credit ~~risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically,~~risk. In certain situations, Piedmont ~~enters~~has entered into derivative financial instruments such as interest rate swap agreements to manage ~~exposures that arise~~interest rate risk exposure arising from ~~business activities~~variable rate debt transactions that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Piedmont’s derivative financial instrument is used to manage differences in the amount, timing, and duration of Piedmont’s known or expected cash receipts and its known or expected cash payments principally related to Piedmont’s investments and borrowings.

~~Piedmont’s~~ objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. ~~To accomplish this objective, Piedmont currently uses an interest rate swap as part~~

Cash Flow Hedges of ~~its interest rate risk management strategy.~~ Interest Rate Risk

Interest rate swaps designated as cash flow hedges ~~which account for Piedmont’s only swap derivative,~~ 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.

During the three months ended March 31, 2010, Piedmont’s existing interest rate swap agreement was used to hedge the variable cash flows associated with its $250 Million Unsecured Term Loan that matures on June 28, 2010. During the three months ended March 31, 2010, Piedmont notified its administrative agent of its intent to extend the $250 Million Unsecured Term Loan until June 28, 2011, as permitted under the terms of the loan agreement, and entered into four additional forward interest rate swaps that become effective concurrent with the extension of the term loan. A detail of Piedmont’s interest rate swaps that were outstanding as of March 31, 2010 is as follows:

All of the above interest rate swap agreements are designated as cash flow hedges of interest rate risk. The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in Other Comprehensive Income (“OCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. ~~During~~

The effective portion of Piedmont’s derivative financial instruments (interest rate swaps) that was recorded in the ~~nine~~accompanying consolidated statement of operations for the three months ended ~~September 30,~~March 31, 2010 and 2009 ~~Piedmont’s interest rate swap agreement~~(in thousands) is as follows:

No gain or loss was ~~used~~recognized related to hedge ~~the variable cash flows associated with the $250 Million Unsecured Term Loan, and such agreement expires at the maturity of the loan. No hedge~~ ineffectiveness or to amounts excluded from effectiveness testing on Piedmont’s cash flow ~~hedge was recognized~~hedges during the ~~nine~~three months ended ~~September 30,~~March 31, 2010 or 2009.

Amounts reported in accumulated other comprehensive loss related to Piedmont’s ~~derivative~~derivatives will be reclassified to interest expense as interest payments are made on ~~Piedmont’s variable-rate debt (the~~the $250 Million Unsecured Term ~~Loan). During the twelve months ending September 30, 2010,~~Loan. Piedmont estimates that an additional ~~$5.7~~$2.5 million will be reclassified from accumulated other comprehensive loss as an increase to interest ~~expense.~~expense over the next twelve months.

~~As of September 30, 2009, Piedmont had the following outstanding interest rate derivative that was designated as a cash flow hedge of interest rate risk:~~

The ~~table below presents the~~ fair value of Piedmont’s derivative financial ~~instrument~~instruments designated as ~~well~~hedging instruments under GAAP (its interest rate swap agreements) as ~~its classification on~~of March 31, 2010 and December 31, 2009 was $2.3 million and $3.9 million respectively and was classified as an “Other Liability” in the accompanying consolidated balance ~~sheets as~~sheet.

~~The table below presents the effect~~stockholders’ equity for a roll forward of Piedmont’s ~~derivative financial instrument on the accompanying consolidated statement of operations for the three months ended September 30, 2009 (in thousands):~~Other Comprehensive Loss account.

The table below presents the effect of Piedmont’s derivative financial instrument on the accompanying consolidated statement of operations for the nine months ended September 30, 2009 (in thousands):

Piedmont has ~~an agreement~~agreements with its derivative ~~counterparty~~counterparties that ~~contains~~contain a provision whereby if Piedmont defaults on any of its 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 obligation.

As of ~~September 30, 2009,~~March 31, 2010, the fair value of the ~~derivative~~derivatives in a liability ~~position~~positions related to this agreement was approximately ~~$5.7~~$2.3 million. If Piedmont breached any of the contractual provisions of the derivative ~~contract,~~contracts, it would be required to settle its ~~obligation~~obligations under the ~~agreement~~agreements at ~~its~~their termination value of the fair ~~value~~values plus accrued interest, or approximately ~~$5.8~~$2.4 million.

Piedmont considers its cash, accounts receivable, notes receivable, accounts payable, interest rate swap ~~agreement,~~agreements, and line of credit and notes payable to meet the definition of financial instruments. ~~As of September 30, 2009,~~The following table sets forth the carrying ~~value of cash, accounts receivable, notes receivable from tenants to fund certain expenditures related to the property,~~ and ~~accounts payable approximated fair value. Piedmont estimates the fair value of its line of credit and notes payable to be $1.4 billion as of September 30, 2009. The~~ estimated fair value for each of Piedmont’s ~~investments in mezzanine debt, a component of notes receivable in its accompanying consolidated balance sheet, is approximately $40.8 million~~financial instruments as of ~~September 30, 2009. Such value was derived based on the sum of the estimated fair value of Piedmont’s original investment in mezzanine debt as of~~March 31, 2010 and December 31, 2008, and Piedmont’s second investment in mezzanine debt on a cost basis in first quarter 2009. The estimated fair value of such investments is highly dependent upon the underlying characteristics of each specific real estate asset and existing capital structure securing each note receivable. The valuation of Piedmont’s original investment in mezzanine debt, which was performed as of December 31, 2008, used the pricing negotiated on the second investment in mezzanine debt that closed in March 2009. Given the limited amount of relevant current transactional activity, more recent market comparables are not available for further update of this estimate.2009 (in thousands):

Piedmont’s interest rate swap agreements discussed in Note 6 above were the only financial ~~liability~~liabilities carried at fair value as of September 30, 2009 is classified in the table below in one of the three categories as defined by GAAP. See Note 7 below for further information on certain assets which were adjusted to fair value during the three months ended September 30, 2009,March 31, 2010 and ~~their classification within the fair value hierarchy in accordance with GAAP.~~

   Quoted Prices in Active
Markets for Identical
Assets and Liabilities (Level 1)    Significant
Other
Observable
Inputs (Level 2)    Significant
Unobservable
Inputs (Level 3)    Balance at
September 30, 2009
Liabilities

Derivative financial instrument
   $ —      $ 5,675    $ —      $ 5,675

Piedmont’s interest rate swap has been designated as a hedge of the variability in expected future cash flows on the $250 Million Unsecured Term Loan. As further discussed above in Note 5, Piedmont’s objective in using this interest rate derivative is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks that currently exist.December 31, 2009. The valuation of ~~this instrument is~~these instruments was determined using widely accepted valuation techniques including discounted cash flow analysis based on ~~the expected cash flows of this derivative. This analysis reflects~~ the contractual terms of the ~~derivative,~~derivatives, including the period to maturity of each instrument, and uses observable market-based inputs, including interest rate curves and implied volatilities.

Therefore, the fair values determined are considered to be based on significant other observable inputs (Level 2). In addition, ~~to the computations previously described,~~ Piedmont considered both its own and the respective ~~counterparty’s~~counterparties’ risk of ~~non-performance~~nonperformance in determining the fair value of its derivative financial ~~instrument. To do this, Piedmont estimated~~instruments by estimating the ~~total expected~~current and potential future exposure under the derivative financial ~~instrument, consisting of the current exposure and the potential future exposure~~instruments, that both Piedmont and the ~~counterparty to the interest rate swap agreement~~counterparties were at risk for as of the valuation date. ~~The~~This total expected exposure was then discounted using discount factors that contemplate the ~~credit risk~~creditworthiness of Piedmont and the ~~counterparty~~counterparties to arrive at a credit charge. This credit charge was then netted against the ~~fair~~ value of the derivative financial ~~instrument computed based on Piedmont’s prior methodology~~instruments determined using the discounted cash flow analysis described above to arrive at ~~an estimate of~~a total estimated fair value ~~based on~~of the ~~framework presented in GAAP.~~interest rate swap agreements. As of ~~September 30,~~March 31, 2010 and December 31, 2009, the credit valuation adjustment did not comprise a material portion of the fair ~~value~~values of the derivative financial ~~instrument.~~

~~As of September 30, 2009,~~instruments; therefore, Piedmont believes that any unobservable inputs used to determine the fair ~~value~~values of its derivative financial ~~instrument~~instruments are not significant to the fair value ~~measurement~~measurements in ~~its~~their entirety, and ~~therefore Piedmont~~ does not consider its derivative financial ~~instrument~~instruments to be ~~considered a~~ Level 3 ~~Liability.~~Liabilities.

~~During the three months ended September 30, 2009, Piedmont recorded the following impairment charges (in thousands).~~

During the three months ended September 30, 2009, Piedmont reduced its intended holding periods for the Auburn Hills Corporate Center Building (purchased in May 2003), the 1111 Durham Avenue Building (purchased in November 2000), and the 1441 West Long Lake Road Building (purchased in June 2000), which comprise approximately 119,000 square feet, 237,000 square feet, and 107,000 square feet, respectively. The decision to reduce future rental revenues and the holding periods for the two Detroit assets was prompted by the loss of prospective replacement tenants and overall market declines in the Detroit, Michigan market. Further, changes in management’s expectation of re-leasing prospects of the New Jersey asset, coupled with general market declines in the South Plainfield submarket in which it is located, prompted the reduction of intended hold period and future rental revenues during the quarter ended September 30, 2009. The cumulative effect of these decisions triggered a reassessment of speculative leasing assumptions for these buildings, which entailed, among other things, evaluating market rents, leasing costs and the downtime necessary to complete necessary re-leasing activities.

Based on a comparison of the projected undiscounted future cash flows with the net book value of the real estate and intangible assets, Piedmont determined that the carrying values of the assets were not recoverable and, accordingly, recorded an impairment loss on real estate assets in the amount of approximately $35.1 million to reduce the carrying value of the assets to their estimated fair value based upon the present value of future cash flows.

