UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
    
For the quarterly period ended SeptemberJune 30, 20172022
or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from [ ] to [ ]
hiw-20220630_g1.jpg
HIGHWOODS PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MarylandMaryland001-13100001-1310056-1871668
(State or other jurisdiction
of incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)

HIGHWOODS REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
North Carolina000-2173156-1869557
(State or other jurisdiction
of incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)

3100 Smoketree Court, Suite 600
Raleigh, NC 27604
(Address of principal executive offices) (Zip Code)
919-872-4924
(Registrants’ telephone number, including area code)
_________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $.01 par value, of Highwoods Properties, Inc.HIWNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Highwoods Properties, Inc.  Yes  x☒    No ¨☐Highwoods Realty Limited Partnership  Yes  x☒    No ¨☐

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).
Highwoods Properties, Inc.  Yes  x☒    No ¨☐Highwoods Realty Limited Partnership  Yes  x☒    No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of 'large“large accelerated filer,' 'accelerated” “accelerated filer,' 'smaller” “smaller reporting company,'” and 'emerging“emerging growth company'company” in Rule 12b-2 of the Exchange Act.
Highwoods Properties, Inc.
Large accelerated filer x☒   Accelerated filer ¨☐   Non-accelerated filer ¨ (Do not check if a smaller reporting company)  
☐Smaller reporting company ¨☐   Emerging growth company ¨☐
Highwoods Realty Limited Partnership
Large accelerated filer ¨☐   Accelerated filer ¨☐   Non-accelerated filer x (Do not check if a smaller reporting company)  
☒Smaller reporting company ¨☐   Emerging growth company ¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Highwoods Properties, Inc.¨☐Highwoods Realty Limited Partnership¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Highwoods Properties, Inc.  Yes  ¨☐    No x☒Highwoods Realty Limited Partnership  Yes  ¨☐    No x☒

The Company had 103,248,940105,184,854 shares of Common Stock outstanding as of October 18, 2017.
July 19, 2022.




EXPLANATORY NOTE


We refer to Highwoods Properties, Inc. as the “Company,” Highwoods Realty Limited Partnership as the “Operating Partnership,” the Company’s common stock as “Common Stock” or “Common Shares,” the Company’s preferred stock as “Preferred Stock” or “Preferred Shares,” the Operating Partnership’s common partnership interests as “Common Units” and the Operating Partnership’s preferred partnership interests as “Preferred Units.” References to “we” and “our” mean the Company and the Operating Partnership, collectively, unless the context indicates otherwise.


The Company conducts its activities through the Operating Partnership and is its sole general partner. The partnership agreement provides that the Operating Partnership will assume and pay when due, or reimburse the Company for payment of, all costs and expenses relating to the ownership and operations of, or for the benefit of, the Operating Partnership. The partnership agreement further provides that all expenses of the Company are deemed to be incurred for the benefit of the Operating Partnership.


Certain information contained herein is presented as of October 18, 2017,July 19, 2022, the latest practicable date for financial information prior to the filing of this Quarterly Report.


This report combines the Quarterly Reports on Form 10-Q for the period ended SeptemberJune 30, 20172022 of the Company and the Operating Partnership. We believe combining the quarterly reports into this single report results in the following benefits:


•combined reports better reflect how management and investors view the business as a single operating unit;


•combined reports enhance investors'investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;


•combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and


•combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.


To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:


•Consolidated Financial Statements;


•Note 1213 to Consolidated Financial Statements - Earnings Per Share and Per Unit;


•Item 4 - Controls and Procedures; and


•Item 6 - Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.







HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP


QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBERJUNE 30, 20172022


TABLE OF CONTENTS


Page
Page
PART I - FINANCIAL INFORMATION
3
HIGHWOODS PROPERTIES, INC.:
Consolidated Balance Sheets at SeptemberJune 30 2017, 2022 and December 31, 20162021
3
Consolidated Statements of Income for the Three and Nine Six Months Ended September 30, 2017June30, 2022 and 20162021
4
Consolidated Statements of Comprehensive Income for the Three and Nine Six Months Ended
SeptemberJune 30 2017, 2022 and 20162021
5
Consolidated Statements of Equity for the Nine Three and Six Months Ended SeptemberJune 30 2017, 2022 and 20162021
6
Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20172022 and 20162021
78
HIGHWOODS REALTY LIMITED PARTNERSHIP:
Consolidated Balance Sheets at September 30, 2017June 30, 2022 and December 31, 20162021
910
Consolidated Statements of Income for the Three and NineSix Months Ended September June 30 2017, 2022 and 20162021
1011
Consolidated Statements of Comprehensive Income for the Three and Nine Six Months Ended
SeptemberJune 30 2017, 2022 and 20162021
1112
Consolidated Statements of Capital for the Nine Three and Six Months Ended SeptemberJune 30 2017, 2022 and 20162021
1213
Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30 2017, 2022 and 20162021
1315
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1517
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS
3132
Disclosure Regarding Forward-Looking Statements
3132
Executive Summary
3233
Results of Operations
3437
Liquidity and Capital Resources
3740
Critical Accounting Estimates
4043
Non-GAAP Information
4144
4447
4447
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
4548
ITEM 5. OTHER INFORMATION
45
ITEM 6. EXHIBITS
4648





2
Table of Contents
PART I - FINANCIAL INFORMATION


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


HIGHWOODS PROPERTIES, INC.
Consolidated Balance Sheets
(Unaudited and in thousands, except share and per share data)
June 30,
2022		December 31,
2021
Assets:
Real estate assets, at cost:
Land$532,215 $549,228 
Buildings and tenant improvements5,676,352 5,718,169 
Development in-process19,088 6,890 
Land held for development238,159 215,257 
6,465,814 6,489,544 
Less-accumulated depreciation(1,522,363)(1,457,511)
Net real estate assets4,943,451 5,032,033 
Real estate and other assets, net, held for sale— 3,518 
Cash and cash equivalents25,045 23,152 
Restricted cash46,623 8,046 
Accounts receivable17,938 14,002 
Mortgages and notes receivable1,153 1,227 
Accrued straight-line rents receivable277,086 268,324 
Investments in and advances to unconsolidated affiliates14,457 7,383 
Deferred leasing costs, net of accumulated amortization of $155,594 and $143,111, respectively243,624 258,902 
Prepaid expenses and other assets, net of accumulated depreciation of $19,968 and $21,408, respectively112,937 78,551 
Total Assets$5,682,314 $5,695,138 
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
Mortgages and notes payable, net$2,804,314 $2,788,915 
Accounts payable, accrued expenses and other liabilities271,716 294,976 
Total Liabilities3,076,030 3,083,891 
Commitments and contingencies00
Noncontrolling interests in the Operating Partnership84,583 111,689 
Equity:
Preferred Stock, $.01 par value, 50,000,000 authorized shares;
8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 28,821 shares issued and outstanding28,821 28,821 
Common Stock, $.01 par value, 200,000,000 authorized shares;
105,184,854 and 104,892,780 shares issued and outstanding, respectively1,052 1,049 
Additional paid-in capital3,065,208 3,027,861 
Distributions in excess of net income available for common stockholders(593,846)(579,616)
Accumulated other comprehensive loss(1,062)(973)
Total Stockholders’ Equity2,500,173 2,477,142 
Noncontrolling interests in consolidated affiliates21,528 22,416 
Total Equity2,521,701 2,499,558 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity$5,682,314 $5,695,138 
 September 30,
2017		 December 31,
2016
Assets:   
Real estate assets, at cost:   
Land$488,013
 $474,375
Buildings and tenant improvements4,605,061
 4,313,373
Development in-process58,578
 279,602
Land held for development76,969
 77,355
 5,228,621
 5,144,705
Less-accumulated depreciation(1,196,642) (1,134,103)
Net real estate assets4,031,979
 4,010,602
Cash and cash equivalents4,864
 49,490
Restricted cash47,761
 29,141
Accounts receivable, net of allowance of $504 and $624, respectively18,027
 17,372
Mortgages and notes receivable, net of allowance of $80 and $105, respectively6,789
 8,833
Accrued straight-line rents receivable, net of allowance of $324 and $692, respectively194,639
 172,829
Investments in and advances to unconsolidated affiliates23,523
 18,846
Deferred leasing costs, net of accumulated amortization of $145,814 and $140,081, respectively202,814
 213,500
Prepaid expenses and other assets, net of accumulated amortization of $22,341 and $19,904,
respectively		30,070
 40,437
Total Assets$4,560,466
 $4,561,050
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:   
Mortgages and notes payable, net$1,966,398
 $1,948,047
Accounts payable, accrued expenses and other liabilities227,575
 313,885
Total Liabilities2,193,973
 2,261,932
Commitments and contingencies
 
Noncontrolling interests in the Operating Partnership147,451
 144,802
Equity:   
Preferred Stock, $.01 par value, 50,000,000 authorized shares;   
8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per
share), 28,892 and 28,920 shares issued and outstanding, respectively		28,892
 28,920
Common Stock, $.01 par value, 200,000,000 authorized shares;   
103,248,940 and 101,665,554 shares issued and outstanding, respectively1,032
 1,017
Additional paid-in capital2,924,048
 2,850,881
Distributions in excess of net income available for common stockholders(758,484) (749,412)
Accumulated other comprehensive income5,910
 4,949
Total Stockholders’ Equity2,201,398
 2,136,355
Noncontrolling interests in consolidated affiliates17,644
 17,961
Total Equity2,219,042
 2,154,316
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity$4,560,466
 $4,561,050

See accompanying notes to consolidated financial statements.

3
Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Income
(Unaudited and in thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Rental and other revenues$203,841 $185,502 $410,219 $369,307 
Operating expenses:
Rental property and other expenses62,369 56,226 123,791 112,415 
Depreciation and amortization69,742 61,949 139,409 122,876 
Impairments of real estate assets35,000 — 35,000 — 
General and administrative9,591 10,107 23,147 20,059 
Total operating expenses176,702 128,282 321,347 255,350 
Interest expense25,027 19,001 49,420 38,769 
Other income120 332 483 644 
Gains on disposition of property50,044 22,862 54,144 41,799 
Equity in earnings of unconsolidated affiliates326 431 626 1,068 
Net income52,602 61,844 94,705 118,699 
Net (income) attributable to noncontrolling interests in the Operating Partnership(1,203)(1,624)(2,168)(3,117)
Net (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Dividends on Preferred Stock(622)(621)(1,243)(1,243)
Net income available for common stockholders$50,511 $59,305 $90,771 $113,764 
Earnings per Common Share – basic:
Net income available for common stockholders$0.48 $0.57 $0.86 $1.09 
Weighted average Common Shares outstanding – basic105,163 104,106 105,049 104,035 
Earnings per Common Share – diluted:
Net income available for common stockholders$0.48 $0.57 $0.86 $1.09 
Weighted average Common Shares outstanding – diluted107,654 106,964 107,554 106,887 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Rental and other revenues$180,185
 $166,269
 $526,876
 $497,988
Operating expenses:       
Rental property and other expenses61,234
 58,620
 177,484
 173,715
Depreciation and amortization56,973
 52,923
 168,934
 161,734
Impairments of real estate assets1,445
 —
 1,445
 —
General and administrative9,247
 9,863
 29,787
 29,327
Total operating expenses128,899
 121,406
 377,650
 364,776
Interest expense:       
Contractual16,395
 17,722
 48,763
 56,111
Amortization of debt issuance costs796
 844
 2,445
 2,645
 17,191
 18,566
 51,208
 58,756
Other income:       
Interest and other income558
 833
 1,806
 1,884
Gains on debt extinguishment—
 —
 826
 —
 558
 833

2,632

1,884
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates34,653
 27,130
 100,650
 76,340
Gains on disposition of property19,849
 3,902
 25,181
 14,160
Equity in earnings of unconsolidated affiliates5,047
 2,808
 6,757
 5,010
Income from continuing operations59,549
 33,840
 132,588
 95,510
Discontinued operations:       
Income from discontinued operations—
 —
 —
 4,097
Net gains on disposition of discontinued operations—
 —
 —
 414,496
 —
 —
 —
 418,593
Net income59,549
 33,840
 132,588
 514,103
Net (income) attributable to noncontrolling interests in the Operating Partnership(1,571) (926) (3,502) (14,876)
Net (income) attributable to noncontrolling interests in consolidated affiliates(315) (319) (914) (941)
Dividends on Preferred Stock(623) (624) (1,869) (1,877)
Net income available for common stockholders$57,040
 $31,971

$126,303

$496,409
Earnings per Common Share – basic:       
Income from continuing operations available for common stockholders$0.55
 $0.32
 $1.23
 $0.92
Income from discontinued operations available for common stockholders—
 —
 —
 4.16
Net income available for common stockholders$0.55
 $0.32
 $1.23
 $5.08
Weighted average Common Shares outstanding – basic103,237
 98,973
 102,489
 97,669
Earnings per Common Share – diluted:       
Income from continuing operations available for common stockholders$0.55
 $0.32
 $1.23
 $0.92
Income from discontinued operations available for common stockholders—
 —
 —
 4.16
Net income available for common stockholders$0.55
 $0.32
 $1.23
 $5.08
Weighted average Common Shares outstanding – diluted106,145
 101,939
 105,402
 100,645
Dividends declared per Common Share$0.440
 $0.425
 $1.320
 $1.275
Net income available for common stockholders:       
Income from continuing operations available for common stockholders$57,040
 $31,971
 $126,303
 $90,081
Income from discontinued operations available for common stockholders—
 —
 —
 406,328
Net income available for common stockholders$57,040
 $31,971
 $126,303
 $496,409

See accompanying notes to consolidated financial statements.

4
Table of Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Comprehensive Income
(Unaudited and in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Comprehensive income:
Net income$52,602 $61,844 $94,705 $118,699 
Other comprehensive income/(loss):
Unrealized losses on cash flow hedges— (11)— (11)
Amortization of cash flow hedges(74)126 (89)248 
Total other comprehensive income/(loss)(74)115 (89)237 
Total comprehensive income52,528 61,959 94,616 118,936 
Less-comprehensive (income) attributable to noncontrolling interests(1,469)(1,918)(2,691)(3,692)
Comprehensive income attributable to common stockholders$51,059 $60,041 $91,925 $115,244 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Comprehensive income:       
Net income$59,549
 $33,840
 $132,588
 $514,103
Other comprehensive income/(loss):       
Unrealized gains/(losses) on cash flow hedges(347) 1,610
 (31) (7,785)
Amortization of cash flow hedges211
 758
 992
 2,336
Total other comprehensive income/(loss)(136) 2,368
 961
 (5,449)
Total comprehensive income59,413
 36,208
 133,549
 508,654
Less-comprehensive (income) attributable to noncontrolling interests(1,886) (1,245) (4,416) (15,817)
Comprehensive income attributable to common stockholders$57,527
 $34,963
 $129,133
 $492,837


See accompanying notes to consolidated financial statements.





5
Table of Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Equity
(Unaudited and in thousands, except share amounts)


Three Months Ended June 30, 2022
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at March 31, 2022105,143,984 $1,051 $28,821 $3,034,155 $(988)$21,262 $(591,780)$2,492,521 
Issuances of Common Stock, net of issuance costs and tax withholdings9,537 1 — 261 — — — 262 
Conversions of Common Units to Common Stock30,909 1,251 1,251 
Dividends on Common Stock ($0.50 per share)— — — — — (52,577)(52,577)
Dividends on Preferred Stock ($21.5625 per share)— — — — — (622)(622)
Adjustment of noncontrolling interests in the Operating Partnership to fair value— — 28,696 — — — 28,696 
Issuances of restricted stock424 — — — — — — — 
Share-based compensation expense, net of forfeitures— — — 845 — — — 845 
Net (income) attributable to noncontrolling interests in the Operating Partnership— — — — — (1,203)(1,203)
Net (income) attributable to noncontrolling interests in consolidated affiliates— — — — 266 (266)— 
Comprehensive income:
Net income— — — — — 52,602 52,602 
Other comprehensive loss— — — (74)— — (74)
Total comprehensive income52,528 
Balance at June 30, 2022105,184,854 $1,052 $28,821 $3,065,208 $(1,062)$21,528 $(593,846)$2,521,701 
 Number of Common Shares Common Stock Series A Cumulative Redeemable Preferred Shares Additional Paid-In Capital Accumulated Other Compre-hensive Income Non-controlling Interests in Consolidated Affiliates Distributions in Excess of Net Income Available for Common Stockholders Total
Balance at December 31, 2016101,665,554
 $1,017
 $28,920
 $2,850,881
 $4,949
 $17,961
 $(749,412) $2,154,316
Issuances of Common Stock, net of issuance costs and tax withholdings1,464,638
 15
 —
 70,292
 —
 —
 —
 70,307
Conversions of Common Units to Common Stock8,000
 —
 —
 408
 —
 —
 —
 408
Dividends on Common Stock

 —
 —
 —
 —
 —
 (135,375) (135,375)
Dividends on Preferred Stock

 —
 —
 —
 —
 —
 (1,869) (1,869)
Adjustment of noncontrolling interests in the Operating Partnership to fair value

 —
 —
 (3,297) —
 —
 —
 (3,297)
Distributions to noncontrolling interests in consolidated affiliates

 —
 —
 —
 —
 (1,231) —
 (1,231)
Issuances of restricted stock110,748
 —
 —
 —
 —
 —
 —
 —
Redemptions/repurchases of Preferred Stock  —
 (28) —
 —
 —
 —
 (28)
Share-based compensation expense, net of forfeitures—
 —
 —
 5,764
 —
 —
 —
 5,764
Net (income) attributable to noncontrolling interests in the Operating Partnership

 —
 —
 —
 —
 —
 (3,502) (3,502)
Net (income) attributable to noncontrolling interests in consolidated affiliates

 —
 —
 —
 —
 914
 (914) —
Comprehensive income:               
Net income

 —
 —
 —
 —
 —
 132,588
 132,588
Other comprehensive income

 —
 —
 —
 961
 —
 —
 961
Total comprehensive income              133,549
Balance at September 30, 2017103,248,940
 $1,032
 $28,892
 $2,924,048
 $5,910
 $17,644
 $(758,484) $2,219,042


Six Months Ended June 30, 2022
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at December 31, 2021104,892,780 $1,049 $28,821 $3,027,861 $(973)$22,416 $(579,616)$2,499,558 
Issuances of Common Stock, net of issuance costs and tax withholdings79,358 1 — 4,434 — — — 4,435 
Conversions of Common Units to Common Stock30,909 1,251 1,251 
Dividends on Common Stock ($1.00 per share)— — — — — (105,001)(105,001)
Dividends on Preferred Stock ($43.125 per share)— — — — — (1,243)(1,243)
Adjustment of noncontrolling interests in the Operating Partnership to fair value— — 25,528 — — — 25,528 
Distributions to noncontrolling interests in consolidated affiliates— — — — (1,411)— (1,411)
Issuances of restricted stock181,807 — — — — — — — 
Share-based compensation expense, net of forfeitures— 2 — 6,134 — — — 6,136 
Net (income) attributable to noncontrolling interests in the Operating Partnership— — — — — (2,168)(2,168)
Net (income) attributable to noncontrolling interests in consolidated affiliates— — — — 523 (523)— 
Comprehensive income:
Net income— — — — — 94,705 94,705 
Other comprehensive loss— — — (89)— — (89)
Total comprehensive income94,616 
Balance at June 30, 2022105,184,854 $1,052 $28,821 $3,065,208 $(1,062)$21,528 $(593,846)$2,521,701 

 Number of Common Shares Common Stock Series A Cumulative Redeemable Preferred Shares Additional Paid-In Capital Accumulated Other Compre-hensive Loss Non-controlling Interests in Consolidated Affiliates Distributions in Excess of Net Income Available for Common Stockholders Total
Balance at December 31, 201596,091,932
 $961
 $29,050
 $2,598,242
 $(3,811) $17,975
 $(1,023,135) $1,619,282
Issuances of Common Stock, net of issuance costs and tax withholdings3,930,262
 39
 —
 187,175
 —
 —
 —
 187,214
Conversions of Common Units to Common Stock60,048
 —
 —
 3,006
 —
 —
 —
 3,006
Dividends on Common Stock
 —
 —
 —
 —
 —
 (124,228) (124,228)
Dividends on Preferred Stock
 —
 —
 —
 —
 —
 (1,877) (1,877)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
 —
 —
 (13,390) —
 —
 —
 (13,390)
Distributions to noncontrolling interests in consolidated affiliates
 —
 —
 —
 —
 (966) —
 (966)
Issuances of restricted stock130,752
 —
 —
 —
 —
 —
 —
 —
Redemptions/repurchases of Preferred Stock
 —
 (130) —
 —
 —
 —
 (130)
Share-based compensation expense, net of forfeitures(8,888) 2
 —
 5,410
 —
 —
 —
 5,412
Net (income) attributable to noncontrolling interests in the Operating Partnership
 —
 —
 —
 —
 —
 (14,876) (14,876)
Net (income) attributable to noncontrolling interests in consolidated affiliates
 —
 —
 —
 —
 941
 (941) —
Comprehensive income:               
Net income
 —
 —
 —
 —
 —
 514,103
 514,103
Other comprehensive loss
 —
 —
 —
 (5,449) —
 —
 (5,449)
Total comprehensive income              508,654
Balance at September 30, 2016100,204,106
 $1,002
 $28,920
 $2,780,443
 $(9,260) $17,950
 $(650,954) $2,168,101


See accompanying notes to consolidated financial statements.

