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 September 30, ~~2017~~2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [ ] to [ ]

HIGHWOODS PROPERTIES, INC.

(Exact name of registrant as specified in its charter)



Maryland	~~Maryland~~001-13100		~~001-13100~~		56-1871668
	(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 Carolina	000-21731	56-1869557
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

~~3100 Smoketree Court,~~150 Fayetteville Street, Suite ~~600~~1400

Raleigh, NC ~~27604~~27601

(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 Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $.01 par value, of Highwoods Properties, Inc.	HIW	New 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 ~~103,248,940~~105,197,658 shares of Common Stock outstanding as of October 18, ~~2017~~.

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~~,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 September 30, ~~2017~~2022 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 SEPTEMBER 30, ~~2017~~2022

TABLE OF CONTENTS


		Page

		~~Page~~

PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)		3
HIGHWOODS PROPERTIES, INC.:
Consolidated Balance Sheets at September 30, ~~2017~~2022 and December 31, ~~2016~~2021		3
Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		4
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		5
Consolidated Statements of Equity for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		78
HIGHWOODS REALTY LIMITED PARTNERSHIP:
Consolidated Balance Sheets at September 30, ~~2017~~2022 and December 31, ~~2016~~2021		910
Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		1011
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		1112
Consolidated Statements of Capital for the Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		1213
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021		1315
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		1517
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		3133
Disclosure Regarding Forward-Looking Statements		3133
Executive Summary		3234
Results of Operations		3438
Liquidity and Capital Resources		3740
Critical Accounting Estimates		4043
Non-GAAP Information		4144
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		4447
ITEM 4. CONTROLS AND PROCEDURES		4447

PART II - OTHER INFORMATION



ITEM 2. 6. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~EXHIBITS		4548
~~ITEM 5.~~ ~~OTHER INFORMATION~~	45
~~ITEM 6.~~ ~~EXHIBITS~~	46

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)


	September 30, 2022		December 31, 2021
Assets:
Real estate assets, at cost:
Land	$	548,720	$	549,228
Buildings and tenant improvements	5,867,137		5,718,169
Development in-process	29,774		6,890
Land held for development	231,911		215,257
	6,677,542		6,489,544
Less-accumulated depreciation	(1,562,374)		(1,457,511)
Net real estate assets	5,115,168		5,032,033
Real estate and other assets, net, held for sale	—		3,518
Cash and cash equivalents	23,055		23,152
Restricted cash	6,038		8,046
Accounts receivable	24,589		14,002
Mortgages and notes receivable	1,103		1,227
Accrued straight-line rents receivable	284,515		268,324
Investments in and advances to unconsolidated affiliates	88,974		7,383
Deferred leasing costs, net of accumulated amortization of $157,205 and $143,111, respectively	255,831		258,902
Prepaid expenses and other assets, net of accumulated depreciation of $20,753 and $21,408, respectively	71,278		78,551
Total Assets	$	5,870,551	$	5,695,138
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
Mortgages and notes payable, net	$	2,973,369	$	2,788,915
Accounts payable, accrued expenses and other liabilities	307,294		294,976


Total Liabilities	3,280,663		3,083,891
Commitments and contingencies
Noncontrolling interests in the Operating Partnership	64,219		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 outstanding	28,821		28,821
Common Stock, $.01 par value, 200,000,000 authorized shares;
105,197,658 and 104,892,780 shares issued and outstanding, respectively	1,052		1,049
Additional paid-in capital	3,083,229		3,027,861
Distributions in excess of net income available for common stockholders	(608,181)		(579,616)
Accumulated other comprehensive loss	(1,137)		(973)
Total Stockholders’ Equity	2,503,784		2,477,142
Noncontrolling interests in consolidated affiliates	21,885		22,416
Total Equity	2,525,669		2,499,558
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	5,870,551	$	5,695,138

September 30,
2017 December 31,
2016
Assets:
Real estate assets, at cost:
Land $ 488,013
$ 474,375
Buildings and tenant improvements 4,605,061
4,313,373
Development in-process 58,578
279,602
Land held for development 76,969
77,355
5,228,621
5,144,705
Less-accumulated depreciation (1,196,642 ) (1,134,103 )
Net real estate assets 4,031,979
4,010,602
Cash and cash equivalents 4,864
49,490
Restricted cash 47,761
29,141
Accounts receivable, net of allowance of $504 and $624, respectively 18,027
17,372
Mortgages and notes receivable, net of allowance of $80 and $105, respectively 6,789
8,833
Accrued straight-line rents receivable, net of allowance of $324 and $692, respectively 194,639
172,829
Investments in and advances to unconsolidated affiliates 23,523
18,846
Deferred leasing costs, net of accumulated amortization of $145,814 and $140,081, respectively 202,814
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 liabilities 227,575
313,885
Total Liabilities 2,193,973
2,261,932
Commitments and contingencies

Noncontrolling interests in the Operating Partnership 147,451
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, respectively 1,032
1,017
Additional paid-in capital 2,924,048
2,850,881
Distributions in excess of net income available for common stockholders (758,484 ) (749,412 )
Accumulated other comprehensive income 5,910
4,949
Total Stockholders’ Equity 2,201,398
2,136,355
Noncontrolling interests in consolidated affiliates 17,644
17,961
Total Equity 2,219,042
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.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Income

(Unaudited and in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Rental and other revenues	$	206,997	$	195,495	$	617,216	$	564,802
Operating expenses:
Rental property and other expenses	66,334		60,567		190,125		172,982
Depreciation and amortization	73,057		66,547		212,466		189,423
Impairments of real estate assets	1,515		—		36,515		—
General and administrative	9,586		10,350		32,733		30,409
Total operating expenses	150,492		137,464		471,839		392,814
Interest expense	26,392		21,986		75,812		60,755
Other income	138		424		621		1,068

Gains on disposition of property	9,402		38,572		63,546		80,371



Equity in earnings of unconsolidated affiliates	457		546		1,083		1,614






Net income	40,110		75,587		134,815		194,286
Net (income) attributable to noncontrolling interests in the Operating Partnership	(881)		(1,967)		(3,049)		(5,084)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(357)		(894)		(880)		(1,469)
Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)

Net income available for common stockholders	$	38,251	$	72,105	$	129,022	$	185,869
Earnings per Common Share – basic:


Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79
Weighted average Common Shares outstanding – basic	105,184		104,277		105,094		104,117
Earnings per Common Share – diluted:


Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79
Weighted average Common Shares outstanding – diluted	107,601		107,139		107,570		106,972

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 expenses 61,234
58,620
177,484
173,715
Depreciation and amortization 56,973
52,923
168,934
161,734
Impairments of real estate assets 1,445
—
1,445
—
General and administrative 9,247
9,863
29,787
29,327
Total operating expenses 128,899
121,406
377,650
364,776
Interest expense:
Contractual 16,395
17,722
48,763
56,111
Amortization of debt issuance costs 796
844
2,445
2,645
17,191
18,566
51,208
58,756
Other income:
Interest and other income 558
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 affiliates 34,653
27,130
100,650
76,340
Gains on disposition of property 19,849
3,902
25,181
14,160
Equity in earnings of unconsolidated affiliates 5,047
2,808
6,757
5,010
Income from continuing operations 59,549
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 income 59,549
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 – basic 103,237
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 – diluted 106,145
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.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Comprehensive Income

(Unaudited and in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Comprehensive income:
Net income	$	40,110	$	75,587	$	134,815	$	194,286
Other comprehensive income/(loss):

Unrealized losses on cash flow hedges	—		(6)		—		(17)
Amortization of cash flow hedges	(75)		129		(164)		377
Total other comprehensive income/(loss)	(75)		123		(164)		360
Total comprehensive income	40,035		75,710		134,651		194,646
Less-comprehensive (income) attributable to noncontrolling interests	(1,238)		(2,861)		(3,929)		(6,553)
Comprehensive income attributable to common stockholders	$	38,797	$	72,849	$	130,722	$	188,093

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 hedges 211
758
992
2,336
Total other comprehensive income/(loss) (136 ) 2,368
961
(5,449 )
Total comprehensive income 59,413
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.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Equity

(Unaudited and in thousands, except share amounts)


	Three Months Ended September 30, 2022
	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 June 30, 2022	105,184,854	$	1,052	$	28,821	$	3,065,208	$	(1,062)	$	21,528	$	(593,846)	$	2,521,701
Issuances of Common Stock, net of issuance costs and tax withholdings	13,583	—		—		362		—		—		—		362

Dividends on Common Stock ($0.50 per share)		—		—		—		—		—		(52,586)		(52,586)
Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(621)		(621)
Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		16,952		—		—		—		16,952




Share-based compensation expense, net of forfeitures	(779)	—		—		707		—		—		—		707
Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(881)		(881)
Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		357		(357)		—
Comprehensive income:
Net income		—		—		—		—		—		40,110		40,110
Other comprehensive loss		—		—		—		(75)		—		—		(75)
Total comprehensive income														40,035
Balance at September 30, 2022	105,197,658	$	1,052	$	28,821	$	3,083,229	$	(1,137)	$	21,885	$	(608,181)	$	2,525,669

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, 2016 101,665,554
$ 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 withholdings 1,464,638
15
—
70,292
—
—
—
70,307
Conversions of Common Units to Common Stock 8,000
—
—
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 stock 110,748
—
—
—
—
—
—
—
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, 2017 103,248,940
$ 1,032
$ 28,892
$ 2,924,048
$ 5,910
$ 17,644
$ (758,484 ) $ 2,219,042


	Nine Months Ended September 30, 2022
	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, 2021	104,892,780	$	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 withholdings	92,941	1		—		4,796		—		—		—		4,797
Conversions of Common Units to Common Stock	30,909					1,251								1,251
Dividends on Common Stock ($1.50 per share)		—		—		—		—		—		(157,587)		(157,587)
Dividends on Preferred Stock ($64.6875 per share)		—		—		—		—		—		(1,864)		(1,864)
Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		42,480		—		—		—		42,480
Distributions to noncontrolling interests in consolidated affiliates		—		—		—		—		(1,411)		—		(1,411)

Issuances of restricted stock	181,807	—		—		—		—		—		—		—

Share-based compensation expense, net of forfeitures	(779)	2		—		6,841		—		—		—		6,843
Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(3,049)		(3,049)
Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		880		(880)		—
Comprehensive income:
Net income		—		—		—		—		—		134,815		134,815
Other comprehensive loss		—		—		—		(164)		—		—		(164)
Total comprehensive income														134,651
Balance at September 30, 2022	105,197,658	$	1,052	$	28,821	$	3,083,229	$	(1,137)	$	21,885	$	(608,181)	$	2,525,669

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, 2015 96,091,932
$ 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 withholdings 3,930,262
39
—
187,175
—
—
—
187,214
Conversions of Common Units to Common Stock 60,048
—
—
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 stock 130,752
—
—
—
—
—
—
—
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, 2016 100,204,106
$ 1,002
$ 28,920
$ 2,780,443
$ (9,260 ) $ 17,950
$ (650,954 ) $ 2,168,101

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Equity - Continued

(Unaudited and in thousands, except share amounts)


	Three Months Ended September 30, 2021
	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 June 30, 2021	104,209,513	$	1,042	$	28,821	$	2,989,405	$	(1,225)	$	21,839	$	(672,239)	$	2,367,643
Issuances of Common Stock, net of issuance costs and tax withholdings	168,311	2		—		7,506		—		—		—		7,508
Conversions of Common Units to Common Stock	5,238	—		—		234		—		—		—		234
Dividends on Common Stock ($0.50 per share)		—		—		—		—		—		(52,120)		(52,120)
Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(621)		(621)
Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		4,262		—		—		—		4,262
Distributions to noncontrolling interests in consolidated affiliates		—		—		—		—		(560)		—		(560)



Share-based compensation expense, net of forfeitures	—	—		—		1,896		—		—		—		1,896
Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(1,967)		(1,967)
Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		894		(894)		—
Comprehensive income:
Net income		—		—		—		—		—		75,587		75,587
Other comprehensive income		—		—		—		123		—		—		123
Total comprehensive income														75,710
Balance at September 30, 2021	104,383,062	$	1,044	$	28,821	$	3,003,303	$	(1,102)	$	22,173	$	(652,254)	$	2,401,985