During the three months ended September 30, 2009, Piedmont also analyzed its equity method investment in Wells/Fremont Associates Joint Venture, which owns and operates the 47320 Kato Road Building. The building was purchased in July 1998 and consists of one, two-story office building located in Fremont, CA totaling approximately 58,000 square feet. Due to feedback received during renewal negotiations with the incumbent tenant as well as observed significant downward pressure on rental rates in the East Bay Research & Development submarket, which includes Fremont, California, Piedmont determined that the difference in fair value and carrying value for its pro-rata share of its investment in Wells/Fremont Associates Joint Venture was “other than temporary”, and recorded an impairment charge of approximately $2.6 million during the three months ended September 30, 2009. Piedmont owns approximately 78% of the building.

During the third quarter 2008, Piedmont recorded approximately $2.1 million as its pro-rata share of an impairment charge related to the 20/20 Building, which is owned by Fund XI-XII-REIT Joint Venture. The 20/20 Building was purchased in July 1999 and consists of one, three-story office building located in Leawood, KS totaling approximately 70,000 square feet. Piedmont, through its investment in Fund XI-XII-REIT, owns approximately 57% of the 20/20 Building.

In accordance with GAAP regarding fair value measurements, Piedmont valued the Auburn Hills Corporate Center Building, 1111 Durham Avenue Building, 1441 West Long Lake Road Building, and its investment in unconsolidated joint venture using the fair value processes and techniques prescribed by authoritative literature. The fair value measurements used in these evaluations of non-financial assets are considered to be Level 3 valuations within the fair value hierarchy as defined in GAAP, as there are significant unobservable inputs. Examples of inputs Piedmont utilizes in its fair value calculations are discount rates, market capitalization rates, speculative leasing rates and assumptions, timing of leases, rental concessions and leasing capital, and sales prices. The following amounts represent the detail of the adjustments recognized using Level 3 inputs (in thousands):

~~Outlined below are significant noncash investing and financing activities for the nine months ended September 30, 2009 and 2008 (in thousands):~~

Certain lease agreements include provisions that, at the option of the tenant, may obligate Piedmont to provide funding for capital improvements. Under its existing lease agreements, Piedmont may be required to fund significant tenant improvements, leasing commissions, and building improvements. In addition, certain lease agreements contain provisions that require Piedmont to issue corporate guarantees to provide funding for such capital improvements. We anticipate funding approximately $118.9 million in potential obligations for tenant improvements related to our existing lease portfolio over the respective lease terms, much of which we estimate may be required to be funded over the next five years. For most of our leases, the timing of the actual funding of these tenant improvements is largely dependent upon tenant requests for reimbursement. In some cases, these obligations may expire with the leases without further recourse to us.

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 the re-interpretation of language in the lease agreements which could result in the refund of previously recognized tenant reimbursement revenues, resulting in financial loss to Piedmont. Piedmont recorded a recovery of $0.1 million and reserves of $0.5 million as a component of tenant reimbursement income during the three months ended March 31, 2010 and 2009, respectively, related to such tenant audits.

In Re Wells Real Estate Investment Trust, Inc. Securities Litigation, Civil Action No. 1:07-cv-00862-CAP (Upon motions to dismiss filed by defendants, parts of all seven counts were dismissed by the court. CountsIII through VII were dismissed in their entirety. Motions for ~~Summary Judgment~~summary judgment are ~~currently due to be filed on November 24, 2009.~~pending before the court.)

On March 12, 2007, a stockholder filed a purported class action and derivative complaint in the United States District Court for the District of Maryland against, among others, Piedmont, Piedmont’s previous advisors, and the officers and directors of Piedmont prior to the closing of the Internalization. The complaint attempts to assert class action claims on behalf of those persons who received and were entitled to vote on the proxy statement filed with the SEC on February 26, 2007.

The complaint ~~alleged,~~alleges, among other things, (i) that the consideration to be paid as part of the Internalization is excessive; (ii) violations of Section 14(a), including Rule 14a-9 thereunder, and Section 20(a) of the Exchange Act, based upon allegations that the proxy statement contains false and misleading statements or omits to state material facts; (iii) that the board of directors and the current and previous advisors breached their fiduciary duties to the class and to Piedmont; and (iv) that the proposed Internalization will unjustly enrich certain directors and officers of Piedmont.

The complaint ~~sought,~~seeks, among other things, (i) certification of the class action; (ii) a judgment declaring the proxy statement false and misleading; (iii) unspecified monetary damages; (iv) to nullify any stockholder approvals obtained during the proxy process; (v) to nullify the Internalization; (vi) restitution for disgorgement of profits, benefits, and other compensation for wrongful conduct and fiduciary breaches; (vii) the nomination and election of new independent directors, and the retention of a new financial advisor to assess the advisability of Piedmont’s strategic alternatives; and (viii) the payment of reasonable attorneys’ fees and experts’ fees.

On June 27, 2007, the plaintiff filed an amended complaint, which ~~contained~~contains the same counts as the original complaint, described above, with amended factual allegations based primarily on events occurring subsequent to the original complaint and the addition of a Piedmont officer as an individual defendant.

On March 31, 2008, the court granted in part the defendants’ motion to dismiss the amended complaint. The court dismissed five of the seven counts of the amended complaint in their entirety. The court dismissed the remaining two counts with the exception of allegations regarding the failure to disclose in Piedmont’s proxy statement details of certain expressions of interest by a third party in acquiring Piedmont. On April 21, 2008, the plaintiff filed a second amended complaint, which alleges violations of the federal proxy rules based upon allegations that the proxy statement to obtain approval for Internalization omitted details of certain expressions of interest in acquiring Piedmont. The second amended complaint seeks, among other things, unspecified monetary damages, to nullify and rescind Internalization, and to cancel and rescind any stock issued to the defendants as consideration for Internalization. On May 12, 2008, the defendants answered the second amended complaint.

On June 23, 2008, the plaintiff filed a motion for class certification. On September 16, 2009, the ~~Court~~court granted the plaintiff’s motion for class certification. On September 30, 2009, the defendants filed a petition for permission to appeal immediately the ~~Court’s~~court’s order granting the motion for class certification with the Eleventh Circuit Court of Appeals, which the Eleventh Circuit Court of Appeals denied on October 30, 2009.

On April 13, 2009, the plaintiff moved for leave to amend the second amended complaint to add additional defendants. The court denied the motion for leave to amend on June 23, 2009.

On December 4, 2009, the parties filed motions for summary judgment. The parties filed their responses to the motions for summary judgment on January 29, 2010. The parties filed their respective replies to the motions for summary judgment on February 19, 2010. The motions for summary judgment are currently pending before the court.

Piedmont believes that the allegations contained in the complaint are without merit and will continue to vigorously defend this action. Due to the uncertainties inherent in the litigation process, it is not possible to predict the ultimate outcome of this matter at this time; however, as with any litigation, the risk of financial loss does exist.

In Re Piedmont Office Realty Trust, Inc. Securities Litigation, Civil Action No. 1:~~07-cv-02660~~07-cv-02660-~~-CAP~~CAP (Upon motions to dismiss filed by defendants, parts of all four counts were dismissed by the court. Counts III and IV were dismissed in their entirety. ~~A motion for class certification has been filed and the~~The parties are engaged in discovery.)

On October 25, 2007, the same stockholder mentioned above filed a second purported class action in the United States District Court for the Northern District of Georgia against Piedmont and its board of directors. The complaint attempts to assert class action claims on behalf of (i) those persons who were entitled to tender their shares pursuant to the tender offer filed with the SEC by Lex-Win Acquisition LLC, ~~(“Lex-Win”),~~ a former stockholder, on May 25, 2007, and (ii) all persons who are entitled to vote on the proxy statement filed with the SEC on October 16, 2007.

The complaint ~~alleged,~~alleges, among other things, violations of the federal securities laws, including Sections 14(a) and 14(e) of the Exchange Act and Rules 14a-9 and 14e-2(b) promulgated thereunder. In addition, the complaint ~~alleged~~alleges that defendants have also breached their fiduciary duties owed to the proposed classes.

On December 26, 2007, the plaintiff filed a motion seeking that the court designate it as lead plaintiff and its counsel as class lead counsel, which the court granted on May 2, 2008.

On May 19, 2008, the lead plaintiff filed an amended complaint which contained the same counts as the original complaint. On June 30, 2008, defendants filed a motion to dismiss the amended complaint.

On March 30, 2009, the court granted in part the defendants’ motion to dismiss the amended complaint. The court dismissed two of the four counts of the amended complaint in their entirety. The court dismissed the remaining two counts with the exception of allegations regarding (i) the failure to disclose information regarding the likelihood of a listing in ~~Piedmont’s~~our amended response to the Lex-Win tender offer and (ii) purported misstatements or omissions in ~~Piedmont’s~~our proxy statement concerning then-existing market conditions, the alternatives to a listing or extension that were explored by the defendants, the results of conversations with potential buyers as to ~~Piedmont’s~~our valuation, and certain details of our share redemption program. On April 13, 2009, defendants moved for reconsideration of the court’s March 30, 2009 order or, alternatively, for certification of the order for immediate appellate review. The defendants also requested that the proceedings be stayed pending consideration of the motion. On June 19, 2009, the court denied the motion for reconsideration and the motion for certification of the order for immediate appellate review.

On April 20, 2009, the plaintiff, joined by a second plaintiff, filed a second amended complaint, which alleges violations of the federal securities laws, including Sections 14(a) and 14(e) of the Exchange Act and Rules 14a-9 and 14e-2(b) promulgated thereunder. The second amended complaint seeks, among other things, unspecified monetary damages, to nullify and void any authorizations secured by the proxy statement, and to compel a tender offer. On May 11, 2009, the defendants answered the second amended complaint.

On June 10, 2009, the plaintiffs filed a motion for class certification. The ~~time for defendants to respond to~~court granted the ~~plaintiff’s~~plaintiffs’ motion for class certification ~~has not yet expired.~~on March 10, 2010. On March 24, 2010, the defendants filed a petition for permission to appeal immediately the court’s order granting the motion for class certification with the Eleventh Circuit Court of Appeals. The plaintiffs filed a response to the defendant’s petition for permission to appeal on April 8, 2010. The parties are presently engaged in discovery.