6
Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Equity - Continued
(Unaudited and in thousands, except share amounts)

Three Months Ended June 30, 2021
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at March 31, 2021104,055,152 $1,041 $28,826 $2,986,462 $(1,340)$21,545 $(681,613)$2,354,921 
Issuances of Common Stock, net of issuance costs and tax withholdings158,188 1 — 7,094 — — — 7,095 
Conversions of Common Units to Common Stock1,000 — — 44 — — — 44 
Dividends on Common Stock ($0.48 per share)— — — — — (49,931)(49,931)
Dividends on Preferred Stock ($21.5625 per share)— — — — — (621)(621)
Adjustment of noncontrolling interests in the Operating Partnership to fair value— — (6,068)— — — (6,068)
Issuances of restricted stock1,484 — — — — — — — 
Redemptions/repurchases of Preferred Stock— (5)— — — — (5)
Share-based compensation expense, net of forfeitures(6,311)— — 1,873 — — — 1,873 
Net (income) attributable to noncontrolling interests in the Operating Partnership— — — — — (1,624)(1,624)
Net (income) attributable to noncontrolling interests in consolidated affiliates— — — — 294 (294)— 
Comprehensive income:
Net income— — — — — 61,844 61,844 
Other comprehensive income— — — 115 — — 115 
Total comprehensive income61,959 
Balance at June 30, 2021104,209,513 $1,042 $28,821 $2,989,405 $(1,225)$21,839 $(672,239)$2,367,643 

Six Months Ended June 30, 2021
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at December 31, 2020103,921,546 $1,039 $28,826 $2,993,946 $(1,462)$22,046 $(686,225)$2,358,170 
Issuances of Common Stock, net of issuance costs and tax withholdings109,130 1 — 5,896 — — — 5,897 
Conversions of Common Units to Common Stock1,000 — — 44 — — — 44 
Dividends on Common Stock ($0.96 per share)— — — — — (99,778)(99,778)
Dividends on Preferred Stock ($43.125 per share)— — — — — (1,243)(1,243)
Adjustment of noncontrolling interests in the Operating Partnership to fair value— — (15,334)— — — (15,334)
Distributions to noncontrolling interests in consolidated affiliates— — — — (782)— (782)
Issuances of restricted stock184,584 — — — — — — — 
Redemptions/repurchases of Preferred Stock— (5)— — — — (5)
Share-based compensation expense, net of forfeitures(6,747)2 — 4,853 — — — 4,855 
Net (income) attributable to noncontrolling interests in the Operating Partnership— — — — — (3,117)(3,117)
Net (income) attributable to noncontrolling interests in consolidated affiliates— — — — 575 (575)— 
Comprehensive income:
Net income— — — — — 118,699 118,699 
Other comprehensive income— — — 237 — — 237 
Total comprehensive income118,936 
Balance at June 30, 2021104,209,513 $1,042 $28,821 $2,989,405 $(1,225)$21,839 $(672,239)$2,367,643 

See accompanying notes to consolidated financial statements.
7
Table of Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows
(Unaudited and in thousands)
Six Months Ended June 30,
20222021
Operating activities:
Net income$94,705 $118,699 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization139,409 122,876 
Amortization of lease incentives and acquisition-related intangible assets and liabilities(166)(1,439)
Share-based compensation expense6,136 4,855 
Net credit losses/(reversals) on operating lease receivables2,625 (489)
Accrued interest on mortgages and notes receivable(46)(54)
Amortization of debt issuance costs2,040 1,661 
Amortization of cash flow hedges(89)248 
Amortization of mortgages and notes payable fair value adjustments(41)776 
Impairments of real estate assets35,000 — 
Losses on debt extinguishment— 134 
Net gains on disposition of property(54,144)(41,799)
Equity in earnings of unconsolidated affiliates(626)(1,068)
Distributions of earnings from unconsolidated affiliates598 1,402 
Changes in operating assets and liabilities:
Accounts receivable(3,758)6,694 
Prepaid expenses and other assets(6,534)(5,642)
Accrued straight-line rents receivable(13,053)(7,638)
Accounts payable, accrued expenses and other liabilities(158)(1,801)
Net cash provided by operating activities201,898 197,415 
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired(26,977)(120)
Investments in development in-process(20,869)(54,365)
Investments in tenant improvements and deferred leasing costs(60,661)(44,827)
Investments in building improvements(26,528)(24,109)
Investment in acquired controlling interest in unconsolidated affiliate— (127,339)
Net proceeds from disposition of real estate assets107,362 71,501 
Investments in mortgages and notes receivable(24)(23)
Repayments of mortgages and notes receivable144 154 
Investments in and advances to unconsolidated affiliates(7,500)— 
Payments of earnest money deposits(37,500)(55,000)
Changes in other investing activities2,684 5,711 
Net cash used in investing activities(69,869)(228,417)
Financing activities:
Dividends on Common Stock(105,001)(99,778)
Redemptions/repurchases of Preferred Stock— (5)
Dividends on Preferred Stock(1,243)(1,243)
Distributions to noncontrolling interests in the Operating Partnership(2,495)(2,726)
Distributions to noncontrolling interests in consolidated affiliates(1,411)(782)
Proceeds from the issuance of Common Stock6,839 7,763 
Costs paid for the issuance of Common Stock(248)(185)
Repurchase of shares related to tax withholdings(2,156)(1,681)
Borrowings on revolving credit facility145,000 230,000 
Repayments of revolving credit facility(125,000)(75,000)
Borrowings on mortgages and notes payable200,000 — 
Repayments of mortgages and notes payable(203,187)(151,006)
Changes in debt issuance costs and other financing activities(2,657)(5,166)
Net cash used in financing activities(91,559)(99,809)
Net increase/(decrease) in cash and cash equivalents and restricted cash$40,470 $(130,811)
 Nine Months Ended
September 30,
 2017 2016
Operating activities:   
Net income$132,588
 $514,103
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization168,934
 161,734
Amortization of lease incentives and acquisition-related intangible assets and liabilities(666) (1,599)
Share-based compensation expense5,764
 5,412
Allowance for losses on accounts and accrued straight-line rents receivable435
 1,846
Accrued interest on mortgages and notes receivable(391) (364)
Amortization of debt issuance costs2,445
 2,645
Amortization of cash flow hedges992
 2,336
Amortization of mortgages and notes payable fair value adjustments422
 (175)
Impairments of real estate assets1,445
 —
Gains on debt extinguishment(826) —
Net gains on disposition of property(25,181) (428,656)
Equity in earnings of unconsolidated affiliates(6,757) (5,010)
Distributions of earnings from unconsolidated affiliates4,815
 3,936
Settlement of cash flow hedges7,322
 —
Changes in operating assets and liabilities:   
Accounts receivable916
 4,798
Prepaid expenses and other assets2,735
 (2,243)
Accrued straight-line rents receivable(24,473) (18,931)
Accounts payable, accrued expenses and other liabilities(308) (7,447)
Net cash provided by operating activities270,211
 232,385
Investing activities:   
Investments in acquired real estate and related intangible assets, net of cash acquired—
 (110,249)
Investments in development in-process(121,367) (122,839)
Investments in tenant improvements and deferred leasing costs(78,691) (63,715)
Investments in building improvements(41,862) (51,714)
Net proceeds from disposition of real estate assets85,538
 680,994
Distributions of capital from unconsolidated affiliates11,670
 2,639
Investments in mortgages and notes receivable—
 (7,934)
Repayments of mortgages and notes receivable2,435
 869
Investments in and advances to unconsolidated affiliates(10,063) (105)
Repayments from unconsolidated affiliates—
 448
Changes in restricted cash and other investing activities(24,225) (23,310)
Net cash provided by/(used in) investing activities(176,565) 305,084
Financing activities:   
Dividends on Common Stock(135,375) (124,228)
Special dividend on Common Stock(81,205) —
Redemptions/repurchases of Preferred Stock(28) (130)
Dividends on Preferred Stock(1,869) (1,877)
Distributions to noncontrolling interests in the Operating Partnership(3,742) (3,684)
Special distribution to noncontrolling interests in the Operating Partnership(2,271) —
Distributions to noncontrolling interests in consolidated affiliates(1,231) (966)
Proceeds from the issuance of Common Stock75,517
 194,518
Costs paid for the issuance of Common Stock(1,244) (2,888)
Repurchase of shares related to tax withholdings(3,966) (4,416)
Borrowings on revolving credit facility492,300
 257,800
Repayments of revolving credit facility(420,300) (528,800)
Borrowings on mortgages and notes payable456,001
 75,000
Repayments of mortgages and notes payable(507,114) (395,455)
Payments of debt extinguishment costs(57) —
Changes in debt issuance costs and other financing activities(3,688) (992)
Net cash used in financing activities(138,272) (536,118)
Net increase/(decrease) in cash and cash equivalents$(44,626) $1,351

See accompanying notes to consolidated financial statements.

8
Table of Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows – Continued
(Unaudited and in thousands)

Six Months Ended June 30,
20222021
Net increase/(decrease) in cash and cash equivalents and restricted cash$40,470 $(130,811)
Cash and cash equivalents and restricted cash at beginning of the period31,198 189,244 
Cash and cash equivalents and restricted cash at end of the period$71,668 $58,433 

 Nine Months Ended
September 30,
 2017 2016
Net increase/(decrease) in cash and cash equivalents$(44,626) $1,351
Cash and cash equivalents at beginning of the period49,490
 5,036
Cash and cash equivalents at end of the period$4,864
 $6,387
Reconciliation of cash and cash equivalents and restricted cash:


Six Months Ended June 30,
20222021
Cash and cash equivalents at end of the period$25,045 $6,535 
Restricted cash at end of the period46,623 51,898 
Cash and cash equivalents and restricted cash at end of the period$71,668 $58,433 

Supplemental disclosure of cash flow information:
Six Months Ended June 30,
20222021
Cash paid for interest, net of amounts capitalized$47,762 $36,071 
 Nine Months Ended
September 30,
 2017 2016
Cash paid for interest, net of amounts capitalized$50,025
 $58,138


Supplemental disclosure of non-cash investing and financing activities:
Six Months Ended June 30,
20222021
Unrealized losses on cash flow hedges$— $(11)
Conversions of Common Units to Common Stock1,251 44 
Changes in accrued capital expenditures (1)
(20,066)(23,599)
Write-off of fully depreciated real estate assets21,827 36,798 
Write-off of fully amortized leasing costs11,628 28,575 
Write-off of fully amortized debt issuance costs1,216 4,158 
Adjustment of noncontrolling interests in the Operating Partnership to fair value(25,528)15,334 
Future consideration in connection with the acquisition of land— 16,000 
 Nine Months Ended
September 30,
 2017 2016
Unrealized losses on cash flow hedges$(31) $(7,785)
Conversions of Common Units to Common Stock408
 3,006
Changes in accrued capital expenditures(6,327) 25,037
Write-off of fully depreciated real estate assets41,860
 28,783
Write-off of fully amortized leasing costs28,343
 16,075
Write-off of fully amortized debt issuance costs4,324
 916
Adjustment of noncontrolling interests in the Operating Partnership to fair value3,297
 13,390
__________


(1)Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at June 30, 2022 and 2021 were $34.5 million and $42.3 million, respectively.

See accompanying notes to consolidated financial statements.

9
Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Balance Sheets
(Unaudited and in thousands, except unit and per unit data)
June 30,
2022		December 31,
2021
Assets:
Real estate assets, at cost:
Land$532,215 $549,228 
Buildings and tenant improvements5,676,352 5,718,169 
Development in-process19,088 6,890 
Land held for development238,159 215,257 
6,465,814 6,489,544 
Less-accumulated depreciation(1,522,363)(1,457,511)
Net real estate assets4,943,451 5,032,033 
Real estate and other assets, net, held for sale— 3,518 
Cash and cash equivalents25,045 23,152 
Restricted cash46,623 8,046 
Accounts receivable17,938 14,002 
Mortgages and notes receivable1,153 1,227 
Accrued straight-line rents receivable277,086 268,324 
Investments in and advances to unconsolidated affiliates14,457 7,383��
Deferred leasing costs, net of accumulated amortization of $155,594 and $143,111, respectively243,624 258,902 
Prepaid expenses and other assets, net of accumulated depreciation of $19,968 and $21,408, respectively112,937 78,551 
Total Assets$5,682,314 $5,695,138 
Liabilities, Redeemable Operating Partnership Units and Capital:
Mortgages and notes payable, net$2,804,314 $2,788,915 
Accounts payable, accrued expenses and other liabilities271,716 294,976 
Total Liabilities3,076,030 3,083,891 
Commitments and contingencies00
Redeemable Operating Partnership Units:
Common Units, 2,473,896 and 2,504,805 outstanding, respectively84,583 111,689 
Series A Preferred Units (liquidation preference $1,000 per unit), 28,821 units issued and outstanding28,821 28,821 
Total Redeemable Operating Partnership Units113,404 140,510 
Capital:
Common Units:
General partner Common Units, 1,072,499 and 1,069,888 outstanding, respectively24,723 24,492 
Limited partner Common Units, 103,703,546 and 103,414,083 outstanding, respectively2,447,691 2,424,802 
Accumulated other comprehensive loss(1,062)(973)
Noncontrolling interests in consolidated affiliates21,528 22,416 
Total Capital2,492,880 2,470,737 
Total Liabilities, Redeemable Operating Partnership Units and Capital$5,682,314 $5,695,138 
 September 30,
2017		 December 31,
2016
Assets:   
Real estate assets, at cost:   
Land$488,013
 $474,375
Buildings and tenant improvements4,605,061
 4,313,373
Development in-process58,578
 279,602
Land held for development76,969
 77,355
 5,228,621
 5,144,705
Less-accumulated depreciation(1,196,642) (1,134,103)
Net real estate assets4,031,979
 4,010,602
Cash and cash equivalents4,864
 49,490
Restricted cash47,761
 29,141
Accounts receivable, net of allowance of $504 and $624, respectively18,027
 17,372
Mortgages and notes receivable, net of allowance of $80 and $105, respectively6,789
 8,833
Accrued straight-line rents receivable, net of allowance of $324 and $692, respectively194,639
 172,829
Investments in and advances to unconsolidated affiliates23,523
 18,846
Deferred leasing costs, net of accumulated amortization of $145,814 and $140,081, respectively202,814
 213,500
Prepaid expenses and other assets, net of accumulated amortization of $22,341 and $19,904,
respectively		30,070
 40,437
Total Assets$4,560,466
 $4,561,050
Liabilities, Redeemable Operating Partnership Units and Capital:   
Mortgages and notes payable, net$1,966,398
 $1,948,047
Accounts payable, accrued expenses and other liabilities227,575
 313,885
Total Liabilities2,193,973
 2,261,932
Commitments and contingencies
 
Redeemable Operating Partnership Units:   
Common Units, 2,830,704 and 2,838,704 outstanding, respectively147,451
 144,802
Series A Preferred Units (liquidation preference $1,000 per unit), 28,892 and 28,920 units issued and
outstanding, respectively		28,892
 28,920
Total Redeemable Operating Partnership Units176,343
 173,722
Capital:   
Common Units:   
General partner Common Units, 1,056,708 and 1,040,954 outstanding, respectively21,665
 21,023
Limited partner Common Units, 101,783,423 and 100,215,791 outstanding, respectively2,144,931
 2,081,463
Accumulated other comprehensive income5,910
 4,949
Noncontrolling interests in consolidated affiliates17,644
 17,961
Total Capital2,190,150
 2,125,396
Total Liabilities, Redeemable Operating Partnership Units and Capital$4,560,466
 $4,561,050


See accompanying notes to consolidated financial statements.

10
Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Income
(Unaudited and in thousands, except per unit amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Rental and other revenues$203,841 $185,502 $410,219 $369,307 
Operating expenses:
Rental property and other expenses62,369 56,226 123,791 112,415 
Depreciation and amortization69,742 61,949 139,409 122,876 
Impairments of real estate assets35,000 — 35,000 — 
General and administrative9,591 10,107 23,147 20,059 
Total operating expenses176,702 128,282 321,347 255,350 
Interest expense25,027 19,001 49,420 38,769 
Other income120 332 483 644 
Gains on disposition of property50,044 22,862 54,144 41,799 
Equity in earnings of unconsolidated affiliates326 431 626 1,068 
Net income52,602 61,844 94,705 118,699 
Net (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Distributions on Preferred Units(622)(621)(1,243)(1,243)
Net income available for common unitholders$51,714 $60,929 $92,939 $116,881 
Earnings per Common Unit – basic:
Net income available for common unitholders$0.48 $0.57 $0.87 $1.10 
Weighted average Common Units outstanding – basic107,240 106,535 107,135 106,464 
Earnings per Common Unit – diluted:
Net income available for common unitholders$0.48 $0.57 $0.87 $1.10 
Weighted average Common Units outstanding – diluted107,245 106,555 107,145 106,478 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Rental and other revenues$180,185
 $166,269
 $526,876
 $497,988
Operating expenses:       
Rental property and other expenses61,234
 58,620
 177,484
 173,715
Depreciation and amortization56,973
 52,923
 168,934
 161,734
Impairments of real estate assets1,445
 —
 1,445
 —
General and administrative9,247
 9,863
 29,787
 29,327
Total operating expenses128,899
 121,406
 377,650
 364,776
Interest expense:       
Contractual16,395
 17,722
 48,763
 56,111
Amortization of debt issuance costs796
 844
 2,445
 2,645
 17,191
 18,566
 51,208
 58,756
Other income:       
Interest and other income558
 833
 1,806
 1,884
Gains on debt extinguishment—
 —
 826
 —
 558
 833
 2,632
 1,884
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates34,653
 27,130
 100,650
 76,340
Gains on disposition of property19,849
 3,902
 25,181
 14,160
Equity in earnings of unconsolidated affiliates5,047
 2,808
 6,757
 5,010
Income from continuing operations59,549
 33,840
 132,588
 95,510
Discontinued operations:       
Income from discontinued operations—
 —
 —
 4,097
Net gains on disposition of discontinued operations—
 —
 —
 414,496
 —
 —
 —
 418,593
Net income59,549
 33,840
 132,588
 514,103
Net (income) attributable to noncontrolling interests in consolidated affiliates(315) (319) (914) (941)
Distributions on Preferred Units(623) (624) (1,869) (1,877)
Net income available for common unitholders$58,611
 $32,897
 $129,805
 $511,285
Earnings per Common Unit – basic:       
Income from continuing operations available for common unitholders$0.55
 $0.32
 $1.24
 $0.93
Income from discontinued operations available for common unitholders—
 —
 —
 4.18
Net income available for common unitholders$0.55
 $0.32
 $1.24
 $5.11
Weighted average Common Units outstanding – basic105,660
 101,422
 104,914
 100,142
Earnings per Common Unit – diluted:       
Income from continuing operations available for common unitholders$0.55
 $0.32
 $1.24
 $0.92
Income from discontinued operations available for common unitholders—
 —
 —
 4.18
Net income available for common unitholders$0.55
 $0.32
 $1.24
 $5.10
Weighted average Common Units outstanding – diluted105,736
 101,530
 104,993
 100,236
Distributions declared per Common Unit$0.440
 $0.425
 $1.320
 $1.275
Net income available for common unitholders:       
Income from continuing operations available for common unitholders$58,611
 $32,897
 $129,805
 $92,692
Income from discontinued operations available for common unitholders—
 —
 —
 418,593
Net income available for common unitholders$58,611
 $32,897
 $129,805
 $511,285

See accompanying notes to consolidated financial statements.

11
Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Comprehensive Income
(Unaudited and in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Comprehensive income:
Net income$52,602 $61,844 $94,705 $118,699 
Other comprehensive income/(loss):
Unrealized losses on cash flow hedges— (11)— (11)
Amortization of cash flow hedges(74)126 (89)248 
Total other comprehensive income/(loss)(74)115 (89)237 
Total comprehensive income52,528 61,959 94,616 118,936 
Less-comprehensive (income) attributable to noncontrolling interests(266)(294)(523)(575)
Comprehensive income attributable to common unitholders$52,262 $61,665 $94,093 $118,361 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Comprehensive income:       
Net income$59,549
 $33,840
 $132,588
 $514,103
Other comprehensive income/(loss):       
Unrealized gains/(losses) on cash flow hedges(347) 1,610
 (31) (7,785)
Amortization of cash flow hedges211
 758
 992
 2,336
Total other comprehensive income/(loss)(136) 2,368
 961
 (5,449)
Total comprehensive income59,413
 36,208
 133,549
 508,654
Less-comprehensive (income) attributable to noncontrolling interests(315) (319) (914) (941)
Comprehensive income attributable to common unitholders$59,098

$35,889
 $132,635
 $507,713


See accompanying notes to consolidated financial statements.