	Nine Months Ended September 30, 2021
	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, 2020	103,921,546	$	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 withholdings	277,441	3		—		13,402		—		—		—		13,405
Conversions of Common Units to Common Stock	6,238	—		—		278		—		—		—		278
Dividends on Common Stock ($1.46 per share)		—		—		—		—		—		(151,898)		(151,898)
Dividends on Preferred Stock ($64.6875 per share)		—		—		—		—		—		(1,864)		(1,864)
Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		(11,072)		—		—		—		(11,072)
Distributions to noncontrolling interests in consolidated affiliates		—		—		—		—		(1,342)		—		(1,342)

Issuances of restricted stock	184,584	—		—		—		—		—		—		—
Redemptions/repurchases of Preferred Stock		—		(5)		—		—		—		—		(5)
Share-based compensation expense, net of forfeitures	(6,747)	2		—		6,749		—		—		—		6,751
Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(5,084)		(5,084)
Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		1,469		(1,469)		—
Comprehensive income:
Net income		—		—		—		—		—		194,286		194,286
Other comprehensive income		—		—		—		360		—		—		360
Total comprehensive income														194,646
Balance at September 30, 2021	104,383,062	$	1,044	$	28,821	$	3,003,303	$	(1,102)	$	22,173	$	(652,254)	$	2,401,985

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Cash Flows

(Unaudited and in thousands)


	Nine Months Ended September 30,
	2022		2021
Operating activities:
Net income	$	134,815	$	194,286
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	212,466		189,423
Amortization of lease incentives and acquisition-related intangible assets and liabilities	(342)		(1,770)
Share-based compensation expense	6,843		6,751

Net credit losses/(reversals) on operating lease receivables	3,167		(60)

Accrued interest on mortgages and notes receivable	(67)		(79)
Amortization of debt issuance costs	3,096		2,963
Amortization of cash flow hedges	(164)		377
Amortization of mortgages and notes payable fair value adjustments	(60)		882
Impairments of real estate assets	36,515		—

Losses on debt extinguishment	—		134
Net gains on disposition of property	(63,546)		(80,371)



Equity in earnings of unconsolidated affiliates	(1,083)		(1,614)

Distributions of earnings from unconsolidated affiliates	606		1,410

Changes in operating assets and liabilities:
Accounts receivable	(11,454)		5,753
Prepaid expenses and other assets	(2,150)		(1,210)
Accrued straight-line rents receivable	(20,558)		(13,734)
Accounts payable, accrued expenses and other liabilities	21,795		6,077
Net cash provided by operating activities	319,879		309,218
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired	(224,934)		(270,160)
Investments in development in-process	(26,220)		(65,333)
Investments in tenant improvements and deferred leasing costs	(90,910)		(68,197)
Investments in building improvements	(45,289)		(34,452)
Investment in acquired controlling interest in unconsolidated affiliate	—		(127,339)
Net proceeds from disposition of real estate assets	130,038		187,964



Investments in mortgages and notes receivable	(24)		(56)
Repayments of mortgages and notes receivable	215		229
Investments in and advances to unconsolidated affiliates	(81,693)		—


Payments of earnest money deposits	(3,000)		—
Changes in other investing activities	224		4,119
Net cash used in investing activities	(341,593)		(373,225)
Financing activities:
Dividends on Common Stock	(157,587)		(151,898)

Redemptions/repurchases of Preferred Stock	—		(5)
Redemptions of Common Units	(3,101)		—
Dividends on Preferred Stock	(1,864)		(1,864)
Distributions to noncontrolling interests in the Operating Partnership	(3,687)		(4,144)

Distributions to noncontrolling interests in consolidated affiliates	(1,411)		(1,342)
Proceeds from the issuance of Common Stock	7,200		15,453
Costs paid for the issuance of Common Stock	(247)		(355)
Repurchase of shares related to tax withholdings	(2,156)		(1,693)
Borrowings on revolving credit facility	275,000		310,000
Repayments of revolving credit facility	(235,000)		(175,000)
Borrowings on mortgages and notes payable	350,000		200,000
Repayments of mortgages and notes payable	(204,807)		(264,212)



Changes in debt issuance costs and other financing activities	(2,731)		(9,279)
Net cash provided by/(used in) financing activities	19,609		(84,339)
Net decrease in cash and cash equivalents and restricted cash	$	(2,105)	$	(148,346)

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 amortization 168,934
161,734
Amortization of lease incentives and acquisition-related intangible assets and liabilities (666 ) (1,599 )
Share-based compensation expense 5,764
5,412
Allowance for losses on accounts and accrued straight-line rents receivable 435
1,846
Accrued interest on mortgages and notes receivable (391 ) (364 )
Amortization of debt issuance costs 2,445
2,645
Amortization of cash flow hedges 992
2,336
Amortization of mortgages and notes payable fair value adjustments 422
(175 )
Impairments of real estate assets 1,445
—
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 affiliates 4,815
3,936
Settlement of cash flow hedges 7,322
—
Changes in operating assets and liabilities:
Accounts receivable 916
4,798
Prepaid expenses and other assets 2,735
(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 activities 270,211
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 assets 85,538
680,994
Distributions of capital from unconsolidated affiliates 11,670
2,639
Investments in mortgages and notes receivable —
(7,934 )
Repayments of mortgages and notes receivable 2,435
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 Stock 75,517
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 facility 492,300
257,800
Repayments of revolving credit facility (420,300 ) (528,800 )
Borrowings on mortgages and notes payable 456,001
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.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Cash Flows – Continued

(Unaudited and in thousands)


	Nine Months Ended September 30,
	2022		2021
Net decrease in cash and cash equivalents and restricted cash	$	(2,105)	$	(148,346)
Cash and cash equivalents and restricted cash at beginning of the period	31,198		189,244
Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898

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 period 49,490
5,036
Cash and cash equivalents at end of the period $ 4,864
$ 6,387
Reconciliation of cash and cash equivalents and restricted cash:


	Nine Months Ended September 30,
	2022		2021
Cash and cash equivalents at end of the period	$	23,055	$	27,871
Restricted cash at end of the period	6,038		13,027
Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898

Supplemental disclosure of cash flow information:


	Nine Months Ended September 30,
	2022		2021
Cash paid for interest, net of amounts capitalized	$	82,908	$	66,457

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:


	Nine Months Ended September 30,
	2022		2021
Unrealized losses on cash flow hedges	$	—	$	(17)
Conversions of Common Units to Common Stock	1,251		278
Changes in accrued capital expenditures (1)	(10,180)		(20,150)
Write-off of fully depreciated real estate assets	42,817		52,158
Write-off of fully amortized leasing costs	22,739		37,045
Write-off of fully amortized debt issuance costs	1,216		4,158
Adjustment of noncontrolling interests in the Operating Partnership to fair value	(42,480)		11,072


Assumption of mortgages and notes payable related to acquisition activities	—		403,000






Initial recognition of lease liabilities related to right of use assets	—		5,310
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 Stock 408
3,006
Changes in accrued capital expenditures (6,327 ) 25,037
Write-off of fully depreciated real estate assets 41,860
28,783
Write-off of fully amortized leasing costs 28,343
16,075
Write-off of fully amortized debt issuance costs 4,324
916
Adjustment of noncontrolling interests in the Operating Partnership to fair value 3,297
13,390
__________

(1)Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at September 30, 2022 and 2021 were $44.4 million and $45.8 million, respectively.

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Balance Sheets

(Unaudited and in thousands, except unit and per unit data)


	September 30, 2022		December 31, 2021
Assets:
Real estate assets, at cost:
Land	$	548,720	$	549,228
Buildings and tenant improvements	5,867,137		5,718,169
Development in-process	29,774		6,890
Land held for development	231,911		215,257
	6,677,542		6,489,544
Less-accumulated depreciation	(1,562,374)		(1,457,511)
Net real estate assets	5,115,168		5,032,033
Real estate and other assets, net, held for sale	—		3,518
Cash and cash equivalents	23,055		23,152
Restricted cash	6,038		8,046
Accounts receivable	24,589		14,002
Mortgages and notes receivable	1,103		1,227
Accrued straight-line rents receivable	284,515		268,324
Investments in and advances to unconsolidated affiliates	88,974		7,383
Deferred leasing costs, net of accumulated amortization of $157,205 and $143,111, respectively	255,831		258,902
Prepaid expenses and other assets, net of accumulated depreciation of $20,753 and $21,408, respectively	71,278		78,551
Total Assets	$	5,870,551	$	5,695,138
Liabilities, Redeemable Operating Partnership Units and Capital:
Mortgages and notes payable, net	$	2,973,369	$	2,788,915
Accounts payable, accrued expenses and other liabilities	307,294		294,976


Total Liabilities	3,280,663		3,083,891
Commitments and contingencies
Redeemable Operating Partnership Units:
Common Units, 2,382,009 and 2,504,805 outstanding, respectively	64,219		111,689
Series A Preferred Units (liquidation preference $1,000 per unit), 28,821 units issued and outstanding	28,821		28,821
Total Redeemable Operating Partnership Units	93,040		140,510
Capital:
Common Units:
General partner Common Units, 1,071,709 and 1,069,888 outstanding, respectively	24,759		24,492
Limited partner Common Units, 103,717,140 and 103,414,083 outstanding, respectively	2,451,341		2,424,802
Accumulated other comprehensive loss	(1,137)		(973)
Noncontrolling interests in consolidated affiliates	21,885		22,416
Total Capital	2,496,848		2,470,737
Total Liabilities, Redeemable Operating Partnership Units and Capital	$	5,870,551	$	5,695,138

September 30,
2017 December 31,
2016
Assets:
Real estate assets, at cost:
Land $ 488,013
$ 474,375
Buildings and tenant improvements 4,605,061
4,313,373
Development in-process 58,578
279,602
Land held for development 76,969
77,355
5,228,621
5,144,705
Less-accumulated depreciation (1,196,642 ) (1,134,103 )
Net real estate assets 4,031,979
4,010,602
Cash and cash equivalents 4,864
49,490
Restricted cash 47,761
29,141
Accounts receivable, net of allowance of $504 and $624, respectively 18,027
17,372
Mortgages and notes receivable, net of allowance of $80 and $105, respectively 6,789
8,833
Accrued straight-line rents receivable, net of allowance of $324 and $692, respectively 194,639
172,829
Investments in and advances to unconsolidated affiliates 23,523
18,846
Deferred leasing costs, net of accumulated amortization of $145,814 and $140,081, respectively 202,814
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 liabilities 227,575
313,885
Total Liabilities 2,193,973
2,261,932
Commitments and contingencies

Redeemable Operating Partnership Units:
Common Units, 2,830,704 and 2,838,704 outstanding, respectively 147,451
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 Units 176,343
173,722
Capital:
Common Units:
General partner Common Units, 1,056,708 and 1,040,954 outstanding, respectively 21,665
21,023
Limited partner Common Units, 101,783,423 and 100,215,791 outstanding, respectively 2,144,931
2,081,463
Accumulated other comprehensive income 5,910
4,949
Noncontrolling interests in consolidated affiliates 17,644
17,961
Total Capital 2,190,150
2,125,396
Total Liabilities, Redeemable Operating Partnership Units and Capital $ 4,560,466
$ 4,561,050

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Income

(Unaudited and in thousands, except per unit amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Rental and other revenues	$	206,997	$	195,495	$	617,216	$	564,802
Operating expenses:
Rental property and other expenses	66,334		60,567		190,125		172,982
Depreciation and amortization	73,057		66,547		212,466		189,423
Impairments of real estate assets	1,515		—		36,515		—
General and administrative	9,586		10,350		32,733		30,409
Total operating expenses	150,492		137,464		471,839		392,814




Interest expense	26,392		21,986		75,812		60,755



Other income	138		424		621		1,068

Gains on disposition of property	9,402		38,572		63,546		80,371



Equity in earnings of unconsolidated affiliates	457		546		1,083		1,614






Net income	40,110		75,587		134,815		194,286
Net (income) attributable to noncontrolling interests in consolidated affiliates	(357)		(894)		(880)		(1,469)
Distributions on Preferred Units	(621)		(621)		(1,864)		(1,864)

Net income available for common unitholders	$	39,132	$	74,072	$	132,071	$	190,953
Earnings per Common Unit – basic:


Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79
Weighted average Common Units outstanding – basic	107,192		106,705		107,154		106,546
Earnings per Common Unit – diluted:


Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79
Weighted average Common Units outstanding – diluted	107,192		106,730		107,161		106,563

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 expenses 61,234
58,620
177,484
173,715
Depreciation and amortization 56,973
52,923
168,934
161,734
Impairments of real estate assets 1,445
—
1,445
—
General and administrative 9,247
9,863
29,787
29,327
Total operating expenses 128,899
121,406
377,650
364,776
Interest expense:
Contractual 16,395
17,722
48,763
56,111
Amortization of debt issuance costs 796
844
2,445
2,645
17,191
18,566
51,208
58,756
Other income:
Interest and other income 558
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 affiliates 34,653
27,130
100,650
76,340
Gains on disposition of property 19,849
3,902
25,181
14,160
Equity in earnings of unconsolidated affiliates 5,047
2,808
6,757
5,010
Income from continuing operations 59,549
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 income 59,549
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 – basic 105,660
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 – diluted 105,736
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.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Comprehensive Income

(Unaudited and in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Comprehensive income:
Net income	$	40,110	$	75,587	$	134,815	$	194,286
Other comprehensive income/(loss):

Unrealized losses on cash flow hedges	—		(6)		—		(17)
Amortization of cash flow hedges	(75)		129		(164)		377
Total other comprehensive income/(loss)	(75)		123		(164)		360
Total comprehensive income	40,035		75,710		134,651		194,646
Less-comprehensive (income) attributable to noncontrolling interests	(357)		(894)		(880)		(1,469)
Comprehensive income attributable to common unitholders	$	39,678	$	74,816	$	133,771	$	193,177

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 hedges 211
758
992
2,336
Total other comprehensive income/(loss) (136 ) 2,368
961
(5,449 )
Total comprehensive income 59,413
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.

