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, ~~2022~~2023

☐ 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	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)

150 Fayetteville Street, Suite 1400

Raleigh, NC 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 ☒ No ☐ Highwoods Realty Limited Partnership Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Highwoods Properties, Inc. Yes ☒ No ☐ Highwoods Realty Limited Partnership Yes ☒ 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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Highwoods Properties, Inc.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

Highwoods Realty Limited Partnership

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ 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 ☒ Highwoods Realty Limited Partnership Yes ☐ No ☒

The Company had ~~105,197,658~~105,693,261 shares of Common Stock outstanding as of October ~~18, 2022.~~17, 2023.

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.

Except as otherwise noted, all property-level operational information presented herein includes in-service wholly owned properties and in-service properties owned by consolidated joint ventures (at 100%). Development projects are not considered in-service properties until such projects are completed and stabilized. Stabilization occurs at the beginning of the first quarter after the earlier of: (1) the projected stabilization date, or (2) the date on which a project's occupancy generally exceeds 93%.

Certain information contained herein is presented as of October ~~18, 2022,~~17, 2023, 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, ~~2022~~2023 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’ 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 1311 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, ~~2022~~2023

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)			3
HIGHWOODS PROPERTIES, INC.:
Consolidated Balance Sheets atas of September 30, ~~2022~~2023 and December 31, ~~2021~~2022			3
Consolidated Statements of Income for the Three and ~~Nine~~N ine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			4
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			5
Consolidated Statements of Equity for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			8
HIGHWOODS REALTY LIMITED PARTNERSHIP:
Consolidated Balance Sheets atas of September 30, ~~2022~~2023 and December 31, ~~2021~~2022			10
Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			11
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			12
Consolidated Statements of Capital for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			13
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022			15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			3330
Disclosure Regarding Forward-Looking Statements			3330
Executive Summary			3431
Results of Operations			3834
Liquidity and Capital Resources			4037
Critical Accounting Estimates			4340
Non-GAAP Information			4440
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			4743
ITEM 4. CONTROLS AND PROCEDURES			4743

PART II - OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			44

ITEM 6. EXHIBITS			4844

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			September 30, 2023		December 31, 2022
Assets:	Assets:					Assets:
Real estate assets, at cost:	Real estate assets, at cost:					Real estate assets, at cost:
Land	Land	$	548,720	$	549,228	Land	$	542,418	$	548,720
Buildings and tenant improvements	Buildings and tenant improvements	5,867,137		5,718,169		Buildings and tenant improvements	5,970,163		5,909,754
Development in-process	Development in-process	29,774		6,890		Development in-process	6,203		46,735
Land held for development	Land held for development	231,911		215,257		Land held for development	227,817		231,218
		6,677,542		6,489,544			6,746,601		6,736,427
Less-accumulated depreciation	Less-accumulated depreciation	(1,562,374)		(1,457,511)		Less-accumulated depreciation	(1,711,023)		(1,609,502)
Net real estate assets	Net real estate assets	5,115,168		5,032,033		Net real estate assets	5,035,578		5,126,925
Real estate and other assets, net, held for sale	Real estate and other assets, net, held for sale	—		3,518		Real estate and other assets, net, held for sale	4,706		—
Cash and cash equivalents	Cash and cash equivalents	23,055		23,152		Cash and cash equivalents	16,901		21,357
Restricted cash	Restricted cash	6,038		8,046		Restricted cash	3,809		4,748
Accounts receivable	Accounts receivable	24,589		14,002		Accounts receivable	25,583		25,481
Mortgages and notes receivable	Mortgages and notes receivable	1,103		1,227		Mortgages and notes receivable	9,783		1,051
Accrued straight-line rents receivable	Accrued straight-line rents receivable	284,515		268,324		Accrued straight-line rents receivable	308,277		293,674
Investments in and advances to unconsolidated affiliates	Investments in and advances to unconsolidated affiliates	88,974		7,383		Investments in and advances to unconsolidated affiliates	314,475		269,221
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
Deferred leasing costs, net of accumulated amortization of $173,926 and $163,751, respectively						Deferred leasing costs, net of accumulated amortization of $173,926 and $163,751, respectively	233,079		252,828
Prepaid expenses and other assets, net of accumulated depreciation of $23,008 and $21,660, respectively						Prepaid expenses and other assets, net of accumulated depreciation of $23,008 and $21,660, respectively	72,177		68,091
Total Assets	Total Assets	$	5,870,551	$	5,695,138	Total Assets	$	6,024,368	$	6,063,376
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:	Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:					Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
Mortgages and notes payable, net	Mortgages and notes payable, net	$	2,973,369	$	2,788,915	Mortgages and notes payable, net	$	3,212,185	$	3,197,215
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	307,294		294,976		Accounts payable, accrued expenses and other liabilities	310,409		301,184

Total Liabilities	Total Liabilities	3,280,663		3,083,891		Total Liabilities	3,522,594		3,498,399
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Noncontrolling interests in the Operating Partnership	Noncontrolling interests in the Operating Partnership	64,219		111,689		Noncontrolling interests in the Operating Partnership	44,452		65,977
Equity:	Equity:					Equity:
Preferred Stock, $.01 par value, 50,000,000 authorized shares;	Preferred Stock, $.01 par value, 50,000,000 authorized shares;					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
8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 28,811 and 28,821 shares issued and outstanding, respectively						8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 28,811 and 28,821 shares issued and outstanding, respectively	28,811		28,821
Common Stock, $.01 par value, 200,000,000 authorized shares;	Common Stock, $.01 par value, 200,000,000 authorized shares;					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
105,693,261 and 105,210,858 shares issued and outstanding, respectively						105,693,261 and 105,210,858 shares issued and outstanding, respectively	1,057		1,052
Additional paid-in capital	Additional paid-in capital	3,083,229		3,027,861		Additional paid-in capital	3,107,593		3,081,330
Distributions in excess of net income available for common stockholders	Distributions in excess of net income available for common stockholders	(608,181)		(579,616)		Distributions in excess of net income available for common stockholders	(683,171)		(633,227)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,137)		(973)		Accumulated other comprehensive loss	(1,434)		(1,211)
Total Stockholders’ Equity	Total Stockholders’ Equity	2,503,784		2,477,142		Total Stockholders’ Equity	2,452,856		2,476,765
Noncontrolling interests in consolidated affiliates	Noncontrolling interests in consolidated affiliates	21,885		22,416		Noncontrolling interests in consolidated affiliates	4,466		22,235
Total Equity	Total Equity	2,525,669		2,499,558		Total Equity	2,457,322		2,499,000
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	5,870,551	$	5,695,138	Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	6,024,368	$	6,063,376

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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Rental and other revenues	Rental and other revenues	$	206,997	$	195,495	$	617,216	$	564,802	Rental and other revenues	$	207,095	$	206,997	$	627,138	$	617,216
Operating expenses:	Operating expenses:									Operating expenses:
Rental property and other expenses	Rental property and other expenses	66,334		60,567		190,125		172,982		Rental property and other expenses	67,193		66,334		199,231		190,125
Depreciation and amortization	Depreciation and amortization	73,057		66,547		212,466		189,423		Depreciation and amortization	74,765		73,057		220,416		212,466
Impairments of real estate assets	Impairments of real estate assets	1,515		—		36,515		—		Impairments of real estate assets	—		1,515		—		36,515
General and administrative	General and administrative	9,586		10,350		32,733		30,409		General and administrative	8,873		9,586		30,668		32,733
Total operating expenses	Total operating expenses	150,492		137,464		471,839		392,814		Total operating expenses	150,831		150,492		450,315		471,839
Interest expense	Interest expense	26,392		21,986		75,812		60,755		Interest expense	34,247		26,392		101,408		75,812
Other income	Other income	138		424		621		1,068		Other income	754		138		3,082		621