~~Pursuant to the 2007 Omnibus Incentive Plan,~~As of March 31, 2010, Piedmont ~~has granted~~had the following deferred stock awards to its ~~employees:~~employees outstanding:


Date of grant	Deferred Stock Award Grants						Deferred Stock Award Grants
Date of grant	May 6, 2009		April 21, 2008		May 18, 2007		May 6, 2009		April 21, 2008		May 18, 2007
Shares granted⁽¹⁾		559,902		451,782		764,850		186,634		150,594		254,950
Shares withheld to pay taxes⁽²⁾		52,539		58,018		149,659		17,513		19,340		49,886
Shares unvested as of September 30, 2009		419,927		221,293		182,838
Shares unvested as of March 31, 2010								138,164		72,463		59,552
Fair value per share of awards on date of grant⁽³⁾	$	7.40	$	8.70	$	10.00	$	22.20	$	26.10	$	30.00

During each of the ~~three months~~three–month periods ended ~~September 30,~~March 31, 2010 and 2009, ~~and 2008,~~ Piedmont recognized approximately $0.7 million of compensation expense related to restricted stock awards, all of which relates to the amortization of nonvested shares. During the nine months ended September 30, 2009 and 2008, Piedmont recognized approximately $3.1 million and $3.4 million, respectively, of compensation expense, of which $2.1 million and $2.4 million related to the nonvested shares. As of ~~September 30, 2009,~~March 31, 2010, approximately ~~$2.6~~$1.2 million of unrecognized compensation cost related to nonvested, share-based compensation remained, which Piedmont will record in its statements of income over a weighted-average vesting period of approximately ~~2 years.~~1 year.

There are no adjustments to “Net income attributable to Piedmont” or “Income from continuing operations” for the diluted earnings per share computations.

The following table reconciles the denominator for the basic and diluted earnings per share computations shown on the consolidated statements of operations:


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
	2009	2008	2009	2008	2010	2009
Weighted-average common shares – basic	472,808,175	473,964,303	475,473,616	479,733,105	164,992,477	159,705,275
Plus incremental weighted-average shares from time-vested conversions:
Restricted stock awards	472,592	392,989	397,553	332,572	207,707	172,992

Weighted-average common shares – diluted	473,280,767	474,357,292	475,871,169	480,065,677	165,200,184	159,878,267

Piedmont reviewed its operations and transactions occurring since September 30, 2009 through November 16, 2009, the date on which the financial statements were issued, and have identified the following events:

On ~~November 10, 2009,~~May 11, 2010, the board of directors of Piedmont declared dividends for the ~~fourth~~second quarter ~~2009~~2010 in the amount of ~~$0.1050 (10.50~~$0.315 (31.50 cents) per share on ~~the~~all classes of outstanding common shares of Piedmont to all stockholders of record offor such shares as shown on the books of Piedmont at the close of business on ~~December~~June 15, ~~2009.~~2010. Such dividends are to be paid on June 22, 2010.

On May 5, 2010, Piedmont entered into a binding purchase and sale agreement to dispose of 111 Sylvan Avenue located in Englewood Cliffs, NJ for a gross sale price of approximately $55.0 million, exclusive of closing costs, with an anticipated closing date of December ~~22, 2009.~~1, 2010. In accordance with GAAP, Piedmont will reclassify 111 Sylvan Avenue from real estate assets held-for-use (at cost) to real estate assets held-for-sale (at fair value) on its consolidated balance sheet as of May 5, 2010. Piedmont anticipates recording a $9.8 million impairment loss as a result of marking the assets to fair value (less costs to sell) on May 5, 2010. The estimated impairment charge is subject to change as additional information becomes available in subsequent periods.

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”). See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I, as well as the notes to our consolidated financial statements 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, ~~2008.~~2009.

As of September 30, 2009, we had outstanding borrowings of approximately $130.0 million under our $500 million revolving variable-rate unsecured credit facility (the “$500 Million Unsecured Facility”). Along with outstanding letters of credit totaling approximately $10.4 million, we had approximately $359.6 million available for future borrowing.

We intend to use cash flows generated from operation of our wholly-owned properties and distributions from our unconsolidated joint ventures, proceeds from our ~~dividend reinvestment plan,~~recent offering of common stock, and proceeds from our existing $500 Million Unsecured Facility as our primary sources of immediate and long-term liquidity. In addition, ~~we expect distributions from our existing unconsolidated joint ventures,~~ the potential selective disposal of existing properties and other financing opportunities ~~(including a possible listing and public offering of our common stock)~~ afforded to us bybased on our relatively low leverage and quality asset base tomay also provide additional sources of ~~funds. The continued disruptions in~~capital; however, the ~~financial markets~~availability and ~~deteriorating economic conditions could adversely affect our ability to utilize any one or more~~attractiveness of terms for both of these sources of funds. Based upon recent appraisals of institutionally-owned commercial real estate owned by others in markets that we also serve, we believe that market conditions continue to negatively impact the values of most existing office properties. As a result, wecapital may be limited given the current displacement in the credit markets. During the three months ended March 31, 2010, we paid down all outstanding amounts under our ~~ability to access such financing opportunities and to selectively dispose~~$500 Million Unsecured Facility; therefore, as of ~~our existing properties at attractive prices. Further, a reduction in our estimated net asset value could influence our stockholders’ decision~~March 31, 2010, we had the full capacity available for future borrowing with the exception of ~~whether to participate, or to continue to participate, in our dividend reinvestment plan, which~~$10.4 million of capacity that is ~~the primary source~~reserved as security for outstanding letters of ~~funds for shares purchased pursuant to our share redemption program.~~credit with two tenants.

We anticipate that our ~~primary future uses~~most immediate use of capital will ~~include, but will not~~ be ~~limited~~ to ~~making scheduled debt service payments, funding renovations, expansions, and other significant~~fund capital expenditures for our existing portfolio of ~~properties~~properties. These expenditures include specifically identified building improvement projects, as well as projected amounts for tenant improvements and leasing commissions related to anticipated re-leasing efforts as a significant number of our leases are scheduled to expire over the next four years. The timing and magnitude of amounts associated with tenant improvements and leasing commissions are subject to change as competitive market conditions at the time of lease negotiations dictate. We anticipate funding approximately $118.9 million in contractual obligations for tenant improvements related to our existing lease portfolio over the respective lease term, much of which we estimate may be required to be funded over the next five years. For many of our leases, the timing of the actual funding of these tenant improvements is largely dependent upon tenant requests for reimbursement. In some cases, these obligations may expire with the leases without further recourse to us.

Subject to the availability of attractive properties and our ability to consummate acquisitions on satisfactory terms, acquiring new assets compatible with our investment ~~strategy. These expenditures include specifically identified building improvement projects, as well as projected amounts for tenant improvements and leasing commissions related~~strategy could also be a significant use of capital. Although we do not currently have any near-term debt maturities, we also anticipate using funds to ~~projected re-leasing, which are subject to change as market and tenant conditions dictate. In addition, we anticipate funding potential~~make scheduled debt service payments and/or debt repayments when such obligations for tenant improvements of approximately $123 million over the respective lease term of leases which have already been executed by us with our tenants, much of which we anticipate funding over the next five years. For most of our leases, the actual funding of these tenant improvements can take place throughout the period of the lease with the timing of the funding being largely dependent upon tenant requests for reimbursement. In some cases, these obligations may expire with the leases without further recourse to us.

In addition, we currently expect to use a substantial portion of our future net cash flows generated from operations to pay dividends, and all of the proceeds from our dividend reinvestment plan to fund death and required minimum distribution redemption requests pursuant to our share redemption program during the remainder of 2009. As of September 30, 2009, the allocation of shares for ordinary redemptions for the remainder of 2009 was exhausted; however, the board of directors currently intends to honor death and required minimum distribution redemption requests for the remainder of the 2009 calendar year, unless market factors or regulations dictate otherwise. Our board of directors will continue to monitor the terms under which the share redemption program operates and the extent of our capital that may be used for this program in the future.become due.

Our cash flows from operations depend significantly on market rents and the ability of our tenants to make rental payments. While we believe the diversity and high credit quality of our tenants ~~helps~~help mitigate the risk of a significant interruption of our cash flows from operations, the general economic downturn that we are currently experiencing, or ~~an additional~~a further downturn in one of our ~~core~~concentration markets, could adversely impact our operating cash flows. Our primary focus is to achieve an attractive long-term, risk-adjusted return for our stockholders. Competition to attract and retain high-credit-quality tenants remains intense due to general economic conditions. At the same time, a ~~large percentage~~significant number of our ~~tenants’~~ leases at our properties are ~~expected~~scheduled to expire over the next ~~five~~four years. In addition, the capital requirements necessary to maintain our current occupancy levels, including payment of leasing commissions, tenant concessions, and anticipated leasing expenditures, have continued to increase. As such, we will continue to closely monitor our tenant renewals, competitive market conditions, and our cash flows. The amount 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 ~~existing or future share redemptions or purchases,~~ and selective acquisitions of new properties, (iv) the timing of significant ~~re-leasing activities and the establishment of additional cash reserves~~expenditures for ~~anticipated~~ tenant improvements and general property capital improvements, (v) appropriate long-term payout ratios for comparable companies, (vi) our ability to continue to access additional sources of capital and (vi) the amount required to be distributed to maintain our status as a REIT. Given the fluctuating nature of cash flows and expenditures, we may periodically borrow funds on a short-term basis to pay dividends.

During the nine months ended September 30, 2009, we generated approximately $213.1 million of cash flows from operating activities and approximately $77.6 million from the issuance of common stock pursuant to our dividend reinvestment plan and from combined net borrowing activities. From such cash flows, we (i) paid dividends to stockholders of approximately $149.2 million; (ii) invested approximately $10.0 million in mezzanine debt, (iii) funded capital expenditures and deferred leasing costs totaling approximately $37.6 million; and (iv) redeemed approximately $96.6 million of common stock pursuant to our share redemption program.