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HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Capital

(Unaudited and in thousands)


	Three Months Ended September 30, 2022
	Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
	General Partners’ Capital		Limited Partners’ Capital
Balance at June 30, 2022	$	24,723	$	2,447,691	$	(1,062)	$	21,528	$	2,492,880
Issuances of Common Units, net of issuance costs and tax withholdings	4		358		—		—		362
Redemptions of Common Units	(31)		(3,070)		—		—		(3,101)
Distributions on Common Units ($0.50 per unit)	(536)		(53,037)		—		—		(53,573)
Distributions on Preferred Units ($21.5625 per unit)	(7)		(614)		—		—		(621)
Share-based compensation expense, net of forfeitures	7		700		—		—		707


Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	202		19,957		—		—		20,159
Net (income) attributable to noncontrolling interests in consolidated affiliates	(4)		(353)		—		357		—
Comprehensive income:
Net income	401		39,709		—		—		40,110
Other comprehensive loss	—		—		(75)		—		(75)
Total comprehensive income									40,035
Balance at September 30, 2022	$	24,759	$	2,451,341	$	(1,137)	$	21,885	$	2,496,848

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 withholdings 703
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 forfeitures 58
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 income 1,326
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


	Nine Months Ended September 30, 2022
	Common Units				Accumulated 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 withholdings	48		4,749		—		—		4,797
Redemptions of Common Units	(31)		(3,070)		—		—		(3,101)
Distributions on Common Units ($1.50 per unit)	(1,607)		(159,053)		—		—		(160,660)
Distributions on Preferred Units ($64.6875 per unit)	(19)		(1,845)		—		—		(1,864)
Share-based compensation expense, net of forfeitures	68		6,775		—		—		6,843
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 Partner	469		46,387		—		—		46,856
Net (income) attributable to noncontrolling interests in consolidated affiliates	(9)		(871)		—		880		—
Comprehensive income:
Net income	1,348		133,467		—		—		134,815
Other comprehensive loss	—		—		(164)		—		(164)
Total comprehensive income									134,651
Balance at September 30, 2022	$	24,759	$	2,451,341	$	(1,137)	$	21,885	$	2,496,848

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 withholdings 1,872
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 forfeitures 54
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 income 5,141
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.

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HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Capital - Continued

(Unaudited and in thousands)


	Three Months Ended September 30, 2021
	Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
	General Partners’ Capital		Limited Partners’ Capital
Balance at June 30, 2021	$	23,182	$	2,295,026	$	(1,225)	$	21,839	$	2,338,822
Issuances of Common Units, net of issuance costs and tax withholdings	75		7,433		—		—		7,508

Distributions on Common Units ($0.50 per unit)	(533)		(52,800)		—		—		(53,333)
Distributions on Preferred Units ($21.5625 per unit)	(7)		(614)		—		—		(621)
Share-based compensation expense, net of forfeitures	19		1,877		—		—		1,896
Distributions to noncontrolling interests in consolidated affiliates	—		—		—		(560)		(560)

Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	38		3,704		—		—		3,742
Net (income) attributable to noncontrolling interests in consolidated affiliates	(9)		(885)		—		894		—
Comprehensive income:
Net income	756		74,831		—		—		75,587
Other comprehensive income	—		—		123		—		123
Total comprehensive income									75,710
Balance at September 30, 2021	$	23,521	$	2,328,572	$	(1,102)	$	22,173	$	2,373,164


	Nine Months Ended September 30, 2021
	Common Units				Accumulated 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 withholdings	134		13,271		—		—		13,405

Distributions on Common Units ($1.46 per unit)	(1,554)		(153,891)		—		—		(155,445)
Distributions on Preferred Units ($64.6875 per unit)	(19)		(1,845)		—		—		(1,864)
Share-based compensation expense, net of forfeitures	68		6,683		—		—		6,751
Distributions to noncontrolling interests in consolidated affiliates	—		—		—		(1,342)		(1,342)

Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(123)		(12,208)		—		—		(12,331)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(15)		(1,454)				1,469		—
Comprehensive income:
Net income	1,943		192,343		—		—		194,286
Other comprehensive income	—		—		360		—		360
Total comprehensive income									194,646
Balance at September 30, 2021	$	23,521	$	2,328,572	$	(1,102)	$	22,173	$	2,373,164

See accompanying notes to consolidated financial statements.

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HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Cash Flows

(Unaudited and in thousands)


	Nine Months Ended September 30,							Nine Months Ended September 30,
	2017			2016				2022		2021
Operating activities:							Operating activities:
Net income	$	132,588		$	514,103		Net income	$	134,815	$	194,286
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 amortization	168,934			161,734			Depreciation and amortization	212,466		189,423
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	(342)		(1,770)
Share-based compensation expense	5,764			5,412			Share-based compensation expense	6,843		6,751
Allowance for losses on accounts and accrued straight-line rents receivable	435			1,846

Net credit losses/(reversals) on operating lease receivables							Net credit losses/(reversals) on operating lease receivables	3,167		(60)

Accrued interest on mortgages and notes receivable	(391		)	(364		)	Accrued interest on mortgages and notes receivable	(67)		(79)
Amortization of debt issuance costs	2,445			2,645			Amortization of debt issuance costs	3,096		2,963
Amortization of cash flow hedges	992			2,336			Amortization of cash flow hedges	(164)		377
Amortization of mortgages and notes payable fair value adjustments	422			(175		)	Amortization of mortgages and notes payable fair value adjustments	(60)		882
Impairments of real estate assets	1,445			—			Impairments of real estate assets	36,515		—
Gains on debt extinguishment	(826		)	—

Losses on debt extinguishment							Losses on debt extinguishment	—		134
Net gains on disposition of property	(25,181		)	(428,656		)	Net gains on disposition of property	(63,546)		(80,371)

Equity in earnings of unconsolidated affiliates	(6,757		)	(5,010		)	Equity in earnings of unconsolidated affiliates	(1,083)		(1,614)

Distributions of earnings from unconsolidated affiliates	4,815			3,523			Distributions of earnings from unconsolidated affiliates	606		1,410
Settlement of cash flow hedges	7,322			—

Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable	916			4,798			Accounts receivable	(11,454)		5,753
Prepaid expenses and other assets	2,735			(2,243		)	Prepaid expenses and other assets	(2,150)		(1,210)
Accrued straight-line rents receivable	(24,473		)	(18,931		)	Accrued straight-line rents receivable	(20,558)		(13,734)
Accounts payable, accrued expenses and other liabilities	(308		)	(7,447		)	Accounts payable, accrued expenses and other liabilities	21,795		6,077
Net cash provided by operating activities	270,211			231,972			Net cash provided by operating activities	319,879		309,218
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	(224,934)		(270,160)
Investments in development in-process	(121,367		)	(122,839		)	Investments in development in-process	(26,220)		(65,333)
Investments in tenant improvements and deferred leasing costs	(78,691		)	(63,715		)	Investments in tenant improvements and deferred leasing costs	(90,910)		(68,197)
Investments in building improvements	(41,862		)	(51,714		)	Investments in building improvements	(45,289)		(34,452)
Investment in acquired controlling interest in unconsolidated affiliate							Investment in acquired controlling interest in unconsolidated affiliate	—		(127,339)
Net proceeds from disposition of real estate assets	85,538			680,994			Net proceeds from disposition of real estate assets	130,038		187,964
Distributions of capital from unconsolidated affiliates	11,670			3,052

Investments in mortgages and notes receivable	—			(7,934		)	Investments in mortgages and notes receivable	(24)		(56)
Repayments of mortgages and notes receivable	2,435			869			Repayments of mortgages and notes receivable	215		229
Investments in and advances to unconsolidated affiliates	(10,063		)	(105		)	Investments in and advances to unconsolidated affiliates	(81,693)		—
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 deposits							Payments of earnest money deposits	(3,000)		—
Changes in other investing activities							Changes in other investing activities	224		4,119
Net cash used in investing activities							Net cash used in investing activities	(341,593)		(373,225)
Financing activities:							Financing activities:
Distributions on Common Units	(138,577		)	(127,391		)	Distributions on Common Units	(160,660)		(155,445)
Special distribution on Common Units	(83,149		)	—

Redemptions/repurchases of Preferred Units	(28		)	(130		)	Redemptions/repurchases of Preferred Units	—		(5)
Redemptions of Common Units							Redemptions of Common Units	(3,101)		—
Distributions on Preferred Units	(1,869		)	(1,877		)	Distributions on Preferred Units	(1,864)		(1,864)
Distributions to noncontrolling interests in consolidated affiliates	(1,231		)	(966		)	Distributions to noncontrolling interests in consolidated affiliates	(1,411)		(1,342)
Proceeds from the issuance of Common Units	75,517			194,518			Proceeds from the issuance of Common Units	7,200		15,453
Costs paid for the issuance of Common Units	(1,244		)	(2,888		)	Costs paid for the issuance of Common Units	(247)		(355)
Repurchase of units related to tax withholdings	(3,966		)	(4,416		)	Repurchase of units related to tax withholdings	(2,156)		(1,693)
Borrowings on revolving credit facility	492,300			257,800			Borrowings on revolving credit facility	275,000		310,000
Repayments of revolving credit facility	(420,300		)	(528,800		)	Repayments of revolving credit facility	(235,000)		(175,000)
Borrowings on mortgages and notes payable	456,001			75,000			Borrowings on mortgages and notes payable	350,000		200,000
Repayments of mortgages and notes payable	(507,114		)	(395,455		)	Repayments of mortgages and notes payable	(204,807)		(264,212)
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	(3,345)		(9,876)
Net cash used in financing activities	(138,272		)	(536,118		)
Net increase/(decrease) in cash and cash equivalents	$	(44,626	)	$	1,351
Net cash provided by/(used in) financing activities							Net cash provided by/(used in) financing activities	19,609		(84,339)
Net decrease in cash and cash equivalents and restricted cash							Net decrease in cash and cash equivalents and restricted cash	$	(2,105)	$	(148,346)

See accompanying notes to consolidated financial statements.