Gains on disposition of property	Gains on disposition of property	9,402		38,572		63,546		80,371		Gains on disposition of property	—		9,402		19,818		63,546

Gain on deconsolidation of affiliate										Gain on deconsolidation of affiliate	—		—		11,778		—
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	457		546		1,083		1,614		Equity in earnings of unconsolidated affiliates	400		457		1,902		1,083

Net income	Net income	40,110		75,587		134,815		194,286		Net income	23,171		40,110		111,995		134,815
Net (income) attributable to noncontrolling interests in the Operating Partnership	Net (income) attributable to noncontrolling interests in the Operating Partnership	(881)		(1,967)		(3,049)		(5,084)		Net (income) attributable to noncontrolling interests in the Operating Partnership	(453)		(881)		(2,386)		(3,049)
Net (income) attributable to noncontrolling interests in consolidated affiliates		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Dividends on Preferred Stock	Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)		Dividends on Preferred Stock	(622)		(621)		(1,864)		(1,864)

Net income available for common stockholders	Net income available for common stockholders	$	38,251	$	72,105	$	129,022	$	185,869	Net income available for common stockholders	$	22,101	$	38,251	$	108,233	$	129,022
Earnings per Common Share – basic:	Earnings per Common Share – basic:									Earnings per Common Share – basic:

Net income available for common stockholders	Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79	Net income available for common stockholders	$	0.21	$	0.36	$	1.03	$	1.23
Weighted average Common Shares outstanding – basic	Weighted average Common Shares outstanding – basic	105,184		104,277		105,094		104,117		Weighted average Common Shares outstanding – basic	105,671		105,184		105,473		105,094
Earnings per Common Share – diluted:	Earnings per Common Share – diluted:									Earnings per Common Share – diluted:

Net income available for common stockholders	Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79	Net income available for common stockholders	$	0.21	$	0.36	$	1.03	$	1.23
Weighted average Common Shares outstanding – diluted	Weighted average Common Shares outstanding – diluted	107,601		107,139		107,570		106,972		Weighted average Common Shares outstanding – diluted	107,832		107,601		107,762		107,570

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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Comprehensive income:	Comprehensive income:									Comprehensive income:
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815
Other comprehensive income/(loss):
Other comprehensive loss:										Other comprehensive loss:

Unrealized losses on cash flow hedges		—		(6)		—		(17)

Amortization of cash flow hedges	Amortization of cash flow hedges	(75)		129		(164)		377		Amortization of cash flow hedges	(74)		(75)		(223)		(164)
Total other comprehensive income/(loss)		(75)		123		(164)		360
Total other comprehensive loss										Total other comprehensive loss	(74)		(75)		(223)		(164)
Total comprehensive income	Total comprehensive income	40,035		75,710		134,651		194,646		Total comprehensive income	23,097		40,035		111,772		134,651
Less-comprehensive (income) attributable to noncontrolling interests	Less-comprehensive (income) attributable to noncontrolling interests	(1,238)		(2,861)		(3,929)		(6,553)		Less-comprehensive (income) attributable to noncontrolling interests	(448)		(1,238)		(1,898)		(3,929)
Comprehensive income attributable to common stockholders	Comprehensive income attributable to common stockholders	$	38,797	$	72,849	$	130,722	$	188,093	Comprehensive income attributable to common stockholders	$	22,649	$	38,797	$	109,874	$	130,722

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																Three Months Ended September 30, 2023
		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			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
Balance as of June 30, 2023																	Balance as of June 30, 2023	105,472,213	$	1,055	$	28,811	$	3,095,272	$	(1,360)	$	4,471	$	(652,436)	$	2,475,813
Issuances of Common Stock, net of issuance costs and tax withholdings	Issuances of Common Stock, net of issuance costs and tax withholdings	13,583	—		—		362		—		—		—		362		Issuances of Common Stock, net of issuance costs and tax withholdings	17,521	2		—		359		—		—		—		361

Conversions of Common Units to Common Stock																	Conversions of Common Units to Common Stock	193,907					4,795								4,795
Dividends on Common Stock ($0.50 per share)	Dividends on Common Stock ($0.50 per share)		—		—		—		—		—		(52,586)		(52,586)		Dividends on Common Stock ($0.50 per share)		—		—		—		—		—		(52,836)		(52,836)
Dividends on Preferred Stock ($21.5625 per share)	Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(621)		(621)		Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(622)		(622)
Adjustment of noncontrolling interests in the Operating Partnership to fair value	Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		16,952		—		—		—		16,952		Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		6,334		—		—		—		6,334

Issuances of restricted stock																	Issuances of restricted stock	9,620	—		—		—		—		—		—		—

Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	(779)	—		—		707		—		—		—		707		Share-based compensation expense, net of forfeitures	—	—		—		833		—		—		—		833
Net (income) attributable to noncontrolling interests in the Operating Partnership	Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(881)		(881)		Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(453)		(453)
Net (income) attributable to noncontrolling interests in consolidated affiliates			—		—		—		—		357		(357)		—
Net loss attributable to noncontrolling interests in consolidated affiliates																	Net loss attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		(5)		5		—

Comprehensive income:	Comprehensive income:																Comprehensive income:
Net income	Net income		—		—		—		—		—		40,110		40,110		Net income		—		—		—		—		—		23,171		23,171
Other comprehensive loss	Other comprehensive loss		—		—		—		(75)		—		—		(75)		Other comprehensive loss		—		—		—		(74)		—		—		(74)
Total comprehensive income	Total comprehensive income														40,035		Total comprehensive income														23,097
Balance at September 30, 2022		105,197,658	$	1,052	$	28,821	$	3,083,229	$	(1,137)	$	21,885	$	(608,181)	$	2,525,669
Balance as of September 30, 2023																	Balance as of September 30, 2023	105,693,261	$	1,057	$	28,811	$	3,107,593	$	(1,434)	$	4,466	$	(683,171)	$	2,457,322


		Nine Months Ended September 30, 2022																Nine Months Ended September 30, 2023
		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			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
Balance at December 31, 2022																	Balance at December 31, 2022	105,210,858	$	1,052	$	28,821	$	3,081,330	$	(1,211)	$	22,235	$	(633,227)	$	2,499,000
Issuances of Common Stock, net of issuance costs and tax withholdings	Issuances of Common Stock, net of issuance costs and tax withholdings	92,941	1		—		4,796		—		—		—		4,797		Issuances of Common Stock, net of issuance costs and tax withholdings	10,010	2		—		(204)		—		—		—		(202)
Conversions of Common Units to Common Stock	Conversions of Common Units to Common Stock	30,909					1,251								1,251		Conversions of Common Units to Common Stock	193,907					4,795								4,795
Dividends on Common Stock ($1.50 per share)	Dividends on Common Stock ($1.50 per share)		—		—		—		—		—		(157,587)		(157,587)		Dividends on Common Stock ($1.50 per share)		—		—		—		—		—		(158,177)		(158,177)
Dividends on Preferred Stock ($64.6875 per share)	Dividends on Preferred Stock ($64.6875 per share)		—		—		—		—		—		(1,864)		(1,864)		Dividends on Preferred Stock ($64.6875 per share)		—		—		—		—		—		(1,864)		(1,864)
Adjustment of noncontrolling interests in the Operating Partnership to fair value	Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		42,480		—		—		—		42,480		Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		15,521		—		—		—		15,521
Distributions to noncontrolling interests in consolidated affiliates			—		—		—		—		(1,411)		—		(1,411)