Our income ~~from continuing operations~~ for ~~each period presented decreased~~the three months ended March 31, 2010 increased as compared to the prior year, primarily due to ~~the recognition of non-cash impairment charges~~lower amortization expense, and lower general and administrative expense offset by a slight increase in depreciation expense in the current ~~period,~~period. The decrease in reimbursement income as compared with the prior year ~~recognition of non-recurring income associated with lease terminations and restructurings, and an increase~~was directly offset by a corresponding decrease in property operating costs ~~which were primarily attributable to~~and a ~~beneficial property tax adjustment offset against operating expenses~~slight increase in ~~2008. These variances were partially offset by a reduction in general and administrative expenses as compared to~~other rental income during the ~~prior~~current period.

Comparison of the three months ended ~~September 30, 2009~~March 31, 2010 versus the three months ended ~~September 30, 2008~~March 31, 2009

The following table sets forth selected data from our consolidated statements of ~~operations~~income for the three months ended ~~September 30,~~March 31, 2010 and 2009, ~~and 2008,~~ respectively, as well as each balance as a percentage of ~~the sum of~~ total revenues for the same periods presented (dollars in millions):

Rental income decreased from approximately ~~$113.5 million for the three months ended September 30, 2008 to approximately~~ $112.9 million for the three months ended ~~September 30, 2009.~~March 31, 2009 to approximately $112.1 million for the three months ended March 31, 2010. This decrease relates primarily to a reduction in rent associated with the ~~early~~ partial termination of a lease at the ~~1975 South Price Road~~Aon Center Building in ~~Chandler, Arizona (formerly known as the Americredit Building).~~Chicago, Illinois. Tenant reimbursements decreased from approximately ~~$37.1~~$40.1 million for the three months ended ~~September 30, 2008~~March 31, 2009 to approximately ~~$36.9~~$35.1 million for the three months ended ~~September 30, 2009~~March 31, 2010 primarily due to lower recoverable tenant-requested services, utility costs, ~~incurred during~~and property tax expense totaling approximately $4.2 million as well as an overall reduction in recoverable expenses due to the ~~three months ended September 30, 2009.~~partial termination at the Aon Center Building.

Property management fee revenue, which includes both fee revenue and salary reimbursements, remained comparable for the three months ended ~~September 30, 2009~~March 31, 2010 as compared to the same period in the prior year. ~~Such income may decrease in future periods in the event that the owner of these properties makes other arrangements for their management.~~

Other rental income is comprised primarily of income recognized for lease terminations and restructurings. Unlike the majority of our rental income, which is recognized ratably over long-term contracts, other rental income is recognized once we have completed our obligation to provide space to the tenant. Lease terminations and restructurings for the three months ended ~~September 30, 2008~~March 31, 2010 of approximately ~~$4.0~~$0.5 million primarily ~~relate~~relates to ~~leases~~a lease terminated at the ~~90 Central~~110 Hidden Lake Circle Building in ~~Boxborough, Massachusetts and the 3750 Brookside Parkway Building in Alpharetta, Georgia.~~Duncan, South Carolina. We do not expect such income to be comparable in future periods, as it will be dependent upon the ~~execution~~exercise of lease terminations by tenants and/or the execution of restructuring agreements that may not be in our control or are deemed by management to be in the best interest of the portfolio over the long term.

Property operating costs ~~increased~~decreased approximately ~~$2.9~~$4.8 million for the three months ended ~~September 30, 2009~~March 31, 2010 compared to the same period in the prior year. This variance is primarily the result of ~~significant~~lower recoverable utility costs of approximately $1.3 million, lower recoverable tenant-requested services (i.e., billback expenses) of approximately $1.5 million, and lower recoverable property tax ~~reductions recognized~~expenses of approximately $1.4 million in the ~~prior period related to a one-time millage rate decrease at certain of our Chicago area properties.~~current period.

Depreciation expense increased approximately ~~$1.5~~$0.5 million for the three months ended ~~September 30, 2009~~March 31, 2010 compared to the same period in the prior year. ~~Tenant-related~~The increase in depreciation is largely due to an increase in tenant-related capital expenditures among various properties ~~contributed approximately $0.9 million~~subsequent to March 31, 2009. The increase was partially offset by a decrease in the depreciable value of certain properties that took impairment charges in the ~~increase, and accelerated depreciation charges related to a tenant’s partial lease termination at the 1975 South Price Road Building contributed an additional $0.8 million of the increase.~~fourth quarter 2009.

Amortization expense decreased approximately ~~$1.0~~$2.0 million for the three months ended ~~September 30, 2009~~March 31, 2010 compared to the same period in the prior year. The decrease primarily relates to lease intangible assets that have fully amortized ~~or terminated~~ subsequent to ~~September 30, 2008.~~March 31, 2009. However, this decrease was partially offset by an increase in amortization related to deferred lease acquisition costs, ~~subsequent to September 30 2008,~~ which ~~were~~are associated with the acquisition of tenants and amortized over the life of the respective leases.

General and administrative expenses decreased approximately ~~$1.8~~$0.8 million for the quarter ended ~~September 30, 2009~~March 31, 2010 compared to the same period in the prior year. ~~This~~The primary items contributing to this net decrease ~~consists of: (1) a decrease~~include decreases in ~~bad debt~~compensation related costs, taxes and license expense ~~of approximately $0.4 million as compared to the prior period, (2) a reduction of approximately $0.3 million~~and other professional fees offset by increases in shareholder communications and legal fee expense due to primarily to director and officer insurance recoveries received; (3) a reduction of approximately $0.2 million in fees associated with the remaining service agreement with our former advisor; and (4) lower costs of approximately $0.2 million to proxy our stockholders for the 2009 Annual Meeting.

During the quarter ended September 30, 2009, we recognized an impairment loss of approximately $35.1 million as a result of lowering expected future rental income and reducing the intended holding periods for the Auburn Hills Corporate Center Building in Auburn Hills, Michigan, and the 1441 West Long Lake Road Building in Troy, Michigan, as well as the 1111 Durham Avenue Building in South Plainfield, New Jersey. The decision to reduce projected future rental revenues and the holding periods for the two Detroit assets was prompted by the loss of prospective replacement tenants and overall declines in the Detroit, Michigan market. Further, changes in management’s expectation of re-leasing prospects of the New Jersey asset, coupled with general market declines in the South Plainfield submarket in which it is located, prompted the reduction of intended hold period and future rental revenues during the quarter ended September 30, 2009. The cumulative effect of these decisions triggered a reassessment of leasing assumptions for these buildings, which entailed, among other things, evaluating market rents, leasing costs and the downtime necessary to complete the necessary re-leasing activities (See Note 7 to our accompanying consolidated financial statements for further details).fees.

Interest expense decreased approximately ~~$0.9~~$0.2 million for the three months ended ~~September 30, 2009~~March 31, 2010 compared to the same period in the prior year. The decrease is attributable primarily to lower net borrowings ~~and lower interest rates~~ on our $500 Million Unsecured ~~Facility, as well as the repayment of the 3100 Clarendon Boulevard Building Mortgage Note during 2008.~~Facility.

Interest and other income increased approximately ~~$0.9~~$0.4 million for the three months ended ~~September 30, 2009~~March 31, 2010 compared to the same period in the prior year, primarily due to the following non-recurring items: (1) the settlement of an acquisition contingency in our favor at our 150 West Jefferson Building in Detroit, Michigan of approximately $0.8 million, and (2) loan extension fees of approximately $0.2 million related to our investments in mezzanine debt in the current year. The levela full quarter of interest income ~~in future periods will be primarily dependent upon the amount of operating cash on hand, as well as income earned on~~from our investment in a second tranche of mezzanine ~~debt.~~debt on March 12, 2009.

Equity in ~~loss~~income of unconsolidated joint ventures ~~increased approximately $0.5 million for the three months ended September 30, 2009 compared~~remained comparable to the ~~prior~~same period as a result of recognizing other-than-temporary impairment of a joint venture which owns the 47320 Kato Road Building in Fremont, California of approximately $2.6 million (See Note 7 to our accompanying consolidated financial statement for further details). The increase was partially offset as a result of recognizing other-than-temporary impairment of a joint venture which owns the 20/20 Building in Leawood, Kansas in the ~~third quarter 2008 of approximately $2.1 million.~~prior year. We expect equity in (loss)/income of unconsolidated joint ventures to fluctuate ~~in the near term~~ based on the timing and extent to which dispositions occur as our unconsolidated joint ventures approach their stated dissolution periods.

(Loss)/income from continuing operations per share on a fully diluted basis decreased from $0.07 for the three months ended September 30, 2008 to $(0.02) for the three months ended September 30, 2009 primarily as a result of the recognition of impairment charges of approximately $35.1 million in the current period. However, absent the impairment charges listed above, we would have recognized income from continuing operations of approximately $0.06 per share on a fully diluted basis, which would be lower than the prior period primarily as the result of recognizing lease termination income in the third quarter 2008 for leases terminated at the 90 Central Building and the 3750 Brookside Parkway Building, as discussed above in other rental income.

~~Comparison of the nine months ended September 30, 2009 versus the nine months ended September 30, 2008~~

The following table sets forth selected data from our consolidated statements of operations for the nine months ended September 30, 2009 and 2008, respectively, as well as each balance as a percentage of total revenues for the periods presented (dollars in millions):

Rental income decreased from approximately $341.8 million for the nine months ended September 30, 2008 to approximately $337.8 million for the nine months ended September 30, 2009. This decrease primarily relates to a lease that expired during the fourth quarter 2008 at the Glenridge Highlands II Building in Atlanta, Georgia. A significant portion of the vacated space at the Glenridge Highlands II Building has subsequently been re-leased to a new tenant. Tenant reimbursements increased from approximately $112.8 million for the nine months ended September 30, 2008 to approximately $113.1 million for the nine months ended September 30, 2009. This increase reflects an increase in recoverable property operating costs, including tenant-requested services, during the nine months ended September 30, 2009.

Property management fee revenue, which includes both fee revenue and salary reimbursements, decreased approximately $0.2 million for the nine months ended September 30, 2009 as compared to the same period in the prior year, primarily as a result of vacancies at certain of the managed properties, as well as non-recurring construction management projects in the prior year. Such income may decrease in future periods in the event that the owner of these properties makes other management arrangements for properties that they own.