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HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Cash Flows - Continued

(Unaudited and in thousands)


	Nine Months Ended September 30,
	2022		2021
Net decrease in cash and cash equivalents and restricted cash	$	(2,105)	$	(148,346)
Cash and cash equivalents and restricted cash at beginning of the period	31,198		189,244
Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898

Reconciliation of cash and cash equivalents and restricted cash:


	Nine Months Ended September 30,
	2022		2021
Cash and cash equivalents at end of the period	$	23,055	$	27,871
Restricted cash at end of the period	6,038		13,027
Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898

Supplemental disclosure of cash flow information:


	Nine Months Ended September 30,
	2022		2021
Cash paid for interest, net of amounts capitalized	$	82,908	$	66,457

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:


	Nine Months Ended September 30,
	2022		2021
Unrealized losses on cash flow hedges	$	—	$	(17)
Changes in accrued capital expenditures (1)	(10,180)		(20,150)
Write-off of fully depreciated real estate assets	42,817		52,158
Write-off of fully amortized leasing costs	22,739		37,045
Write-off of fully amortized debt issuance costs	1,216		4,158

Adjustment of Redeemable Common Units to fair value	(47,470)		11,734


Assumption of mortgages and notes payable related to acquisition activities	—		403,000






Initial recognition of lease liabilities related to right of use assets	—		5,310
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 assets 41,860
28,783
Write-off of fully amortized leasing costs 28,343
16,075
Write-off of fully amortized debt issuance costs 4,324
916
Adjustment of Redeemable Common Units to fair value 2,649
21,576
__________

(1)Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at September 30, 2022 and 2021 were $44.4 million and $45.8 million, respectively.

See accompanying notes to consolidated financial statements.

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HIGHWOODS PROPERTIES, INC.

HIGHWOODS REALTY LIMITED PARTNERSHIP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2017~~2022

(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, construction~~owns, develops, acquires, leases and ~~other customer-related services for its~~manages properties primarily in the best business districts of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and ~~for third parties.~~Tampa. The Company conducts its activities through Highwoods Realty Limited Partnership (the “Operating Partnership”). At September 30, ~~2017~~,2022, we owned or had an interest in ~~30.9~~28.1 million rentable square feet of in-service properties, ~~0.6~~1.4 million rentable square feet of office properties under development and development land with approximately ~~400~~ ~~acres~~5.0 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 September 30, ~~2017,~~2022, the Company owned all of the Preferred Units and ~~102.8~~104.8 million, or ~~97.3%~~97.8%, of the Common Units in the Operating Partnership. Limited partners owned the remaining ~~2.8~~2.4 million Common Units. During the nine months ended September 30, ~~2017,~~2022, the Company redeemed ~~8,000~~30,909 Common Units for a like number of shares of Common ~~Stock.~~Stock and 91,887 Common Units for cash.

~~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 nine months ended September 30, ~~2017,~~2022, the Company issued ~~1,363,919~~130,011 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. As a result of this activity and the redemptions discussed above, the percentage of Common Units owned by the Company increased from 97.7% at December 31, 2021 to 97.8% at September 30, 2022.

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's~~Company’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's~~Partnership’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. In addition, we consolidate those entities deemed to be variable interest entities in which we are determined to be the primary beneficiary.

During the third quarter of 2022, we acquired an office building using a special purpose entity owned by a qualified intermediary to facilitate one or more potential Section 1031 reverse exchanges under the Internal Revenue Code. To realize the tax deferrals available under the Section 1031 exchanges, we must complete the Section 1031 exchanges and take title to the to-be-exchanged buildings within 180 days of the acquisition date. We have determined that this entity is a variable interest entity of which we are the primary beneficiary; and therefore, we consolidate this entity. At September 30, 2022, we also have involvement with four additional entities we determined to be variable interest entities, one of which we are the primary beneficiary and is consolidated and three of which we are not the primary beneficiary and are 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

Table of Contents

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 ~~2016~~2021 Annual Report on Form 10-K.

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

~~Table~~We 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 ~~Contents~~claim liabilities. At September 30, 2022, a reserve of $0.6 million was recorded to cover estimated reported and unreported claims.

~~HIGHWOODS PROPERTIES, INC.~~

~~HIGHWOODS REALTY LIMITED PARTNERSHIP~~Investment Activity

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(tabular dollar~~During the third quarter of 2022, we entered the Dallas market through the formation of two joint ventures with Granite Properties to develop the following Class AA assets:

Project

BBD

Own %

Rentable Square Feet

Granite Park Six

Frisco/Plano

50%

422,000

23Springs

Uptown

50%

642,000

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. We determined that we have a variable interest in each of these entities (see Note 3).

The Granite Park Six joint venture obtained a construction loan for $115.0 million, with an interest rate of SOFR plus 394 basis points and a maturity date of January 2026. In connection with this loan, the Granite Park Six joint venture obtained an interest rate hedge contract that effectively caps the underlying SOFR rate at 3.5% with respect to $95.2 million of any outstanding amounts. The cap expires in July 2024. No amounts were drawn on this loan as of September 30, 2022. The 23Springs joint venture obtained a construction loan for $265.0 million, with an interest rate of SOFR plus 355 basis points and a maturity date of March 2026. In connection with this loan, the 23Springs joint venture obtained an interest rate hedge contract that effectively caps the underlying SOFR rate at 3.5% with respect to $83.0 million of any outstanding amounts. The cap expires in ~~thousands, except per~~April 2024. No amounts were drawn on this loan as of September 30, 2022.

We plan to fund our entry into the Dallas market, including our share of the equity required to construct Granite Park Six and ~~per unit data)~~

23Springs, by exiting the Pittsburgh market (see Note 4). Our Pittsburgh assets, which consist of 2,155,000 square feet of office that was 90.3% occupied as of September 30, 2022, represent approximately 6% of our overall net operating income.

~~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 model~~provides 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 on~~to remeasure the ~~evaluation and implementation of~~contracts 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 of~~would 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 adoption~~ASU; however, we currently expect to avail ourselves of such optional expedients and exceptions should our modified contracts meet the required criteria.

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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 $203.9 million and $192.3 million during the three months ended September 30, 2022 and 2021, respectively, and $608.1 million and $554.6 million during the nine months ended September 30, 2022 and 2021, respectively. Included in these amounts are variable lease payments of $16.9 million and $13.7 million during the three months ended September 30, 2022 and 2021, respectively, and $51.9 million and $42.7 million during the nine months ended September 30, 2022 and 2021, respectively.

3. Variable Interest Entities

The acquisition of SIX50 at Legacy Union in Charlotte was completed in the third quarter of 2022 using a special purpose entity owned by a qualified intermediary to facilitate one or more potential Section 1031 reverse exchanges under the Internal Revenue Code. As of September 30, 2022, this variable interest entity had total assets, liabilities and cash flows of $200.6 million, $3.3 million, and $0.5 million, respectively.

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 September 30, 2022, $37.7 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:


	September 30, 2022		December 31, 2021

Net real estate assets	$	60,917	$	53,191

Cash and cash equivalents	$	1,246	$	389
Accounts receivable	$	166	$	—
Accrued straight-line rents receivable	$	720	$	121
Deferred leasing costs, net	$	2,251	$	1,519
Prepaid expenses and other assets, net	$	160	$	163
Accounts payable, accrued expenses and other liabilities	$	1,476	$	646

The assets of the ~~ASU, we will~~Midtown 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 impact~~recourse 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.

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~~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 Entities

~~1. Description~~During the fourth quarter of ~~Business~~2021, we and ~~Significant Accounting Policies – Continued~~Brand 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 September 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 that~~2827 Peachtree joint venture was further determined to be a variable interest entity as it requires ~~among other things,~~additional subordinated financial support in the ~~use~~form of a ~~new current expected credit~~loan because the initial equity investment provided by us and Brand is not sufficient to finance its planned investments and operations. 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 September 30, 2022, our risk of loss ~~("CECL") model in determining our allowances for doubtful accounts~~ with respect to ~~accounts receivable, accrued straight-line rents receivable~~this arrangement was limited to the carrying value of the investment balance of $13.7 million as no amounts were outstanding under the loan. The assets of the 2827 Peachtree joint venture can be used only to settle obligations of the joint venture and ~~mortgages and notes receivable. The CECL model requires~~its creditors have no recourse to our wholly owned assets.

We also determined that we ~~estimate~~have a variable interest in both the Granite Park Six and 23Springs joint ventures primarily because the entities were designed to pass along interest rate risk, equity price risk and operation risk to us and Granite Properties as equity holders. The joint ventures were further determined to be variable interest entities as they require additional subordinated financial support in the form of loans because the initial equity investments provided by us and Granite Properties are not sufficient to finance the planned investments and operations. We concluded we do not have the power to direct matters that most significantly impact the activities of either entity and therefore do not qualify as the primary beneficiary. Accordingly, the entities are not consolidated. At September 30, 2022, our ~~lifetime expected credit~~risk of loss with respect to these ~~receivables~~arrangements was limited to the carrying value of each investment balance as no amounts were outstanding under the loans. Our investment balances were $36.1 million and ~~record allowances that, when deducted from the balance~~$37.9 million at September 30, 2022 for Granite Park Six and 23Springs, respectively. The assets of the ~~receivables, represent~~Granite Park Six and 23Springs joint ventures can be used only to settle obligations of the ~~net amounts expected~~respective joint venture and their creditors have no recourse to be collected. We will also be required 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~~wholly owned assets.

Table 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.Contents

2.4. Real Estate Assets

~~Dispositions~~Acquisitions

During the third quarter of ~~2017,~~2022, we ~~sold~~acquired SIX50 at Legacy Union, a ~~total~~367,000 square foot trophy office building in Charlotte’s Uptown CBD submarket, for a net purchase price of ~~12 buildings~~$198.0 million. The assets acquired and liabilities assumed were recorded at relative fair value as determined by management, with the assistance of third party specialists, based on information available at the acquisition date and on current assumptions as to future operations.

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

Dispositions

During the third quarter of 2022, we sold land in Richmond for a sales price of ~~$78.0~~$23.3 million and recorded a gain on disposition of property of $9.4 million.

During the second quarter of 2022, we sold office buildings and land in Atlanta, Greensboro and Tampa for an aggregate sales price of $100.7 million (before closing credits to ~~buyer~~buyers 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 building~~land in Tampa for a ~~sale~~sales 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

Because we classified all of our assets in Pittsburgh as non-core, we recorded the following impairment charges in 2022:

•During the third quarter of ~~2017,~~2022, we recorded ~~aggregate impairments~~an impairment charge of ~~real estate assets~~$1.5 million to lower the carrying amount of ~~$1.4~~a land parcel in Pittsburgh to its estimated fair value less costs to sell; and

•During the second quarter of 2022, we recorded an impairment charge of $35.0 million ~~which resulted from~~to lower the carrying amount of EQT Plaza (including accrued straight-line rents receivable and deferred leasing costs) to its estimated fair value less costs to sell. EQT Plaza is a ~~change~~616,000 square foot office building located in ~~market-based inputs and our assumptions about~~ the ~~use~~heart 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.~~

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~~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:


	September 30, 2022		December 31, 2021
Assets:
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)	$	413,036	$	402,013
Less accumulated amortization	(157,205)		(143,111)
	$	255,831	$	258,902
Liabilities (in accounts payable, accrued expenses and other liabilities):
Acquisition-related below market lease liabilities	$	55,371	$	57,703
Less accumulated amortization	(28,633)		(28,978)
	$	26,738	$	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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)	$	11,425	$	10,070	$	33,603	$	27,267
Amortization of lease incentives (in rental and other revenues)	$	500	$	424	$	1,369	$	1,317
Amortization of acquisition-related intangible assets (in rental and other revenues)	$	797	$	636	$	2,448	$	1,154

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)	$	(1,473)	$	(1,391)	$	(4,159)	$	(4,241)

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)
October 1 through December 31, 2022	$	11,068	$	488	$	865	$	(1,275)
2023	40,696		1,623		3,279		(4,918)
2024	35,514		1,554		3,065		(4,278)
2025	28,586		1,478		2,202		(2,764)
2026	24,614		1,279		1,868		(2,464)
Thereafter	86,384		4,089		7,179		(11,039)
	$	226,862	$	10,511	$	18,458	$	(26,738)
Weighted average remaining amortization periods as of September 30, 2022 (in years)	7.9		7.9		7.7		8.4

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

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~~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)~~

The following table sets forth the intangible assets acquired and below market lease liabilities assumed as a result of the acquisition of SIX50 at Legacy Union in Charlotte:


	Acquisition-Related Intangible Assets (amortized in Rental and Other Revenues)		Acquisition-Related Intangible Assets (amortized in Depreciation and Amortization)		Acquisition-Related Below Market Lease Liabilities (amortized in Rental and Other Revenues)
Amount recorded at acquisition	$	4,722	$	12,606	$	(2,172)
Weighted average remaining amortization periods as of September 30, 2022 (in years)	9.1		9.8		12.7

6. Mortgages and Notes Payable

The following table sets forth our mortgages and notes payable:


	September 30, 2022		December 31, 2021
Secured indebtedness	$	486,003	$	491,942
Unsecured indebtedness	2,503,252		2,312,180
Less-unamortized debt issuance costs	(15,886)		(15,207)
Total mortgages and notes payable, net	$	2,973,369	$	2,788,915

September 30,
2017 December 31,
2016
Secured indebtedness $ 99,421
$ 128,204
Unsecured indebtedness 1,875,239
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 September 30, ~~2017,~~2022, our secured mortgage loans were collateralized by real estate assets with an ~~aggregate~~ undepreciated book value of ~~$147.7~~$742.1 million.