Issuances of restricted stock	Issuances of restricted stock	181,807	—		—		—		—		—		—		—		Issuances of restricted stock	282,453	—		—		—		—		—		—		—

Redemptions/repurchases of Preferred Stock																	Redemptions/repurchases of Preferred Stock		—		(10)		—		—		—		—		(10)
Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	(779)	2		—		6,841		—		—		—		6,843		Share-based compensation expense, net of forfeitures	(3,967)	3		—		6,151		—		—		—		6,154
Net (income) attributable to noncontrolling interests in the Operating Partnership	Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(3,049)		(3,049)		Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(2,386)		(2,386)
Net (income) attributable to noncontrolling interests in consolidated affiliates			—		—		—		—		880		(880)		—
Net loss attributable to noncontrolling interests in consolidated affiliates																	Net loss attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		(488)		488		—
Deconsolidation of affiliate																	Deconsolidation of affiliate		—		—		—		—		(17,281)		—		(17,281)
Comprehensive income:	Comprehensive income:																Comprehensive income:
Net income	Net income		—		—		—		—		—		134,815		134,815		Net income		—		—		—		—		—		111,995		111,995
Other comprehensive loss	Other comprehensive loss		—		—		—		(164)		—		—		(164)		Other comprehensive loss		—		—		—		(223)		—		—		(223)
Total comprehensive income	Total comprehensive income														134,651		Total comprehensive income														111,772
Balance at September 30, 2022		105,197,658	$	1,052	$	28,821	$	3,083,229	$	(1,137)	$	21,885	$	(608,181)	$	2,525,669
Balance as of September 30, 2023																	Balance as of September 30, 2023	105,693,261	$	1,057	$	28,811	$	3,107,593	$	(1,434)	$	4,466	$	(683,171)	$	2,457,322

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																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			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
Balance as of June 30, 2022																	Balance as of 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	Issuances of Common Stock, net of issuance costs and tax withholdings	168,311	2		—		7,506		—		—		—		7,508		Issuances of Common Stock, net of issuance costs and tax withholdings	13,583	—		—		362		—		—		—		362
Conversions of Common Units to Common Stock		5,238	—		—		234		—		—		—		234

Dividends on Common Stock ($0.50 per share)	Dividends on Common Stock ($0.50 per share)		—		—		—		—		—		(52,120)		(52,120)		Dividends on Common Stock ($0.50 per share)		—		—		—		—		—		(52,586)		(52,586)
Dividends on Preferred Stock ($21.5625 per share)	Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(621)		(621)		Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(621)		(621)
Adjustment of noncontrolling interests in the Operating Partnership to fair value	Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		4,262		—		—		—		4,262		Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		16,952		—		—		—		16,952
Distributions to noncontrolling interests in consolidated affiliates			—		—		—		—		(560)		—		(560)

Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	—	—		—		1,896		—		—		—		1,896		Share-based compensation expense, net of forfeitures	(779)	—		—		707		—		—		—		707
Net (income) attributable to noncontrolling interests in the Operating Partnership	Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(1,967)		(1,967)		Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(881)		(881)
Net (income) attributable to noncontrolling interests in consolidated affiliates	Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		894		(894)		—		Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		357		(357)		—
Comprehensive income:	Comprehensive income:																Comprehensive income:
Net income	Net income		—		—		—		—		—		75,587		75,587		Net income		—		—		—		—		—		40,110		40,110
Other comprehensive income			—		—		—		123		—		—		123
Other comprehensive loss																	Other comprehensive loss		—		—		—		(75)		—		—		(75)
Total comprehensive income	Total comprehensive income														75,710		Total comprehensive income														40,035
Balance at September 30, 2021		104,383,062	$	1,044	$	28,821	$	3,003,303	$	(1,102)	$	22,173	$	(652,254)	$	2,401,985
Balance as of September 30, 2022																	Balance as of September 30, 2022	105,197,658	$	1,052	$	28,821	$	3,083,229	$	(1,137)	$	21,885	$	(608,181)	$	2,525,669


		Nine Months Ended September 30, 2021																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			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
Balance at December 31, 2021																	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	Issuances of Common Stock, net of issuance costs and tax withholdings	277,441	3		—		13,402		—		—		—		13,405		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	Conversions of Common Units to Common Stock	6,238	—		—		278		—		—		—		278		Conversions of Common Units to Common Stock	30,909					1,251								1,251
Dividends on Common Stock ($1.46 per share)			—		—		—		—		—		(151,898)		(151,898)
Dividends on Common Stock ($1.50 per share)																	Dividends on Common Stock ($1.50 per share)		—		—		—		—		—		(157,587)		(157,587)
Dividends on Preferred Stock ($64.6875 per share)	Dividends on Preferred Stock ($64.6875 per share)		—		—		—		—		—		(1,864)		(1,864)		Dividends on Preferred Stock ($64.6875 per share)		—		—		—		—		—		(1,864)		(1,864)
Adjustment of noncontrolling interests in the Operating Partnership to fair value	Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		(11,072)		—		—		—		(11,072)		Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		42,480		—		—		—		42,480
Distributions to noncontrolling interests in consolidated affiliates	Distributions to noncontrolling interests in consolidated affiliates		—		—		—		—		(1,342)		—		(1,342)		Distributions to noncontrolling interests in consolidated affiliates		—		—		—		—		(1,411)		—		(1,411)

Issuances of restricted stock	Issuances of restricted stock	184,584	—		—		—		—		—		—		—		Issuances of restricted stock	181,807	—		—		—		—		—		—		—
Redemptions/repurchases of Preferred Stock			—		(5)		—		—		—		—		(5)

Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	(6,747)	2		—		6,749		—		—		—		6,751		Share-based compensation expense, net of forfeitures	(779)	2		—		6,841		—		—		—		6,843
Net (income) attributable to noncontrolling interests in the Operating Partnership	Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(5,084)		(5,084)		Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(3,049)		(3,049)
Net (income) attributable to noncontrolling interests in consolidated affiliates	Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		1,469		(1,469)		—		Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		880		(880)		—
Comprehensive income:	Comprehensive income:																Comprehensive income:
Net income	Net income		—		—		—		—		—		194,286		194,286		Net income		—		—		—		—		—		134,815		134,815
Other comprehensive income			—		—		—		360		—		—		360
Other comprehensive loss																	Other comprehensive loss		—		—		—		(164)		—		—		(164)
Total comprehensive income	Total comprehensive income														194,646		Total comprehensive income														134,651
Balance at September 30, 2021		104,383,062	$	1,044	$	28,821	$	3,003,303	$	(1,102)	$	22,173	$	(652,254)	$	2,401,985
Balance as of September 30, 2022																	Balance as of September 30, 2022	105,197,658	$	1,052	$	28,821	$	3,083,229	$	(1,137)	$	21,885	$	(608,181)	$	2,525,669

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,
	2023		2022
Operating activities:
Net income	$	111,995	$	134,815
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	220,416		212,466
Amortization of lease incentives and acquisition-related intangible assets and liabilities	712		(342)
Share-based compensation expense	6,154		6,843

Net credit losses on operating lease receivables	1,850		3,167

Accrued interest on mortgages and notes receivable	(750)		(67)
Amortization of debt issuance costs	3,645		3,096
Amortization of cash flow hedges	(223)		(164)
Amortization of mortgages and notes payable fair value adjustments	(257)		(60)
Impairments of real estate assets	—		36,515