Other rental income is comprised primarily of income recognized for lease terminations and restructurings. Unlike the majority of our rental income, which is recognized ratably over long-term contracts, other rental income is recognized once we have completed our obligation to provide space to the tenant. Other rental income decreased approximately $8.7 million for the nine months ended September 30, 2009 as compared to the same period in the prior year. Other rental income for the nine months ended September 30, 2008 primarily relates to leases terminated at the 6031 Connection Drive Building in Irving, Texas, the 90 Central Building, and the 3750 Brookside Parkway Building. Other rental income for the current period consists of a termination at the 1901 Main Street Building in Irvine, California, as well as a termination at the Auburn Hills Corporate Center. We do not expect such income to be comparable in future periods, as it will be dependent upon the execution of lease terminations by tenants and/or restructuring agreements that may not be in our control or are deemed by management to be in the best interest of the portfolio over the long term.

Property operating costs increased approximately $4.0 million for the nine months ended September 30, 2009 compared to the same period in the prior year. This variance is primarily the result of the non-recurrence of significant property tax reductions recognized in the prior year, as well an increase in tenant-requested services during the nine months ended September 30, 2009. Tenant-requested services are typically fees for services requested by a tenant and/or operating costs directly attributable to a specific tenant. These variances were partially offset by a decrease in utility costs in the current year.

Depreciation expense increased approximately $5.3 million for the nine months ended September 30, 2009 compared to the same period in the prior year. Building improvements at the Aon Center Building in Chicago, Illinois as well as tenant-related expenditures at other properties contributed approximately $3.2 million of the increase, and accelerated depreciation charges related to lease termination by tenants at the 1975 South Price Road Building (partial lease termination) and the 1901 Main Street Building contributed approximately $1.6 million of the increase. Additionally, the current period includes nine full months of depreciation related to the acquisition of the Piedmont Pointe II Building in Bethesda, Maryland (acquired in June 2008) of approximately $0.7 million, as compared to only approximately three months of depreciation related to the building during the prior period.

Amortization expense decreased approximately $6.0 million for the nine months ended September 30, 2009 compared to the same period in the prior year. The decrease primarily relates to lease assets that have been fully amortized or written-off subsequent to September 30, 2008 of approximately $8.0 million. Accelerated amortization as a result of tenants’ lease terminations at the 1975 South Price Road Building (partial lease termination) and the 1901 Main Street Building of approximately $1.0 million partially offset this decrease, as well as increases in amortization of deferred tenant acquisition costs of approximately $1.4 million resulting from new leasing transactions occurring since September 30, 2008.

General and administrative expense decreased approximately $1.5 million for the nine months ended September 30, 2009 compared to the same period in the prior year. Of this decrease, approximately $1.3 million is related to net savings realized through the termination of service agreements with our former advisor in July 2008.

During the nine months ended September 30, 2009, we recognized an impairment loss of approximately $35.1 million as a result of lowering expected future rental income and reducing the intended holding periods for the Auburn Hills Corporate Center Building in Auburn Hills, Michigan, and the 1441 West Long Lake Road Building in Troy, Michigan, as well as the 1111 Durham Avenue Building in South Plainfield, New Jersey. The decision to reduce future rental revenues and the holding periods for the two Detroit assets was prompted by the loss of prospective replacement tenants and overall declines in the Detroit, Michigan market. Further, changes in management’s expectation of re-leasing prospects of the New Jersey asset, coupled with general market declines in the South Plainfield submarket in which it is located, prompted the reduction of intended hold period and future rental revenues during the nine months ended September 30, 2009. The cumulative effect of these decisions triggered a reassessment of leasing assumptions for these buildings, which entailed, among other things, evaluating market rents, leasing costs and the downtime necessary to complete the necessary releasing activities (See Note 7 to our accompanying consolidated financial statement for further details).

Interest expense increased approximately $2.5 million for the nine months ended September 30, 2009 compared to the same period in the prior year. We incurred additional interest expense in the current year as a result of entering into our $250 Million Unsecured Term Loan late in the second quarter 2008. These increases were partially offset by lower net borrowings and lower interest rates on our $500 Million Unsecured Facility, as well as the repayment of the 3100 Clarendon Boulevard Building Mortgage Note during 2008.

Interest and other income increased approximately $1.1 million for the nine months ended September 30, 2009 compared to the same period in the prior year, primarily due to the fact that we recognized a full period of income related to our investment in mezzanine debt in the current year, as well as the purchase of a second tranche of mezzanine debt in March 2009. The level of interest income in future periods will primarily be dependent upon the amount of operating cash on hand, as well as income earned on our investment in mezzanine debt.

Equity in loss of unconsolidated joint ventures increased approximately $0.1 million for the nine months ended September 30, 2009 compared to the prior period as a result of recognizing other-than-temporary impairment on the joint venture which owns the 47320 Kato Road Building of approximately $2.6 million (See Note 7 to our accompanying consolidated financial statement for further details). The increase was partially offset as a result of recognizing other-than-temporary impairment on the joint venture which owns the 20/20 Building in the third quarter 2008 of approximately $2.1 million. The increase in the loss was also partially offset as a result of lease intangible assets which have fully amortized at the AIU Building in Hoffman Estate, Illinois (owned through a joint venture). We expect equity in (loss)/income of unconsolidated joint ventures to fluctuate in the near term based on the timing and extent to which dispositions occur as our unconsolidated joint ventures approach their stated dissolution periods.

Income from continuing operations per share on a fully diluted basis ~~decreased~~increased from ~~$0.21~~$0.18 for the ~~nine~~three months ended ~~September 30, 2008~~March 31, 2009 to ~~$0.10~~$0.19 for the ~~nine~~three months ended ~~September 30, 2009~~March 31, 2010 primarily as a result of lower amortization costs incurred in the current year recognition of impairment charges of approximately $35.1 million, as well as, the prior year recognition of approximately $9.5 million of non-recurring fees associated with lease terminations and restructurings.period.

Funds From Operations (“FFO”), Core FFO, and Adjusted Funds from Operations (“AFFO”)

~~Our consolidated financial statements are prepared~~Net income calculated in accordance with ~~GAAP.~~GAAP is the starting point for calculating FFO, ~~is a~~Core FFO, and AFFO. FFO, Core FFO, and AFFO are non-GAAP financial ~~measure~~measures and should not be viewed as an alternative measurement of our operating performance to net income attributable to Piedmont. We believe that FFO is a beneficial indicator of the performance of an equity REIT. Specifically, FFO calculations may be helpful to investors as a starting point in measuring our operating performance, because they exclude factors that do not relate to, or are not indicative of, our operating performance, such as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets. As such factors can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates, FFO may provide a valuable comparison of operating performance between periods and with other REITs.

income. Management believes that accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, Core FFO, and AFFO, together with the required GAAP presentation, provides a more complete understanding of our performance relative to our competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

We calculate FFO in accordance with the current NAREIT definition ~~which defines FFO~~ as ~~net~~follows: Net income ~~attributable to Piedmont~~ (computed in accordance with GAAP), excluding gains or losses from sales of property, plus depreciation and amortization on real estate assets (including our proportionate share of depreciation and ~~after the same adjustments for~~amortization related to investments in unconsolidated ~~partnerships and~~ joint ~~ventures. However, other~~ventures). Other REITs may not define FFO in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than we do; therefore, our computation of FFO may not be comparable to such other REITs.

~~As presented below,~~We calculate Core FFO ~~is adjusted to exclude the impact~~as FFO (calculated as set forth above) less impairment charges and extraordinary items (including our proportionate share of ~~certain noncash items, such as depreciation, amortization, and gains on the sale of real estate assets. However, FFO is not adjusted to exclude the impact of~~any impairment charges or ~~certain~~extraordinary items recognized during the period related to investments in unconsolidated joint ventures).

For the three months ended March 31, 2010 and 2009, we calculated AFFO as Core FFO (calculated as set forth above) exclusive of the net effects of: (i) amortization associated with deferred financing costs; (ii) depreciation on non-income-producing real estate assets; (iii) straight line lease revenue/expense; (iv) amortization of above and below-market lease intangibles; (v) stock-based and other ~~noncash charges~~non-cash compensation expense; (vi) amortization of mezzanine discount income; and (vii) non-incremental capital expenditures (as defined below). Our proportionate share of such adjustments related to ~~earnings.~~ investments in unconsolidated joint ventures are also included when calculating AFFO.

Reconciliations of net ~~(loss)/~~income ~~attributable to Piedmont~~ to FFO, Core FFO, and AFFO are presented below (in ~~thousands)~~thousands except per share amounts):

Set forth below is additional information related to certain significant cash and noncash items included in or excluded from net income attributable to Piedmont above, which may be helpful in assessing our operating results. In addition, cash flows generated from FFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO, such as capitalized interest, tenant improvements, building improvements, and deferred lease costs. Please see our accompanying consolidated statements of cash flows for details of our operating, investing (including capital expenditures), and financing cash activities.

(2)

~~Center Building,~~Represents capital expenditures of a recurring nature related to tenant improvements and leasing commissions that do not incrementally enhance the ~~1111 Durham Avenue Building,~~underlying assets’ income generating capacity. First generation tenant improvements and ~~the 1441 West Long Lake Road Building~~leasing commissions are ~~included in net (loss)/income attributable to Piedmont~~excluded from this measure.

(3)

Includes adjustments for wholly-owned properties, as well as ~~FFO~~such adjustments for ~~the three and nine months ended September 30, 2009 above. Additionally, the impairment charge recognized of approximately $2.1 million related to~~ our ~~investment~~proportionate ownership in aunconsolidated joint venture which owns the 20/20 Building is included in net (loss)/income attributable to Piedmont as well as FFO for the three and nine months ended September 30, 2008 above. These impairment charges are a non-cash expense, and accordingly, do not impact cash flows from operating activities.ventures.