~~At September 30, 2017, we had a $475.0~~Our $750.0 million unsecured revolving credit facility ~~that was~~is 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 two 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 20~~are 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 one basis ~~points.~~point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. There was ~~$72.0~~$110.0 million and $170.0 million outstanding under our revolving credit facility at September 30, ~~2017~~2022 and ~~$0.6~~October 18, 2022, respectively. At both September 30, 2022 and October 18, 2022, we had $0.1 million of outstanding letters of credit, which ~~reduced~~reduces the availability on ~~the~~our revolving credit facility. As a result, the unused capacity of our revolving credit facility at September 30, ~~2017~~2022 and October 18, 2022 was ~~$402.4 million.~~$639.9 million and $579.9 million, respectively.

During the second quarter of ~~2017,~~2022, we ~~prepaid without penalty~~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 ~~secured mortgage~~$150.0 million delayed-draw term loan, ~~with a fair market value of $108.2 million with an effective interest rate of 4.22% that~~which was ~~originally scheduled to mature~~drawn in ~~November 2017. We recorded $0.4 million of gain on debt extinguishment related to this prepayment.~~

~~During 2015, we acquired our joint venture partner’s 77.2% interest~~its entirety 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 secondthird 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, we obtained a $100.0 million secured mortgage loan from a third party lender with an effective interest rate of 4.0%. This loan~~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 one 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.

~~Table~~See Note 15 for a discussion of ~~Contents~~financing activities subsequent to September 30, 2022.

~~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, 2017~~25, 2022 (the date of issuance of the quarterly financial statements) and the adequacy of our estimated cash flows from operating activities and other ~~expected~~available financing sources to meet these needs. ~~In particular, we have considered our scheduled debt maturities during such one-year period, including the $200.0 million principal amount of unsecured notes due April 15, 2018.~~ We have concluded it is probable we will meet these short-term liquidity requirements through a combination of the following:

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•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;

•borrowings under our revolving credit facility;

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

•the disposition of non-core assets.


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 ~~fix~~fixed the underlying ~~one-month~~one 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-starting~~2022, 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 been~~were 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 ~~have~~had no collateral requirements related to our interest rate swaps.

Amounts reported in accumulated other comprehensive income/(loss) related to derivatives ~~will be~~are reclassified to interest expense as interest payments are made on our ~~variable-rate~~ debt. During the period from October 1, ~~2017~~2022 through September 30, ~~2018,~~2023, we estimate that ~~less than $0.1~~$0.3 million will be reclassified as a net ~~increase~~decrease to interest expense.

~~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:


	September 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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Derivatives Designated as Cash Flow Hedges:
Amount of unrealized losses recognized in accumulated other comprehensive loss on derivatives:
Interest rate swaps	$	—	$	(6)	$	—	$	(17)
Amount of (gains)/losses reclassified out of accumulated other comprehensive loss into interest expense:
Interest rate swaps	$	(75)	$	129	$	(164)	$	377

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

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8. Noncontrolling Interests


7.	~~Noncontrolling Interests~~

Noncontrolling Interests in Consolidated Affiliates

At September 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 an~~partners are unrelated third ~~party.~~parties.

Noncontrolling Interests in the Operating Partnership

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Beginning noncontrolling interests in the Operating Partnership	$	84,583	$	128,180	$	111,689	$	112,499
Adjustment of noncontrolling interests in the Operating Partnership to fair value	(16,952)		(4,262)		(42,480)		11,072

Conversions of Common Units to Common Stock	—		(234)		(1,251)		(278)
Redemptions of Common Units	(3,101)		—		(3,101)		—
Net income attributable to noncontrolling interests in the Operating Partnership	881		1,967		3,049		5,084
Distributions to noncontrolling interests in the Operating Partnership	(1,192)		(1,418)		(3,687)		(4,144)
Total noncontrolling interests in the Operating Partnership	$	64,219	$	124,233	$	64,219	$	124,233

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 value 3,297
13,390
Conversions of Common Units to Common Stock (408 ) (3,006 )
Net income attributable to noncontrolling interests in the Operating Partnership 3,502
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

~~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's~~Company’s noncontrolling interests in the Operating Partnership:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income available for common stockholders	$	38,251	$	72,105	$	129,022	$	185,869
Increase in additional paid in capital from conversions of Common Units to Common Stock	—		234		1,251		278

Change from net income available for common stockholders and transfers from noncontrolling interests	$	38,251	$	72,339	$	130,273	$	186,147

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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's~~Company’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 ~~remaining~~any 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 ~~were~~are 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.

~~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~~.

~~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.

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 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, 2022:
Assets:
Mortgages and notes receivable, at fair value (1)	$	1,103	$	—	$	1,103	$	—

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,364		2,364		—		—
Impaired real estate assets	1,665		—		—		1,665


Total Assets	$	5,132	$	2,364	$	1,103	$	1,665
Noncontrolling Interests in the Operating Partnership	$	64,219	$	64,219	$	—	$	—
Liabilities:
Mortgages and notes payable, net, at fair value (1)	$	2,630,788	$	—	$	2,630,788	$	—

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,364		2,364		—		—


Total Liabilities	$	2,633,152	$	2,364	$	2,630,788	$	—


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 September 30, 2022 and December 31, 2021.

The Level 3 impaired real estate assets measured at a fair value of $1.7 million in the third quarter of 2022 included a land parcel in Pittsburgh. This impairment resulted from the changes in our assumptions about the use of the asset as a result of our plan to exit the Pittsburgh market and was calculated using broker opinions of value, as observable inputs were not available.

In the second quarter of 2022, Level 3 impaired real estate assets, which measured at a fair value of $57.4 million, resulted from the shortened hold period assumptions for EQT Plaza as a result of our plan to exit the Pittsburgh market. 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%.

Table of Contents

10. Share-Based Payments

During the nine months ended September 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~~ ~~61,404~~99,975 shares of time-based restricted stock and ~~49,344~~81,832 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~~$0.7 million and $1.9 million during ~~each of~~ the three months ended September 30, ~~2017~~2022 and ~~2016~~2021, and $~~5.8~~$6.8 million ~~and $5.4 million~~ during each of the nine months endedSeptember 30, ~~2017~~2022 and ~~2016, respectively.~~2021. At September 30, ~~2017~~,2022, there was ~~$6.1~~$4.3 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of ~~2.3~~2.0 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 September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2022		2021		2022		2021
Cash flow hedges:													Cash flow hedges:
Beginning balance	$	6,046		$	(11,628	)	$	4,949		$	(3,811	)	Beginning balance	$	(1,062)	$	(1,225)	$	(973)	$	(1,462)
Unrealized gains/(losses) on cash flow hedges	(347		)	1,610			(31		)	(7,785		)
Unrealized losses on cash flow hedges													Unrealized losses on cash flow hedges	—		(6)		—		(17)
Amortization of cash flow hedges (1)	211			758			992			2,336			Amortization of cash flow hedges (1)	(75)		129		(164)		377
Total accumulated other comprehensive income/(loss)	$	5,910		$	(9,260	)	$	5,910		$	(9,260	)
Total accumulated other comprehensive loss													Total accumulated other comprehensive loss	$	(1,137)	$	(1,102)	$	(1,137)	$	(1,102)

__________

(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 September 30, 2022 and December 31, 2021, which are considered non-core:


	September 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

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

~~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 stockholders 57,040
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 shares 103,237
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 Partnership 58,611
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 shares 103,237
98,973
102,489
97,669
Add:
Stock options using the treasury method 76
108
79
94
Noncontrolling interests Common Units 2,832
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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Earnings per Common Share - basic:
Numerator:
Net income	$	40,110	$	75,587	$	134,815	$	194,286
Net (income) attributable to noncontrolling interests in the Operating Partnership	(881)		(1,967)		(3,049)		(5,084)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(357)		(894)		(880)		(1,469)
Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)
Net income available for common stockholders	$	38,251	$	72,105	$	129,022	$	185,869
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)	105,184		104,277		105,094		104,117
Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79
Earnings per Common Share - diluted:
Numerator:
Net income	$	40,110	$	75,587	$	134,815	$	194,286
Net (income) attributable to noncontrolling interests in consolidated affiliates	(357)		(894)		(880)		(1,469)
Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership	$	39,132	$	74,072	$	132,071	$	190,953
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)	105,184		104,277		105,094		104,117
Add:
Stock options using the treasury method	—		25		7		17
Noncontrolling interests Common Units	2,417		2,837		2,469		2,838
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions	107,601		107,139		107,570		106,972
Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79

__________


~~(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.

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 September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2022		2021		2022		2021
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 income													Net income	$	40,110	$	75,587	$	134,815	$	194,286
Net (income) attributable to noncontrolling interests in consolidated affiliates													Net (income) attributable to noncontrolling interests in consolidated affiliates	(357)		(894)		(880)		(1,469)
Distributions on Preferred Units	(623		)	(624		)	(1,869		)	(1,877		)	Distributions on Preferred Units	(621)		(621)		(1,864)		(1,864)
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		Net income available for common unitholders	$	39,132	$	74,072	$	132,071	$	190,953
Denominator:													Denominator:
Denominator for basic earnings per Common Unit – weighted average units	105,660			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)	107,192		106,705		107,154		106,546

Net income available for common unitholders	$	0.55		$	0.32		$	1.24		$	5.11		Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79
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 income													Net income	$	40,110	$	75,587	$	134,815	$	194,286
Net (income) attributable to noncontrolling interests in consolidated affiliates													Net (income) attributable to noncontrolling interests in consolidated affiliates	(357)		(894)		(880)		(1,469)
Distributions on Preferred Units	(623		)	(624		)	(1,869		)	(1,877		)	Distributions on Preferred Units	(621)		(621)		(1,864)		(1,864)
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		Net income available for common unitholders	$	39,132	$	74,072	$	132,071	$	190,953
Denominator:													Denominator:
Denominator for basic earnings per Common Unit – weighted average units	105,660			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)	107,192		106,705		107,154		106,546
Add:													Add:
Stock options using the treasury method	76			108			79			94			Stock options using the treasury method	—		25		7		17
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 conversions													Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions	107,192		106,730		107,161		106,563

Net income available for common unitholders	$	0.55		$	0.32		$	1.24		$	5.10		Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79

__________


~~(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.