Net gains on disposition of property	(19,818)		(63,546)
Gain on deconsolidation of controlling interest in affiliate	(11,778)		—



Equity in earnings of unconsolidated affiliates	(1,902)		(1,083)

Distributions of earnings from unconsolidated affiliates	1,153		606

Changes in operating assets and liabilities:
Accounts receivable	1,182		(11,454)
Prepaid expenses and other assets	(4,376)		(2,150)
Accrued straight-line rents receivable	(20,196)		(20,558)
Accounts payable, accrued expenses and other liabilities	(3,636)		21,795
Net cash provided by operating activities	284,171		319,879
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired	(18,544)		(224,934)
Investments in development in-process	(26,179)		(26,220)
Investments in tenant improvements and deferred leasing costs	(68,625)		(90,910)
Investments in building improvements	(55,155)		(45,289)

Net proceeds from disposition of real estate assets	51,538		130,038


Distributions of capital from unconsolidated affiliates	3,864		—
Investments in mortgages and notes receivable	(9,763)		(24)
Repayments of mortgages and notes receivable	200		215
Investments in and advances to unconsolidated affiliates	(100,052)		(81,693)
Repayments of preferred equity from unconsolidated affiliates	80,000		—

Changes in earnest money deposits	15,500		(3,000)
Changes in other investing activities	(3,751)		224
Net cash used in investing activities	(130,967)		(341,593)
Financing activities:
Dividends on Common Stock	(158,177)		(157,587)

Redemptions/repurchases of Preferred Stock	(10)		—
Redemptions of Common Units	(163)		(3,101)
Dividends on Preferred Stock	(1,864)		(1,864)
Distributions to noncontrolling interests in the Operating Partnership	(3,432)		(3,687)

Distributions to noncontrolling interests in consolidated affiliates	—		(1,411)
Proceeds from the issuance of Common Stock	1,349		7,200
Costs paid for the issuance of Common Stock	(226)		(247)
Repurchase of shares related to tax withholdings	(1,325)		(2,156)
Borrowings on revolving credit facility	219,000		275,000
Repayments of revolving credit facility	(400,000)		(235,000)
Borrowings on mortgages and notes payable	200,000		350,000
Repayments of mortgages and notes payable	(5,018)		(204,807)



Payments for debt issuance costs and other financing activities	(2,347)		(2,731)
Net cash provided by/(used in) financing activities	(152,213)		19,609
Net increase/(decrease) in cash and cash equivalents and restricted cash	$	991	$	(2,105)

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,					Nine Months Ended September 30,
		2022		2021			2023		2022
Net decrease in cash and cash equivalents and restricted cash		$	(2,105)	$	(148,346)
Net increase/(decrease) in cash and cash equivalents and restricted cash						Net increase/(decrease) in cash and cash equivalents and restricted cash	$	991	$	(2,105)
Cash from deconsolidation of controlling interest in affiliate						Cash from deconsolidation of controlling interest in affiliate	(6,386)		—
Cash and cash equivalents and restricted cash at beginning of the period	Cash and cash equivalents and restricted cash at beginning of the period	31,198		189,244		Cash and cash equivalents and restricted cash at beginning of the period	26,105		31,198
Cash and cash equivalents and restricted cash at end of the period	Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898	Cash and cash equivalents and restricted cash at end of the period	$	20,710	$	29,093

Reconciliation of cash and cash equivalents and restricted cash:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	23,055	$	27,871	Cash and cash equivalents at end of the period	$	16,901	$	23,055
Restricted cash at end of the period	Restricted cash at end of the period	6,038		13,027		Restricted cash at end of the period	3,809		6,038
Cash and cash equivalents and restricted cash at end of the period	Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898	Cash and cash equivalents and restricted cash at end of the period	$	20,710	$	29,093

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,
	2023		2022
Cash paid for interest, net of amounts capitalized	$	105,342	$	82,908

Supplemental disclosure of non-cash investing and financing activities:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023	2022
Unrealized losses on cash flow hedges		$	—	$	(17)

Conversions of Common Units to Common Stock	Conversions of Common Units to Common Stock	1,251		278		Conversions of Common Units to Common Stock	4,795	1,251
Changes in accrued capital expenditures (1)	Changes in accrued capital expenditures (1)	(10,180)		(20,150)		Changes in accrued capital expenditures (1)	17,275	(10,180)
Write-off of fully depreciated real estate assets	Write-off of fully depreciated real estate assets	42,817		52,158		Write-off of fully depreciated real estate assets	54,489	42,817
Write-off of fully amortized leasing costs	Write-off of fully amortized leasing costs	22,739		37,045		Write-off of fully amortized leasing costs	25,605	22,739
Write-off of fully amortized debt issuance costs	Write-off of fully amortized debt issuance costs	1,216		4,158		Write-off of fully amortized debt issuance costs	—	1,216
Adjustment of noncontrolling interests in the Operating Partnership to fair value	Adjustment of noncontrolling interests in the Operating Partnership to fair value	(42,480)		11,072		Adjustment of noncontrolling interests in the Operating Partnership to fair value	(15,521)	(42,480)

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

__________

(1)Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities atas of September 30, 2023 and 2022 ~~and 2021~~ were ~~$44.4~~$70.7 million and ~~$45.8~~$44.4 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			September 30, 2023		December 31, 2022
Assets:	Assets:					Assets:
Real estate assets, at cost:	Real estate assets, at cost:					Real estate assets, at cost:
Land	Land	$	548,720	$	549,228	Land	$	542,418	$	548,720
Buildings and tenant improvements	Buildings and tenant improvements	5,867,137		5,718,169		Buildings and tenant improvements	5,970,163		5,909,754
Development in-process	Development in-process	29,774		6,890		Development in-process	6,203		46,735
Land held for development	Land held for development	231,911		215,257		Land held for development	227,817		231,218
		6,677,542		6,489,544			6,746,601		6,736,427
Less-accumulated depreciation	Less-accumulated depreciation	(1,562,374)		(1,457,511)		Less-accumulated depreciation	(1,711,023)		(1,609,502)
Net real estate assets	Net real estate assets	5,115,168		5,032,033		Net real estate assets	5,035,578		5,126,925
Real estate and other assets, net, held for sale	Real estate and other assets, net, held for sale	—		3,518		Real estate and other assets, net, held for sale	4,706		—
Cash and cash equivalents	Cash and cash equivalents	23,055		23,152		Cash and cash equivalents	16,901		21,357
Restricted cash	Restricted cash	6,038		8,046		Restricted cash	3,809		4,748
Accounts receivable	Accounts receivable	24,589		14,002		Accounts receivable	25,583		25,481
Mortgages and notes receivable	Mortgages and notes receivable	1,103		1,227		Mortgages and notes receivable	9,783		1,051
Accrued straight-line rents receivable	Accrued straight-line rents receivable	284,515		268,324		Accrued straight-line rents receivable	308,277		293,674
Investments in and advances to unconsolidated affiliates	Investments in and advances to unconsolidated affiliates	88,974		7,383		Investments in and advances to unconsolidated affiliates	314,475		269,221
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
Deferred leasing costs, net of accumulated amortization of $173,926 and $163,751, respectively						Deferred leasing costs, net of accumulated amortization of $173,926 and $163,751, respectively	233,079		252,828
Prepaid expenses and other assets, net of accumulated depreciation of $23,008 and $21,660, respectively						Prepaid expenses and other assets, net of accumulated depreciation of $23,008 and $21,660, respectively	72,177		68,091
Total Assets	Total Assets	$	5,870,551	$	5,695,138	Total Assets	$	6,024,368	$	6,063,376
Liabilities, Redeemable Operating Partnership Units and Capital:	Liabilities, Redeemable Operating Partnership Units and Capital:					Liabilities, Redeemable Operating Partnership Units and Capital:
Mortgages and notes payable, net	Mortgages and notes payable, net	$	2,973,369	$	2,788,915	Mortgages and notes payable, net	$	3,212,185	$	3,197,215
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	307,294		294,976		Accounts payable, accrued expenses and other liabilities	310,409		301,184