We have elected to be taxed as a REIT under the ~~Internal Revenue~~ Code ~~of 1986, as amended,~~ and have operated as such beginning with our taxable year ended December 31, 1998. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our adjusted REIT taxable income, computed without regard to the dividends-paid deduction and by excluding net capital gains attributable to our stockholders, as defined by the Code. As a REIT, we generally will not be subject to federal income tax on ~~taxable~~ income that we distribute to our ~~stockholders.~~ stockholders; however, we are subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in our accompanying consolidated financial statements.

If we fail to qualify as a REIT in any taxable year, we may be subject to federal income taxes on our taxable income for that year and for the four years following the year during which qualification is lost and/or penalties, unless the ~~Internal Revenue Service~~IRS grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income ~~attributable to Piedmont~~ and net cash available for distribution to our stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT and intend to continue to operate in the foreseeable future in such a manner that we will remain qualified as a REIT for federal income tax purposes.

We have elected to treat Piedmont Office Holdings, Inc. (“~~Piedmont Holdings”~~POH”), a wholly-owned subsidiary of Piedmont, as a taxable REIT subsidiary. We may perform non-customary services for tenants of buildings that we own, including any real estate or non-real estate related-services; however, any earnings related to such services performed by our taxable REIT subsidiary are subject to federal and state income taxes. In addition, for us to continue to qualify as a REIT, our investments in taxable REIT subsidiaries cannot exceed 25% of the value of our total assets. ~~Except for holding 20,000 limited partnership units in Piedmont OP, our operating partnership, Piedmont Holdings,~~As POH had no significant operations for the ~~nine~~three months ended ~~September 30, 2009.~~

~~No provision for federal income taxes has been made in our accompanying consolidated financial statements, as we had no operations subject to such treatment,~~March 31, 2010, and we made distributions in excess of taxable income for the periods ~~presented. We are subject to certain state and local~~presented, no provision for federal income taxes ~~related to the operations of properties in certain locations, which have~~has been ~~provided for~~made in our accompanying consolidated financial statements.

We are exposed to inflation risk, as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps, reimbursement billings for operating expense pass-through charges, real estate tax, and insurance reimbursements on a per square-foot basis, or in some cases, annual reimbursement of operating expenses above certain per square-foot allowances. However, due to the long-term nature of the leases, the leases may not readjust their reimbursement rates frequently enough to fully cover inflation.

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.

We are required to make subjective assessments as to the useful lives of our depreciable assets. We consider the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income attributable to Piedmont. The estimated useful lives of our assets by class are as follows:

Upon the acquisition of real properties, it is our policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and building, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases, and value of tenant relationships, based in each case on their estimated fair values.

The fair values of the tangible assets of an acquired property (which includes land and buildings) are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and building based on our determination of the fair value of these assets. We determine the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by us in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance, and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. We also estimate the cost to execute similar leases including leasing commissions, legal, and other related costs.

The fair values of above-market and below-market in-place lease values are recorded based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining noncancelable term of the lease. The above-market and below-market lease values are capitalized as intangible lease assets and liabilities and amortized as an adjustment of rental income over the remaining terms of the respective leases.

The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. These direct costs are included in deferred lease costs in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These lease intangibles are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.

Estimates of the fair values of the tangible and intangible assets require us to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property is held for investment. The use of inappropriate estimates would result in an incorrect assessment of our purchase price allocations, which could impact the amount of our reported net income attributable to Piedmont.

Valuation of Real Estate Assets and Investments in Joint Ventures Which Hold Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying amounts of the real estate and related intangible assets, both operating properties and properties under construction, in which we have an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate and related intangible assets may not be recoverable, we assess the recoverability of these assets by determining whether the carrying value will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, we adjust the real estate and related intangible assets to the fair value and recognize an impairment loss.

Projections of expected future cash flows require that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the property’s fair value and, therefore, could result in the misstatement of the carrying value of our real estate and related intangible assets and our net income attributable to Piedmont. We have determined that there has been a decline in the fair market value of our investment in the Wells/Fremont Associates unconsolidated joint venture which is “other than temporary” in nature. Therefore, we recorded our proportionate share of a charge taken by the joint venture during the three months ended September 30, 2009. Additionally, we took an impairment charge on our Auburn Hills Corporate Center Building, our 1111 Durham Avenue Building, and our 1441 West Long Lake Road Building during the three months ended September 30, 2009. See Note 7 to our accompanying consolidated financial statements for further information on these impairment charges. Other than the charges previously discussed, we have determined that there has been no ~~other~~ impairment in the carrying value of real estate assets owned by us or any unconsolidated joint ventures as of ~~September 30, 2009.~~March 31, 2010; however subsequent to March 31, 2010 we will reclassify one real estate asset from held for use to held for sale and anticipate recognizing an impairment loss of approximately $9.8 million – see Note 11 of our accompanying consolidated financial statements for a more detailed discussion.

Goodwill is the excess of cost of an acquired entity over the amounts specifically assigned to assets acquired and liabilities assumed in purchase accounting for business ~~combinations.~~combinations, as well as costs incurred as part of the acquisition. We test the carrying value of our goodwill for impairment on an annual ~~basis. The carrying value will be tested for impairment between annual impairment tests~~basis, or on an interim basis if an event occurs or circumstances change that would indicate the carrying amount may be impaired. ~~An impairment~~Such interim circumstances may include, but are not limited to, significant adverse changes in legal factors or in the general business climate, adverse action or assessment by a regulator, unanticipated competition, the loss ~~may be recognized when the~~of key personnel, or persistent declines in an entity’s stock price below carrying ~~amount~~value of the ~~acquired net assets exceeds~~entity. The test prescribed by authoritative accounting guidance is a two-step test. The first step involves comparing the estimated fair value of ~~those assets.~~the entity to its carrying value, including goodwill. Fair value is determined by adjusting the trading price of the stock for various factors including, but not limited to: (i) liquidity or transferability considerations, (ii) control premiums, and/or (iii) fully distributed premiums, if necessary, multiplied by the common shares outstanding. If such calculated fair value exceeds the carrying value, no further procedures or analysis is permitted or required. However, if the carrying value exceeds the calculated fair value, goodwill is potentially impaired and step two of the analysis would be required. Step two of the test involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the entity from the entity’s fair value calculated in step one of the test. If the implied value of the goodwill (the remainder left after deducting the fair values of the entity from its calculated overall fair value in step one of the test) is less than the carrying value of goodwill, an impairment loss would be recognized. We have determined that there have been no events or circumstances that would indicate that the carrying amount may be impaired as of ~~September 30, 2009.~~March 31, 2010.

Variable Interest Entities (“VIEs”) are defined by GAAP as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. If an entity is determined to be a VIE, it must be consolidated by the primary beneficiary. The primary beneficiary is the enterprise that absorbs the majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both. Generally, expected losses and expected residual returns are the ~~expected~~anticipated negative and positive variability, respectively, in the fair value of the VIE’s net assets.

When we make an investment, we assess whether the investment represents a variable interest in a VIE and, if so, whether we are the primary beneficiary of the VIE. These analyses require considerable judgment in determining the primary beneficiary of a VIE since they involve subjective probability weighting of various cash flow scenarios. Incorrect assumptions or estimates of future cash flows may result in an inaccurate determination of the primary beneficiary. The result could be the consolidation of an entity acquired or formed in the future that would otherwise not have been consolidated or the non-consolidation of such an entity that would otherwise have been consolidated.

We evaluate each investment to determine whether it represents variable interests in a VIE. Further, we evaluate the sufficiency of the entities’ equity investment at risk to absorb expected losses, and whether as a group, the equity has the characteristics of a controlling financial interest.

When we enter into an interest rate swap agreement to hedge our exposure to changing interest rates on our variable rate debt instruments, as required by GAAP, we record all derivatives on the balance sheet at fair value. We reassess the effectiveness of our derivatives designated as cash flow hedges on a regular basis to determine if they continue to be highly effective and also to determine if the forecasted transactions remain highly probable. The changes in fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (“OCI”), and the amounts in OCI will be reclassified to earnings when the hedged transactions occur. Changes in the fair values of derivatives designated as cash flow hedges that do not qualify for hedge accounting treatment are recorded as gain/(loss) on interest rate swap in the consolidated statements of operations in the current period. The fair value of the interest rate swap agreement is recorded as prepaid expenses and other assets or as interest rate swap liability in the accompanying consolidated balance sheets. Amounts ~~paid~~received or ~~received~~paid under interest rate swap agreements are recorded as ~~increases or decreases, respectively, to~~ interest expense in the consolidated statements of operations as incurred. Currently, we do not use derivatives for trading or speculative purposes and do not have any derivatives that are not designated as cash flow hedges.

We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 98 to our consolidated financial statements for further explanation. Examples of such commitments and contingencies include:

Our future income, cash flows, and fair values of our financial instruments depend in part upon prevailing market interest rates. Market risk is the exposure to loss resulting from changes in interest rates, foreign currency, exchange rates, commodity prices, and equity prices. Our exposure to market risk includes interest rate fluctuations in connection with any borrowings under our $500 Million Unsecured Facility and our $250 Million Unsecured Term Loan. As a result, the primary market risk to which we believe we are exposed is interest rate risk. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control contribute to interest rate risk. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flow primarily ~~by maintaining~~through a ~~moderate~~low-to-moderate level of ~~variable-rate~~overall borrowings, as well as managing the variability in rate fluctuations on our outstanding debt. ~~In addition,~~As such, a significant portion of our debt is based on fixed interest rates to hedge against instability in the credit markets, and we ~~entered into an~~have effectively fixed the interest rate ~~swap agreement to effectively fix~~on our ~~rate on the~~ $250 Million Unsecured Term ~~Loan.~~Loan through interest rate swap agreements.

All of our debt was entered into for other than trading purposes, and the estimated fair value of our debt as of ~~September 30, 2009 is~~March 31, 2010 was approximately $1.4 billion. See Note 67 of our accompanying consolidated financial statements for further detail.

As of ~~September 30, 2009, approximately $1.4 billion~~March 31, 2010, all of our outstanding debt is subject to fixed, or effectively fixed, interest rates. Our total outstanding debt has an average interest rate of approximately ~~4.82%~~5.13% per annum with expirations ranging from 2010 to 2017. Additionally, during the three months ended March 31, 2010 we notified the administrative agent of our intent to extend the term of the $250 Million Unsecured Term Loan from June 2010 to June 2011, upon payment of a 25 basis point fee. A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio but has no impact on interest incurred or cash flows. Such agreements may result in higher fixed interest rates in certain periods of lower variable interest rates, but are intended to decrease our exposure to potential increases in interest rates.