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~~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. Our segment information for the three and nine months ended September 30, 2021 has been retrospectively revised from previously reported amounts to reflect a change in our reportable segments as a result of our plan to exit the Pittsburgh market.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Rental and Other Revenues:
Office:
Atlanta	$	35,804	$	36,672	$	106,805	$	108,385
Charlotte	18,825		14,313		52,643		32,364
Nashville	44,587		36,136		130,640		106,873
Orlando	13,634		12,852		40,298		38,141

Raleigh	45,220		42,471		137,051		117,168
Richmond	10,872		12,050		31,837		35,263
Tampa	23,590		23,856		71,169		74,166
Total Office Segment	192,532		178,350		570,443		512,360
Other	14,465		17,145		46,773		52,442
Total Rental and Other Revenues	$	206,997	$	195,495	$	617,216	$	564,802


Net Operating Income:
Office:
Atlanta	$	22,524	$	24,157	$	69,472	$	71,779
Charlotte	14,275		11,159		40,132		25,446
Nashville	33,154		27,355		97,093		78,172
Orlando	7,865		7,920		24,264		23,414

Raleigh	32,822		31,425		101,557		88,005
Richmond	7,112		7,805		21,700		24,092
Tampa	14,351		15,143		44,912		49,640
Total Office Segment	132,103		124,964		399,130		360,548
Other	8,560		9,964		27,961		31,272
Total Net Operating Income	140,663		134,928		427,091		391,820
Reconciliation to net income:
Depreciation and amortization	(73,057)		(66,547)		(212,466)		(189,423)
Impairments of real estate assets	(1,515)		—		(36,515)		—
General and administrative expenses	(9,586)		(10,350)		(32,733)		(30,409)
Interest expense	(26,392)		(21,986)		(75,812)		(60,755)
Other income	138		424		621		1,068
Gains on disposition of property	9,402		38,572		63,546		80,371
Equity in earnings of unconsolidated affiliates	457		546		1,083		1,614
Net income	$	40,110	$	75,587	$	134,815	$	194,286

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
Greensboro 5,370
5,167
15,956
15,351
Memphis 11,459
12,330
35,077
36,275
Nashville 28,945
23,979
81,471
71,760
Orlando 13,309
11,678
38,183
34,360
Pittsburgh 14,719
14,386
44,420
43,721
Raleigh 30,524
27,767
90,167
84,013
Richmond 11,152
11,414
33,200
33,420
Tampa 25,072
22,836
72,578
67,088
Total Office Segment 177,021
162,897
517,079
487,176
Other 3,164
3,372
9,797
10,812
Total Rental and Other Revenues $ 180,185
$ 166,269
$ 526,876
$ 497,988

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~~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

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
Greensboro 3,367
3,187
10,116
9,544
Memphis 6,930
7,753
21,474
22,566
Nashville 21,000
17,042
59,250
51,470
Orlando 7,999
6,633
23,007
19,638
Pittsburgh 8,822
8,482
26,396
25,193
Raleigh 21,960
19,525
65,345
59,935
Richmond 6,987
7,602
22,453
22,718
Tampa 15,972
14,349
46,297
42,037
Total Office Segment 116,637
105,291
342,488
316,782
Other 2,314
2,358
6,904
7,491
Total Net Operating Income 118,951
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 income 558
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

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~~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,~~11, 2022, we ~~entered into~~obtained a ~~new $600.0~~$200.0 million, two-year unsecured bank term loan that is scheduled to mature in October 2024 and reduces the existing accordion feature on our $750.0 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~~from $400.0 million ~~of borrowing capacity subject~~ to ~~additional lender commitments. Our new revolving credit facility is scheduled to mature in January 2022.~~$200.0 million. Assuming no defaults have occurred, we have an option to extend the maturity for ~~two~~one additional ~~six-month periods.~~year. The interest rate, based on ~~the new facility at our~~ current credit ratings, is ~~LIBOR~~SOFR plus ~~100~~a related spread adjustment of 10 basis points and ~~the annual facility fee is 20~~a borrowing spread of 95 basis points. The interest rate ~~and facility fee are~~is 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~~We may be entitled to a temporary reduction in the ~~new facility are similar~~interest rate of one basis point provided we meet certain sustainability goals with respect to ~~our previous credit facility. We expect to incur approximately $3.5~~the ongoing reduction of greenhouse gas emissions.

On October 17, 2022, we used the additional $200.0 million of ~~debt issuance costs, which will be amortized along~~borrowings, together 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 outstandingavailable cash and borrowings under our ~~new~~ revolving credit facility, ~~and $0.6~~to prepay without penalty $250.0 million principal amount 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~~3.625% unsecured ~~bank term loan, which was originally~~notes that were 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.2023.

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,~~20, 2022, the Company declared a cash dividend of ~~$0.44~~$0.50 per share of Common Stock, which is payable on December ~~5, 2017~~13, 2022 to stockholders of record as of November ~~14, 2017.~~21, 2022.

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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:

•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;

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

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•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 ~~2016~~2021 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;~~

~~improving~~markets. A core component of this strategy is to continuously strengthen the ~~operating results~~financial 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 our~~existing in-service portfolio and ~~generate attractive returns over the long term for our stockholders;~~

~~disposing of~~recycle 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 ~~2016~~2021 Annual Report on Form 10-K. Occupancy in our office portfolio decreased from ~~92.9%~~91.2% at December 31, ~~2016~~2021 to ~~92.2%~~90.7% at September 30, ~~2017 primarily due~~2022. We expect average occupancy for our office portfolio to ~~scheduled expirations in Nashville and Atlanta.~~be approximately 90.5% to 91.0% for the remainder of 2022.

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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 third quarter of ~~2017~~2022 (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 Office				New		Renewal		All Office
Leased space (in rentable square feet)	193,911			910,118			1,104,029			Leased space (in rentable square feet)	518,438		516,871		1,035,309
Average term (in years - rentable square foot weighted)	7.8			4.1			4.8			Average term (in years - rentable square foot weighted)	9.5		4.8		7.2
Base rents (per rentable square foot) (1)	$	28.23		$	25.71		$	26.15		Base rents (per rentable square foot) (1)	$	37.45	$	34.82	$	36.14
Rent concessions (per rentable square foot) (1)	(0.69		)	(0.26		)	(0.34		)	Rent concessions (per rentable square foot) (1)	(2.30)		(1.06)		(1.68)
GAAP rents (per rentable square foot) (1)	$	27.54		$	25.45		$	25.81		GAAP rents (per rentable square foot) (1)	$	35.15	$	33.76	$	34.46
Tenant improvements (per rentable square foot) (1)	$	3.99		$	2.32		$	2.61		Tenant improvements (per rentable square foot) (1)	$	4.86	$	3.11	$	3.99
Leasing commissions (per rentable square foot) (1)	$	1.04		$	0.78		$	0.83		Leasing commissions (per rentable square foot) (1)	$	1.27	$	0.83	$	1.05

__________


~~(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 third quarter were ~~$25.81~~$34.46 per rentable square foot, ~~or 11.3%,~~13.4% 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's~~Company’s Board of Directors. As of September 30, ~~2017, no customer~~2022, Bank of America (3.8%) and Asurion (3.7%) 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~~$0.6 million, or ~~3.2%~~0.5%, higher in the third quarter of ~~2017~~2022 as compared to ~~2016~~2021 due to an increase of $7.1 million in same property revenues ~~of $4.2 million~~ offset by an increase of ~~$0.9~~$6.4 million in same property expenses.

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~~$5.7 million, or ~~10.5%~~4.3%, higher in the third quarter of ~~2017~~2022 as compared to ~~2016~~2021 primarily due to ~~the impact of~~ development properties placed in service, the acquisition of real estate assets from Preferred Apartment Communities, Inc. (“PAC”) in the third quarter of 2021, the acquisition of SIX50 at Legacy Union in the third quarter of 2022 and ~~acquisitions,~~higher same property NOI, partially offset by NOI lost from ~~sold properties not classified as discontinued operations.~~property dispositions.

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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 ~~intend~~continue to maintain a conservative and flexible balance sheet ~~with access~~and believe we have ample liquidity to ~~multiple sources~~fund our operations and growth prospects. As of ~~debt~~October 18, 2022, we had approximately $32.0 million of available cash and ~~equity capital and sufficient availability under~~$170.0 million drawn on our $750.0 million revolving credit facility, ~~that allows us~~which is scheduled to ~~capitalize on favorable development~~mature in March 2026, assuming we exercise our option to extend the maturity date for two additional six-month periods. At September 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 40.4%, and there were 107.6 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~~$579.9 million of availability at October 18, ~~2017.~~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 continued~~Continued 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 Stock~~equity and/or ~~unsecured~~ debt securities through redemptions, open market repurchases, privately negotiated acquisitions or otherwise.

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

•cash ~~flow~~flows from operating activities;

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•issuance of debt securities by the Operating Partnership;

•issuance of secured debt;

•bank term ~~loans and~~ loans;

•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 recently obtained $200.0 million, two-year unsecured bank term loan that is scheduled to mature in October 2025, assuming we exercise our option to extend the maturity date for one additional year. We generally ~~expect~~believe we will be able to ~~grow~~satisfy these obligations with existing cash, borrowings under our ~~company on a leverage-neutral basis. At September 30, 2017, our leverage ratio, as measured by~~revolving credit facility, new bank term loans, issuance of other unsecured debt, mortgage debt and/or proceeds from the ~~ratio~~sale 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.

During the third quarter of 2022, we entered the Dallas market through the formation of two joint ventures with Granite Properties to develop the following Class AA assets:

Project

BBD

Own %

Rentable Square Feet

Granite Park Six

Frisco/Plano

50%

422,000

23Springs

Uptown

50%

642,000

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 Granite Park Six joint venture obtained a construction loan for $115.0 million, with an interest rate of SOFR plus 394 basis points and a maturity date of January 2026. In connection with this loan, the Granite Park Six joint venture obtained an interest rate hedge contract that effectively caps the underlying SOFR rate at 3.5% with respect to $95.2 million of any outstanding amounts. The cap expires in July 2024. No amounts were drawn on this loan as of September 30, 2022. The 23Springs joint venture obtained a construction loan for $265.0 million, with an interest rate of SOFR plus 355 basis points and a maturity date of March 2026. In connection with this loan, the 23Springs joint venture obtained an interest rate hedge contract that effectively caps the underlying SOFR rate at 3.5% with respect to $83.0 million of any outstanding amounts. The cap expires in April 2024. No amounts were drawn on this loan as of September 30, 2022.

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 90.3% occupied as of September 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.

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Results of Operations

Three Months Ended September 30, ~~2017~~2022 and ~~2016~~2021

Rental and Other Revenues

Rental and other revenues were ~~$13.9~~$11.5 million, or ~~8.4%~~5.9%, higher in the third quarter of ~~2017~~2022 as compared to ~~2016~~2021 primarily due to the development properties placed in service, higher same property revenues, the acquisition of real estate assets from PAC and ~~acquisitions,~~the acquisition of SIX50 at Legacy Union, which increased rental and other revenues by ~~$7.9~~$7.2 million, ~~$4.2~~$7.1 million and $6.4 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, cost recoveries, parking income and termination fees. These increases were partially offset by lost revenue of $9.3 million from property dispositions.

Operating Expenses

Rental property and other expenses were $5.8 million, or 9.5%, higher in the third quarter of 2022 as compared to 2021 primarily due to higher same property operating expenses, the acquisition of real estate assets from PAC and the acquisition of SIX50 at Legacy Union and development properties placed in service, which increased operating expenses by $6.4 million, $1.9 million and $1.2 million, respectively. Same property operating expenses were higher primarily due to higher property taxes, utilities, contract services and repairs and maintenance. These increases were partially offset by a $3.6 million decrease in operating expenses from property dispositions.

Depreciation and amortization was $6.5 million, or 9.8%, higher in the third quarter of 2022 as compared to 2021 primarily due to higher same property lease related depreciation and amortization, the acquisition of real estate assets from PAC and the acquisition of SIX50 at Legacy Union and development properties placed in service, partially offset by property dispositions.

Because we classified all of our assets in Pittsburgh as non-core, we recorded an impairment charge of $1.5 million on a land parcel in Pittsburgh in the third quarter of 2022. We recorded no such impairment in 2021.

General and administrative expenses were $0.8 million, or 7.4%, lower in the third quarter of 2022 as compared to 2021 primarily due to lower long-term equity incentive compensation, partially offset by higher salaries, benefits and office rent.

Interest Expense

Interest expense was $4.4 million, or 20.0%, higher in the third quarter of 2022 as compared to 2021 primarily due to higher average debt balances, higher average interest rates and lower capitalized interest.

Other Income

Other income was $0.3 million lower in the third quarter of 2022 as compared to 2021 primarily due to losses on deferred compensation plan investments (which is fully offset by a corresponding decrease in general and administrative expenses).

Gains on Disposition of Property

Gains on disposition of property were $29.2 million lower in the third quarter of 2022 as compared to 2021.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates was $0.1 million lower in the third quarter of 2022 as compared to 2021 primarily due to higher property taxes.

Earnings Per Common Share - Diluted

Diluted earnings per common share was $0.33 lower in the third quarter of 2022 as compared to 2021 due to a decrease in net income for the reasons discussed above.

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Nine Months Ended September 30, 2022 and 2021

Rental and Other Revenues

Rental and other revenues were $52.4 million, or 9.3%, higher in the nine months ended September 30, 2022 as compared to 2021 primarily due to the acquisition of real estate assets from PAC, the acquisition of SIX50 at Legacy Union, development properties placed in service and higher same property revenues, which increased rental and other revenues by $39.0 million, $23.5 million and $16.1 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher ~~termination fees~~average occupancy and higher cost ~~recovery income.~~recoveries, parking income and termination fees, partially offset by higher credit losses. These increases were ~~partly~~partially offset by lost revenue of ~~$0.6~~$26.6 million from property dispositions.