Total Liabilities	Total Liabilities	3,280,663		3,083,891		Total Liabilities	3,522,594		3,498,399
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Redeemable Operating Partnership Units:	Redeemable Operating Partnership Units:					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
Common Units, 2,156,808 and 2,358,009 outstanding, respectively						Common Units, 2,156,808 and 2,358,009 outstanding, respectively	44,452		65,977
Series A Preferred Units (liquidation preference $1,000 per unit), 28,811 and 28,821 units issued and outstanding, respectively						Series A Preferred Units (liquidation preference $1,000 per unit), 28,811 and 28,821 units issued and outstanding, respectively	28,811		28,821
Total Redeemable Operating Partnership Units	Total Redeemable Operating Partnership Units	93,040		140,510		Total Redeemable Operating Partnership Units	73,263		94,798
Capital:	Capital:					Capital:
Common Units:	Common Units:					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
General partner Common Units, 1,074,413 and 1,071,601 outstanding, respectively						General partner Common Units, 1,074,413 and 1,071,601 outstanding, respectively	24,255		24,492
Limited partner Common Units, 104,210,039 and 103,730,448 outstanding, respectively						Limited partner Common Units, 104,210,039 and 103,730,448 outstanding, respectively	2,401,224		2,424,663
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,137)		(973)		Accumulated other comprehensive loss	(1,434)		(1,211)
Noncontrolling interests in consolidated affiliates	Noncontrolling interests in consolidated affiliates	21,885		22,416		Noncontrolling interests in consolidated affiliates	4,466		22,235
Total Capital	Total Capital	2,496,848		2,470,737		Total Capital	2,428,511		2,470,179
Total Liabilities, Redeemable Operating Partnership Units and Capital	Total Liabilities, Redeemable Operating Partnership Units and Capital	$	5,870,551	$	5,695,138	Total Liabilities, Redeemable Operating Partnership Units and Capital	$	6,024,368	$	6,063,376

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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Rental and other revenues	Rental and other revenues	$	206,997	$	195,495	$	617,216	$	564,802	Rental and other revenues	$	207,095	$	206,997	$	627,138	$	617,216
Operating expenses:	Operating expenses:									Operating expenses:
Rental property and other expenses	Rental property and other expenses	66,334		60,567		190,125		172,982		Rental property and other expenses	67,193		66,334		199,231		190,125
Depreciation and amortization	Depreciation and amortization	73,057		66,547		212,466		189,423		Depreciation and amortization	74,765		73,057		220,416		212,466
Impairments of real estate assets	Impairments of real estate assets	1,515		—		36,515		—		Impairments of real estate assets	—		1,515		—		36,515
General and administrative	General and administrative	9,586		10,350		32,733		30,409		General and administrative	8,873		9,586		30,668		32,733
Total operating expenses	Total operating expenses	150,492		137,464		471,839		392,814		Total operating expenses	150,831		150,492		450,315		471,839

Interest expense	Interest expense	26,392		21,986		75,812		60,755		Interest expense	34,247		26,392		101,408		75,812

Other income	Other income	138		424		621		1,068		Other income	754		138		3,082		621

Gains on disposition of property	Gains on disposition of property	9,402		38,572		63,546		80,371		Gains on disposition of property	—		9,402		19,818		63,546
Gain on deconsolidation of affiliate										Gain on deconsolidation of affiliate	—		—		11,778		—

Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	457		546		1,083		1,614		Equity in earnings of unconsolidated affiliates	400		457		1,902		1,083

Net income	Net income	40,110		75,587		134,815		194,286		Net income	23,171		40,110		111,995		134,815
Net (income) attributable to noncontrolling interests in consolidated affiliates		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Distributions on Preferred Units	Distributions on Preferred Units	(621)		(621)		(1,864)		(1,864)		Distributions on Preferred Units	(622)		(621)		(1,864)		(1,864)

Net income available for common unitholders	Net income available for common unitholders	$	39,132	$	74,072	$	132,071	$	190,953	Net income available for common unitholders	$	22,554	$	39,132	$	110,619	$	132,071
Earnings per Common Unit – basic:	Earnings per Common Unit – basic:									Earnings per Common Unit – basic:

Net income available for common unitholders	Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79	Net income available for common unitholders	$	0.21	$	0.37	$	1.03	$	1.23
Weighted average Common Units outstanding – basic	Weighted average Common Units outstanding – basic	107,192		106,705		107,154		106,546		Weighted average Common Units outstanding – basic	107,423		107,192		107,353		107,154
Earnings per Common Unit – diluted:	Earnings per Common Unit – diluted:									Earnings per Common Unit – diluted:

Net income available for common unitholders	Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79	Net income available for common unitholders	$	0.21	$	0.37	$	1.03	$	1.23
Weighted average Common Units outstanding – diluted	Weighted average Common Units outstanding – diluted	107,192		106,730		107,161		106,563		Weighted average Common Units outstanding – diluted	107,423		107,192		107,353		107,161

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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Comprehensive income:	Comprehensive income:									Comprehensive income:
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815
Other comprehensive income/(loss):
Other comprehensive loss:										Other comprehensive loss:

Unrealized losses on cash flow hedges		—		(6)		—		(17)

Amortization of cash flow hedges	Amortization of cash flow hedges	(75)		129		(164)		377		Amortization of cash flow hedges	(74)		(75)		(223)		(164)
Total other comprehensive income/(loss)		(75)		123		(164)		360
Total other comprehensive loss										Total other comprehensive loss	(74)		(75)		(223)		(164)
Total comprehensive income	Total comprehensive income	40,035		75,710		134,651		194,646		Total comprehensive income	23,097		40,035		111,772		134,651
Less-comprehensive (income) attributable to noncontrolling interests		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Comprehensive income attributable to common unitholders	Comprehensive income attributable to common unitholders	$	39,678	$	74,816	$	133,771	$	193,177	Comprehensive income attributable to common unitholders	$	23,102	$	39,678	$	112,260	$	133,771

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Capital

(Unaudited and in thousands)


		Three Months Ended September 30, 2022											Three Months Ended September 30, 2023
		Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total			Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
		General Partners’ Capital		Limited Partners’ Capital									General Partners’ Capital		Limited Partners’ Capital
Balance at June 30, 2022		$	24,723	$	2,447,691	$	(1,062)	$	21,528	$	2,492,880
Balance as of June 30, 2023												Balance as of June 30, 2023	$	24,439	$	2,419,452	$	(1,360)	$	4,471	$	2,447,002
Issuances of Common Units, net of issuance costs and tax withholdings	Issuances of Common Units, net of issuance costs and tax withholdings	4		358		—		—		362		Issuances of Common Units, net of issuance costs and tax withholdings	4		357		—		—		361
Redemptions of Common Units		(31)		(3,070)		—		—		(3,101)

Distributions on Common Units ($0.50 per unit)	Distributions on Common Units ($0.50 per unit)	(536)		(53,037)		—		—		(53,573)		Distributions on Common Units ($0.50 per unit)	(537)		(53,172)		—		—		(53,709)
Distributions on Preferred Units ($21.5625 per unit)	Distributions on Preferred Units ($21.5625 per unit)	(7)		(614)		—		—		(621)		Distributions on Preferred Units ($21.5625 per unit)	(7)		(615)		—		—		(622)
Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	7		700		—		—		707		Share-based compensation expense, net of forfeitures	9		824		—		—		833

Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	202		19,957		—		—		20,159		Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	115		11,434		—		—		11,549
Net (income) attributable to noncontrolling interests in consolidated affiliates		(4)		(353)		—		357		—
Net loss attributable to noncontrolling interests in consolidated affiliates												Net loss attributable to noncontrolling interests in consolidated affiliates	—		5		—		(5)		—

Comprehensive income:	Comprehensive income:											Comprehensive income:
Net income	Net income	401		39,709		—		—		40,110		Net income	232		22,939		—		—		23,171
Other comprehensive loss	Other comprehensive loss	—		—		(75)		—		(75)		Other comprehensive loss	—		—		(74)		—		(74)
Total comprehensive income	Total comprehensive income									40,035		Total comprehensive income									23,097
Balance at September 30, 2022		$	24,759	$	2,451,341	$	(1,137)	$	21,885	$	2,496,848
Balance as of September 30, 2023												Balance as of September 30, 2023	$	24,255	$	2,401,224	$	(1,434)	$	4,466	$	2,428,511


		Nine Months Ended September 30, 2022											Nine Months Ended September 30, 2023
		Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total			Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
		General Partners’ Capital		Limited Partners’ Capital									General Partners’ Capital		Limited Partners’ Capital
Balance at December 31, 2021		$	24,492	$	2,424,802	$	(973)	$	22,416	$	2,470,737
Balance at December 31, 2022												Balance at December 31, 2022	$	24,492	$	2,424,663	$	(1,211)	$	22,235	$	2,470,179
Issuances of Common Units, net of issuance costs and tax withholdings	Issuances of Common Units, net of issuance costs and tax withholdings	48		4,749		—		—		4,797		Issuances of Common Units, net of issuance costs and tax withholdings	(2)		(200)		—		—		(202)
Redemptions of Common Units	Redemptions of Common Units	(31)		(3,070)		—		—		(3,101)		Redemptions of Common Units	(2)		(161)		—		—		(163)
Distributions on Common Units ($1.50 per unit)	Distributions on Common Units ($1.50 per unit)	(1,607)		(159,053)		—		—		(160,660)		Distributions on Common Units ($1.50 per unit)	(1,610)		(159,385)		—		—		(160,995)
Distributions on Preferred Units ($64.6875 per unit)	Distributions on Preferred Units ($64.6875 per unit)	(19)		(1,845)		—		—		(1,864)		Distributions on Preferred Units ($64.6875 per unit)	(19)		(1,845)		—		—		(1,864)
Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	68		6,775		—		—		6,843		Share-based compensation expense, net of forfeitures	62		6,092		—		—		6,154
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	Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	469		46,387		—		—		46,856		Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	209		20,702		—		—		20,911
Net (income) attributable to noncontrolling interests in consolidated affiliates		(9)		(871)		—		880		—
Net loss attributable to noncontrolling interests in consolidated affiliates												Net loss attributable to noncontrolling interests in consolidated affiliates	5		483		—		(488)		—
Deconsolidation of affiliate												Deconsolidation of affiliate	—		—		—		(17,281)		(17,281)
Comprehensive income:	Comprehensive income:											Comprehensive income:
Net income	Net income	1,348		133,467		—		—		134,815		Net income	1,120		110,875		—		—		111,995
Other comprehensive loss	Other comprehensive loss	—		—		(164)		—		(164)		Other comprehensive loss	—		—		(223)		—		(223)
Total comprehensive income	Total comprehensive income									134,651		Total comprehensive income									111,772
Balance at September 30, 2022		$	24,759	$	2,451,341	$	(1,137)	$	21,885	$	2,496,848
Balance as of September 30, 2023												Balance as of September 30, 2023	$	24,255	$	2,401,224	$	(1,434)	$	4,466	$	2,428,511

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Capital - Continued

(Unaudited and in thousands)


		Three Months Ended September 30, 2021											Three Months Ended September 30, 2022
		Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total			Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
		General Partners’ Capital		Limited Partners’ Capital									General Partners’ Capital		Limited Partners’ Capital
Balance at June 30, 2021		$	23,182	$	2,295,026	$	(1,225)	$	21,839	$	2,338,822
Balance as of June 30, 2022												Balance as of 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	Issuances of Common Units, net of issuance costs and tax withholdings	75		7,433		—		—		7,508		Issuances of Common Units, net of issuance costs and tax withholdings	4		358		—		—		362

Redemptions of Common Units												Redemptions of Common Units	(31)		(3,070)		—		—		(3,101)
Distributions on Common Units ($0.50 per unit)	Distributions on Common Units ($0.50 per unit)	(533)		(52,800)		—		—		(53,333)		Distributions on Common Units ($0.50 per unit)	(536)		(53,037)		—		—		(53,573)
Distributions on Preferred Units ($21.5625 per unit)	Distributions on Preferred Units ($21.5625 per unit)	(7)		(614)		—		—		(621)		Distributions on Preferred Units ($21.5625 per unit)	(7)		(614)		—		—		(621)
Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	19		1,877		—		—		1,896		Share-based compensation expense, net of forfeitures	7		700		—		—		707
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	Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	38		3,704		—		—		3,742		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	Net (income) attributable to noncontrolling interests in consolidated affiliates	(9)		(885)		—		894		—		Net (income) attributable to noncontrolling interests in consolidated affiliates	(4)		(353)		—		357		—
Comprehensive income:	Comprehensive income:											Comprehensive income:
Net income	Net income	756		74,831		—		—		75,587		Net income	401		39,709		—		—		40,110
Other comprehensive income		—		—		123		—		123
Other comprehensive loss												Other comprehensive loss	—		—		(75)		—		(75)
Total comprehensive income	Total comprehensive income									75,710		Total comprehensive income									40,035
Balance at September 30, 2021		$	23,521	$	2,328,572	$	(1,102)	$	22,173	$	2,373,164
Balance as of September 30, 2022												Balance as of September 30, 2022	$	24,759	$	2,451,341	$	(1,137)	$	21,885	$	2,496,848


		Nine Months Ended September 30, 2021											Nine Months Ended September 30, 2022
		Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total			Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
		General Partners’ Capital		Limited Partners’ Capital									General Partners’ Capital		Limited Partners’ Capital
Balance at December 31, 2020		$	23,087	$	2,285,673	$	(1,462)	$	22,046	$	2,329,344
Balance at December 31, 2021												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	Issuances of Common Units, net of issuance costs and tax withholdings	134		13,271		—		—		13,405		Issuances of Common Units, net of issuance costs and tax withholdings	48		4,749		—		—		4,797