As of ~~September 30, 2009, approximately $130.0 million of our~~March 31, 2010, we had no amounts outstanding ~~debt (the amount outstanding under~~on our $500 Million Unsecured ~~Facility)~~Facility, which is the only debt facility subject to variable interest rates. Our $500 Million Unsecured Facility currently has a stated rate of LIBOR plus 0.475% per annum or the prime rate, at the company’s discretion. The 30-day LIBOR rate as of ~~September 30, 2009~~March 31, 2010 was 0.25%~~. The weighted-average interest rate on all outstanding draws as of September 30, 2009 is 1.52%~~. To the extent that we borrow funds in the future under the $500 Million Unsecured Facility or potential future variable-rate lines of credit, we would have exposure to increases in interest rates, which would potentially increase our cost of debt.

Management’s Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the quarterly period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2009~~March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In Re Wells Real Estate Investment Trust, Inc. Securities Litigation, Civil Action No. 1:07-cv-00862-CAP (Upon motions to dismiss filed by defendants, parts of all seven counts were dismissed by the court. Counts III through VII were dismissed in their entirety. Motions for ~~Summary Judgment~~summary judgment are ~~currently due to be filed on November 24, 2009.~~pending before the court.)

On March 12, 2007, a stockholder filed a purported class action and derivative complaint in the United States District Court for the District of Maryland against, among others, Piedmont, ~~Piedmont’s~~our previous advisors, and ~~the~~our officers and directors ~~of Piedmont~~ prior to the closing of the Internalization. The complaint attempts to assert class action claims on behalf of those persons who received and were entitled to vote on the proxy statement filed with the SEC on February 26, 2007.

The complaint ~~alleged,~~alleges, among other things, (i) that the consideration to be paid as part of the Internalization is excessive; (ii) violations of Section 14(a), including Rule 14a-9 thereunder, and Section 20(a) of the Exchange Act, based upon allegations that the proxy statement contains false and misleading statements or omits to state material facts; (iii) that the board of directors and the current and previous advisors breached their fiduciary duties to the class and to ~~Piedmont;~~us; and (iv) that the proposed Internalization will unjustly enrich certain directors and officers of Piedmont.

The complaint ~~sought,~~seeks, among other things, (i) certification of the class action; (ii) a judgment declaring the proxy statement false and misleading; (iii) unspecified monetary damages; (iv) to nullify any stockholder approvals obtained during the proxy process; (v) to nullify the Internalization; (vi) restitution for disgorgement of profits, benefits, and other compensation for wrongful conduct and fiduciary breaches; (vii) the nomination and election of new independent directors, and the retention of a new financial advisor to assess the advisability of ~~Piedmont’s~~our strategic alternatives; and (viii) the payment of reasonable attorneys’ fees and experts’ fees.

On March 31, 2008, the court granted in part the defendants’ motion to dismiss the amended complaint. The court dismissed five of the seven counts of the amended complaint in their entirety. The court dismissed the remaining two counts with the exception of allegations regarding the failure to disclose in ~~Piedmont’s~~our proxy statement details of certain expressions of interest by a third party in acquiring ~~Piedmont.~~us. On April 21, 2008, the plaintiff filed a second amended complaint, which alleges violations of the federal proxy rules based upon allegations that the proxy statement to obtain approval for Internalization omitted details of certain expressions of interest in acquiring ~~Piedmont.~~us. The second amended complaint seeks, among other things, unspecified monetary damages, to nullify and rescind Internalization, and to cancel and rescind any stock issued to the defendants as consideration for Internalization. On May 12, 2008, the defendants answered the second amended complaint.

On April 13, 2009, the plaintiff moved for leave to amend the second amended complaint to add additional defendants. The court denied the motion for leave to amend on June 23, 2009.

We believe that the allegations contained in the complaint are without merit and will continue to vigorously defend this action. Due to the uncertainties inherent in the litigation process, it is not possible to predict the ultimate outcome of this matter at this time; however, as with any litigation, the risk of financial loss does exist.

In Re Piedmont Office Realty Trust, Inc. Securities Litigation, Civil Action No. 1:07-cv-02660-CAP (Upon motions to dismiss filed by defendants, parts of all four counts were dismissed by the court. Counts III and IV were dismissed in their entirety. ~~A motion for class certification has been filed and the~~The parties are engaged in discovery.)

On October 25, 2007, the same stockholder mentioned above filed a second purported class action in the United States District Court for the Northern District of Georgia against ~~Piedmont~~us and ~~its~~our board of directors. The complaint attempts to assert class action claims on behalf of (i) those persons who were entitled to tender their shares pursuant to the tender offer filed with the SEC by Lex-Win Acquisition LLC, ~~(“Lex-Win”),~~ a former stockholder, on May 25, 2007, and (ii) all persons who are entitled to vote on the proxy statement filed with the SEC on October 16, 2007.

On December 26, 2007, the plaintiff filed a motion seeking that the court designate it as lead plaintiff and its counsel as class lead counsel, which the court granted on May 2, 2008.

On May 19, 2008, the lead plaintiff filed an amended complaint which contained the same counts as the original complaint. On June 30, 2008, defendants filed a motion to dismiss the amended complaint.

Stockholders who are currently participating in our dividend reinvestment plan (“DRP”), and stockholders who may choose to participate in the DRP in the future, may be purchasing shares above the value of the next estimated net asset value per share, which is scheduled to be announced in the first quarter 2010. Additionally, shares purchased pursuant to our share redemption program for the remainder of calendar year 2009 may be purchased at a price which could be higher than our next estimated net asset value per share.

Based upon appraisals in the first half of 2009 on institutionally-owned commercial real estate owned by others in markets that we also serve, we believe that the current market conditions are having a negative impact on the values of existing U.S. office properties. A reduction in the values of our existing properties will cause a reduction in our annual estimated net asset value calculation which is scheduled to be completed in the first quarter 2010. While we cannot predict what our estimated net asset value per share may be in the future, given current market conditions, the current dividend reinvestment price and current share redemption price of $7.03 per share (which is 95% of the latest estimated net asset value per share) may be above the value of the next estimated net asset value per share, which is scheduled to be determined and announced during first quarter 2010.

There have been no ~~other~~ known material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2008.~~2009.

~~distributions redemption requests, will be approximately $110.0 million. During the quarter ended September 30, 2009, we redeemed shares pursuant to our share redemption program as follows:~~

The Exhibits required to be filed with this report are set forth on the Exhibit Index to ~~Third~~First Quarter 2010 Form 10-Q attached hereto.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Maryland		58-2328421
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


Large Accelerated filer¨		Accelerated filer¨
Non-Accelerated filerx (Do not check if a smaller reporting company)		Smaller reporting company ¨


			Page No.
PART I.	Financial Statements

	Item 1.	Consolidated Financial Statements	4

		Consolidated Balance Sheets—~~September 30, 2009~~March 31, 2010 (unaudited) and December 31, ~~2008~~2009	5

		Consolidated Statements of Operations for the Three Months ~~and Nine Months~~ Ended ~~September 30,~~March 31, 2010 (unaudited) and 2009 (unaudited) ~~and 2008 (unaudited)~~	6

		Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, ~~2008~~2009 and the ~~Nine~~Three Months Ended ~~September 30, 2009~~March 31, 2010 (unaudited)	7

		Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2010 (unaudited) and 2009 (unaudited) ~~and 2008 (unaudited)~~	8

		Condensed Notes to Consolidated Financial Statements (unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2825

	Item 4T.	Controls and Procedures	2826

PART II.	Other Information

	Item 1.	Legal Proceedings	27

	Item 1A.	Risk Factors	28

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

	Item ~~1A.~~	~~Risk Factors~~	30

	~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	30

	~~Item~~ 3.	Defaults Upon Senior Securities	3129

	Item 4.	~~Submission of Matters to a Vote of Security Holders~~Reserved	3129

	Item 5.	Other Information	3129

	Item 6.	Exhibits	3129


Interest Rate Derivative	Notional Amount (in millions)		Effective Date	Maturity Date
Interest Rate Swap	$	250	6/27/2008	6/28/2010
Interest Rate Swap	$	100	6/28/2010	6/28/2011
Interest Rate Swap	$	75	6/28/2010	6/28/2011
Interest Rate Swap	$	50	6/28/2010	6/28/2011
Interest Rate Swap	$	25	6/28/2010	6/28/2011


Derivative in Cash Flow Hedging Relationships (Interest Rate Swap)	Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Reclassified from Accumulated OCI into Interest Expense
Three Months Ended March 31, 2010	$	471	$	(2,021	)
Three Months Ended March 31, 2009	$	1,057	$	(1,884	)


	September 30, 2009		December 31, 2008
Investments in mezzanine debt	$	58,405	$	46,461
Note receivable from tenant		118		453

Notes receivable	$	58,523	$	46,914


Interest Rate Derivative	Notional Amount
Interest Rate Swap	$	250,000,000


	Fair Value of Derivative Instrument
	Asset Derivative As of September 30, 2009			Liability Derivative As of September 30, 2009
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under GAAP:
Interest rate swap	N/A	$	—	Other liabilities	$	5,675

Total derivatives designated as hedging instruments under GAAP		$	—		$	5,675


Derivative in Cash Flow Hedging Relationships	Amount of Loss Recognized in OCI on Derivative (Effective Portion)		Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Interest Rate Swap	$	843	Interest expense	$	(2,033	)	Interest expense	$	0

Total	$	843		$	(2,033	)		$	0


Derivative in Cash Flow Hedging Relationships	Amount of Gain Recognized in OCI on Derivative (Effective Portion)		Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Interest Rate Swap	$	2,563	Interest expense	$	(5,844	)	Interest expense	$	0