12
Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Capital
(Unaudited and in thousands)


Three Months Ended June 30, 2022
Common UnitsAccumulated
Other
Comprehensive Loss		Noncontrolling
Interests in
Consolidated
Affiliates		Total
General
Partners’
Capital		Limited
Partners’
Capital
Balance at March 31, 2022$24,433 $2,418,993 $(988)$21,262 $2,463,700 
Issuances of Common Units, net of issuance costs and tax withholdings2 260 — — 262 
Distributions on Common Units ($0.50 per unit)(536)(53,080)— — (53,616)
Distributions on Preferred Units ($21.5625 per unit)(6)(616)— — (622)
Share-based compensation expense, net of forfeitures8 837 — — 845 
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner298 29,485 — — 29,783 
Net (income) attributable to noncontrolling interests in consolidated affiliates(2)(264)— 266 — 
Comprehensive income:
Net income526 52,076 — — 52,602 
Other comprehensive loss— — (74)— (74)
Total comprehensive income52,528 
Balance at June 30, 2022$24,723 $2,447,691 $(1,062)$21,528 $2,492,880 
 Common Units 
Accumulated
Other
Comprehensive Income
 
Noncontrolling
Interests in
Consolidated
Affiliates
 Total
 
General
Partners’
Capital
 
Limited
Partners’
Capital
 
Balance at December 31, 2016$21,023
 $2,081,463
 $4,949
 $17,961
 $2,125,396
Issuances of Common Units, net of issuance costs and tax withholdings703
 69,604
 —
 —
 70,307
Distributions on Common Units(1,386) (137,191) —
 —
 (138,577)
Distributions on Preferred Units(19) (1,850) —
 —
 (1,869)
Share-based compensation expense, net of forfeitures58
 5,706
 —
 —
 5,764
Distributions to noncontrolling interests in consolidated affiliates—
 —
 —
 (1,231) (1,231)
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner(31) (3,158) —
 —
 (3,189)
Net (income) attributable to noncontrolling interests in consolidated affiliates(9) (905) —
 914
 —
Comprehensive income:         
Net income1,326
 131,262
 —
 —
 132,588
Other comprehensive income—
 —
 961
 —
 961
Total comprehensive income        133,549
Balance at September 30, 2017$21,665
 $2,144,931
 $5,910
 $17,644
 $2,190,150


Six Months Ended June 30, 2022
Common UnitsAccumulated
Other
Comprehensive Loss		Noncontrolling
Interests in
Consolidated
Affiliates		Total
General
Partners’
Capital		Limited
Partners’
Capital
Balance at December 31, 2021$24,492 $2,424,802 $(973)$22,416 $2,470,737 
Issuances of Common Units, net of issuance costs and tax withholdings44 4,391 — — 4,435 
Distributions on Common Units ($1.00 per unit)(1,071)(106,016)— — (107,087)
Distributions on Preferred Units ($43.125 per unit)(12)(1,231)— — (1,243)
Share-based compensation expense, net of forfeitures61 6,075 — — 6,136 
Distributions to noncontrolling interests in consolidated affiliates— — — (1,411)(1,411)
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner267 26,430 — — 26,697 
Net (income) attributable to noncontrolling interests in consolidated affiliates(5)(518)523 — 
Comprehensive income:
Net income947 93,758 — — 94,705 
Other comprehensive loss— — (89)— (89)
Total comprehensive income94,616 
Balance at June 30, 2022$24,723 $2,447,691 $(1,062)$21,528 $2,492,880 

 Common Units 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests in
Consolidated
Affiliates
 Total
 
General
Partners’
Capital
 
Limited
Partners’
Capital
 
Balance at December 31, 2015$15,759
 $1,560,309
 $(3,811) $17,975
 $1,590,232
Issuances of Common Units, net of issuance costs and tax withholdings1,872
 185,342
 —
 —
 187,214
Distributions on Common Units(1,274) (126,117) —
 —
 (127,391)
Distributions on Preferred Units(19) (1,858) —
 —
 (1,877)
Share-based compensation expense, net of forfeitures54
 5,358
 —
 —
 5,412
Distributions to noncontrolling interests in consolidated affiliates—
 —
 —
 (966) (966)
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner(221) (21,876) —
 —
 (22,097)
Net (income) attributable to noncontrolling interests in consolidated affiliates(9) (932) —
 941
 —
Comprehensive income:         
Net income5,141
 508,962
 —
 —
 514,103
Other comprehensive loss—
 —
 (5,449) —
 (5,449)
Total comprehensive income        508,654
Balance at September 30, 2016$21,303
 $2,109,188
 $(9,260) $17,950
 $2,139,181


See accompanying notes to consolidated financial statements.

13
Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Capital - Continued
(Unaudited and in thousands)

Three Months Ended June 30, 2021
Common UnitsAccumulated
Other
Comprehensive Loss		Noncontrolling
Interests in
Consolidated
Affiliates		Total
General
Partners’
Capital		Limited
Partners’
Capital
Balance at March 31, 2021$23,059 $2,282,831 $(1,340)$21,545 $2,326,095 
Issuances of Common Units, net of issuance costs and tax withholdings71 7,024 — — 7,095 
Distributions on Common Units ($0.48 per unit)(511)(50,587)— — (51,098)
Distributions on Preferred Units ($21.5625 per unit)(6)(615)— — (621)
Share-based compensation expense, net of forfeitures19 1,854 — — 1,873 
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner(65)(6,416)— — (6,481)
Net (income) attributable to noncontrolling interests in consolidated affiliates(3)(291)— 294 — 
Comprehensive income:
Net income618 61,226 — — 61,844 
Other comprehensive income— — 115 — 115 
Total comprehensive income61,959 
Balance at June 30, 2021$23,182 $2,295,026 $(1,225)$21,839 $2,338,822 

Six Months Ended June 30, 2021
Common UnitsAccumulated
Other
Comprehensive Loss		Noncontrolling
Interests in
Consolidated
Affiliates		Total
General
Partners’
Capital		Limited
Partners’
Capital
Balance at December 31, 2020$23,087 $2,285,673 $(1,462)$22,046 $2,329,344 
Issuances of Common Units, net of issuance costs and tax withholdings59 5,838 — — 5,897 
Distributions on Common Units ($0.96 per unit)(1,021)(101,091)— — (102,112)
Distributions on Preferred Units ($43.125 per unit)(12)(1,231)— — (1,243)
Share-based compensation expense, net of forfeitures49 4,806 — — 4,855 
Distributions to noncontrolling interests in consolidated affiliates— — — (782)(782)
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner(161)(15,912)— — (16,073)
Net (income) attributable to noncontrolling interests in consolidated affiliates(6)(569)575 — 
Comprehensive income:
Net income1,187 117,512 — — 118,699 
Other comprehensive income— — 237 — 237 
Total comprehensive income118,936 
Balance at June 30, 2021$23,182 $2,295,026 $(1,225)$21,839 $2,338,822 

See accompanying notes to consolidated financial statements.
14
Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(Unaudited and in thousands)
Nine Months Ended
September 30,		Six Months Ended June 30,
2017 201620222021
Operating activities:   Operating activities:
Net income$132,588
 $514,103
Net income$94,705 $118,699 
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization168,934
 161,734
Depreciation and amortization139,409 122,876 
Amortization of lease incentives and acquisition-related intangible assets and liabilities(666) (1,599)Amortization of lease incentives and acquisition-related intangible assets and liabilities(166)(1,439)
Share-based compensation expense5,764
 5,412
Share-based compensation expense6,136 4,855 
Allowance for losses on accounts and accrued straight-line rents receivable435
 1,846
Net credit losses/(reversals) on operating lease receivablesNet credit losses/(reversals) on operating lease receivables2,625 (489)
Accrued interest on mortgages and notes receivable(391) (364)Accrued interest on mortgages and notes receivable(46)(54)
Amortization of debt issuance costs2,445
 2,645
Amortization of debt issuance costs2,040 1,661 
Amortization of cash flow hedges992
 2,336
Amortization of cash flow hedges(89)248 
Amortization of mortgages and notes payable fair value adjustments422
 (175)Amortization of mortgages and notes payable fair value adjustments(41)776 
Impairments of real estate assets1,445
 —
Impairments of real estate assets35,000 — 
Gains on debt extinguishment(826) —
Losses on debt extinguishmentLosses on debt extinguishment— 134 
Net gains on disposition of property(25,181) (428,656)Net gains on disposition of property(54,144)(41,799)
Equity in earnings of unconsolidated affiliates(6,757) (5,010)Equity in earnings of unconsolidated affiliates(626)(1,068)
Distributions of earnings from unconsolidated affiliates4,815
 3,523
Distributions of earnings from unconsolidated affiliates598 1,402 
Settlement of cash flow hedges7,322
 —
Changes in operating assets and liabilities:   Changes in operating assets and liabilities:
Accounts receivable916
 4,798
Accounts receivable(3,758)6,694 
Prepaid expenses and other assets2,735
 (2,243)Prepaid expenses and other assets(6,534)(5,642)
Accrued straight-line rents receivable(24,473) (18,931)Accrued straight-line rents receivable(13,053)(7,638)
Accounts payable, accrued expenses and other liabilities(308) (7,447)Accounts payable, accrued expenses and other liabilities(158)(1,801)
Net cash provided by operating activities270,211
 231,972
Net cash provided by operating activities201,898 197,415 
Investing activities:   Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired—
 (110,249)Investments in acquired real estate and related intangible assets, net of cash acquired(26,977)(120)
Investments in development in-process(121,367) (122,839)Investments in development in-process(20,869)(54,365)
Investments in tenant improvements and deferred leasing costs(78,691) (63,715)Investments in tenant improvements and deferred leasing costs(60,661)(44,827)
Investments in building improvements(41,862) (51,714)Investments in building improvements(26,528)(24,109)
Investment in acquired controlling interest in unconsolidated affiliateInvestment in acquired controlling interest in unconsolidated affiliate— (127,339)
Net proceeds from disposition of real estate assets85,538
 680,994
Net proceeds from disposition of real estate assets107,362 71,501 
Distributions of capital from unconsolidated affiliates11,670
 3,052
Investments in mortgages and notes receivable—
 (7,934)Investments in mortgages and notes receivable(24)(23)
Repayments of mortgages and notes receivable2,435
 869
Repayments of mortgages and notes receivable144 154 
Investments in and advances to unconsolidated affiliates(10,063) (105)Investments in and advances to unconsolidated affiliates(7,500)— 
Repayments from unconsolidated affiliates—
 448
Changes in restricted cash and other investing activities(24,225) (23,310)
Net cash provided by/(used in) investing activities(176,565) 305,497
Payments of earnest money depositsPayments of earnest money deposits(37,500)(55,000)
Changes in other investing activitiesChanges in other investing activities2,684 5,711 
Net cash used in investing activitiesNet cash used in investing activities(69,869)(228,417)
Financing activities:   Financing activities:
Distributions on Common Units(138,577) (127,391)Distributions on Common Units(107,087)(102,112)
Special distribution on Common Units(83,149) —
Redemptions/repurchases of Preferred Units(28) (130)Redemptions/repurchases of Preferred Units— (5)
Distributions on Preferred Units(1,869) (1,877)Distributions on Preferred Units(1,243)(1,243)
Distributions to noncontrolling interests in consolidated affiliates(1,231) (966)Distributions to noncontrolling interests in consolidated affiliates(1,411)(782)
Proceeds from the issuance of Common Units75,517
 194,518
Proceeds from the issuance of Common Units6,839 7,763 
Costs paid for the issuance of Common Units(1,244) (2,888)Costs paid for the issuance of Common Units(248)(185)
Repurchase of units related to tax withholdings(3,966) (4,416)Repurchase of units related to tax withholdings(2,156)(1,681)
Borrowings on revolving credit facility492,300
 257,800
Borrowings on revolving credit facility145,000 230,000 
Repayments of revolving credit facility(420,300) (528,800)Repayments of revolving credit facility(125,000)(75,000)
Borrowings on mortgages and notes payable456,001
 75,000
Borrowings on mortgages and notes payable200,000 — 
Repayments of mortgages and notes payable(507,114) (395,455)Repayments of mortgages and notes payable(203,187)(151,006)
Payments of debt extinguishment costs(57) —
Changes in debt issuance costs and other financing activities(4,555) (1,513)Changes in debt issuance costs and other financing activities(3,066)(5,558)
Net cash used in financing activities(138,272) (536,118)Net cash used in financing activities(91,559)(99,809)
Net increase/(decrease) in cash and cash equivalents$(44,626) $1,351
Net increase/(decrease) in cash and cash equivalents and restricted cashNet increase/(decrease) in cash and cash equivalents and restricted cash$40,470 $(130,811)

See accompanying notes to consolidated financial statements.

15
Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - Continued
(Unaudited and in thousands)


Six Months Ended June 30,
20222021
Net increase/(decrease) in cash and cash equivalents and restricted cash$40,470 $(130,811)
Cash and cash equivalents and restricted cash at beginning of the period31,198 189,244 
Cash and cash equivalents and restricted cash at end of the period$71,668 $58,433 
 Nine Months Ended
September 30,
 2017 2016
Net increase/(decrease) in cash and cash equivalents$(44,626) $1,351
Cash and cash equivalents at beginning of the period49,490
 5,036
Cash and cash equivalents at end of the period$4,864
 $6,387


Reconciliation of cash and cash equivalents and restricted cash:

Six Months Ended June 30,
20222021
Cash and cash equivalents at end of the period$25,045 $6,535 
Restricted cash at end of the period46,623 51,898 
Cash and cash equivalents and restricted cash at end of the period$71,668 $58,433 

Supplemental disclosure of cash flow information:

Six Months Ended June 30,
20222021
Cash paid for interest, net of amounts capitalized$47,762 $36,071 
 Nine Months Ended
September 30,
 2017 2016
Cash paid for interest, net of amounts capitalized$50,025
 $58,138


Supplemental disclosure of non-cash investing and financing activities:

Six Months Ended June 30,
20222021
Unrealized losses on cash flow hedges$— $(11)
Changes in accrued capital expenditures (1)
(20,066)(23,599)
Write-off of fully depreciated real estate assets21,827 36,798 
Write-off of fully amortized leasing costs11,628 28,575 
Write-off of fully amortized debt issuance costs1,216 4,158 
Adjustment of Redeemable Common Units to fair value(27,106)15,681 
Future consideration in connection with the acquisition of land— 16,000 
 Nine Months Ended
September 30,
 2017 2016
Unrealized losses on cash flow hedges$(31) $(7,785)
Changes in accrued capital expenditures(6,327) 25,037
Write-off of fully depreciated real estate assets41,860
 28,783
Write-off of fully amortized leasing costs28,343
 16,075
Write-off of fully amortized debt issuance costs4,324
 916
Adjustment of Redeemable Common Units to fair value2,649
 21,576
__________


(1)Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at June 30, 2022 and 2021 were $34.5 million and $42.3 million, respectively.

See accompanying notes to consolidated financial statements.

16
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20172022
(tabular dollar amounts in thousands, except per share and per unit data)
(Unaudited)


1.    Description of Business and Significant Accounting Policies


Description of Business


Highwoods Properties, Inc. (the “Company”) is a fully integrated office real estate investment trust (“REIT”) that provides leasing, management, development, constructionowns, develops, acquires, leases and other customer-related services for itsmanages properties primarily in the best business districts of Atlanta, Charlotte, Dallas, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and for third parties.Tampa. The Company conducts its activities through Highwoods Realty Limited Partnership (the “Operating Partnership”). At SeptemberJune 30, 2017,2022, we owned or had an interest in 30.927.6 million rentable square feet of in-service properties, 0.6 million rentable square feet of office properties under development and development land with approximately 400 acres4.9 million rentable square feet of development land.potential office build out.

Capital Structure

The Company is the sole general partner of the Operating Partnership. At SeptemberJune 30, 2017,2022, the Company owned all of the Preferred Units and 102.8104.8 million, or 97.3%97.7%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.82.5 million Common Units. During the ninesix months ended SeptemberJune 30, 2017,2022, the Company redeemed 8,00030,909 Common Units for a like number of shares of Common Stock.

Common Stock Offerings

During the first quarter of 2017,2020, we entered into separate equity distribution agreements in which the Company may offer and sell up to $300.0 million in aggregate gross sales price of shares of Common Stock. During the ninesix months ended SeptemberJune 30, 2017,2022, the Company issued 1,363,919130,011 shares of Common Stock under its equity distribution agreements at an average gross sales price of $50.85$46.50 per share and received net proceeds, after sales commissions, of $68.3$6.0 million.


Basis of Presentation

Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).


The Company'sCompany’s Consolidated Financial Statements include the Operating Partnership, wholly owned subsidiaries and those entities in which the Company has the controlling interest. The Operating Partnership'sPartnership’s Consolidated Financial Statements include wholly owned subsidiaries and those entities in which the Operating Partnership has the controlling interest. We consolidate joint venture investments, such as interests in partnerships and limited liability companies, when we control the major operating and financial policies of the investment through majority ownership, in our capacity as a general partner or managing member or through some other contractual right. At June 30, 2022, we have involvement with, and are the primary beneficiary in, an entity that we concluded to be a variable interest entity. As such, this entity is consolidated. Additionally, at June 30, 2022, we have involvement with, but are not the primary beneficiary in, an entity that we concluded to be a variable interest entity. As such, this entity is not consolidated. (See Note 3).

All intercompany transactions and accounts have been eliminated.


The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in the opinion of management, contain all adjustments (including normal recurring accruals) necessary for a fair presentation of our financial position, results of operations and cash flows. We have condensed or omitted certain notes and other information from the interim Consolidated Financial Statements presented in this Quarterly Report as permitted by SEC rules and regulations. These Consolidated Financial Statements should be read in conjunction with our 20162021 Annual Report on Form 10-K.


17
Table of Contents
Use of Estimates


The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates.


Insurance
15
TableWe are primarily self-insured for health care claims for participating employees. We have stop-loss coverage to limit our exposure to significant claims on a per claim and annual aggregate basis. We determine our liabilities for claims, including incurred but not reported losses, based on all relevant information, including actuarial estimates of Contentsclaim liabilities. At June 30, 2022, a reserve of $0.5 million was recorded to cover estimated reported and unreported claims.
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIPPlanned Investment Activity
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amountsDuring the second quarter of 2022, we agreed to acquire 650 South Tryon at Legacy Union in thousands,Charlotte’s Uptown CBD submarket for a total investment of $203.0 million, including $3.9 million of anticipated leasing capital expenditures to bring the property to stabilization. 650 South Tryon, which delivered in late 2020 and is currently 79% leased, is a trophy, LEED gold-certified office building encompassing 367,000 square feet. 650 South Tryon is immediately adjacent and connected to Company-owned Bank of America Tower at Legacy Union, a trophy, LEED gold-certified office building encompassing 841,000 square feet that delivered in 2019. The acquisition of 650 South Tryon is scheduled to close in August 2022. We have posted earnest money deposits totaling $37.5 million that are non-refundable except per share and per unit data)
in limited circumstances.


1.    Description of Business and Significant Accounting Policies – Continued


Recently Issued Accounting Standards


The Financial Accounting Standards Board ("FASB"(“FASB”) issued an accounting standards update ("ASU"(“ASU”) that requires the use of a new five-step modelprovides temporary optional expedients and exceptions to recognize revenue from customer contracts. The five-step model requires that we identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when we satisfy the performance obligations. We will also be required to disclose information regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Upon adoption of the ASU in 2018, we expect to utilize the modified retrospective approach. We are currently conducting our analysis of the impact of the guidance on our Consolidated Financial Statements, including our internal control processes,contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have an active project team working onto remeasure the evaluation and implementation ofcontracts at the guidance. Our analysis of our non-lease related revenue contracts, which include primarily real estate sales, management, development and construction fee income and transient parking income, indicatesmodification date or reassess a previous accounting determination. Entities can also elect various optional expedients that the adoption ofwould allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance in this ASU is optional and may be elected now through December 31, 2022 as reference rate reform activities occur. We will impact the financial statement disclosure of these contracts with no material impact on the timing of revenue recognition; however, we continue to evaluate the impacts of adoption of this ASU. We expect additional impact of this ASU upon adoptionASU; however, we currently expect to avail ourselves of such optional expedients and exceptions should our modified contracts meet the required criteria.

18
Table of Contents

2.    Leases

Operating Leases

We generally lease our office properties to lessees in exchange for fixed monthly payments that cover rent, property taxes, insurance and certain cost recoveries, primarily common area maintenance. Office properties owned by us that are under lease are primarily located in Atlanta, Charlotte, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa and are leased to a wide variety of lessees across many industries. Our leases are operating leases and mostly range from three to 10 years. We recognized rental and other revenues related to operating lease payments of $200.7 million and $182.4 million during the three months ended June 30, 2022 and 2021, respectively, and $404.3 million and $362.4 million during the six months ended June 30, 2022 and 2021, respectively. Included in these amounts are variable lease payments of $17.7 million and $14.5 million during the three months ended June 30, 2022 and 2021, respectively, and $35.0 million and $29.0 million during the six months ended June 30, 2022 and 2021, respectively.