Operating Expenses

Rental property and other expenses were ~~$2.6~~$17.1 million, or ~~4.5%~~9.9%, higher in the ~~third quarter of 2017~~nine months ended September 30, 2022 as compared to ~~2016~~2021 primarily due to higher same property operating expenses, the acquisition of real estate assets from PAC and the acquisition of SIX50 at Legacy Union and development properties placed in service, ~~higher same property operating expenses and acquisitions,~~ which increased operating expenses by ~~$1.5~~$12.4 million, ~~$0.9~~$10.5 million and ~~$0.4~~$3.7 million, respectively. Same property operating expenses were higher primarily due to higher contract services, utilities, property taxes ~~contract services~~ and ~~property insurance, partly offset by lower utilities.~~repairs and maintenance. These increases were ~~partly~~partially offset by a ~~$0.3~~$9.6 million decrease in operating expenses from property dispositions.

Depreciation and amortization was ~~$4.1~~$23.0 million, or ~~7.7%, higher in the third quarter of 2017 as compared to 2016 primarily due to development properties placed in service and acquisitions, partly offset by property dispositions.~~

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

General and administrative expenses were $0.6 million, or 6.2%, lower in the third quarter of 2017 as compared to 2016 primarily due to lower acquisition costs, partly offset by higher company-wide base salaries and benefits.

~~Interest Expense~~

Interest expense was $1.4 million, or 7.4%, lower in the third quarter of 2017 as compared to 2016 primarily due to lower average debt balances and lower average interest rates, partly offset by lower capitalized interest.

~~Other Income~~

~~Other income was $0.3 million, or 33.0%, lower in the third quarter of 2017 as compared to 2016 primarily due to the repayments of mortgages receivable in 2016.~~

~~Gains on Disposition of Property~~

~~Gains on disposition of property were $15.9 million higher in the third quarter of 2017 as compared to 2016 due to the net effect of the disposition activity in such periods.~~

~~Equity in Earnings of Unconsolidated Affiliates~~

~~Equity in earnings of unconsolidated affiliates was $2.2 million higher in the third quarter of 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.~~

~~Earnings Per Common Share - Diluted~~

Diluted earnings per common share was $0.23 higher in the third quarter of 2017 as compared to 2016 due to an increase in net income for the reasons discussed above, partly offset by an increase in the weighted average Common Shares outstanding.

~~Nine Months Ended September 30, 2017 and 2016~~

~~Rental and Other Revenues~~

~~Rental and other revenues were $28.9 million, or 5.8%~~12.2%, higher in the nine months ended September 30, ~~2017~~2022 as compared to ~~2016~~2021 primarily due to the acquisition of real estate assets from PAC and the acquisition of SIX50 at Legacy Union, development properties placed in service and higher same property ~~revenues~~lease related depreciation and ~~acquisitions, which increased rental~~amortization, partially offset by fully amortized acquisition-related intangible assets and ~~other revenues by $17.7~~property dispositions.

Because we classified all of our assets in Pittsburgh as non-core, we recorded an impairment charge of $36.5 million ~~$8.0 million and $4.4 million, respectively. Same property rental and other revenues were higher~~in the nine months ended September 30, 2022, primarily ~~due~~ to ~~higher average GAAP rents per rentable~~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 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 ~~higher parking income, partly offset by lower termination fees. These increases were partly offset by lost revenue of $1.5 million from property dispositions.~~

~~Operating Expenses~~

~~Rental property and other~~administrative expenses were ~~$3.8~~$2.3 million, or ~~2.2%~~7.6%, higher in the nine months ended September 30, ~~2017~~2022 as compared to ~~2016~~2021 primarily due to ~~development properties placed in service~~higher salaries, benefits and ~~acquisitions, which increased operating expenses by $3.3 million and $1.1 million, respectively. These increases were partly offset by a $0.8 million decrease in operating expenses~~office rent.

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

~~Depreciation and amortization~~Interest expense was ~~$7.2~~$15.1 million, or ~~4.5%~~24.8%, higher in the nine months ended September 30, ~~2017~~2022 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.

We recorded aggregate impairments of real estate assets of $1.4 million in the nine months ended September 30, 2017, which resulted from a change in market-based inputs and our assumptions about the use of the assets.

~~General and administrative expenses were $0.5 million, or 1.6%, higher in the nine months ended September 30, 2017 as compared to 2016~~2021 primarily due to higher ~~company-wide base salaries, benefits and incentive compensation, partly offset by lower acquisition costs.~~

~~Interest Expense~~

~~Interest expense was $7.5 million, or 12.8%, lower in the nine months ended September 30, 2017 as compared to 2016 primarily due to lower~~ average debt balances, ~~lower~~higher average interest rates and ~~higher~~lower capitalized interest.

Other Income

Other income was ~~$0.7 million, or 39.7%, higher in the nine months ended September 30, 2017 as compared to 2016 primarily due to gains on debt extinguishment in 2017.~~

~~Gains on Disposition of Property and Net Gains on Disposition of Discontinued Operations~~

~~Total gains were $403.5~~$0.4 million lower in the nine months ended September 30, ~~2017~~2022 as compared to ~~2016 due to the sales of substantially all of our wholly-owned Country Club Plaza assets in Kansas City (which we refer to as the “Plaza assets”) in 2016.~~

~~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~~2021 primarily due to ~~our share of the net effect of the disposition activity by certain unconsolidated affiliates in such periods, partly~~losses on deferred compensation plan investments (which is fully offset by ~~lower occupancy~~a corresponding decrease in ~~2017.~~general and administrative expenses), partially offset by losses on debt extinguishment in 2021.

~~Income From Discontinued Operations~~Gains on Disposition of Property

~~Income from discontinued operations was $4.1~~Gains on disposition of property were $16.8 million lower in the nine months ended September 30, ~~2017~~2022 as compared to ~~2016 due to the sales~~2021.

Equity in Earnings of ~~the Plaza assets~~Unconsolidated Affiliates

Equity in ~~2016.~~

~~Earnings Per Common Share - Diluted~~

~~Diluted~~ earnings ~~per common share~~of unconsolidated affiliates was ~~$3.85~~$0.5 million lower in the nine months ended September 30, ~~2017~~2022 as compared to ~~2016~~2021 primarily due to ~~gains from~~ the ~~sales~~acquisition of ~~the Plaza assets~~our joint venture partner’s 75.0% interest in ~~2016 and an increase~~our Highwoods DLF Forum, LLC joint venture in the ~~weighted average~~first quarter of 2021 and higher property taxes.

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Earnings Per Common ~~Shares outstanding, partly offset by increases~~Share - Diluted

Diluted earnings per common share was $0.56 lower in the nine months ended September 30, 2022 as compared to 2021 due to a decrease in net income ~~from continuing operations~~ for the reasons discussed above.

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):


	Nine Months Ended September 30,
	2022		2021		Change
Net Cash Provided By Operating Activities	$	319,879	$	309,218	$	10,661
Net Cash Used In Investing Activities	(341,593)		(373,225)		31,632
Net Cash Provided By/(Used In) Financing Activities	19,609		(84,339)		103,948
Total Cash Flows	$	(2,105)	$	(148,346)	$	146,241

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 ~~increase~~change in net cash provided by operating activities in the nine months ended September 30, ~~2017~~2022 as compared to ~~2016~~2021 was primarily due to higher net cash from the operations of acquired real estate assets from PAC, the acquisition of SIX50 at Legacy Union, same properties and development properties placed in service, ~~same properties~~partially offset by property dispositions.

The change in net cash used in investing activities in the nine months ended September 30, 2022 as compared to 2021 was primarily due to lower acquisition activity and ~~acquisitions,~~investments in development in-process in 2022, partially offset by investments in the ~~timing of cash paid for operating expenses~~2827 Peachtree, Granite Park Six and ~~the settlement of cash flow hedges.~~23Springs joint ventures in 2022, lower net proceeds from disposition activity in 2022 and higher investments in tenant and building improvements in 2022.

The change in net cash provided by/(used in) investing activities in the nine months ended September 30, 2017 as compared to 2016 was primarily due to the net proceeds from the sales of the Plaza assets in 2016, partly offset by higher acquisition activity in 2016.

~~The decrease in net cash used in~~ financing activities in the nine months ended September 30, ~~2017~~2022 as compared to ~~2016~~2021 was primarily due to ~~higher~~ net debt borrowings in ~~2017, partly offset by the payment of a special dividend declared in the fourth quarter of 2016 and lower proceeds from the issuance of Common Stock in 2017.~~2022.

Capitalization

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


	September 30, 2022		December 31, 2021

Mortgages and notes payable, net, at recorded book value	$	2,973,369	$	2,788,915

Preferred Stock, at liquidation value	$	28,821	$	28,821
Common Stock outstanding	105,198		104,893
Common Units outstanding (not owned by the Company)	2,382		2,505
Per share stock price at period end	$	26.96	$	44.59
Market value of Common Stock and Common Units	$	2,900,357	$	4,788,877
Total capitalization	$	5,902,547	$	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 outstanding 103,249
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 September 30, ~~2017,~~2022, our mortgages and notes payable and outstanding preferred stock represented ~~26.5%~~50.9% of our total capitalization and ~~34.7%~~40.4% of the undepreciated book value of our assets. See also ~~"Executive~~“Executive Summary - Liquidity and Capital Resources."”

Our mortgages and notes payable as of September 30, ~~2017~~2022 consisted of ~~$99.4~~$486.0 million of secured indebtedness with a weighted average interest rate of ~~4.0%~~3.62% and ~~$1,875.2~~$2,503.3 million of unsecured indebtedness with a weighted average interest rate of ~~3.54%~~3.67%. The secured indebtedness was collateralized by real estate assets with an ~~aggregate~~ undepreciated book value of ~~$147.7 million~~.$742.1 million. As of September 30, ~~2017, $557.0~~2022, $460.0 million of our debt does not bear interest at fixed rates or is not protected by interest rate hedge contracts.

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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 ~~2016~~2021 Annual Report on Form 10-K.

During the third quarter of ~~2017,~~2022, we ~~sold~~acquired SIX50 at Legacy Union, a ~~total of 12 buildings~~367,000 square foot trophy office building in Charlotte’s Uptown CBD submarket, for ~~an aggregate sale~~a net purchase price of ~~$78.0 million (before closing credits~~$198.0 million. The assets acquired and liabilities assumed were recorded at relative fair value as determined by management, with the assistance of third party specialists, based on information available at the acquisition date and on current assumptions as to ~~buyer of $2.5 million) and recorded aggregate gains on disposition of property of $19.8 million.~~future operations.

During the third quarter of ~~2017,~~2022, we sold land in Richmond for a sales price of $23.3 million and recorded ~~aggregate impairments~~a gain on disposition of ~~real estate assets~~property of ~~$1.4 million, which resulted from a change in market-based inputs and our assumptions about the use of the assets.~~$9.4 million.

As of September 30, ~~2017,~~2022, we were developing ~~0.7~~1.4 million rentable square feet of office properties. The following table summarizes these announced and in-process office developments:


Property	Market	Own %		Consolidated (Y/N)	Rentable Square Feet	Anticipated Total Investment (1)		Investment As Of September 30, 2022 (1)		Pre Leased %		Estimated Completion	Estimated Stabilization
						($ in thousands)
23Springs (2)	Dallas	50.0	%	N	642,000	$	460,000	$	75,177	17.1	%	1Q 25	1Q 28
Granite Park Six (2)	Dallas	50.0	%	N	422,000	200,000		71,777		12.4		4Q 23	1Q 26
GlenLake III Office & Retail (3)	Raleigh	100.0	%	Y	218,250	94,600		30,938		14.6		3Q 23	1Q 26
2827 Peachtree	Atlanta	50.0	%	N	135,300	79,000		28,151		72.0		3Q 23	1Q 25
Four Morrocroft	Charlotte	100.0	%	Y	18,000	12,000		656		100.0		2Q24	2Q24





					1,435,550	$	845,600	$	206,699	21.6	%

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 %
__________

~~__________~~(1)Includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheet.