Total	$	2,563		$	(5,844	)		$	0


	As of March 31, 2010				As of December 31, 2009
Financial Instrument	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Cash and Cash Equivalents	$	76,994	$	76,994	$	10,004	$	10,004
Accounts Receivable	$	128,316	$	128,316	$	128,442	$	128,442
Notes Receivable	$	59,407	$	44,797	$	58,739	$	44,500
Accounts Payable	$	12,075	$	12,075	$	12,170	$	12,170
Interest Rate Swap Agreements	$	2,316	$	2,316	$	3,866	$	3,866
Line of Credit and Notes Payable	$	1,402,525	$	1,360,802	$	1,516,525	$	1,436,060


	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at September 30, 2009
Liabilities
Derivative financial instrument	$	—	$	5,675	$	—	$	5,675


Impairment loss recorded in real estate operating expenses:
Auburn Hills Corporate Center Building	$	10,173
1111 Durham Avenue Building		14,274
1441 West Long Lake Road Building		10,616

Impairment loss on real estate assets	$	35,063

Impairment loss recorded in equity in loss of unconsolidated joint ventures:
Wells/Fremont Associates Joint Venture (at Piedmont’s approximate 78% ownership)	$	2,570


Property or Investment in Unconsolidated Joint Venture	Net Book Value		Impairment Recognized		Fair Value
Auburn Hills Corporate Center Building	$	17,633	$	10,173	$	7,460
1111 Durham Avenue Building		27,984		14,274		13,710
1441 West Long Lake Road Building		17,141		10,616		6,525
Wells Fremont Associates Joint Venture (at Piedmont’s approximate 78% ownership)		5,280		2,570		2,710

	$	68,038	$	37,633	$	30,405


	Nine months ended September 30, (in thousands)
	2009			2008
Reduction in goodwill related to return of common stock used to acquire Piedmont’s former advisor	$	(293	)	$	—
Accrued redemptions of common stock	$	3,942		$	(5,969	)
Accrued capital expenditures and deferred lease costs	$	828		$	6,191
Discounts applied to issuance of common stock, net of return of common stock used to acquire Piedmont’s former advisor	$	(12,917	)	$	646
Discounts reduced as a result of redemptions and purchases of common stock	$	19,327		$	1,690
Redeemable common stock	$	(51,211	)	$	(79,837	)


	September 30, 2009			% of Total Revenues	September 30, 2008			% of Total Revenues	$ Increase (Decrease)
Revenue:
Rental income	$	112.9			$	113.5			$	(0.6	)
Tenant reimbursements		36.9				37.1				(0.2	)
Property management fee revenue		0.8				0.7				0.1
Other rental income		0.0				4.0				(4.0	)

Total revenues		150.6		100		155.3		100		(4.7	)
Expense:
Property operating costs		56.6		38		53.7		35		2.9
Asset and property management fees		0.5		0		0.5		0		0.0
Depreciation		26.8		18		25.3		16		1.5
Amortization		14.0		9		15.0		10		(1.0	)
General and administrative expense		6.2		4		8.0		5		(1.8	)
Impairment loss on real estate assets		35.1		23		—		0		35.1

Real estate operating income		11.4		8		52.8		34		(41.4	)
Other income (expense):
Interest expense		(19.5	)	13		(20.4	)	13		(0.9	)
Interest and other income		2.0		1		1.1		1		0.9
Equity in loss of unconsolidated joint ventures		(2.0	)	1		(1.5	)	1		0.5

(Loss)/income from continuing operations	$	(8.1	)	5	$	32.0		21	$	(40.1	)


	March 31, 2010			% of Total Revenues		March 31, 2009			% of Total Revenues		$ Increase (Decrease)
Revenue:
Rental income	$	112.1				$	112.9				$	(0.8	)
Tenant reimbursements		35.1					40.1					(5.0	)
Property management fee revenue		0.7					0.7					0.0
Other rental income		0.5					—					0.5

Total revenues		148.4		100	%		153.7		100	%		(5.3	)
Expense:
Property operating costs		55.3		37	%		60.1		39	%		(4.8	)
Depreciation		26.1		18	%		25.6		17	%		0.5
Amortization		11.4		8	%		13.4		9	%		(2.0	)
General and administrative expense		6.6		4	%		7.4		5	%		(0.8	)

Real estate operating income		49.0		33	%		47.2		31	%		1.8
Other income (expense):
Interest expense		(19.1	)	13	%		(19.3	)	13	%		(0.2	)
Interest and other income		1.0		1	%		0.6		0	%		0.4
Equity in income of unconsolidated joint ventures		0.7		0	%		0.7		0	%		0.0

Income from continuing operations	$	31.6		21	%	$	29.2		19	%	$	2.4


	Three Months Ended September 30,										Nine Month Ended September 30,
	2009			Per Share*			2008		Per Share*		2009		Per Share*		2008		Per Share*
Net (loss)/income attributable to Piedmont	$	(8,260	)	$	(.02	)	$	31,888	$	.07	$	48,754	$	.10	$	99,720	$	.21
Add:
Depreciation of real assets – wholly owned properties		26,637			.06			25,083		.05		78,522		.17		73,516		.15
Depreciation of real assets – unconsolidated partnerships		367			—			375		—		1,092		—		1,124		—
Amortization of lease-related costs – wholly owned properties		13,991			.03			15,020		.03		41,127		.09		47,147		.10
Amortization of lease-related costs – unconsolidated partnerships		103			—			125		—		307		—		608		—
Subtract:
Gain on sale of properties – wholly owned		—			—			—		—		—		—		—		—
Gain on sale of properties – unconsolidated partnerships		—			—			—		—		—		—		—		—

FFO	$	32,838		$	.07		$	72,491	$	.15	$	169,802	$	.36	$	222,115	$	.46

Weighted-average shares outstanding – diluted		473,281						474,357				475,871				480,066


	Three Months Ended March 31,
	2010			Per Share⁽¹⁾			2009			Per Share⁽¹⁾
Net income attributable to Piedmont	$	31,460		$	.19		$	29,038		$	.18
Add:
Depreciation of real assets⁽³⁾		26,250			.16			25,837			.16
Amortization of lease-related costs⁽³⁾		11,488			.07			13,543			.09
Subtract:
Gain on sale of properties		—			—			—			—

Funds From Operations and Core Funds From Operations	$	69,198		$	.42		$	68,418		$	.43

Adjustments:
Add:
Deferred financing cost amortization		696			—			708			—
Depreciation of non real estate assets		178			—			152			—
Straight-line effects of lease (revenue)/expense⁽³⁾		1,073			.01			2,696			.01
Stock-based and other non-cash compensation		653			—			1,005			.01
Subtract:
Net Effect of Amortization of Above/(Below)-Market In-Place Lease Intangibles⁽³⁾		(1,426	)		(.01	)		(1,230	)		(.01	)
Income from amortization of discount on purchase of mezzanine loans		(668	)		—			(367	)		—
Non-incremental capital expenditures⁽²⁾		(9,122	)		(.05	)		(11,805	)		(.07	)

Adjusted Funds From Operations	$	60,582		$	.37		$	59,577		$	.37

Weighted-average shares outstanding – diluted		165,200						159,878


Buildings		40 years
Building improvements		5-25 years
Land improvements		20-25 years
Tenant improvements		Shorter of economic life or lease term
Intangible lease assets		Lease term


Period	Total Number of Shares Purchased (in 000’s)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (in 000’s)	Maximum Approximate Dollar Value of Shares Available That May Yet Be Redeemed in Calendar Year 2009 Under the Program (in 000’s)
July 1, 2009 to July 31, 2009	633	$	7.03	633	$	5,641
August 1, 2009 to August 31, 2009	326	$	7.03	326	$	3,350
September 1, 2009 to September 30, 2009	561	$	7.03	561	$		⁽¹⁾


Name	Number of Shares Voted For	% of Shares Cast		Number of Shares Withheld	% of Shares Cast
W. Wayne Woody	232,924,886	95.65	%	10,599,626	4.35	%
Michael R. Buchanan	232,999,359	95.68	%	10,525,153	4.32	%
Wesley E. Cantrell	232,584,383	95.51	%	10,940,129	4.49	%
William H. Keogler, Jr.	232,924,340	95.65	%	10,600,172	4.35	%
Donald S. Moss	232,402,412	95.43	%	11,122,100	4.57	%
Donald A. Miller, CFA	232,557,190	95.50	%	10,967,322	4.50	%
Frank C. McDowell	233,091,359	95.72	%	10,433,153	4.28	%
Jeffery L. Swope	232,949,037	95.66	%	10,575,475	4.34	%


			PIEDMONT OFFICE REALTY TRUST, INC.
	(Registrant)

Dated: ~~November 16, 2009~~May 11, 2010	By:	/s/ Robert E. Bowers
			Robert E. Bowers
			Chief Financial Officer and Executive Vice President
			(Principal Financial Officer and Duly Authorized Officer)


Exhibit Number		Description of Document
3.1		~~Second~~Third Articles of Amendment and Restatement of ~~the Company (incorporating all amendments thereto through December 17, 2007)~~Piedmont Office Realty Trust, Inc. (the “Company”) (incorporated by reference to Exhibit 3.1 to the Company’s ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the fiscal year ended December 31, 2009 filed on ~~May 14, 2008)~~March 16, 2010)

3.2		Amended and Restated Bylaws of ~~Piedmont Office Realty Trust, Inc. (incorporating all amendments thereto through June 26, 2008)~~the Company (incorporated by reference to Exhibit 3.2 to the Company’s ~~Quarterly~~current Report on Form ~~10-Q,~~8-K filed ~~August 13, 2008)~~on January 22, 2010)

31.1		Rule 13a-14(a)/15d-14(a) Certification, executed by Donald A. Miller, CFA, Principal Executive Officer of the Company

31.2		Rule 13a-14(a)/15d-14(a) Certification, executed by Robert E. Bowers, Principal Financial Officer of the Company

32.1		Certification required by Rule 13a-14(b)/15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, executed by Donald A. Miller, CFA, Chief Executive Officer and President of the Company

32.2		Certification required by Rule 13a-14(b)/15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, executed by Robert E. Bowers, Chief Financial Officer and Executive Vice-President of the Company