3.    Variable Interest Entities

Consolidated Variable Interest Entity

In 2019, we and The Bromley Companies formed a joint venture to construct Midtown West, a 150,000 square foot, multi-customer office building located in the mixed-use Midtown Tampa project in Tampa’s Westshore submarket. Midtown West has an anticipated total investment of $71.3 million. Construction of Midtown West began in the third quarter of 2019 and the building was placed in service in the second quarter of 2021. At closing, we agreed to contribute cash of $20.0 million, which has been fully funded, in exchange for an 80.0% interest in the Midtown West joint venture and The Bromley Companies contributed land valued at $5.0 million in exchange for the remaining 20.0% interest. We also committed to provide a $46.3 million interest-only secured construction loan to the Midtown West joint venture that is scheduled to mature in June 2023. The loan bears interest at LIBOR plus 250 basis points. As of June 30, 2022, $33.2 million under the loan has been funded.

We determined that we have a variable interest in the Midtown West joint venture primarily because the entity was designed to pass along interest rate risk, equity price risk and operation risk to us as both a debt and an equity holder and The Bromley Companies as an equity holder. The Midtown West joint venture was further determined to be a variable interest entity as it requires additional subordinated financial support in the form of a loan because the initial equity investment provided by us and The Bromley Companies is not sufficient to finance its planned investments and operations. We, as majority owner and managing member and through our control rights as set forth in the joint venture’s governance documents, were determined to be the primary beneficiary as we have both the power to direct the activities that most significantly affect the entity (primarily lease rates, property operations and capital expenditures) and significant economic exposure through our equity investment and loan commitment. As such, the Midtown West joint venture is consolidated and all intercompany transactions and accounts are eliminated. The following table sets forth the assets and liabilities of the ASU related to accounting for leases discussed below for certain lease revenue streams that will be required to be evaluated as non-lease components using the five-step revenue recognition model.
The FASB issued an ASU that adds to and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The ASU is required to be adopted in 2018 with retrospective application required. We do not expect such adoption to have a material effect on our Consolidated Statements of Cash Flows.

The FASB issued an ASU that clarifies and narrows the definition of a business used in determining whether to account for a transaction as an asset acquisition or business combination. The guidance requires evaluation of the fair value of the assets acquired to determine if it is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the transferred assets would not be a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs. The ASU is required to be adopted in 2018 and applied prospectively. Upon adoption of this ASU, we expect that the majority of our future acquisitions would not meet the definition of a business; therefore, the related acquisition costs would be capitalized as part of the purchase price.

The FASB issued an ASU that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The guidance requires modification accounting if the value, vesting conditions or classification of the award changes. The ASU is required to be adopted in 2018 and applied prospectively. We do not expect such adoption to have a material effect on our Consolidated Financial Statements.

The FASB issued an ASU which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. We are currently conducting our initial analysis of the impact of the guidance on our Consolidated Financial Statements and have an active project team working on the evaluation and implementation of the guidance. We currently believe that the adoption of the ASU will not significantly change the accounting for operating leasesMidtown West joint venture included on our Consolidated Balance Sheets where we are the lessor, and that such leases will be accounted for in a similar method to existing standards with the underlying leased asset being reported and recognized as a real estate asset. In addition, the guidance requires lessors to capitalize and amortize only incremental direct leasing costs. As a result, we expect that upon the adoptionSheets:

June 30,
2022		December 31,
2021
Net real estate assets$58,645 $53,191 
Cash and cash equivalents$1,084 $389 
Accounts receivable$188 $— 
Accrued straight-line rents receivable$182 $121 
Deferred leasing costs, net$1,588 $1,519 
Prepaid expenses and other assets, net$284 $163 
Accounts payable, accrued expenses and other liabilities$2,749 $646 

The assets of the ASU, we willMidtown West joint venture can be used only to settle obligations of the joint venture and its creditors have no longer be able to capitalize and amortize certain leasing related costs and instead will expense these costs as incurred. We are in the process of evaluating the impactrecourse to our results of operations of expensing such costs. The ASU is required to be adopted in 2019 using a modified retrospective approach. Our initial analysis of our leases also indicates that upon adoption of the ASU, certain lease revenue streams that are currently accounted for using the lease accounting standard will be accounted for as non-lease components using the five-step revenue recognition model discussed above. We continue to evaluate other impacts of adoption of this ASU.wholly owned assets.

The FASB issued an ASU that eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item when the hedged item affects earnings. The ASU is required to be adopted in 2019 using a modified retrospective approach. We do not expect such adoption to have a material effect on our Consolidated Financial Statements.


16
19
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

Unconsolidated Variable Interest Entity


1.    DescriptionDuring the fourth quarter of Business2021, we and Significant Accounting Policies – ContinuedBrand Properties, LLC (“Brand”) formed a joint venture to construct 2827 Peachtree, a 135,000 square foot, multi-customer office building located in Atlanta’s Buckhead submarket. 2827 Peachtree has an anticipated total investment of $79.0 million. Construction of 2827 Peachtree began in the first quarter of 2022 with a scheduled completion date in the third quarter of 2023. At closing, we agreed to contribute cash of $13.3 million, which has been fully funded, in exchange for a 50.0% interest in the 2827 Peachtree joint venture and Brand contributed land valued at $7.7 million and cash of $5.6 million in exchange for the remaining 50.0% interest. We also committed to provide a $49.6 million interest-only secured construction loan to the 2827 Peachtree joint venture that is scheduled to mature in December 2024 with an option to extend for one year. The loan bears interest at LIBOR plus 300 basis points. As of June 30, 2022, no amounts under the loan have been funded.


We determined that we have a variable interest in the 2827 Peachtree joint venture primarily because the entity was designed to pass along interest rate risk, equity price risk and operation risk to us as both a debt and equity holder and Brand as an equity holder. The FASB issued an ASU that2827 Peachtree joint venture was further determined to be a variable interest entity as it requires among other things,additional subordinated financial support in the useform of a new current expected credit loss ("CECL") model in determiningloan because the initial equity investment provided by us and Brand is not sufficient to finance its planned investments and operations. However, since we are not the managing member or lead developer, we concluded we do not have the power to direct matters that most significantly impact the activities of the entity and therefore, do not qualify as the primary beneficiary. Accordingly, the entity is not consolidated. At June 30, 2022, our allowances for doubtful accounts with respect to accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable. The CECL model requires that we estimate our lifetime expected creditrisk of loss with respect to these receivables and record allowances that, when deducted fromthis arrangement was limited to the carrying value of the investment balance of $13.6 million as no amounts were outstanding under the receivables, representloan. The assets of the net amounts expected2827 Peachtree joint venture can be used only to be collected. We will also be requiredsettle obligations of the joint venture and its creditors have no recourse to disclose information about how we developed the allowances, including changes in the factors (e.g., portfolio mix, credit trends, unemployment, gross domestic product, etc.) that influenced our estimate of expected credit losses and the reasons for those changes. We will apply the ASU’s provisions as a cumulative-effect adjustment to retained earnings upon adoption in 2020. We are in the process of evaluating this ASU.wholly owned assets.


2.4.    Real Estate Assets

DispositionsAcquisitions


During the thirdsecond quarter of 2017,2022, we sold a total of 12 buildingsacquired land in Charlotte for an aggregate salepurchase price, including capitalized acquisition costs, of $27.0 million.

Dispositions

During the second quarter of 2022, we sold office buildings and land in Atlanta, Greensboro and Tampa for an aggregate sales price of $78.0$100.7 million (before closing credits to buyerbuyers of $2.5$1.1 million) and recorded aggregate gains on disposition of property of $19.8$50.0 million.


During the first quarter of 2017,2022, we sold a buildingland in Tampa for a salesales price of $13.0$9.6 million (before closing credits to buyer of $1.2 million) and recorded a gain on disposition of property of $5.3$4.1 million.


Impairments


DuringAs more fully described in Note 15, we have entered the thirdDallas market through the formation of 2 50/50 joint ventures to develop Class AA assets in 2 Dallas submarkets. We plan to fund our entry into Dallas, including our share of the 2 developments, by exiting the Pittsburgh market. Our Pittsburgh assets, which consist of 2,155,000 square feet of office that were 92.9% occupied as of June 30, 2022, represent approximately 6% of our overall net operating income.

Because we classified all of our assets in Pittsburgh as non-core, net income in the second quarter of 2017, we recorded aggregate impairments2022 included an impairment charge of real estate assets$35.0 million to lower the carrying amount of $1.4 million, which resulted fromEQT Plaza (including accrued straight-line rents receivable and deferred leasing costs) to its estimated fair value less costs to sell. EQT Plaza is a change616,000 square foot office building located in market-based inputs and our assumptions about the useheart of the assets.Pittsburgh’s CBD. EQT Corporation’s lease of 317,000 square feet at EQT Plaza is scheduled to expire in September 2024.

3.    Mortgages and Notes Receivable
Mortgages and notes receivable were $6.8 million and $8.8 million at September 30, 2017 and December 31, 2016, respectively. We evaluate the ability to collect our mortgages and notes receivable by monitoring the leasing statistics and/or market fundamentals of these assets. As of September 30, 2017, our mortgages and notes receivable were not in default and there were no other indicators of impairment.


17
20
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)


4.5.    Intangible Assets and Below Market Lease Liabilities

The following table sets forth total intangible assets and acquisition-related below market lease liabilities, net of accumulated amortization:

June 30,
2022		December 31,
2021
Assets:
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)$399,218 $402,013 
Less accumulated amortization(155,594)(143,111)
$243,624 $258,902 
Liabilities (in accounts payable, accrued expenses and other liabilities):
Acquisition-related below market lease liabilities$56,888 $57,703 
Less accumulated amortization(30,849)(28,978)
$26,039 $28,725 
 September 30,
2017		 December 31,
2016
Assets:   
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)$348,628
 $353,581
Less accumulated amortization(145,814) (140,081)
 $202,814
 $213,500
Liabilities (in accounts payable, accrued expenses and other liabilities):   
Acquisition-related below market lease liabilities$60,304
 $61,221
Less accumulated amortization(26,905) (23,074)
 $33,399
 $38,147

The following table sets forth amortization of intangible assets and below market lease liabilities:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)$10,933 $8,626 $22,178 $17,197 
Amortization of lease incentives (in rental and other revenues)$419 $445 $869 $893 
Amortization of acquisition-related intangible assets (in rental and other revenues)$821 $241 $1,651 $518 
Amortization of acquisition-related below market lease liabilities (in rental and other revenues)$(1,319)$(1,421)$(2,686)$(2,850)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)$10,130
 $10,111
 $30,882
 $33,177
Amortization of lease incentives (in rental and other revenues)$444
 $273
 $1,284
 $1,374
Amortization of acquisition-related intangible assets (in rental and other revenues)$671
 $901
 $2,382
 $2,904
Amortization of acquisition-related intangible assets (in rental property and other expenses)$140
 $140
 $416
 $417
Amortization of acquisition-related below market lease liabilities (in rental and other revenues)$(1,576) $(1,734) $(4,748) $(6,294)


The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities:

Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization)Amortization of Lease Incentives (in Rental and Other Revenues)Amortization of Acquisition-Related Intangible Assets (in Rental and Other Revenues)Amortization of Acquisition-Related Below Market Lease Liabilities (in Rental and Other Revenues)
July 1 through December 31, 2022$21,172 $812 $1,460 $(2,608)
202338,414 1,536 2,745 (4,824)
202433,314 1,392 2,531 (4,111)
202526,557 1,316 1,667 (2,594)
202622,609 1,190 1,336 (2,294)
Thereafter76,813 3,966 4,794 (9,608)
$218,879 $10,212 $14,533 $(26,039)
Weighted average remaining amortization periods as of June 30, 2022 (in years)7.98.27.48.1


21
  Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization) Amortization of Lease Incentives (in Rental and Other Revenues) Amortization of Acquisition-Related Intangible Assets (in Rental and Other Revenues) Amortization of Acquisition-Related Intangible Assets (in Rental Property and Other Expenses) Amortization of Acquisition-Related Below Market Lease Liabilities (in Rental and Other Revenues)
October 1 through December 31, 2017 $10,019
 $427
 $469
 $134
 $(1,497)
2018 35,970
 1,599
 1,680
 553
 (5,962)
2019 30,311
 1,377
 1,286
 553
 (5,492)
2020 25,589
 1,101
 967
 525
 (5,180)
2021 21,254
 886
 647
 —
 (4,409)
Thereafter 61,333
 4,249
 1,885
 —
 (10,859)
  $184,476
 $9,639
 $6,934
 $1,765
 $(33,399)
Weighted average remaining amortization periods as of September 30, 2017 (in years) 7.6
 9.5
 6.5
 3.2
 6.8

18
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

5.6.    Mortgages and Notes Payable

The following table sets forth our mortgages and notes payable:

June 30,
2022		December 31,
2021
Secured indebtedness$488,000 $491,942 
Unsecured indebtedness2,332,895 2,312,180 
Less-unamortized debt issuance costs(16,581)(15,207)
Total mortgages and notes payable, net$2,804,314 $2,788,915 
 September 30,
2017		 December 31,
2016
Secured indebtedness$99,421
 $128,204
Unsecured indebtedness1,875,239
 1,826,145
Less-unamortized debt issuance costs(8,262) (6,302)
Total mortgages and notes payable, net$1,966,398
 $1,948,047

At SeptemberJune 30, 2017,2022, our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $147.7$732.3 million.
At September 30, 2017, we had a $475.0Our $750.0 million unsecured revolving credit facility that wasis scheduled to mature in January 2018.March 2025 and includes an accordion feature that allows for an additional $400.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for 2 additional six-month periods. During the second quarter of 2022, in connection with the modification of our $200.0 million term loan as discussed below, the interest rate on our revolving credit facility was converted from LIBOR plus 90 basis points to SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 85 basis points, based on current credit ratings. The annual facility fee is 20 basis points. The interest rate was LIBOR plus 110 basis points and the annual facility fee was 20are based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services. We may be entitled to a temporary reduction in the interest rate of 1 basis points.point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. There was $72.0$90.0 million and $130.0 million outstanding under our revolving credit facility at SeptemberJune 30, 20172022 and $0.6July 19, 2022, respectively. At both June 30, 2022 and July 19, 2022, we had $0.1 million of outstanding letters of credit which reducedreduces the availability on theour revolving credit facility. As a result, the unused capacity of our revolving credit facility at SeptemberJune 30, 20172022 and July 19, 2022 was $402.4 million.$659.9 million and $619.9 million, respectively.
During the second quarter of 2017,2022, we prepaid without penalty a secured mortgagemodified our $200.0 million unsecured bank term loan with a fair market valueto extend the maturity date from November 2022 to May 2026. As part of $108.2 million with an effective interest rate of 4.22% that was originally scheduled to mature in November 2017. We recorded $0.4 million of gain on debt extinguishment related to this prepayment.
During 2015,modification, we acquired our joint venture partner’s 77.2% interest in a building in Orlando. Simultaneously with this acquisition, the joint venture's previously existing mortgage note was restructured into a new $18.0 million first mortgage note and a $10.2 million subordinated note, both of which were scheduled to mature in July 2017. The first mortgage and subordinated notes had effective interest rates of 5.36% and 8.6%, respectively. The subordinated note and accrued interest thereon can be satisfied, in certain circumstances, upon payment of a "waterfall payment" equal to a cash payment of 50.0% of the amount by which the net sale proceeds or appraised value at the time of refinancing exceeded (1) the outstanding principal of the first mortgage note, (2) funds deposited by us into escrow to fund tenant improvements, leasing commissions and building improvements and (3) a 10.0% return on such funds deposited by us into escrow. As of the date of such restructuring, the subordinated note was recorded at a projected waterfall payment of $1.0 million. During the second quarter of 2017, both notes were retired upon payment of the $18.0 million principal balance on the first mortgage note and a $0.5 million waterfall payment relating to the subordinated note, which resulted in $0.4 million of gain on debt extinguishment.
During the second quarter of 2017, wealso obtained a $100.0$150.0 million secured mortgagedelayed-draw term loan, from a third party lender with an effective interest rate of 4.0%. This loanwhich must be drawn in its entirety by August 2022, that is scheduled to mature in May 2029.2027. The interest rate, based on current credit ratings, is SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 95 basis points. The interest rate is based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services. We may be entitled to a temporary reduction in the interest rate of 1 basis point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. We incurred $0.8$2.7 million of debt issuance costs, in connection with this loan, which will be amortized over the term of the loan.
During the first quarter of 2017, the Operating Partnership issued $300.0 million aggregate principal amount of 3.875% notes due 2027, less original issue discount of $4.0 million. These notes were priced to yield 4.038%. Underwriting fees and other expenses were incurred that aggregated $2.5 million; these costs were deferred and will be amortized over the term of the notes.
During the first quarter of 2017, we paid off at maturity $379.7 million principal amount of 5.85% unsecured notes.
During the first quarter of 2017, we amended our $150.0 million unsecured bank term loan that is scheduled to mature in January 2022 by increasing the borrowed amount to $200.0 million. The interest rate on this term loan at our current credit ratings is LIBOR plus 110 basis points. The underlying LIBOR rate with respect to $50.0 million of the unsecured bank term loan has been effectively fixed for the term through floating-to-fixed interest rate swaps as discussed in Note 6. We incurred $0.3 million of debt issuance costs in connection with this amendment, which will beare being amortized along with certain existing unamortized debt issuance costs over the remaining term.term of our modified term loan.

19
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)


5.    Mortgages and Notes Payable - Continued
We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
We have considered our short-term liquidity needs within one year from October 24, 2017July 26, 2022 (the date of issuance of the quarterly financial statements) and the adequacy of our estimated cash flows from operating activities and other expectedavailable financing sources to meet these needs. In particular, we have considered our scheduled debt maturities during such one-year period, including the $200.0$250.0 million principal amount of unsecured notes due April 15, 2018.that are scheduled to mature in January 2023. We have concluded it is probable we will meet these short-term liquidity requirements through a combination of the following:

•available cash and cash equivalents;

•cash flows from operating activities;

•issuance of debt securities by the Operating Partnership (some of which debt securities may be hedged to a fixed interest rate pursuant to the forward-starting swaps referred to in Note 6);Partnership;

•issuance of secured debt;

•bank term loans;loans (including the $150.0 million delayed-draw term loan discussed above);

•borrowings under our revolving credit facility;

•issuance of equity securities by the Company or the Operating Partnership; and

•the disposition of non-core assets.

22
Table of Contents
6.Derivative Financial Instruments


During the second quarter of 2017, we entered into $150.0 million notional amount of forward-starting swaps that effectively lock the underlying 10-year treasury rate at 2.44% with respect to a planned issuance of debt securities by the Operating Partnership expected to occur prior to May 15, 2018.

7.    Derivative Financial Instruments
During the second quarter of 2017, we
We previously entered into floating-to-fixed interest rate swaps through January 2022 with respect to an aggregate of $50.0 million LIBOR-based borrowings. These swaps effectively fixfixed the underlying one-monthone month LIBOR rate at a weighted average rate of 1.693%.

During 2016, we entered into $150.0 million notional amount of forward-starting swaps that effectively locked the underlying 10-year treasury rate at 1.90% with respect to a planned issuance of debt securities by the Operating Partnership. Upon issuance of the $300.0 million aggregate principal amount of 3.875% notes due 2027 during the first quarter of 2017, we terminated the forward-starting2022, these interest rate swaps resulting in an unrealized gain of $7.3 million in accumulated other comprehensive income.expired.

The counterparties under these swaps are major financial institutions. The swap agreements contain a provision whereby if we default on certain of our indebtedness and which default results in repayment of such indebtedness being, or becoming capable of being, accelerated by the lender, then we could also be declared in default on our swaps.


Our interest rate swaps have beenwere designated as and are being accounted for as cash flow hedges with changes in fair value recorded in other comprehensive income/(loss) each reporting period. No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on our cash flow hedges during the nine months ended September 30, 2017 and 2016. We havehad no collateral requirements related to our interest rate swaps.

Amounts reported in accumulated other comprehensive income/(loss) related to derivatives will beare reclassified to interest expense as interest payments are made on our variable-rate debt. During the period from OctoberJuly 1, 20172022 through SeptemberJune 30, 2018,2023, we estimate that less than $0.1$0.3 million will be reclassified as a net increasedecrease to interest expense.

20
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)


6.Derivative Financial Instruments - Continued


The following table sets forth the gross fair value of our derivatives:

June 30,
2022		December 31,
2021
Derivatives:
Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
Interest rate swaps$— $60 
 September 30,
2017		 December 31,
2016
Derivatives:   
Derivatives designated as cash flow hedges in prepaid expenses and other assets:   
Interest rate swaps$306
 $7,619
Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:   
Interest rate swaps$1,059
 $1,870

The following table sets forth the effect of our cash flow hedges on accumulated other comprehensive income/(loss)loss and interest expense:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Derivatives Designated as Cash Flow Hedges:
Amount of unrealized losses recognized in accumulated other comprehensive loss on derivatives:
Interest rate swaps$— $(11)$— $(11)
Amount of (gains)/losses reclassified out of accumulated other comprehensive loss into interest expense:
Interest rate swaps$(74)$126 $(89)$248 

23
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Derivatives Designated as Cash Flow Hedges:       
Amount of unrealized gains/(losses) recognized in accumulated other comprehensive income/(loss) on derivatives (effective portion):       
Interest rate swaps$(347) $1,610
 $(31) $(7,785)
Amount of net losses reclassified out of accumulated other comprehensive income/(loss) into contractual interest expense (effective portion):       
Interest rate swaps$211
 $758
 $992
 $2,336
Table of Contents

8.    Noncontrolling Interests
7.Noncontrolling Interests


Noncontrolling Interests in Consolidated Affiliates

At SeptemberJune 30, 2017,2022, our noncontrolling interests in consolidated affiliates relate to our joint venture partner's partners’ 50.0% interest in office properties in Richmond.Richmond and 20.0% interest in the Midtown West joint venture. Our joint venture partner is anpartners are unrelated third party.parties.