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)
Redemptions of Common Units												Redemptions of Common Units	(31)		(3,070)		—		—		(3,101)
Distributions on Common Units ($1.50 per unit)												Distributions on Common Units ($1.50 per unit)	(1,607)		(159,053)		—		—		(160,660)
Distributions on Preferred Units ($64.688 per unit)												Distributions on Preferred Units ($64.688 per unit)	(19)		(1,845)		—		—		(1,864)
Share-based compensation expense, net of forfeitures	Share-based compensation expense, net of forfeitures	68		6,683		—		—		6,751		Share-based compensation expense, net of forfeitures	68		6,775		—		—		6,843
Distributions to noncontrolling interests in consolidated affiliates	Distributions to noncontrolling interests in consolidated affiliates	—		—		—		(1,342)		(1,342)		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	Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(123)		(12,208)		—		—		(12,331)		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	Net (income) attributable to noncontrolling interests in consolidated affiliates	(15)		(1,454)				1,469		—		Net (income) attributable to noncontrolling interests in consolidated affiliates	(9)		(871)				880		—
Comprehensive income:	Comprehensive income:											Comprehensive income:
Net income	Net income	1,943		192,343		—		—		194,286		Net income	1,348		133,467		—		—		134,815
Other comprehensive income		—		—		360		—		360
Other comprehensive loss												Other comprehensive loss	—		—		(164)		—		(164)
Total comprehensive income	Total comprehensive income									194,646		Total comprehensive income									134,651
Balance at September 30, 2021		$	23,521	$	2,328,572	$	(1,102)	$	22,173	$	2,373,164
Balance as of September 30, 2022												Balance as of September 30, 2022	$	24,759	$	2,451,341	$	(1,137)	$	21,885	$	2,496,848

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

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:
Distributions on Common Units (160,660) (155,445)
Redemptions/repurchases of Preferred Units — (5)
Redemptions of Common Units (3,101) —
Distributions on Preferred Units (1,864) (1,864)
Distributions to noncontrolling interests in consolidated affiliates (1,411) (1,342)
Proceeds from the issuance of Common Units 7,200 15,453
Costs paid for the issuance of Common Units (247) (355)
Repurchase of units 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 (3,345) (9,876)
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,
	2023		2022
Operating activities:
Net income	$	111,995	$	134,815
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	220,416		212,466
Amortization of lease incentives and acquisition-related intangible assets and liabilities	712		(342)
Share-based compensation expense	6,154		6,843

Net credit losses on operating lease receivables	1,850		3,167

Accrued interest on mortgages and notes receivable	(750)		(67)
Amortization of debt issuance costs	3,645		3,096
Amortization of cash flow hedges	(223)		(164)
Amortization of mortgages and notes payable fair value adjustments	(257)		(60)
Impairments of real estate assets	—		36,515


Net gains on disposition of property	(19,818)		(63,546)
Gain on deconsolidation of controlling interest in affiliate	(11,778)		—



Equity in earnings of unconsolidated affiliates	(1,902)		(1,083)

Distributions of earnings from unconsolidated affiliates	1,153		606

Changes in operating assets and liabilities:
Accounts receivable	1,182		(11,454)
Prepaid expenses and other assets	(4,376)		(2,150)
Accrued straight-line rents receivable	(20,196)		(20,558)
Accounts payable, accrued expenses and other liabilities	(3,636)		21,795
Net cash provided by operating activities	284,171		319,879
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired	(18,544)		(224,934)
Investments in development in-process	(26,179)		(26,220)
Investments in tenant improvements and deferred leasing costs	(68,625)		(90,910)
Investments in building improvements	(55,155)		(45,289)

Net proceeds from disposition of real estate assets	51,538		130,038


Distributions of capital from unconsolidated affiliates	3,864		—
Investments in mortgages and notes receivable	(9,763)		(24)
Repayments of mortgages and notes receivable	200		215
Investments in and advances to unconsolidated affiliates	(100,052)		(81,693)
Repayments of preferred equity from unconsolidated affiliates	80,000		—

Changes in earnest money deposits	15,500		(3,000)
Changes in other investing activities	(3,751)		224
Net cash used in investing activities	(130,967)		(341,593)
Financing activities:
Distributions on Common Units	(160,995)		(160,660)

Redemptions/repurchases of Preferred Units	(10)		—
Redemptions of Common Units	(163)		(3,101)
Dividends on Preferred Units	(1,864)		(1,864)
Distributions to noncontrolling interests in consolidated affiliates	—		(1,411)
Proceeds from the issuance of Common Units	1,349		7,200
Costs paid for the issuance of Common Units	(226)		(247)
Repurchase of units related to tax withholdings	(1,325)		(2,156)
Borrowings on revolving credit facility	219,000		275,000
Repayments of revolving credit facility	(400,000)		(235,000)
Borrowings on mortgages and notes payable	200,000		350,000
Repayments of mortgages and notes payable	(5,018)		(204,807)



Payments for debt issuance costs and other financing activities	(2,961)		(3,345)
Net cash provided by/(used in) financing activities	(152,213)		19,609
Net increase/(decrease) in cash and cash equivalents and restricted cash	$	991	$	(2,105)

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,					Nine Months Ended September 30,
		2022		2021			2023		2022
Net decrease in cash and cash equivalents and restricted cash		$	(2,105)	$	(148,346)
Net increase/(decrease) in cash and cash equivalents and restricted cash						Net increase/(decrease) in cash and cash equivalents and restricted cash	$	991	$	(2,105)
Cash from deconsolidation of controlling interest in affiliate						Cash from deconsolidation of controlling interest in affiliate	(6,386)		—
Cash and cash equivalents and restricted cash at beginning of the period	Cash and cash equivalents and restricted cash at beginning of the period	31,198		189,244		Cash and cash equivalents and restricted cash at beginning of the period	26,105		31,198
Cash and cash equivalents and restricted cash at end of the period	Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898	Cash and cash equivalents and restricted cash at end of the period	$	20,710	$	29,093

Reconciliation of cash and cash equivalents and restricted cash:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	23,055	$	27,871	Cash and cash equivalents at end of the period	$	16,901	$	23,055
Restricted cash at end of the period	Restricted cash at end of the period	6,038		13,027		Restricted cash at end of the period	3,809		6,038
Cash and cash equivalents and restricted cash at end of the period	Cash and cash equivalents and restricted cash at end of the period	$	29,093	$	40,898	Cash and cash equivalents and restricted cash at end of the period	$	20,710	$	29,093

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,
	2023		2022
Cash paid for interest, net of amounts capitalized	$	105,342	$	82,908

Supplemental disclosure of non-cash investing and financing activities:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023	2022
Unrealized losses on cash flow hedges		$	—	$	(17)

Changes in accrued capital expenditures (1)	Changes in accrued capital expenditures (1)	(10,180)		(20,150)		Changes in accrued capital expenditures (1)	17,275	(10,180)
Write-off of fully depreciated real estate assets	Write-off of fully depreciated real estate assets	42,817		52,158		Write-off of fully depreciated real estate assets	54,489	42,817
Write-off of fully amortized leasing costs	Write-off of fully amortized leasing costs	22,739		37,045		Write-off of fully amortized leasing costs	25,605	22,739
Write-off of fully amortized debt issuance costs	Write-off of fully amortized debt issuance costs	1,216		4,158		Write-off of fully amortized debt issuance costs	—	1,216

Adjustment of Redeemable Common Units to fair value	Adjustment of Redeemable Common Units to fair value	(47,470)		11,734		Adjustment of Redeemable Common Units to fair value	(21,525)	(47,470)

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

__________

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, ~~2022~~2023

(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 owns, develops, acquires, leases and manages properties primarily in the best business districts of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa. The Company conducts its activities through Highwoods Realty Limited Partnership (the “Operating Partnership”). AtAs of September 30, ~~2022,~~2023, we owned or had an interest in ~~28.1~~28.5 million rentable square feet of in-service properties, ~~1.4~~1.6 million rentable square feet of office properties under development and development land with approximately ~~5.0~~5.2 million rentable square feet of potential office build out.