~~(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.~~

(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.

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&T~~BofA 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, ~~MUFG~~Regions Securities ~~Americas~~LLC 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 third quarter of 2022.

~~On October 18, 2017, we entered into a new $600.0~~

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Our $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. ~~The~~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 ~~the new~~our revolving credit facility ~~at our current credit ratings is~~was converted from LIBOR plus ~~100~~90 basis points to SOFR plus a related spread adjustment of 10 basis points and ~~the~~a 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 financial~~We 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 $110.0 million and ~~other covenants~~$170.0 million outstanding under our revolving credit facility at September 30, 2022 and October 18, 2022, respectively. At both September 30, 2022 and October 18, 2022, we had $0.1 million of outstanding letters of credit, which reduces the ~~new facility are similar to~~availability on our ~~previous~~revolving credit facility. As a result, the unused capacity of our revolving credit facility at September 30, 2022 and October 18, 2022 was $639.9 million and $579.9 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 was drawn in its entirety in the third quarter of 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 ~~expect~~may be entitled to ~~incur approximately $3.5~~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. We incurred $2.7 million of debt issuance costs, which ~~will be~~are 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~~modified term loan.

On October ~~18, 2017,~~11, 2022, we ~~had~~obtained a $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~~two-year unsecured bank term loan ~~which was originally~~that is scheduled to mature in ~~January 2019.~~October 2024 and reduces the existing accordion feature on our $750.0 million unsecured revolving credit facility from $400.0 million to $200.0 million. Assuming no defaults have occurred, we have an option to extend the maturity for one additional year. 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~~is SOFR plus ~~120~~a related spread adjustment of 10 basis points ~~to LIBOR plus 110~~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 ~~expect~~may be entitled to ~~incur~~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.

~~approximately $1.1~~On October 17, 2022, we used the additional $200.0 million of ~~debt issuance costs, which will be amortized along~~borrowings, together with ~~certain existing unamortized debt issuance costs over the remaining term of the modified loan. We expect~~available cash and borrowings under our revolving credit facility, to ~~record $0.4 million of loss on debt extinguishment.~~

~~We also simultaneously prepaid~~prepay without penalty ~~$125.0~~$250.0 million ~~on a $350.0 million~~principal amount of 3.625% unsecured ~~bank term loan which is~~notes that were scheduled to mature in ~~June 2020. We expect to record $0.4 million of loss on debt extinguishment related to this prepayment.~~January 2023.

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 ~~the~~our revolving credit facility, the lenders having at least 51.0% of the total commitments under ~~the~~our 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 done~~debt at higher interest rates, the increased interest expense could adversely affect our cash flow and ability to pay distributions. ~~Any such refinancing could~~We may also ~~impose~~be 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.

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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's~~Company’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's~~Company’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 Purchases~~Analysis of ~~Equity Securities"~~Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and Distributions” in our ~~2016~~2021 Annual Report on Form 10-K.

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

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

Current and Future Cash Needs

We anticipate that our available cash and cash equivalents, cash flows from operating activities and other ~~expected~~available 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. 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 ~~the $200.0 million principal amount of unsecured notes due April 15, 2018.~~building improvement costs, tenant improvement costs and lease commissions.

We had ~~$4.9~~$23.1 million of cash and cash equivalents as of September 30, ~~2017.~~2022. The unused capacity of our ~~new~~ revolving credit facility at September 30, 2022 and October 18, ~~2017~~2022 was ~~$399.4~~$639.9 million and $579.9 million, respectively, excluding an accordion feature that allows for an additional $400.0 million and $200.0 million, respectively, 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 nine months endedSeptember 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 ~~2016~~2021 Annual Report on Form 10-K.

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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's~~Company’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's~~Company’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's~~Company’s operating performance.

The ~~Company's~~Company’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.

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The following table sets forth the ~~Company's~~Company’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 September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2022		2021		2022		2021
Funds from operations:													Funds from operations:
Net income	$	59,549		$	33,840		$	132,588		$	514,103		Net income	$	40,110	$	75,587	$	134,815	$	194,286
Net (income) attributable to noncontrolling interests in consolidated affiliates	(315		)	(319		)	(914		)	(941		)	Net (income) attributable to noncontrolling interests in consolidated affiliates	(357)		(894)		(880)		(1,469)
Depreciation and amortization of real estate assets	56,271			52,303			166,862			159,780			Depreciation and amortization of real estate assets	72,323		65,823		210,362		187,344
Impairments of depreciable properties													Impairments of depreciable properties	—		—		35,000		—
(Gains) on disposition of depreciable properties	(19,849		)	—			(25,181		)	(8,915		)	(Gains) on disposition of depreciable properties	—		(37,309)		(47,807)		(79,108)

Unconsolidated affiliates:													Unconsolidated affiliates:
Depreciation and amortization of real estate assets	529			736			1,923			2,227			Depreciation and amortization of real estate assets	181		185		548		584
(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 operations	91,568			84,718			270,661			249,585			Funds from operations	112,257		103,392		332,038		301,637
Dividends on Preferred Stock	(623		)	(624		)	(1,869		)	(1,877		)	Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)

Funds from operations available for common stockholders	$	90,945		$	84,094		$	268,792		$	247,708		Funds from operations available for common stockholders	$	111,636	$	102,771	$	330,174	$	299,773
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	$	1.04	$	0.96	$	3.07	$	2.80
Weighted average shares outstanding (1)	106,145			101,939			105,402			100,645			Weighted average shares outstanding (1)	107,601		107,139		107,570		106,972

__________


~~(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 September 30, ~~2017~~,2022, our same property portfolio consisted of ~~212~~148 in-service properties encompassing ~~28.2~~24.4 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, ~~2016~~2021 to September 30, ~~2017~~)2022). As of December 31, ~~2016~~,2021, our same property portfolio consisted of ~~217~~148 in-service properties encompassing ~~26.7~~24.2 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, ~~2015~~2020 to December 31, ~~2016~~)2021). The change in our same property portfolio was due to the addition of ~~four~~five acquired properties encompassing ~~1.6~~0.6 million rentable square feet, ~~acquired during~~ ~~2015~~ ~~and~~ ~~four~~ ~~newly developed properties encompassing~~ ~~0.8 million~~ ~~rentable square feet placed in service during~~ ~~2015. These additions were~~ offset by the removal of 13five properties encompassing ~~0.8~~0.4 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~~$29.2 million and ~~$7.8~~$24.8 million for the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$42.9~~$88.4 million and ~~$22.0~~$52.1 million for the nine months endedSeptember 30, ~~2017~~2022 and ~~2016~~,2021, respectively. Rental property and other expenses related to properties not in our same property portfolio were ~~$4.3~~$7.2 million and ~~$2.6~~$7.8 million for the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, and ~~$11.0~~$21.5 million and ~~$7.3~~$16.8 million for the nine months endedSeptember 30, ~~2017~~2022 and ~~2016~~,2021, respectively.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	40,110	$	75,587	$	134,815	$	194,286
Equity in earnings of unconsolidated affiliates	(457)		(546)		(1,083)		(1,614)
Gains on disposition of property	(9,402)		(38,572)		(63,546)		(80,371)
Other income	(138)		(424)		(621)		(1,068)
Interest expense	26,392		21,986		75,812		60,755
General and administrative expenses	9,586		10,350		32,733		30,409
Impairments of real estate assets	1,515		—		36,515		—
Depreciation and amortization	73,057		66,547		212,466		189,423
Net operating income	140,663		134,928		427,091		391,820
Non same property and other net operating income	(22,018)		(16,925)		(66,899)		(35,293)
Same property net operating income	$	118,645	$	118,003	$	360,192	$	356,527







Same property net operating income	$	118,645	$	118,003	$	360,192	$	356,527
Lease termination fees, straight-line rent and other non-cash adjustments (1)	(5,401)		(2,809)		(11,952)		(10,291)
Same property cash net operating income	$	113,244	$	115,194	$	348,240	$	346,236

__________

(1) Includes $0.3 million and $0.1 million of temporary rent deferrals granted by the Company, net of repayments, during the three and nine months ended September 30, 2022, respectively. Includes $0.4 million and $2.4 million of repayments of temporary rent deferrals, net of additional temporary rent deferrals granted by the Company, during the three and nine months ended September 30, 2021, respectively.

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 expense 17,191
18,566
51,208
58,756
General and administrative expenses 9,247
9,863
29,787
29,327
Impairments of real estate assets 1,445
—
1,445
—
Depreciation and amortization 56,973
52,923
168,934
161,734
Net operating income from continuing operations 118,951
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

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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 collars, 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 September 30, 2022, we had $2,529.3 million principal amount of ~~June~~fixed rate debt outstanding, a $4.9 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 $2,187.1 million. If interest rates had been 100 basis points higher, the aggregate fair market value of our fixed rate debt would have been $111.4 million lower. If interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt would have been $119.7 million higher.

At September 30, ~~2017, see "Quantitative and Qualitative Disclosures About Market Risk" in our Quarterly Report~~2022, we had $460.0 million of variable rate debt outstanding, a $240.0 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 for~~this variable rate debt had been 100 basis points higher or lower, the ~~second quarter of 2017.~~annual interest expense at September 30, 2022 would increase or decrease by $4.6 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's~~SEC’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's~~Company’s CEO and CFO have concluded that the disclosure controls and procedures of the Company and the Operating Partnership were each effective ~~at the end~~as of ~~the period covered by this Quarterly Report.~~September 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 30, ~~2017~~2022 that materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting. There were also no changes in internal control over financial reporting during the three months endedSeptember 30, ~~2017~~2022 that materially affected, or are reasonably likely to materially affect, the Operating ~~Partnership's~~Partnership’s internal control over financial reporting.

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PART II - OTHER INFORMATION

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

~~During the~~ ~~third~~ quarter of 2017, the Company issued an aggregate of 2,000 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 INFORMATION~~

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.

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~~
~~10.1~~31.1		Fifth Amended and Restated Credit Agreement, dated as of October 18, 2017, 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 and PNC Bank, National Association, as Co-Syndication Agents, and the Other Lenders named therein
~~10.2~~	Second Amendment to Amended and Restated Seven-Year Term Loan Agreement, dated as of October 18, 2017, by and among the Company, the Operating Partnership and Wells Fargo Bank, National Association, as Administrative Agent
~~12.1~~	~~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.INS		Inline 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.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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

Date: October ~~24, 2017~~25, 2022



	September 30, 2017			December 31, 2016
Assets:
Real estate assets, at cost:
Land	$	488,013		$	474,375
Buildings and tenant improvements	4,605,061			4,313,373
Development in-process	58,578			279,602
Land held for development	76,969			77,355
	5,228,621			5,144,705
Less-accumulated depreciation	(1,196,642		)	(1,134,103		)
Net real estate assets	4,031,979			4,010,602
Cash and cash equivalents	4,864			49,490
Restricted cash	47,761			29,141
Accounts receivable, net of allowance of $504 and $624, respectively	18,027			17,372
Mortgages and notes receivable, net of allowance of $80 and $105, respectively	6,789			8,833
Accrued straight-line rents receivable, net of allowance of $324 and $692, respectively	194,639			172,829
Investments in and advances to unconsolidated affiliates	23,523			18,846
Deferred leasing costs, net of accumulated amortization of $145,814 and $140,081, respectively	202,814			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 liabilities	227,575			313,885
Total Liabilities	2,193,973			2,261,932
Commitments and contingencies
Noncontrolling interests in the Operating Partnership	147,451			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, respectively	1,032			1,017
Additional paid-in capital	2,924,048			2,850,881
Distributions in excess of net income available for common stockholders	(758,484		)	(749,412		)
Accumulated other comprehensive income	5,910			4,949
Total Stockholders’ Equity	2,201,398			2,136,355
Noncontrolling interests in consolidated affiliates	17,644			17,961
Total Equity	2,219,042			2,154,316
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	4,560,466		$	4,561,050



	Common Units						Accumulated Other Comprehensive Income		Noncontrolling Interests in Consolidated Affiliates			Total
	General Partners’ Capital			Limited Partners’ Capital			Accumulated Other Comprehensive Income		Noncontrolling Interests in Consolidated Affiliates			Total
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 withholdings	703			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 forfeitures	58			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 income	1,326			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



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	$	—