Noncontrolling Interests in the Operating Partnership


The following table sets forth the Company'sCompany’s noncontrolling interests in the Operating Partnership:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Beginning noncontrolling interests in the Operating Partnership$114,570 $121,895 $111,689 $112,499 
Adjustment of noncontrolling interests in the Operating Partnership to fair value(28,696)6,068 (25,528)15,334 
Conversions of Common Units to Common Stock(1,251)(44)(1,251)(44)
Net income attributable to noncontrolling interests in the Operating Partnership1,203 1,624 2,168 3,117 
Distributions to noncontrolling interests in the Operating Partnership(1,243)(1,363)(2,495)(2,726)
Total noncontrolling interests in the Operating Partnership$84,583 $128,180 $84,583 $128,180 
 Nine Months Ended
September 30,
 2017 2016
Beginning noncontrolling interests in the Operating Partnership$144,802
 $126,429
Adjustment of noncontrolling interests in the Operating Partnership to fair value3,297
 13,390
Conversions of Common Units to Common Stock(408) (3,006)
Net income attributable to noncontrolling interests in the Operating Partnership3,502
 14,876
Distributions to noncontrolling interests in the Operating Partnership(3,742) (3,684)
Total noncontrolling interests in the Operating Partnership$147,451
 $148,005

21
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)


7.Noncontrolling Interests - Continued


The following table sets forth net income available for common stockholders and transfers from the Company'sCompany’s noncontrolling interests in the Operating Partnership:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income available for common stockholders$50,511 $59,305 $90,771 $113,764 
Increase in additional paid in capital from conversions of Common Units to Common Stock1,251 44 1,251 44 
Change from net income available for common stockholders and transfers from noncontrolling interests$51,762 $59,349 $92,022 $113,808 
24
Table of Contents
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net income available for common stockholders$57,040
 $31,971
 $126,303
 $496,409
Increase in additional paid in capital from conversions of Common Units
to Common Stock		103
 1,448
 408
 3,006
Change from net income available for common stockholders and transfers from noncontrolling interests$57,143
 $33,419
 $126,711
 $499,415


9.    Disclosure About Fair Value of Financial Instruments
8.Disclosure About Fair Value of Financial Instruments


The following summarizes the three levels of inputs that we use to measure fair value.


Level 1.  Quoted prices in active markets for identical assets or liabilities.


Our Level 1 asset is our investment in marketable securities that we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 liability is our non-qualified deferred compensation obligation. The Company'sCompany’s Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company.


Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.


Our Level 2 assets include the fair value of our mortgages and notes receivable and certain interest rate swaps.receivable. Our Level 2 liabilities include the fair value of our mortgages and notes payable and remainingany interest rate swaps.


The fair value of mortgages and notes receivable and mortgages and notes payable is estimated by the income approach utilizing contractual cash flows and market-based interest rates to approximate the price that would be paid in an orderly transaction between market participants. The fair value of any interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments of interest rate swaps are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments are considered in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our Level 3 assets included (1)include any real estate assets recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis, which wereare valued using the terms of definitive sales contracts or the sales comparison approach, and (2) our tax increment financing bond, which was not routinely traded but whose fair value was determined by the income approach utilizing contractual cash flows and market-based interest rates to estimate the projected redemption value based on quoted bid/ask prices for similar unrated municipal bonds. Our tax increment financing bond was assigned in conjunction with a sale during the first quarter of 2016. The estimated fair value at the date of sale of $11.2 million was equal to the outstanding principal amount due on the bond.

22
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)


8.Disclosure About Fair Value of Financial Instruments - Continued

The following table sets forth our assets and liabilities and the Company's noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy.
    Level 1 Level 2 Level 3
  Total 
Quoted Prices
in Active
Markets for Identical Assets or Liabilities
 Significant Observable Inputs Significant Unobservable Inputs
Fair Value at September 30, 2017:        
Assets:        
Mortgages and notes receivable, at fair value (1)
 $6,789
 $—
 $6,789
 $—
Interest rate swaps (in prepaid expenses and other assets) 306
 —
 306
 —
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets) 2,269
 2,269
 —
 —
Impaired real estate assets 5,888
 —
 —
 5,888
Total Assets $15,252
 $2,269
 $7,095
 $5,888
Noncontrolling Interests in the Operating Partnership $147,451
 $147,451
 $—
 $—
Liabilities:        
Mortgages and notes payable, net, at fair value (1)
 $1,983,723
 $—
 $1,983,723
 $—
Interest rate swaps (in accounts payable, accrued expenses and other liabilities) 1,059
 —
 1,059
 —
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities) 2,269
 2,269
 —
 —
Total Liabilities $1,987,051
 $2,269
 $1,984,782
 $—
Fair Value at December 31, 2016:        
Assets:        
Mortgages and notes receivable, at fair value (1)
 $8,833
 $—
 $8,833
 $—
Interest rate swaps (in prepaid expenses and other assets) 7,619
 —
 7,619
 —
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets) 2,451
 2,451
 —
 —
Total Assets $18,903
 $2,451
 $16,452
 $—
Noncontrolling Interests in the Operating Partnership $144,802
 $144,802
 $—
 $—
Liabilities:        
Mortgages and notes payable, net, at fair value (1)
 $1,965,611
 $—
 $1,965,611
 $—
Interest rate swaps (in accounts payable, accrued expenses and other liabilities) 1,870
 —
 1,870
 —
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities) 2,451
 2,451
 —
 —
Total Liabilities $1,969,932
 $2,451
 $1,967,481
 $—
__________
(1)    Amounts recorded at historical cost on our Consolidated Balance Sheets at September 30, 2017 and December 31, 2016.


23
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)


8.Disclosure About Fair Value of Financial Instruments - Continued
The impaired real estate assets that were measured in the third quarter of 2017 at fair value and deemed to be Level 3 assets were valued based primarily on market-based inputs and our assumptions about the use of the assets, as observable inputs were not available. In the absence of observable inputs, we estimate the fair value of real estate using unobservable local and national industry market data such as comparable sales, appraisals, brokers’ opinions of value and/or the terms of definitive sales contracts and appraisals to assist us in our estimation of fair value.contracts. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement.


25
Table of Contents
9.Share-Based Payments
The following table sets forth our assets and liabilities and the Company’s noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy:

Level 1Level 2Level 3
TotalQuoted Prices
in Active
Markets for Identical Assets or Liabilities		Significant Observable InputsSignificant Unobservable Inputs
Fair Value at June 30, 2022:
Assets:
Mortgages and notes receivable, at fair value (1)
$1,153 $— $1,153 $— 
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)2,500 2,500 — — 
Impaired real estate assets57,418 — — 57,418 
Total Assets$61,071 $2,500 $1,153 $57,418 
Noncontrolling Interests in the Operating Partnership$84,583 $84,583 $— $— 
Liabilities:
Mortgages and notes payable, net, at fair value (1)
$2,587,436 $— $2,587,436 $— 
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)2,500 2,500 — — 
Total Liabilities$2,589,936 $2,500 $2,587,436 $— 
Fair Value at December 31, 2021:
Assets:
Mortgages and notes receivable, at fair value (1)
$1,227 $— $1,227 $— 
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)2,866 2,866 — — 
Total Assets$4,093 $2,866 $1,227 $— 
Noncontrolling Interests in the Operating Partnership$111,689 $111,689 $— $— 
Liabilities:
Mortgages and notes payable, net, at fair value (1)
$2,907,492 $— $2,907,492 $— 
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)60 — 60 — 
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)2,866 2,866 — — 
Total Liabilities$2,910,418 $2,866 $2,907,552 $— 
__________
(1)    Amounts are not recorded at fair value on our Consolidated Balance Sheets at June 30, 2022 and December 31, 2021.

The Level 3 impaired real estate assets as of June 30, 2022 reflected in the table above resulted from the shortened hold period assumptions for EQT Plaza as a result of our plan to exit the Pittsburgh market (see Note 15). The estimated fair value was calculated using broker opinions of value, which incorporate an income approach, as observable inputs were not available. Key assumptions used in the impairment calculation were estimated selling costs of 3.5% (including seller’s share of anticipated transfer taxes), the high end of an estimated discount rate ranging from 13.2% to 16.2% and an estimated terminal capitalization rate of 8.0%.

26
Table of Contents
10.    Share-Based Payments

During the ninesix months ended SeptemberJune 30, 2017,2022, the Company granted 168,748 stock options with an exercise price equal to the last reported stock price of our Common Stock on the New York Stock Exchange on the last trading day prior to the date of grant. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $6.72. During the nine months endedSeptember 30, 2017, the Company also granted 61,40499,975 shares of time-based restricted stock and 49,34481,832 shares of total return-based restricted stock with weighted average grant date fair values per share of $52.49$43.58 and $49.59,$41.94, respectively. We recorded share-based compensation expense of $0.9$0.8 million and $1.9 million during each of the three months ended SeptemberJune 30, 20172022 and 20162021, and $5.8$6.1 million and $5.4$4.9 million during the ninesix months endedSeptember June 30, 20172022 and 2016,2021, respectively. At SeptemberJune 30, 2017,2022, there was $6.1$5.1 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 2.32.2 years.


10.Accumulated Other Comprehensive Income/(Loss)
11.    Accumulated Other Comprehensive Loss

The following table sets forth the components of accumulated other comprehensive income/(loss):loss:

Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended June 30,Six Months Ended June 30,
2017 2016 2017 20162022202120222021
Cash flow hedges:       Cash flow hedges:
Beginning balance$6,046
 $(11,628) $4,949
 $(3,811)Beginning balance$(988)$(1,340)$(973)$(1,462)
Unrealized gains/(losses) on cash flow hedges(347) 1,610
 (31) (7,785)
Unrealized losses on cash flow hedgesUnrealized losses on cash flow hedges— (11)— (11)
Amortization of cash flow hedges (1)
211
 758
 992
 2,336
Amortization of cash flow hedges (1)
(74)126 (89)248 
Total accumulated other comprehensive income/(loss)$5,910

$(9,260) $5,910
 $(9,260)
Total accumulated other comprehensive lossTotal accumulated other comprehensive loss$(1,062)$(1,225)$(1,062)$(1,225)
__________
(1)    Amounts reclassified out of accumulated other comprehensive income/(loss)loss into contractual interest expense.


12.    Real Estate and Other Assets Held For Sale

The following table sets forth the assets held for sale at June 30, 2022 and December 31, 2021, which are considered non-core:

June 30,
2022		December 31,
2021
Assets:
Land held for development— $3,482 
Net real estate assets— 3,482 
Prepaid expenses and other assets, net— 36 
Real estate and other assets, net, held for sale$— $3,518 
24
27
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

11.Discontinued Operations

13.    Earnings Per Share and Per Unit
The following tables set forth the results of operations for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016 related to discontinued operations:
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Rental and other revenues$—
 $—
 $—
 $8,484
Operating expenses:       
Rental property and other expenses—
 —
 —
 3,334
General and administrative—
 —
 —
 1,388
Total operating expenses—
 —
 —
 4,722
Interest expense—
 —
 —
 85
Other income—
 —
 —
 420
Income from discontinued operations—
 —
 —
 4,097
Net gains on disposition of discontinued operations—
 —
 —
 414,496
Total income from discontinued operations$—
 $—
 $—
 $418,593

 Nine Months Ended
September 30,
 2017 2016
Cash flows from operating activities$—
 $2,040
Cash flows from investing activities$—
 $417,097


25
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

12.Earnings Per Share and Per Unit


The following table sets forth the computation of basic and diluted earnings per share of the Company:


 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Earnings per Common Share - basic:       
Numerator:       
Income from continuing operations$59,549
 $33,840
 $132,588
 $95,510
Net (income) attributable to noncontrolling interests in the Operating Partnership from continuing operations(1,571) (926) (3,502) (2,611)
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations(315) (319) (914) (941)
Dividends on Preferred Stock(623) (624) (1,869) (1,877)
Income from continuing operations available for common stockholders57,040
 31,971
 126,303
 90,081
Income from discontinued operations—
 —
 —
 418,593
Net (income) attributable to noncontrolling interests in the Operating Partnership from discontinued operations—
 —
 —
 (12,265)
Income from discontinued operations available for common stockholders—
 —
 —
 406,328
Net income available for common stockholders$57,040
 $31,971
 $126,303
 $496,409
Denominator:       
Denominator for basic earnings per Common Share – weighted average shares103,237
 98,973
 102,489
 97,669
Earnings per Common Share - basic:       
Income from continuing operations available for common stockholders$0.55
 $0.32
 $1.23
 $0.92
Income from discontinued operations available for common stockholders—
 —
 —
 4.16
Net income available for common stockholders$0.55
 $0.32
 $1.23
 $5.08
Earnings per Common Share - diluted:       
Numerator:       
Income from continuing operations$59,549
 $33,840
 $132,588
 $95,510
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations(315) (319) (914) (941)
Dividends on Preferred Stock(623) (624) (1,869) (1,877)
Income from continuing operations available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership58,611
 32,897
 129,805
 92,692
Income from discontinued operations available for common stockholders—
 —
 —
 418,593
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership$58,611
 $32,897
 $129,805
 $511,285
Denominator:       
Denominator for basic earnings per Common Share – weighted average shares103,237
 98,973
 102,489
 97,669
Add:       
Stock options using the treasury method76
 108
 79
 94
Noncontrolling interests Common Units2,832
 2,858
 2,834
 2,882
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions (1)
106,145
 101,939
 105,402
 100,645
Earnings per Common Share - diluted:       
Income from continuing operations available for common stockholders$0.55
 $0.32
 $1.23
 $0.92
Income from discontinued operations available for common stockholders—
 —
 —
 4.16
Net income available for common stockholders$0.55
 $0.32
 $1.23
 $5.08
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Earnings per Common Share - basic:
Numerator:
Net income$52,602 $61,844 $94,705 $118,699 
Net (income) attributable to noncontrolling interests in the Operating Partnership(1,203)(1,624)(2,168)(3,117)
Net (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Dividends on Preferred Stock(622)(621)(1,243)(1,243)
Net income available for common stockholders$50,511 $59,305 $90,771 $113,764 
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)
105,163 104,106 105,049 104,035 
Net income available for common stockholders$0.48 $0.57 $0.86 $1.09 
Earnings per Common Share - diluted:
Numerator:
Net income$52,602 $61,844 $94,705 $118,699 
Net (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Dividends on Preferred Stock(622)(621)(1,243)(1,243)
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership$51,714 $60,929 $92,939 $116,881 
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)
105,163 104,106 105,049 104,035 
Add:
Stock options using the treasury method5 20 10 14 
Noncontrolling interests Common Units2,486 2,838 2,495 2,838 
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions107,654 106,964 107,554 106,887 
Net income available for common stockholders$0.48 $0.57 $0.86 $1.09 
__________
(1)Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.

(1)Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.
26
28
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)


12.Earnings Per Share and Per Unit - Continued


The following table sets forth the computation of basic and diluted earnings per unit of the Operating Partnership:

Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended June 30,Six Months Ended June 30,
2017 2016 2017 20162022202120222021
Earnings per Common Unit - basic:       Earnings per Common Unit - basic:
Numerator:       Numerator:
Income from continuing operations$59,549
 $33,840
 $132,588
 $95,510
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations(315) (319) (914) (941)
Net incomeNet income$52,602 $61,844 $94,705 $118,699 
Net (income) attributable to noncontrolling interests in consolidated affiliatesNet (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Distributions on Preferred Units(623) (624) (1,869) (1,877)Distributions on Preferred Units(622)(621)(1,243)(1,243)
Income from continuing operations available for common unitholders58,611
 32,897
 129,805
 92,692
Income from discontinued operations available for common unitholders—
 —
 —
 418,593
Net income available for common unitholders$58,611
 $32,897
 $129,805
 $511,285
Net income available for common unitholders$51,714 $60,929 $92,939 $116,881 
Denominator:       Denominator:
Denominator for basic earnings per Common Unit – weighted average units105,660
 101,422
 104,914
 100,142
Earnings per Common Unit - basic:       
Income from continuing operations available for common unitholders$0.55
 $0.32
 $1.24
 $0.93
Income from discontinued operations available for common unitholders—
 —
 —
 4.18
Denominator for basic earnings per Common Unit – weighted average units (1)
Denominator for basic earnings per Common Unit – weighted average units (1)
107,240 106,535 107,135 106,464 
Net income available for common unitholders$0.55
 $0.32
 $1.24
 $5.11
Net income available for common unitholders$0.48 $0.57 $0.87 $1.10 
Earnings per Common Unit - diluted:       Earnings per Common Unit - diluted:
Numerator:       Numerator:
Income from continuing operations$59,549
 $33,840
 $132,588
 $95,510
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations(315) (319) (914) (941)
Net incomeNet income$52,602 $61,844 $94,705 $118,699 
Net (income) attributable to noncontrolling interests in consolidated affiliatesNet (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Distributions on Preferred Units(623) (624) (1,869) (1,877)Distributions on Preferred Units(622)(621)(1,243)(1,243)
Income from continuing operations available for common unitholders58,611
 32,897
 129,805
 92,692
Income from discontinued operations available for common unitholders—
 —
 —
 418,593
Net income available for common unitholders$58,611
 $32,897
 $129,805
 $511,285
Net income available for common unitholders$51,714 $60,929 $92,939 $116,881 
Denominator:       Denominator:
Denominator for basic earnings per Common Unit – weighted average units105,660
 101,422
 104,914
 100,142
Denominator for basic earnings per Common Unit – weighted average units (1)
Denominator for basic earnings per Common Unit – weighted average units (1)
107,240 106,535 107,135 106,464 
Add:       Add:
Stock options using the treasury method76
 108
 79
 94
Stock options using the treasury method5 20 10 14 
Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions (1)
105,736
 101,530
 104,993
 100,236
Earnings per Common Unit - diluted:       
Income from continuing operations available for common unitholders$0.55
 $0.32
 $1.24
 $0.92
Income from discontinued operations available for common unitholders—
 —
 —
 4.18
Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversionsDenominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions107,245 106,555 107,145 106,478 
Net income available for common unitholders$0.55
 $0.32
 $1.24
 $5.10
Net income available for common unitholders$0.48 $0.57 $0.87 $1.10 
__________
(1)Includes all unvested restricted stock where distributions on such restricted stock are non-forfeitable.

(1)Includes all unvested restricted stock where distributions on such restricted stock are non-forfeitable.
27
29
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

14.    Segment Information
13.Segment Information


The following tables summarize the rental and other revenues and net operating income, the primary industry property-level performance metric used by our chief operating decision maker and which is defined as rental and other revenues less rental property and other expenses, for each of our reportable segments.


Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Rental and Other Revenues:
Office:
Atlanta$35,447 $35,738 $71,001 $71,713 
Charlotte16,874 8,917 33,818 18,051 
Nashville42,606 35,578 86,053 70,737 
Orlando13,352 12,730 26,664 25,289 
Pittsburgh14,908 13,949 29,854 28,567 
Raleigh45,535 37,655 91,831 74,697 
Richmond10,432 11,751 20,965 23,213 
Tampa23,556 25,886 47,579 50,310 
Total Office Segment202,710 182,204 407,765 362,577 
Other1,131 3,298 2,454 6,730 
Total Rental and Other Revenues$203,841 $185,502 $410,219 $369,307 
Net Operating Income:
Office:
Atlanta$23,267 $23,622 $46,948 $47,622 
Charlotte12,807 7,035 25,857 14,287 
Nashville31,417 25,824 63,939 50,817 
Orlando8,262 7,782 16,399 15,494 
Pittsburgh9,051 8,411 17,912 17,300 
Raleigh34,020 28,444 68,735 56,580 
Richmond7,363 8,234 14,588 16,287 
Tampa14,615 17,857 30,561 34,497 
Total Office Segment140,802 127,209 284,939 252,884 
Other670 2,067 1,489 4,008 
Total Net Operating Income141,472 129,276 286,428 256,892 
Reconciliation to net income:
Depreciation and amortization(69,742)(61,949)(139,409)(122,876)
Impairments of real estate assets(35,000)— (35,000)— 
General and administrative expenses(9,591)(10,107)(23,147)(20,059)
Interest expense(25,027)(19,001)(49,420)(38,769)
Other income120 332 483 644 
Gains on disposition of property50,044 22,862 54,144 41,799 
Equity in earnings of unconsolidated affiliates326 431 626 1,068 
Net income$52,602 $61,844 $94,705 $118,699 

30
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Rental and Other Revenues:       
Office:       
Atlanta$36,471
 $33,340
 $106,027
 $101,188
Greensboro5,370
 5,167
 15,956
 15,351
Memphis11,459
 12,330
 35,077
 36,275
Nashville28,945
 23,979
 81,471
 71,760
Orlando13,309
 11,678
 38,183
 34,360
Pittsburgh14,719
 14,386
 44,420
 43,721
Raleigh30,524
 27,767
 90,167
 84,013
Richmond11,152
 11,414
 33,200
 33,420
Tampa25,072
 22,836
 72,578
 67,088
Total Office Segment177,021
 162,897
 517,079
 487,176
Other3,164
 3,372
 9,797
 10,812
Total Rental and Other Revenues$180,185
 $166,269
 $526,876
 $497,988

28
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)



13.Segment Information - Continued

15.    Subsequent Events

On July 19, 2022, we announced a series of planned investment activities. First, we have entered the Dallas market through the formation of joint ventures with Granite Properties to develop the following Class AA assets:

ProjectBBDOwn %Rentable Square FeetPre Leased %Anticipated Total Investment (at 100%)Estimated CompletionEstimated Stabilization
($ in thousands)
Granite Park SixFrisco/Plano50%422,00012%$200,000 4Q 231Q 26
23SpringsUptown50%642,00017%$460,000 1Q 251Q 28

The joint ventures were formed on July 12, 2022. In connection with the formation, we agreed to contribute our 50.0% share of the equity required to fund the development projects, $55.7 million of which was funded on the formation date. The joint ventures have obtained construction loans for both projects of $380.0 million in the aggregate. We plan to fund our entry into the Dallas market, including our share of the equity required to construct Granite Park Six and 23Springs, by exiting the Pittsburgh market. Our Pittsburgh assets, which consist of 2,155,000 square feet of office that was 92.9% occupied as of June 30, 2022, represent approximately 6% of our overall net operating income. We can provide no assurances, however, that we will dispose of any of our assets in Pittsburgh on favorable terms, or at all, because the dispositions are subject to the negotiation and execution of definitive and binding purchase and sale agreements and would then be subject to the buyers’ completion of satisfactory due diligence and other customary closing conditions. There is no pre-determined timetable for our Pittsburgh market exit.

31
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net Operating Income:       
Office:       
Atlanta$23,600
 $20,718
 $68,150
 $63,681
Greensboro3,367
 3,187
 10,116
 9,544
Memphis6,930
 7,753
 21,474
 22,566
Nashville21,000
 17,042
 59,250
 51,470
Orlando7,999
 6,633
 23,007
 19,638
Pittsburgh8,822
 8,482
 26,396
 25,193
Raleigh21,960
 19,525
 65,345
 59,935
Richmond6,987
 7,602
 22,453
 22,718
Tampa15,972
 14,349
 46,297
 42,037
Total Office Segment116,637
 105,291
 342,488
 316,782
Other2,314
 2,358
 6,904
 7,491
Total Net Operating Income118,951
 107,649
 349,392
 324,273
Reconciliation to income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates:       
Depreciation and amortization(56,973) (52,923) (168,934) (161,734)
Impairments of real estate assets(1,445) —
 (1,445) —
General and administrative expenses(9,247) (9,863) (29,787) (29,327)
Interest expense(17,191) (18,566) (51,208) (58,756)
Other income558
 833
 2,632
 1,884
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates$34,653
 $27,130
 $100,650
 $76,340

29
Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

14.Subsequent Events

On October 18, 2017, we entered into a new $600.0 million unsecured revolving credit facility, which replaced our previously existing $475.0 million revolving credit facility, and includes an accordion feature that allows for an additional $400.0 million of borrowing capacity subject to additional lender commitments. Our new revolving credit facility is scheduled to mature in January 2022. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. The interest rate on the new facility at our current credit ratings is LIBOR plus 100 basis points and the annual facility fee is 20 basis points. The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services. The financial and other covenants under the new facility are similar to our previous credit facility. We expect to incur approximately $3.5 million of debt issuance costs, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility. We expect to record $0.1 million of loss on debt extinguishment. At October 18, 2017, we had $200.0 million outstanding under our new revolving credit facility and $0.6 million of outstanding letters of credit, which reduces the availability on the credit facility. As a result, the unused capacity of our new revolving credit facility at October 18, 2017 was $399.4 million.

We simultaneously modified our $200.0 million, five-year unsecured bank term loan, which was originally scheduled to mature in January 2019. The modified term loan is now scheduled to mature in November 2022 and the interest rate, based on current credit ratings, was reduced from LIBOR plus 120 basis points to LIBOR plus 110 basis points. We expect to incur approximately $1.1 million of debt issuance costs, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of the modified loan. We expect to record $0.4 million of loss on debt extinguishment.

We also simultaneously prepaid without penalty $125.0 million on a $350.0 million unsecured bank term loan which is scheduled to mature in June 2020. We expect to record $0.4 million of loss on debt extinguishment related to this prepayment.

On October 19, 2017, the Company declared a cash dividend of $0.44 per share of Common Stock, which is payable on December 5, 2017 to stockholders of record as of November 14, 2017.



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The Company is a fully integrated office real estate investment trust ("REIT"(“REIT”) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Greensboro, Memphis,Charlotte, Dallas, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. The Company conducts its activities through the Operating Partnership. The Operating Partnership is managed by the Company, its sole general partner. Additional information about us can be found on our website at www.highwoods.com. Information on our website is not part of this Quarterly Report.


You should read the following discussion and analysis in conjunction with the accompanying Consolidated Financial Statements and related notes contained elsewhere in this Quarterly Report.


Disclosure Regarding Forward-Looking Statements


Some of the information in this Quarterly Report may contain forward-looking statements. Such statements include, in particular, statements about our plans, strategies and prospects under this section. You can identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved. When considering such forward-looking statements, you should keep in mind the following important factors that could cause our actual results to differ materially from those contained in any forward-looking statement:statement, including the following:


•the closing of the planned acquisition of 650 South Tryon may not occur on the terms described in this report or at all;

•buyers may not be available and pricing may not be adequate with respect to planned dispositions of non-core assets;

•comparable sales data on which we based our expectations with respect to the sales price of non-core assets may not reflect current market trends;

•the extent to which the ongoing COVID-19 pandemic impacts our financial condition, results of operations and cash flows depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its impact on the U.S. economy and potential changes in customer behavior that could adversely affect the use of and demand for office space;

•the financial condition of our customers could deteriorate;deteriorate or further worsen, which could be further exacerbated by the COVID-19 pandemic;


•our assumptions regarding potential losses related to customer financial difficulties due to the COVID-19 pandemic or otherwise could prove incorrect;

•counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity;

•we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases;


•we may not be able to lease our newly constructed buildings as quickly or on as favorable terms as originally anticipated;


•we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects as quickly or on as favorable terms as anticipated;


•development activity by our competitors in our existing markets could result in an excessive supply relative to customer demand;


•our markets may suffer declines in economic and/or office employment growth;


•unanticipated increases in interest rates could increase our debt service costs;


•unanticipated increases in operating expenses could negatively impact our operating results;


32
Table of Contents
•natural disasters and climate change could have an adverse impact on our cash flow and operating results;

•we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and


•the Company could lose key executive officers.


This list of risks and uncertainties, however, is not intended to be exhaustive. You should also review the other cautionary statements we make in “Business –“Item 1A. Risk Factors” set forth in our 20162021 Annual Report on Form 10-K. Given these uncertainties, you should not place undue reliance on forward-looking statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the occurrence of unanticipated events.



Executive Summary

We are in the work-placemaking business. We believe that in creating environments and experiences where the best and brightest can achieve together what they cannot apart, we deliver greater value to our customers, their teammates and, in turn, our stockholders. Our simple and straight-forward strategy is to own and manage high-quality workplaces in the BBDs within our footprint, maintain a strong balance sheet to be opportunistic throughout economic cycles, employ a talented and dedicated team and communicate transparently with all stakeholders. We focus on owning and managing buildings in the most dynamic and vibrant BBDs. BBDs are highly-energized and amenitized workplace locations that enhance our customers’ ability to attract and retain talent. They are both urban and suburban. Providing the most talent-supportive workplace options in these environments is core to our work-placemaking strategy.

Our Strategic Plan focuses on:
investment strategy is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets;

improvingmarkets. A core component of this strategy is to continuously strengthen the operating resultsfinancial and operational performance, resiliency and long-term growth prospects of our properties through concentrated leasing, asset management, cost control and customer service efforts;

developing and acquiring office buildings in BBDs that improve the overall quality of ourexisting in-service portfolio and generate attractive returns over the long term for our stockholders;

disposing ofrecycle those properties that no longer considered to be core assets primarily due to location, age, quality and/or overall strategic fit; and

maintaining a balance sheet with ample liquidity to meet our funding needs and growth prospects.criteria.
Revenues


Our operating results depend heavily on successfully leasing and operating the office space in our portfolio. Economic growth and office employment levels in our core markets are important factors, among others, in predicting our future operating results. Since March 2020, the COVID-19 pandemic has also had a significant impact on the U.S. economy. While all buildings and parking facilities have remained open for business, the usage of our assets has continued to remain lower than pre-pandemic levels. As a result, compared to pre-pandemic levels, parking and parking-related revenues have continued to be low, largely offsetting reduced operating expenses, net of expense recoveries. Although difficult to estimate, we currently expect usage will gradually increase throughout the remainder of 2022. Factors that could cause actual results to differ materially from our current expectations are set forth under “Disclosure Regarding Forward-Looking Statements.”

Revenues

The key components affecting our rental and other revenues are average occupancy, rental rates, cost recovery income, new developments placed in service, acquisitions and dispositions. Average occupancy generally increases during times of improving economic growth, as our ability to lease space outpaces vacancies that occur upon the expirations of existing leases. Average occupancy generally declines during times of slower or negative economic growth, when new vacancies tend to outpace our ability to lease space. Average occupancy could also be negatively impacted by potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, resulting from the COVID-19 pandemic, which could materially and negatively impact the future demand for office space, resulting in slower overall leasing. Asset acquisitions, dispositions and new developments placed in service also directly impact our rental revenues and could impact our average occupancy, depending upon the occupancy rate of the properties that are acquired, sold or placed in service. A further indicator of the predictability of future revenues is the expected lease expirations of our portfolio. As a result, in addition to seeking to increase our average occupancy by leasing current vacant space, we also concentrate our leasing efforts on renewing existing leases prior to expiration. For more information regarding our lease expirations, see "Properties“Properties - Lease Expirations"Expirations” in our 20162021 Annual Report on Form 10-K. Occupancy in our office portfolio decreased from 92.9%91.2% at December 31, 20162021 to 92.2%90.6% at SeptemberJune 30, 2017 primarily due2022. We expect average occupancy for our office portfolio to scheduled expirations in Nashville and Atlanta.be approximately 90.0% to 91.0% for the remainder of 2022.

33
Table of Contents
Whether or not our rental revenue tracks average occupancy proportionally depends upon whether GAAP rents under signed new and renewal leases are higher or lower than the GAAP rents under expiring leases. Annualized rental revenues from second generation leases expiring during any particular year are typically less than 15% of our total annual rental revenues. The following table sets forth information regarding second generation office leases signed during the thirdsecond quarter of 20172022 (we define second generation office leases as leases with new customers and renewals of existing customers in office space that has been previously occupied under our ownership and leases with respect to vacant space in acquired buildings):

New Renewal All OfficeNewRenewalAll Office
Leased space (in rentable square feet)193,911
 910,118
 1,104,029
Leased space (in rentable square feet)242,552 439,971 682,523 
Average term (in years - rentable square foot weighted)7.8
 4.1
 4.8
Average term (in years - rentable square foot weighted)6.1 4.9 5.3 
Base rents (per rentable square foot) (1)
$28.23
 $25.71
 $26.15
Base rents (per rentable square foot) (1)
$32.85 $32.19 $32.43 
Rent concessions (per rentable square foot) (1)
(0.69) (0.26) (0.34)
Rent concessions (per rentable square foot) (1)
(1.65)(1.08)(1.28)
GAAP rents (per rentable square foot) (1)
$27.54
 $25.45
 $25.81
GAAP rents (per rentable square foot) (1)
$31.20 $31.11 $31.15 
Tenant improvements (per rentable square foot) (1)
$3.99
 $2.32
 $2.61
Tenant improvements (per rentable square foot) (1)
$5.59 $2.69 $3.72 
Leasing commissions (per rentable square foot) (1)
$1.04
 $0.78
 $0.83
Leasing commissions (per rentable square foot) (1)
$1.14 $0.76 $0.89 
__________
(1)
(1)    Weighted average per rentable square foot on an annual basis over the lease term.


Annual combined GAAP rents for new and renewal leases signed in the thirdsecond quarter were $25.81$31.15 per rentable square foot, or 11.3%,12.6% higher compared to previous leases in the same office spaces.



We strive to maintain a diverse, stable and creditworthy customer base. We have an internal guideline whereby customers that account for more than 3% of our annualized revenues are periodically reviewed with the Company'sCompany’s Board of Directors. As of SeptemberJune 30, 2017, no customer2022, Bank of America (4.0%), Asurion (3.8%) and the Federal Government (3.1%) accounted for more than 3% of our annualized cash revenues other than the Federal Government, which accounted for less than 6% of our cash revenues on an annualized basis.revenues.


Expenses

Our expenses primarily consist of rental property expenses, depreciation and amortization, general and administrative expenses and interest expense. From time to time, expenses also include impairments of real estate assets. Rental property expenses are expenses associated with our ownership and operation of rental properties and include expenses that vary somewhat proportionately to occupancy and usage levels, such as janitorial services and utilities, and expenses that do not vary based on occupancy, such as property taxes and insurance. Depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year, unless we buy, place in service or sell assets, since our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed lives. General and administrative expenses consist primarily of management and employee salaries and benefits, corporate overhead and short and long-term incentive compensation.


Net Operating Income


Whether or not we record increasing same property net operating income (“NOI”) in our same property portfolio typically depends upon our ability to garner higher rental revenues, whether from higher average occupancy, higher GAAP rents per rentable square foot or higher cost recovery income, that exceed any corresponding growth in operating expenses. Same property NOI from continuing operations was $3.3$0.4 million, or 3.2%0.4%, higherlower in the thirdsecond quarter of 20172022 as compared to 20162021 due to an increase of $3.7 million in same property revenues of $4.2 millionexpenses offset by an increase of $0.9$3.3 million in same property expenses.revenues. We expect same property revenues to approximate the increase in same property expenses from the anticipated gradual increase in usage of our assets. As a result, we expect same property NOI to be relatively consistent for the remainder of 2022 as compared to 2021. We expect same property revenues to be higher due to higher GAAP rents per rentable square foot and higher cost recovery and parking income.


In addition to the effect of same property NOI, whether or not NOI from continuing operations increases typically depends upon whether the NOI from our acquired properties and development properties placed in service exceeds the NOI from sold properties.property dispositions. NOI from continuing operations was $11.3$12.2 million, or 10.5%9.4%, higher in the second quarter of 2022 as compared to 2021 primarily due to the acquisition of real estate assets from Preferred Apartment Communities, Inc. (“PAC”) in the third quarter of 2017 as compared to 2016 due to the impact of2021 and development properties placed in service, and acquisitions,partially offset by NOI lost from soldproperty dispositions and lower same property NOI. We expect NOI to be higher for the remainder of 2022 as compared to 2021 due to the acquisitions of real estate assets from PAC and development properties not classified as discontinued operations.placed in service, partially offset by NOI lost from property dispositions.

34
Table of Contents

Cash Flows


In calculating net cash related to operating activities, depreciation and amortization, which are non-cash expenses, are added back to net income. We have historically generated a positive amount of cash from operating activities. From period to period, cash flow from operations depends primarily upon changes in our net income, as discussed more fully below under “Results of Operations,” changes in receivables and payables and net additions or decreases in our overall portfolio.


Net cash related to investing activities generally relates to capitalized costs incurred for leasing and major building improvements and our acquisition, development, disposition and joint venture activity. During periods of significant net acquisition and/or development activity, our cash used in such investing activities will generally exceed cash provided by investing activities, which typically consists of cash received upon the sale of properties and distributions from our joint ventures.


Net cash related to financing activities generally relates to distributions, incurrence and repayment of debt, and issuances, repurchases or redemptions of Common Stock, Common Units and Preferred Stock. We use a significant amount of our cash to fund distributions. Whether or not we have increases in the outstanding balances of debt during a period depends generally upon the net effect of our acquisition, disposition, development and joint venture activity. We generally use our revolving credit facility for daily working capital purposes, which means that during any given period, in order to minimize interest expense, we may record significant repayments and borrowings under our revolving credit facility.


For a discussion regarding dividends and distributions, see “Liquidity and Capital Resources - Dividends and Distributions.”

Liquidity and Capital Resources

We intendcontinue to maintain a conservative and flexible balance sheet with accessand believe we have ample liquidity to multiple sourcesfund our operations and growth prospects. As of debtJuly 19, 2022, we had approximately $22.0 million of available cash and equity capital and sufficient availability under$130.0 million drawn on our $750.0 million revolving credit facility, that allows uswhich is scheduled to capitalize on favorable developmentmature in March 2026, assuming we exercise our option to extend the maturity date for two additional six-month periods. At June 30, 2022, our leverage ratio, as measured by the ratio of our mortgages and acquisition opportunities as they arise.notes payable and outstanding preferred stock to the undepreciated book value of our assets, was 39.3% and there were 107.7 million diluted shares of Common Stock outstanding.


Rental and other revenues are our principal source of funds to meet our short-term liquidity requirements. Other sources of funds for short-term liquidity needs include available working capital and borrowings under our new revolving credit facility, which had $399.4$619.9 million of availability at October 18, 2017.July 19, 2022. Our short-term liquidity requirements primarily consist of operating

expenses, interest and principal amortization on our debt, distributions and capital expenditures, including building improvement costs, tenant improvement costs and lease commissions. Building improvements are capital costs to maintain or enhance existing buildings not typically related to a specific customer. Tenant improvements are the costs required to customize space for the specific needs of customers. We anticipate that our available cash and cash equivalents and cash provided by operating activities and planned financing activities, including borrowings under our revolving credit facility, will be adequate to meet our short-term liquidity requirements. We use our revolving credit facility for working capital purposes and for the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt. The continuedContinued ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.

We generally believe existing cash and rental and other revenues will continue to be sufficient to fund short-term liquidity needs such as funding operating and general and administrative expenses, paying interest expense, maintaining our existing quarterly dividend and funding existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions.

Our long-term liquidity uses generally consist of the retirement or refinancing of debt upon maturity, funding of building improvements, new building developments and land infrastructure projects and funding acquisitions of buildings and development land. Our expected future capital expenditures for started and/or committed new development projects were approximately $226 million at September 30, 2017. Additionally, we may, from time to time, retire some or all of our remaining outstanding Preferred Stockequity and/or unsecured debt securities through redemptions, open market repurchases, privately negotiated acquisitions or otherwise.

35
Table of Contents
We expect to meet our long-term liquidity needs through a combination of:

•cash flow from operating activities;

•bank term loans and borrowings under our revolving credit facility;

•the issuance of unsecured debt;

•the issuance of secured debt;

•the issuance of equity securities by the Company or the Operating Partnership; and

•the disposition of non-core assets.


We have no debt scheduled to mature prior to 2026 other than our $250.0 million principal amount of unsecured notes that are scheduled to mature January 2023. We generally expectbelieve we will be able to growsatisfy these obligations with existing cash, borrowings under our company on a leverage-neutral basis. At September 30, 2017, our leverage ratio, as measured byrevolving credit facility, new bank term loans, issuance of other unsecured debt, mortgage debt and/or proceeds from the ratiosale of our mortgages and notes payable and outstanding preferred stock to the undepreciated book value of our assets, was 34.7% and there were 106.2 million diluted shares of Common Stock outstanding.additional non-core assets.


Investment Activity


As noted above, a key tenet of our strategic plan is to continuously upgrade the quality of our office portfolio through acquisitions, dispositions and development. We generally seek to acquire and develop office buildings that improve the average quality of our overall portfolio and deliver consistent and sustainable value for our stockholders over the long-term. Whether or not an asset acquisition or new development results in higher per share net income or funds from operations ("FFO"(“FFO”) in any given period depends upon a number of factors, including whether the NOI for any such period exceeds the actual cost of capital used to finance the acquisition or development. Additionally, given the length of construction cycles, development projects are not placed in service until, in some cases, several years after commencement. Sales of non-core assets could result in lower per share net income or FFO in any given period in the event the return on the resulting use of proceeds does not exceed the capitalization rate on the sold properties.


