Fair Value Measurements of Financial Instruments
Piedmont considers its cash and cash equivalents, tenant receivables, restricted cash and escrows, accounts payable and accrued expenses, interest rate swap agreements, and debt to meet the definition of financial instruments. The following table sets forth the carrying and estimated fair value for each of Piedmont’s financial instruments, as well as its level within the GAAP fair value hierarchy, as of December 31, 2025 and 2024, respectively (in thousands):
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| | December 31, 2025 | | December 31, 2024 |
| Financial Instrument | Carrying Value | | Estimated
Fair Value | | Level Within Fair Value Hierarchy | | Carrying Value | | Estimated
Fair Value | | Level Within Fair Value Hierarchy |
| Assets: | | | | | | | | | | | |
Cash and cash equivalents (1) | $ | 731 | | | $ | 731 | | | Level 1 | | $ | 109,637 | | | $ | 109,637 | | | Level 1 |
Tenant receivables, net (1) | $ | 6,155 | | | $ | 6,155 | | | Level 1 | | $ | 5,524 | | | $ | 5,524 | | | Level 1 |
| | | | | | | | | | | |
Restricted cash and escrows (1) | $ | 3,060 | | | $ | 3,060 | | | Level 1 | | $ | 4,245 | | | $ | 4,245 | | | Level 1 |
| Interest rate swaps | $ | — | | | $ | — | | | Level 2 | | $ | 671 | | | $ | 671 | | | Level 2 |
| Liabilities: | | | | | | | | | | | |
Accounts payable and accrued expenses (1) | $ | 26,692 | | | $ | 26,692 | | | Level 1 | | $ | 51,035 | | | $ | 51,035 | | | Level 1 |
| Interest rate swaps | $ | 111 | | | $ | 111 | | | Level 2 | | $ | 8 | | | $ | 8 | | | Level 2 |
| Debt, net | $ | 2,224,712 | | | $ | 2,262,389 | | | Level 2 | | $ | 2,222,346 | | | $ | 2,238,531 | | | Level 2 |
(1)For the periods presented, the carrying value of these financial instruments approximates estimated fair value due to their short-term maturity.
Piedmont's debt was carried at book value as of December 31, 2025 and 2024; however, Piedmont's estimate of its fair value is disclosed in the table above. Piedmont uses widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the debt facilities, including the period to maturity of each instrument, and uses observable market-based inputs for similar debt facilities which have transacted recently in the market. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). Scaling adjustments are made to these inputs to make them applicable to the remaining life of Piedmont's outstanding debt. Piedmont has not changed its valuation technique for estimating the fair value of its debt.
Piedmont’s interest rate swap agreements presented above, and as further discussed in Note 4, are classified as “Interest rate swaps” in the accompanying consolidated balance sheets and were carried at estimated fair value as of December 31, 2025 and 2024. The valuation of these derivative instruments was determined using widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the derivatives, including the period to maturity of each instrument, and uses observable market-based inputs, including interest rate curves and implied volatilities. Therefore, the estimated fair values determined are considered to be based on significant other observable inputs (Level 2). In addition, Piedmont considered both its own and the respective counterparties’ risk of nonperformance in determining the estimated fair value of its derivative financial instruments by estimating the current and potential future exposure under the derivative financial instruments as of the valuation date. The credit risk of Piedmont and its counterparties was factored into the calculation of the estimated fair value of the interest rate swaps; however, as of December 31, 2025 and 2024, this credit valuation adjustment did not comprise a material portion of the estimated fair value. Therefore, Piedmont believes that any unobservable inputs used to determine the estimated fair values of its derivative financial instruments are not significant to the fair value measurements in their entirety, and does not consider any of its derivatives to be Level 3 financial instruments. About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.