On July 19, 2022, we announced a series of planned investment activities. First, we have entered the Dallas market through the formation of joint ventures with Granite Properties to develop the following Class AA assets:

ProjectBBDOwn %Rentable Square Feet
Granite Park SixFrisco/Plano50%422,000
23SpringsUptown50%642,000

The joint ventures were formed on July 12, 2022. In connection with the formation, we agreed to contribute our 50.0% share of the equity required to fund the development projects, $55.7 million of which was funded on the formation date. The joint ventures have obtained construction loans for both projects of $380.0 million in the aggregate. We plan to fund our entry into the Dallas market, including our share of the equity required to construct Granite Park Six and 23Springs, by exiting the Pittsburgh market. Our Pittsburgh assets, which consist of 2,155,000 square feet of office that was 92.9% occupied as of June 30, 2022, represent approximately 6% of our overall net operating income. We can provide no assurances, however, that we will dispose of any of our assets in Pittsburgh on favorable terms, or at all, because the dispositions are subject to the negotiation and execution of definitive and binding purchase and sale agreements and would then be subject to the buyers’ completion of satisfactory due diligence and other customary closing conditions. There is no pre-determined timetable for our Pittsburgh market exit.

36
Table of Contents

Results of Operations


Three Months Ended SeptemberJune 30, 20172022 and 20162021

Rental and Other Revenues

Rental and other revenues were $13.9$18.3 million, or 8.4%9.9%, higher in the thirdsecond quarter of 20172022 as compared to 20162021 primarily due to the acquisition of real estate assets from PAC, development properties placed in service and higher same property revenues, and acquisitions, which increased rental and other revenues by $7.9$16.0 million, $4.2$7.6 million and $1.5$3.3 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher termination feesaverage occupancy and higher cost recovery income.and parking income, partially offset by higher credit losses. These increases were partlypartially offset by lost revenue of $0.6$8.9 million from property dispositions. We expect rental and other revenues to be higher for the remainder of 2022 as compared to 2021 for similar reasons.



Operating Expenses

Rental property and other expenses were $2.6$6.1 million, or 4.5%10.9%, higher in the thirdsecond quarter of 20172022 as compared to 20162021 primarily due to development properties placed in service,the acquisition of real estate assets from PAC, higher same property operating expenses and acquisitions,development properties placed in service, which increased operating expenses by $1.5$4.3 million, $0.9$3.7 million and $0.4$1.2 million, respectively. Same property operating expenses were higher primarily due to higher property taxes, contract services, utilities and property insurance, partly offset by lower utilities.repairs and maintenance. These increases were partlypartially offset by a $0.3$3.0 million decrease in operating expenses from property dispositions. We expect rental property and other expenses to be higher for the remainder of 2022 as compared to 2021 for similar reasons.


Depreciation and amortization was $4.1$7.8 million, or 7.7%12.6%, higher in the thirdsecond quarter of 20172022 as compared to 20162021 primarily due to the acquisition of real estate assets from PAC, development properties placed in service and acquisitions, partlyhigher same property lease related depreciation and amortization, partially offset by fully amortized acquisition-related intangible assets and property dispositions. We expect depreciation and amortization to be higher for the remainder of 2022 as compared to 2021 for similar reasons.


WeBecause we classified all of our assets in Pittsburgh as non-core, we recorded aggregate impairmentsan impairment charge of real estate assets of $1.4$35.0 million in the thirdsecond quarter of 2017, which resulted from2022 to lower the carrying amount of EQT Plaza to its estimated fair value less costs to sell. EQT Plaza is a change616,000 square foot office building located in market-based inputs and our assumptions about the useheart of the assets.Pittsburgh’s CBD. EQT Corporation’s lease of 317,000 square feet at EQT Plaza is scheduled to expire in September 2024. There are no assurances that EQT Corporation will renew all or any of its space upon expiration of its current lease. We recorded no such impairment in 2021.


General and administrative expenses were $0.6$0.5 million, or 6.2%5.1%, lower in the thirdsecond quarter of 20172022 as compared to 20162021 primarily due to lower acquisition costs, partlylong-term equity incentive compensation, partially offset by higher company-wide base salaries, benefits and benefits.office rent. We expect general and administrative expenses to be lower for the remainder of 2022 as compared to 2021 for similar reasons.


Interest Expense

Interest expense was $1.4$6.0 million, or 7.4%31.7%, lowerhigher in the thirdsecond quarter of 20172022 as compared to 20162021 primarily due to lowerhigher average debt balances, and lowerhigher average interest rates partly offset byand lower capitalized interest. We expect interest expense to be higher for the remainder of 2022 as compared to 2021 for similar reasons.


Other Income

Other income was $0.3$0.2 million or 33.0%, lower in the thirdsecond quarter of 20172022 as compared to 20162021 primarily due to the repayments of mortgages receivablelosses on deferred compensation plan investments (which is fully offset by a corresponding decrease in 2016.general and administrative expenses).


Gains on Disposition of Property


Gains on disposition of property were $15.9$27.2 million higher in the thirdsecond quarter of 20172022 as compared to 2016 due to the net effect2021.

37
Table of the disposition activity in such periods.Contents

Equity in Earnings of Unconsolidated Affiliates


Equity in earnings of unconsolidated affiliates was $2.2$0.1 million higherlower in the thirdsecond quarter of 20172022 as compared to 20162021 primarily due to our share of the net effect of the disposition activity by certain unconsolidated affiliates in such periods, partly offset by lower occupancy in 2017.higher property taxes.


Earnings Per Common Share - Diluted

Diluted earnings per common share was $0.23 higher$0.09 lower in the thirdsecond quarter of 20172022 as compared to 20162021 due to an increasea decrease in net income for the reasons discussed above, partly offset by an increase in the weighted average Common Shares outstanding.above.


NineSix Months Ended SeptemberJune 30, 20172022 and 20162021

Rental and Other Revenues

Rental and other revenues were $28.9$40.9 million, or 5.8%11.1%, higher in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 primarily due to the acquisition of real estate assets from PAC, development properties placed in service and higher same property revenues, and acquisitions, which increased rental and other revenues by $17.7$32.6 million, $8.0$16.3 million and $4.4$9.0 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher average occupancy and higher cost recovery and parking income, partlypartially offset by lower termination fees.higher credit losses. These increases were partlypartially offset by lost revenue of $1.5$17.3 million from property dispositions.

Operating Expenses

Rental property and other expenses were $3.8$11.4 million, or 2.2%10.1%, higher in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 primarily due to the acquisition of real estate assets from PAC, higher same property operating expenses and development properties placed in service, which increased operating expenses by $8.6 million, $6.0 million and $2.5 million, respectively. Same property operating expenses were higher primarily due to higher contract services, utilities and repairs and maintenance. These increases were partially offset by a $6.0 million decrease in operating expenses from property dispositions.

Depreciation and amortization was $16.5 million, or 13.5%, higher in the first six months of 2022 as compared to 2021 primarily due to the acquisition of real estate assets from PAC, development properties placed in service and acquisitions, which increased operating expenses by $3.3 millionhigher same property lease related depreciation and $1.1 million, respectively. These increases were partlyamortization, partially offset by a $0.8 million decrease in operating expenses

from property dispositions. Same property operating expenses were relatively unchanged in the nine months ended September 30, 2017 as compared to 2016.

Depreciationfully amortized acquisition-related intangible assets and amortization was $7.2 million, or 4.5%, higher in the nine months ended September 30, 2017 as compared to 2016 primarily due to development properties placed in service, acquisitions and accelerated depreciation related to properties that are expected to be demolished, partly offset by property dispositions.

WeBecause we classified all of our assets in Pittsburgh as non-core, we recorded aggregate impairmentsan impairment charge of real estate assets of $1.4$35.0 million in the ninefirst six months endedof 2022 to lower the carrying amount of EQT Plaza to its estimated fair value less costs to sell. EQT Plaza is a 616,000 square foot office building located in the heart of Pittsburgh’s CBD. EQT Corporation’s lease of 317,000 square feet at EQT Plaza is scheduled to expire in September 30, 2017, which resulted from a change2024. There are no assurances that EQT Corporation will renew all or any of its space upon expiration of its current lease. We recorded no such impairment in market-based inputs and our assumptions about the use of the assets.2021.


General and administrative expenses were $0.5$3.1 million, or 1.6%15.4%, higher in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 primarily due to higher company-wide baselong-term equity incentive compensation, salaries, benefits and incentive compensation, partly offset by lower acquisition costs.office rent.


Interest Expense


Interest expense was $7.5$10.7 million, or 12.8%27.5%, lowerhigher in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 primarily due to lowerhigher average debt balances lower average interest rates and higherlower capitalized interest.

Other Income


Other income was $0.7$0.2 million or 39.7%, higherlower in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 primarily due to gainslosses on deferred compensation plan investments (which is fully offset by a corresponding decrease in general and administrative expenses), partially offset by losses on debt extinguishment in 2017.2021.


Gains on Disposition of Property and Net

Gains on Dispositiondisposition of Discontinued Operations

Total gainsproperty were $403.5$12.3 million lowerhigher in the ninefirst six months ended September 30, 2017of 2022 as compared to 2016 due to the sales2021.

38
Table of substantially all of our wholly-owned Country Club Plaza assets in Kansas City (which we refer to as the “Plaza assets”) in 2016.Contents

Equity in Earnings of Unconsolidated Affiliates


Equity in earnings of unconsolidated affiliates was $1.7 million, or 34.9%, higher in the nine months ended September 30, 2017 as compared to 2016 primarily due to our share of the net effect of the disposition activity by certain unconsolidated affiliates in such periods, partly offset by lower occupancy in 2017.

Income From Discontinued Operations

Income from discontinued operations was $4.1$0.4 million lower in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 primarily due to the salesacquisition of our joint venture partner’s 75.0% interest in our Highwoods DLF Forum, LLC joint venture (the “Forum”) in the Plaza assets in 2016.first quarter of 2021.

Earnings Per Common Share - Diluted


Diluted earnings per common share was $3.85$0.23 lower in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 due to gains from the sales of the Plaza assetsa decrease in 2016 and an increase in the weighted average Common Shares outstanding, partly offset by increases innet income from continuing operations for the reasons discussed above.



39
Table of Contents

Liquidity and Capital Resources


Statements of Cash Flows

We report and analyze our cash flows based on operating activities, investing activities and financing activities. The following table sets forth the changes in the Company’s cash flows ($ in(in thousands):

Six Months Ended June 30,
20222021Change
Net Cash Provided By Operating Activities$201,898 $197,415 $4,483 
Net Cash Used In Investing Activities(69,869)(228,417)158,548 
Net Cash Used In Financing Activities(91,559)(99,809)8,250 
Total Cash Flows$40,470 $(130,811)$171,281 
 Nine Months Ended
September 30,		  
 2017 2016 Change
Net Cash Provided By Operating Activities$270,211
 $232,385
 $37,826
Net Cash Provided By/(Used In) Investing Activities(176,565) 305,084
 (481,649)
Net Cash Used In Financing Activities(138,272) (536,118) 397,846
Total Cash Flows$(44,626) $1,351
 $(45,977)

The increasechange in net cash provided by operating activities in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 was primarily due to higher net cash from the operations of acquired real estate assets from PAC, same properties and development properties placed in service, samepartially offset by property dispositions and changes in operating assets and liabilities. We expect net cash related to operating activities to be higher for the remainder of 2022 as compared to 2021 due to higher net cash from the operations of acquired real estate assets from PAC and development properties and acquisitions, the timing of cash paid for operating expenses and the settlement of cash flow hedges.placed in service, partially offset by property dispositions.

The change in net cash provided by/(used in)in investing activities in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 was primarily due to the acquisition of our joint venture partner’s 75.0% interest in the Forum in 2021, greater net proceeds from the salesdisposition activity in 2022, higher payments of the Plaza assetsearnest money deposits in 2016, partly2021 and higher investments in development in-process in 2021, partially offset by higher acquisition activity in 2016.2022, higher investments in tenant improvements in 2022 and our investment in the 2827 Peachtree joint venture in 2022. We expect uses of cash for investing activities for the remainder of 2022 to be primarily driven by our planned acquisition of 650 South Tryon at Legacy Union in Charlotte for a total investment of $203.0 million, which is scheduled to close in August 2022, the funding of our 50% interest in our newly formed joint ventures with Granite Properties and whether or not we acquire and commence development of additional office buildings in the BBDs of our markets. We expect these uses of cash for investing activities will be partially offset by proceeds from property dispositions for the remainder of 2022.

The decreasechange in net cash used in financing activities in the ninefirst six months ended September 30, 2017of 2022 as compared to 20162021 was primarily due to higher net debt borrowings in 2017, partly offset by2022. Assuming the paymentnet effect of a special dividend declaredour acquisition, disposition and development activity in the fourth quarter of 2016 and lower proceeds from the issuance of2022 results in an increase to our assets, we would expect outstanding debt and/or Common Stock in 2017.balances to increase.

Capitalization


The following table sets forth the Company’s capitalization (in thousands, except per share amounts):

June 30,
2022		December 31,
2021
Mortgages and notes payable, net, at recorded book value$2,804,314 $2,788,915 
Preferred Stock, at liquidation value$28,821 $28,821 
Common Stock outstanding105,185 104,893 
Common Units outstanding (not owned by the Company)2,474 2,505 
Per share stock price at period end$34.19 $44.59 
Market value of Common Stock and Common Units$3,680,861 $4,788,877 
Total capitalization$6,513,996 $7,606,613 
 September 30,
2017		 December 31,
2016
Mortgages and notes payable, net, at recorded book value$1,966,398
 $1,948,047
Preferred Stock, at liquidation value$28,892
 $28,920
Common Stock outstanding103,249
 101,666
Common Units outstanding (not owned by the Company)2,831
 2,839
Per share stock price at period end$52.09
 $51.01
Market value of Common Stock and Common Units$5,525,707
 $5,330,800
Total capitalization$7,520,997
 $7,307,767

At SeptemberJune 30, 2017,2022, our mortgages and notes payable and outstanding preferred stock represented 26.5%43.5% of our total capitalization and 34.7%39.3% of the undepreciated book value of our assets. See also "Executive“Executive Summary - Liquidity and Capital Resources."”
40
Table of Contents

Our mortgages and notes payable as of SeptemberJune 30, 20172022 consisted of $99.4$488.0 million of secured indebtedness with a weighted average interest rate of 4.0%3.63% and $1,875.2$2,332.9 million of unsecured indebtedness with a weighted average interest rate of 3.54%3.47%. The secured indebtedness was collateralized by real estate assets with an aggregate undepreciated book value of $147.7 million.$732.3 million. As of SeptemberJune 30, 2017, $557.02022, $290.0 million of our debt does not bear interest at fixed rates or is not protected by interest rate hedge contracts.

Investment Activity

In the normal course of business, we regularly evaluate potential acquisitions. As a result, from time to time, we may have one or more potential acquisitions under consideration that are in varying stages of evaluation, negotiation or due diligence, including potential acquisitions that are subject to non-binding letters of intent or enforceable contracts. Consummation of any

transaction is subject to a number of contingencies, including the satisfaction of customary closing conditions. No assurances can be provided that we will acquire any properties in the future. See "Item“Item 1A. Risk Factors - Risks Related to our Capital Recycling Activity - Recent and future acquisitions and development properties may fail to perform in accordance with our expectations and may require renovation and development costs exceeding our estimates"estimates” in our 20162021 Annual Report on Form 10-K.


During the thirdsecond quarter of 2017,2022, we acquired land in Charlotte for an aggregate purchase price, including capitalized acquisition costs, of $27.0 million.

During the second quarter of 2022, we also agreed to acquire 650 South Tryon at Legacy Union in Charlotte’s Uptown CBD submarket for a total investment of $203.0 million, including $3.9 million of anticipated leasing capital expenditures to bring the property to stabilization. 650 South Tryon, which delivered in late 2020 and is currently 79% leased, is a trophy, LEED gold-certified office building encompassing 367,000 square feet. 650 South Tryon is immediately adjacent and connected to Company-owned Bank of America Tower at Legacy Union, a trophy, LEED gold-certified office building encompassing 841,000 square feet that delivered in 2019. The acquisition of 650 South Tryon is scheduled to close in August 2022. We have posted earnest money deposits totaling $37.5 million that are non-refundable except in limited circumstances.

During the second quarter of 2022, we sold a total of 12office buildings and land in Atlanta, Greensboro and Tampa for an aggregate sale price of $78.0$100.7 million (before closing credits to buyerbuyers of $2.5$1.1 million) and recorded aggregate gains on disposition of property of $19.8$50.0 million.

During the third quarter of 2017, we recorded aggregate impairments of real estate assets of $1.4 million, which resulted from a change in market-based inputs and our assumptions about the use of the assets.


As of SeptemberJune 30, 2017,2022, we were developing 0.71.4 million rentable square feet of office properties.properties, which includes the 1.1 million rentable square feet for the development projects in our newly formed joint ventures with Granite Properties. The following table summarizes these announced and in-process office developments:

PropertyMarketOwn %Consolidated (Y/N)Rentable Square Feet
Anticipated Total Investment (1)
Investment
As Of
June 30, 2022 (1)
Pre Leased %Estimated CompletionEstimated Stabilization
($ in thousands)
23Springs (2)
 Dallas50.0 %N642,000 $460,000 $— 17.1 %1Q 251Q 28
Granite Park Six (2)
 Dallas50.0 %N422,000 200,000 — 12.4 4Q 231Q 26
GlenLake III Office & Retail (3)
 Raleigh100.0 %Y218,250 94,600 19,531 14.6 3Q 231Q 26
2827 Peachtree Atlanta50.0 %N135,300 79,000 28,151 72.0 3Q 231Q 25
1,417,550 $833,600 $47,682 20.6 %
__________
(1)Includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheet.
(2)Investment includes capitalized interest only on the construction loan portion of the project.
(3)Retail portion recorded on our Consolidated Balance Sheet as land held for development, not development in-process.

41
Property Market Rentable Square Feet Anticipated Total Investment (1) Investment As Of September 30, 2017 (1) Pre-Leased Estimated Completion Estimated Stabilization
      ($ in thousands)      
Virginia Urology Richmond 87,000
 $29,140
 $11,036
 100.0% 3Q18 3Q18
751 Corporate Center Raleigh 89,700
 21,850
 5,352
 35.3
 4Q18 4Q20
MetLife III Raleigh 219,000
 64,500
 8,911
 100.0
 2Q19 2Q21
Virginia Springs I (2)
 Nashville 109,000
 34,300
 5,120
 33.8
 2Q19 3Q20
Mars Petcare - Ovation Nashville 223,700
 96,200
 12,234
 100.0
 3Q19 3Q19
    728,400
 $245,990
 $42,653
 82.1%    
Table of Contents
__________
(1)Includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheets.
(2)Recorded on our Consolidated Balance Sheets in land held for development, not development-in-process.

Financing Activity


During the first quarter of 2017,2020, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, Robert W. Baird & Co. Incorporated, BB&T Capital Markets, a division of BB&TBofA Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated,Inc., BTIG, LLC, Capital One Securities, Inc., Comerica Securities, Inc., Fifth Third Securities, Inc., Jefferies LLC, J.P. Morgan Stanley & Co.Securities LLC, MUFGRegions Securities AmericasLLC and SunTrust Robinson Humphrey, Inc. and RBC Capital Markets, LLC. Under the terms of the equity distribution agreements, the Company may offer and sell up to $300.0 million in aggregate gross sales price of shares of Common Stock from time to time through such firms, acting as agents of the Company or as principals. Sales of the shares, if any, may be made by means of ordinary brokers’ transactions on the New York Stock Exchange (“NYSE”) or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices or as otherwise agreed with any of such firms.firms (which may include block trades). There were no shares of Common Stock issued under these agreements during the second quarter of 2022.


On October 18, 2017, we entered into a new $600.0Our $750.0 million unsecured revolving credit facility which replaced our previously existing $475.0 million revolving credit facility,is scheduled to mature in March 2025 and includes an accordion feature that allows for an additional $400.0 million of borrowing capacity subject to additional lender commitments. Our new revolving credit facility is scheduled to mature in January 2022. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. TheDuring the second quarter of 2022, in connection with the modification of our $200.0 million term loan as discussed below, the interest rate on the newour revolving credit facility at our current credit ratings iswas converted from LIBOR plus 10090 basis points to SOFR plus a related spread adjustment of 10 basis points and thea borrowing spread of 85 basis points, based on current credit ratings. The annual facility fee is 20 basis points. The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services. The financialWe may be entitled to a temporary reduction in the interest rate of one basis point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. There was $90.0 million and other covenants$130.0 million outstanding under our revolving credit facility at June 30, 2022 and July 19, 2022, respectively. At both June 30, 2022 and July 19, 2022, we had $0.1 million of outstanding letters of credit which reduces the new facility are similar toavailability on our previousrevolving credit facility. As a result, the unused capacity of our revolving credit facility at June 30, 2022 and July 19, 2022 was $659.9 million and $619.9 million, respectively.

During the second quarter of 2022, we modified our $200.0 million unsecured bank term loan to extend the maturity date from November 2022 to May 2026. As part of this modification, we also obtained a $150.0 million delayed-draw term loan, which must be drawn in its entirety by August 2022, that is scheduled to mature in May 2027. The interest rate, based on current credit ratings, is SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 95 basis points. The interest rate is based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services. We expectmay be entitled to incur approximately $3.5a temporary reduction in the interest rate of one basis point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. We incurred $2.7 million of debt issuance costs, which will beare being amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility. We expect to record $0.1 million of loss on debt extinguishment. At October 18, 2017, we had $200.0 million outstanding under our new revolving credit facility and $0.6 million of outstanding letters of credit, which reduces the availability on the credit facility. As a result, the unused capacity of our new revolving credit facility at October 18, 2017 was $399.4 million.

We simultaneously modified our $200.0 million, five-year unsecured bank term loan, which was originally scheduled to mature in January 2019. The modified term loan is now scheduled to mature in November 2022 and the interest rate, based on current credit ratings, was reduced from LIBOR plus 120 basis points to LIBOR plus 110 basis points. We expect to incurloan.

approximately $1.1 million of debt issuance costs, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of the modified loan. We expect to record $0.4 million of loss on debt extinguishment.

We also simultaneously prepaid without penalty $125.0 million on a $350.0 million unsecured bank term loan which is scheduled to mature in June 2020. We expect to record $0.4 million of loss on debt extinguishment related to this prepayment.


We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt. Although we expect to remain in compliance with these covenants and ratios for at least the next year, depending upon our future operating performance, property and financing transactions and general economic conditions, we cannot assure you that we will continue to be in compliance.


Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on theour revolving credit facility, the lenders having at least 51.0% of the total commitments under theour revolving credit facility can accelerate all borrowings then outstanding, and we could be prohibited from borrowing any further amounts under our revolving credit facility, which would adversely affect our ability to fund our operations. In addition, certain of our unsecured debt agreements contain cross-default provisions giving the unsecured lenders the right to declare a default if we are in default under more than $30.0$35.0 million with respect to other loans in some circumstances.


The indenture that governs the Operating Partnership’s outstanding unsecured notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0% in principal amount of any series of notes can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.


We may not be able to repay, refinance or extend any or all of our debt at maturity or upon any acceleration. If we refinance any refinancing is donedebt at higher interest rates, the increased interest expense could adversely affect our cash flow and ability to pay distributions. Any such refinancing couldWe may also imposebe subject to tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions.


42
Table of Contents
Dividends and Distributions


To maintain its qualification as a REIT, the Company must pay dividends to stockholders that are at least 90.0% of its annual REIT taxable income, excluding net capital gains. The partnership agreement requires the Operating Partnership to distribute at least enough cash for the Company to be able to pay such dividends. The Company'sCompany’s REIT taxable income, as determined by the federal tax laws, does not equal its net income under accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”). In addition, although capital gains are not required to be distributed to maintain REIT status, capital gains, if any, are subject to federal and state income tax unless such gains are distributed to stockholders.


Cash dividends and distributions reduce the amount of cash that would otherwise be available for other business purposes, including funding debt maturities, reducing debt or future growth initiatives. The amount of future distributions that will be made is at the discretion of the Company'sCompany’s Board of Directors. For a discussion of the factors that will affect such cash flows and, accordingly, influence the decisions of the Company’s Board of Directors regarding dividends and distributions, see "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters“Item 7. Management’s Discussion and Issuer PurchasesAnalysis of Equity Securities"Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and Distributions” in our 20162021 Annual Report on Form 10-K.


During the thirdsecond quarter of 2017,2022, the Company declared and paid a cash dividend of $0.44$0.50 per share of Common Stock.

On October 19, 2017, the Company declared a cash dividend of $0.44 per share of Common Stock, which is payable on December 5, 2017 to stockholders of record as of November 14, 2017.


Current and Future Cash Needs

We anticipate that our available cash and cash equivalents, cash flows from operating activities and other expectedavailable financing sources, including the issuance of debt securities by the Operating Partnership, the issuance of secured debt, bank term loans, borrowings under our revolving credit facility, the issuance of equity securities by the Company or the Operating Partnership and the disposition of non-core assets, will be adequate to meet our short-term liquidity requirements, including the $200.0$250.0 million principal amount of unsecured notes due April 15, 2018.that are scheduled to mature in January 2023. We generally believe existing cash and rental and other revenues will continue to be sufficient to fund operating and general and administrative expenses, interest expense, our existing quarterly dividend and existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions.



We had $4.9$25.0 million of cash and cash equivalents as of SeptemberJune 30, 2017.2022. The unused capacity of our new revolving credit facility at October 18, 2017June 30, 2022 and July 19, 2022 was $399.4$659.9 million and $619.9 million, respectively, excluding an accordion feature that allows for an additional $400.0 million of borrowing capacity subject to additional lender commitments.


We have a currently effective automatic shelf registration statement on Form S-3 with the SEC pursuant to which, at any time and from time to time, in one or more offerings on an as-needed basis, the Company may sell an indefinite amount of common stock, preferred stock and depositary shares and the Operating Partnership may sell an indefinite amount of debt securities, subject to our ability to effect offerings on satisfactory terms based on prevailing market conditions.


The Company from time to time enters into equity distribution agreements with a variety of firms pursuant to which the Company may offer and sell shares of common stock from time to time through such firms, acting as agents of the Company or as principals. Sales of the shares, if any, may be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices or as otherwise agreed with any of such firms (which may include block trades).


To date in 2017, we have sold $105.7 million of properties (including our $14.7 million share of properties sold by certain unconsolidated affiliates) no longer considered to be core assets due to location, age, quality and/or overall strategic fitSee also “Executive Summary - Liquidity and expect to sell an additional $44 million of such properties during the remainder of 2017. We can make no assurance, however, that we will sell any non-core assets or, if we do, what the timing or terms of any such sale will be.Capital Resources.”


We generally intend to fund the growth of our company, including the $197.6 million of contractual commitments through September 30, 2018 related to our development activity, on a leverage-neutral basis. At September 30, 2017, our leverage ratio was 34.7% and there were 106.2 million diluted shares of Common Stock outstanding.

Critical Accounting Estimates

There were no changes made by management to the critical accounting policies in the ninesix months endedSeptember June 30, 2017.2022. For a description of our critical accounting estimates, see “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” in our 20162021 Annual Report on Form 10-K.



43
Table of Contents
Non-GAAP Information

The Company believes that FFO, FFO available for common stockholders and FFO available for common stockholders per share are beneficial to management and investors and are important indicators of the performance of any equity REIT. Because these FFO calculations exclude such factors as depreciation, amortization and impairments of real estate assets and gains or losses from sales of operating real estate assets, which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful life estimates, they facilitate comparisons of operating performance between periods and between other REITs. Management believes that historical cost 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, management believes the use of FFO, FFO available for common stockholders and FFO available for common stockholders per share, together with the required GAAP presentations, provides a more complete understanding of the Company'sCompany’s performance relative to its competitors and a more informed and appropriate basis on which to make decisions involving operating, financing and investing activities.

FFO, FFO available for common stockholders and FFO available for common stockholders per share are non-GAAP financial measures and therefore do not represent net income or net income per share as defined by GAAP. Net income and net income per share as defined by GAAP are the most relevant measures in determining the Company'sCompany’s operating performance because these FFO measures include adjustments that investors may deem subjective, such as adding back expenses such as depreciation, amortization and impairments. Furthermore, FFO available for common stockholders per share does not depict the amount that accrues directly to the stockholders'stockholders’ benefit. Accordingly, FFO, FFO available for common stockholders and FFO available for common stockholders per share should never be considered as alternatives to net income, net income available for common stockholders, or net income available for common stockholders per share as indicators of the Company'sCompany’s operating performance.

The Company'sCompany’s presentation of FFO is consistent with FFO as defined by the National Association of Real Estate Investment Trusts, which is calculated as follows:

•Net income/(loss) computed in accordance with GAAP;

•Less net income attributable to noncontrolling interests in consolidated affiliates;

•Plus depreciation and amortization of depreciable operating properties;

•Less gains, or plus losses, from sales of depreciable operating properties, plus impairments on depreciable operating properties and excluding items that are classified as extraordinary items under GAAP;

•Plus or minus our share of adjustments, including depreciation and amortization of depreciable operating properties, for unconsolidated joint venture investments (to reflect funds from operations on the same basis); and

•Plus or minus adjustments for depreciation and amortization and gains/(losses) on sales of depreciable operating properties, plus impairments on depreciable operating properties, and noncontrolling interests in consolidated affiliates related to discontinued operations.

In calculating FFO, the Company includes net income attributable to noncontrolling interests in the Operating Partnership, which the Company believes is consistent with standard industry practice for REITs that operate through an UPREIT structure. The Company believes that it is important to present FFO on an as-converted basis since all of the Common Units not owned by the Company are redeemable on a one-for-one basis for shares of its Common Stock.


44
Table of Contents
The following table sets forth the Company'sCompany’s FFO, FFO available for common stockholders and FFO available for common stockholders per share ($ in(in thousands, except per share amounts):

Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended June 30,Six Months Ended June 30,
2017 2016 2017 20162022202120222021
Funds from operations:       Funds from operations:
Net income$59,549
 $33,840
 $132,588
 $514,103
Net income$52,602 $61,844 $94,705 $118,699 
Net (income) attributable to noncontrolling interests in consolidated affiliates(315) (319) (914) (941)Net (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Depreciation and amortization of real estate assets56,271
 52,303
 166,862
 159,780
Depreciation and amortization of real estate assets69,047 61,293 138,039 121,521 
Impairments of depreciable propertiesImpairments of depreciable properties35,000 — 35,000 — 
(Gains) on disposition of depreciable properties(19,849) —
 (25,181) (8,915)(Gains) on disposition of depreciable properties(47,807)(22,862)(47,807)(41,799)
Unconsolidated affiliates:       Unconsolidated affiliates:
Depreciation and amortization of real estate assets529
 736
 1,923
 2,227
Depreciation and amortization of real estate assets184 181 367 399 
(Gains) on disposition of depreciable properties(4,617) (1,842) (4,617) (2,173)
Discontinued operations:       
(Gains) on disposition of depreciable properties—
 —
 —
 (414,496)
Funds from operations91,568
 84,718
 270,661
 249,585
Funds from operations108,760 100,162 219,781 198,245 
Dividends on Preferred Stock(623) (624) (1,869) (1,877)Dividends on Preferred Stock(622)(621)(1,243)(1,243)
Funds from operations available for common stockholders$90,945
 $84,094
 $268,792
 $247,708
Funds from operations available for common stockholders$108,138 $99,541 $218,538 $197,002 
Funds from operations available for common stockholders per share$0.86
 $0.82
 $2.55
 $2.46
Funds from operations available for common stockholders per share$1.00 $0.93 $2.03 $1.84 
Weighted average shares outstanding (1)
106,145
 101,939
 105,402
 100,645
Weighted average shares outstanding (1)
107,654 106,964 107,554 106,887 
__________
(1)Includes assumed conversion of all potentially dilutive Common Stock equivalents.

(1)Includes assumed conversion of all potentially dilutive Common Stock equivalents.

In addition, the Company believes NOI from continuing operations and same property NOI are useful supplemental measures of the Company’s property operating performance because such metrics provide a performance measure of the revenues and expenses directly involved in owning real estate assets and a perspective not immediately apparent from net income or FFO. The Company defines NOI as rental and other revenues from continuing operations, less rental property and other expenses from continuing operations.expenses. The Company defines cash NOI as NOI less lease termination fees, straight-line rent, amortization of lease incentives and amortization of acquired above and below market leases. Other REITs may use different methodologies to calculate NOI, same property NOI and cash NOI.


As of SeptemberJune 30, 2017,2022, our same property portfolio consisted of 212148 in-service properties encompassing 28.224.4 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 20162021 to SeptemberJune 30, 2017)2022). As of December 31, 2016,2021, our same property portfolio consisted of 217148 in-service properties encompassing 26.724.2 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 20152020 to December 31, 2016)2021). The change in our same property portfolio was due to the addition of fourfive acquired properties encompassing 1.60.6 million rentable square feet acquired during 2015 and four newly developed properties encompassing 0.8 million rentable square feet placed in service during 2015.feet. These additions were offset by the removal of 13five properties encompassing 0.80.4 million rentable square feet that were sold during 2017.2022.


Rental and other revenues related to properties not in our same property portfolio were $17.5$29.0 million and $7.8$14.0 million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $42.9$59.2 million and $22.0$28.3 million for the ninesix months endedSeptember June 30, 20172022 and 2016,2021, respectively. Rental property and other expenses related to properties not in our same property portfolio were $4.3$7.0 million and $2.6$4.5 million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $11.0$14.4 million and $7.3$9.2 million for the ninesix months endedSeptember June 30, 20172022 and 2016,2021, respectively.



45
Table of Contents
The following table sets forth the Company’s NOI, same property NOI and same property NOI:cash NOI (in thousands):


Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income$52,602 $61,844 $94,705 $118,699 
Equity in earnings of unconsolidated affiliates(326)(431)(626)(1,068)
Gains on disposition of property(50,044)(22,862)(54,144)(41,799)
Other income(120)(332)(483)(644)
Interest expense25,027 19,001 49,420 38,769 
General and administrative expenses9,591 10,107 23,147 20,059 
Impairments of real estate assets35,000 — 35,000 — 
Depreciation and amortization69,742 61,949 139,409 122,876 
Net operating income141,472 129,276 286,428 256,892 
Non same property and other net operating income(22,074)(9,445)(44,881)(18,368)
Same property net operating income$119,398 $119,831 $241,547 $238,524 
Same property net operating income$119,398 $119,831 $241,547 $238,524 
Lease termination fees, straight-line rent and other non-cash adjustments (1)
(2,780)(3,588)(6,551)(7,482)
Same property cash net operating income$116,618 $116,243 $234,996 $231,042 
__________
(1)    Includes $0.1 million and $0.9 million of repayments of temporary rent deferrals, net of additional temporary rent deferrals granted by the Company, during the three months ended June 30, 2022 and 2021, respectively, and $0.2 million and $2.1 million of repayments of temporary rent deferrals, net of additional temporary rent deferrals granted by the Company, during the six months ended June 30, 2022 and 2021, respectively.

46
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates$34,653
 $27,130
 $100,650
 $76,340
Other income(558) (833) (2,632) (1,884)
Interest expense17,191
 18,566
 51,208
 58,756
General and administrative expenses9,247
 9,863
 29,787
 29,327
Impairments of real estate assets1,445
 —
 1,445
 —
Depreciation and amortization56,973
 52,923
 168,934
 161,734
Net operating income from continuing operations118,951
 107,649
 349,392
 324,273
Less – non same property and other net operating income(13,187) (5,203) (31,902) (14,678)
Same property net operating income from continuing operations$105,764
 $102,446
 $317,490
 $309,595
        
Same property net operating income from continuing operations$105,764
 $102,446
 $317,490
 $309,595
Less – lease termination fees, straight-line rent and other non-cash adjustments(3,373) (3,454) (10,924) (16,502)
Same property cash net operating income from continuing operations$102,391
 $98,992
 $306,566
 $293,093

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our
The effects of potential changes in interest rates are discussed below. Our market risk discussion includes “forward-looking statements” and represents an estimate of possible changes in fair value or future earnings that would occur assuming hypothetical future movements in interest rates. Actual future results may differ materially from those presented. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” and the Notes to Consolidated Financial Statements for a description of our accounting policies and other information related to these financial instruments.

We borrow funds at a combination of fixed and variable rates. Borrowings under our revolving credit facility and bank term loans bear interest at variable rates. Our long-term debt, which consists of secured and unsecured long-term financings, typically bears interest at fixed rates. Our interest rate risk management objectives are to limit generally the impact of interest rate changes on earnings and cash flows and lower our overall borrowing costs. To achieve these objectives, from time to time we enter into interest rate hedge contracts such as ofcollars, swaps, caps and treasury lock agreements in order to mitigate our interest rate risk with respect to existing and prospective debt instruments. We generally do not hold or issue these derivative contracts for trading or speculative purposes.

At June 30, 2017, see "Quantitative and Qualitative Disclosures About Market Risk" in2022, we had $2,530.9 million principal amount of fixed rate debt outstanding, a $3.2 million decrease as compared to December 31, 2021, excluding debt with a variable rate that is effectively fixed by related interest rate hedge contracts. The estimated aggregate fair market value of this debt was $2,314.0 million. If interest rates had been 100 basis points higher, the aggregate fair market value of our Quarterly Reportfixed rate debt would have been $126.9 million lower. If interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt would have been $136.8 million higher.

At June 30, 2022, we had $290.0 million of variable rate debt outstanding, a $70.0 million increase as compared to December 31, 2021, not protected by interest rate hedge contracts. If the weighted average interest rate on Form 10-Q forthis variable rate debt had been 100 basis points higher or lower, the second quarter of 2017.annual interest expense at June 30, 2022 would increase or decrease by $2.9 million.


ITEM 4. CONTROLS AND PROCEDURES


SEC rules require us to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our annual and periodic reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC'sSEC’s rules and forms, and that such information is accumulated and communicated to our management to allow for timely decisions regarding required disclosure. The Company'sCompany’s CEO and CFO have concluded that the disclosure controls and procedures of the Company and the Operating Partnership were each effective at the endas of the period covered by this Quarterly Report.June 30, 2022.


SEC rules also require us to establish and maintain internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There were no changes in internal control over financial reporting during the three months endedSeptember June 30, 20172022 that materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting. There were also no changes in internal control over financial reporting during the three months endedSeptember June 30, 20172022 that materially affected, or are reasonably likely to materially affect, the Operating Partnership'sPartnership’s internal control over financial reporting.

47
Table of Contents
PART II - OTHER INFORMATION


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


During the thirdsecond quarter of 2017,2022, the Company issued an aggregate of 2,00030,909 shares of Common Stock to holders of Common Units in the Operating Partnership upon the redemption of a like number of Common Units in private offerings exempt from the registration requirements pursuant to Section 4(2) of the Securities Act. Each of the holders of Common Units was an accredited investor under Rule 501 of the Securities Act. The resale of such shares was registered by the Company under the Securities Act.


ITEM 5. OTHER INFORMATIONThe following table sets forth information related to shares of Common Stock surrendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock during the second quarter of 2022:


On October 18, 2017, we entered into a new $600.0 million unsecured revolving credit facility, which replaced our previously existing $475.0 million revolving credit facility, and includes an accordion feature that allows for an additional $400.0 million of borrowing capacity subject to additional lender commitments. Our new revolving credit facility is scheduled to mature in January 2022. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. The interest rate on the new facility at our current credit ratings is LIBOR plus 100 basis points and the annual facility fee is 20 basis points. The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services. The financial and other covenants under the new facility are similar to our previous credit facility. At October 18, 2017, we had $200.0 million outstanding under our new revolving credit facility and $0.6 million of outstanding letters of credit, which reduces the availability on the credit facility. As a result, the unused capacity of our new revolving credit facility at October 18, 2017 was $399.4 million.
Total Number of Shares PurchasedWeighted Average Price Paid per Share
April 1 to April 30— $— 
May 1 to May 31— — 
June 1 to June 30343 34.03 
Total343 $34.03 


We simultaneously modified our $200.0 million, five-year unsecured bank term loan, which was originally scheduled to mature in January 2019. The modified term loan is now scheduled to mature in November 2022 and the interest rate, based on current credit ratings, was reduced from LIBOR plus 120 basis points to LIBOR plus 110 basis points.

We also simultaneously prepaid without penalty $125.0 million on our seven-year unsecured bank term loan, which now has an outstanding principal amount of $225.0 million and is scheduled to mature in June 2020, and amended such loan to conform certain provisions to our other credit facilities.


ITEM 6. EXHIBITS

Exhibit
Number		Description
Exhibit
Number
Description
10.110
FifthFirst Amendment to Sixth Amended and Restated Credit Agreement, dated as of October 18, 2017,May 24, 2022, by and among the Company, the Operating Partnership, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, andas Co-Syndication Agent, PNC Bank, National Association, as Co-Syndication Agents,Agent, and the Other Lenders named therein
10.2
Second Amendment to Amended and Restated Seven-Year Term Loan Agreement,(filed as part of the Company’s Current Report on Form 8-K dated as of October 18, 2017, by and among the Company, the Operating Partnership and Wells Fargo Bank, National Association, as Administrative AgentMay 24, 2022)
12.131.1
Statement re: Computation of Ratios of the Company
12.2
Statement re: Computation of Ratios of the Operating Partnership
31.1
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company
31.2
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company
31.3
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership
31.4
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership
32.1
Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company
32.2
Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company
32.3
Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership
32.4
Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership
101.INSInline XBRL Instance Document (the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document)
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



48
Table of Contents
SIGNATURES


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

Highwoods Properties, Inc.
 
By: 

/s/ Brendan C. Maiorana
By: 

/s/ Mark F. Mulhern
Brendan C. Maiorana
Mark F. Mulhern
Executive Vice President and Chief Financial Officer



Highwoods Realty Limited Partnership

 
By:Highwoods Properties, Inc., its sole general partner
By: 


/s/ Mark F. MulhernBrendan C. Maiorana
Mark F. MulhernBrendan C. Maiorana
Executive Vice President and Chief Financial Officer


Date: October 24, 2017July 26, 2022





47
49