Capital Structure

The Company is the sole general partner of the Operating Partnership. AtAs of September 30, ~~2022,~~2023, the Company owned all of the Preferred Units and ~~104.8~~105.3 million, or ~~97.8%~~98.0%, of the Common Units in the Operating Partnership. Limited partners owned the remaining ~~2.4~~2.2 million Common Units. During the nine months ended September 30, ~~2022,~~2023, the Company redeemed ~~30,909~~193,907 Common Units for a like number of shares of Common Stock and ~~91,887~~7,294 Common Units for cash. As a result of this activity, the percentage of Common Units owned by the Company increased from 97.8% as of December 31, 2022 to 98.0% as of September 30, 2023.

During ~~2020,~~the first quarter of 2023, 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 each of the three and nine months ended September 30, ~~2022,~~2023, the Company issued ~~130,011~~no shares of Common Stock under its equity distribution agreements at an average gross sales price of $46.50 per share and received net proceeds, after sales commissions, of $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.agreements.

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 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 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~~As 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 whichSeptember 30, 2023, we are ~~the primary beneficiary; and therefore, we consolidate this entity. At September 30, 2022, we also have involvement~~involved with ~~four additional~~six entities we determined to be variable interest entities, one of which we are the primary beneficiary and is consolidated and ~~three~~five of which we are not the primary beneficiary and are not consolidated. ~~(See~~We also own three properties through a joint venture investment that were deconsolidated effective January 1, 2023 (see Note 3).

All intercompany transactions and accounts have been eliminated.

~~The~~In the opinion of management, the unaudited interim ~~consolidated financial statements~~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 ~~2021~~2022 Annual Report on Form 10-K.

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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

We are primarily self-insured for health care claims for participating employees. ~~We have stop-loss coverage to~~To limit our exposure to significant claims, we have stop-loss coverage on a per claim and annual aggregate basis. We use all relevant information to determine our liabilities for claims, including ~~incurred but not reported losses, based on all relevant information, including~~ actuarial estimates of claim liabilities. AtWhen determining our liabilities, we include claims for incurred losses, even if they are unreported. As of September 30, ~~2022,~~2023, a reserve of $0.6 million was recorded to cover estimated reported and unreported claims.

~~Investment Activity~~

~~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 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 (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.

Recently Issued Accounting Standards

The Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that provides temporary optional expedients and exceptions to ~~the guidance on 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 to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that 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 continue to evaluate the impact of this ASU; however, we currently expect to avail ourselves of suchThese optional expedients and exceptions ~~should~~provide guidance on contract modifications and hedge accounting. We have completed the transition to SOFR rates for our ~~modified contracts meet the required criteria.~~

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outstanding debt instruments with no material impact to our Consolidated Financial Statements.

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~~$203.8 million and ~~$192.3~~$203.9 million during the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$608.1~~$617.0 million and ~~$554.6~~$608.1 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Included in these amounts are variable lease payments of ~~$16.9~~$17.7 million and ~~$13.7~~$16.9 million during the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$51.9~~$54.6 million and ~~$42.7~~$51.9 million during the nine months ended September 30, 2023 and 2022, ~~and 2021,~~ respectively.

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3. ~~Variable Interest Entities~~Investments in and Advances to Affiliates

~~The acquisition~~Unconsolidated Affiliates

- Highwoods-Markel Associates, LLC (“Markel”)

Markel is a joint venture in which we own a 50.0% interest that was consolidated as of ~~SIX50 at Legacy Union in Charlotte~~December 31, 2022 because we controlled the major operating and financial policies of the entity. Effective January 1, 2023, the agreement governing the joint venture was ~~completed~~modified to require the consent of both partners for major operating and financial policies of the entity. As a result, Markel was deconsolidated effective January 1, 2023, and this joint venture is now accounted for using the equity method of accounting. We recognized a gain on deconsolidation of $11.8 million related to adjusting our retained interest in the ~~third quarter~~joint venture to fair value. The assets of Markel can be used only to settle obligations of the joint venture, and its creditors have no recourse to our wholly owned assets.

- Granite Park Six JV, LLC/ GPI 23 Springs JV, LLC (“Granite Park Six joint venture”/“23Springs joint venture”)

During 2022, ~~using~~we entered the Dallas market through the formation of two joint ventures with Granite Properties (“Granite”) to develop Granite Park Six and 23Springs. We own a ~~special purpose~~50.0% interest in each of these two joint ventures. We determined that we 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 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 were 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 ~~owned by a qualified intermediary to facilitate one or more potential Section 1031 reverse exchanges under~~and therefore do not qualify as the ~~Internal Revenue Code.~~primary beneficiary. Accordingly, the entities are not consolidated. As of September 30, 2023, our risk of loss with respect to these arrangements was limited to the carrying value of each investment balance. Our investment balances were $41.7 million and $63.6 million as of September 30, 2023 for Granite Park Six and 23Springs, respectively. The assets of the Granite Park Six and 23Springs joint ventures can be used only to settle obligations of the respective joint venture, and their creditors have no recourse to our wholly owned assets.

- M+O JV, LLC (“McKinney & Olive joint venture”)

During 2022, we expanded our Dallas market presence by acquiring McKinney & Olive through the formation of another joint venture with Granite. We own a 50.0% interest in this joint venture. Upon formation, we determined that we had a variable interest in the McKinney & Olive joint venture primarily because the entity was designed to pass along interest rate risk, equity price risk and operation risk to us and Granite as equity holders. The McKinney & Olive joint venture was further determined to be a variable interest entity ~~had total~~as it requires additional subordinated financial support in the form of a loan because the initial equity investments by us and Granite, including the additional preferred equity provided by us, were 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.

During the second quarter of 2023, we and Granite each contributed an additional $40.0 million of common equity to the McKinney & Olive joint venture. Such proceeds were then used by the joint venture to redeem our $80.0 million short-term preferred equity investment in full. The $40.0 million of net proceeds were used to repay amounts outstanding under our $750.0 million revolving credit facility. Prior to the redemption, the preferred equity received monthly distributions at a rate of SOFR plus 350 basis points. This reconsideration event did not change our initial conclusion that the McKinney & Olive joint venture is a variable interest entity of which we are not the primary beneficiary. As such, the entity remains unconsolidated.

As of September 30, 2023, our risk of loss with respect to this arrangement was $121.4 million, which represents the carrying value of our investment balance. The assets ~~liabilities~~of the McKinney & Olive joint venture can be used only to settle obligations of the joint venture, and ~~cash flows~~its creditors have no recourse to our wholly owned assets.

- Midtown East Tampa, LLC (“Midtown East joint venture”)

During 2022, we formed the Midtown East joint venture in Tampa with The Bromley Companies (“Bromley”). We own a 50.0% interest in this joint venture. We determined that we have a variable interest in the Midtown East 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 Bromley as an equity holder. The Midtown East joint venture was further determined to be a variable interest

Table of ~~$200.6~~Contents

entity as it requires additional subordinated financial support in the form of a loan because the initial equity investments provided by us and Bromley were 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. As of September 30, 2023, our risk of loss with respect to this arrangement was limited to the carrying value of our investment balance of $7.8 million ~~$3.3~~as no amounts were outstanding under the loan we have provided to the joint venture. The assets of the Midtown East joint venture can be used only to settle obligations of the joint venture, and its creditors have no recourse to our wholly owned assets.

- Brand/HRLP 2827 Peachtree LLC (“2827 Peachtree joint venture”)

During 2021, we formed the 2827 Peachtree joint venture in Atlanta with Brand Properties, LLC (“Brand”). We own a 50.0% interest in this joint venture. 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 2827 Peachtree 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 investments provided by us and Brand were 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. As of September 30, 2023, our risk of loss with respect to this arrangement was $49.1 million, which consists of the $13.6 million carrying value of our investment balance plus the $35.5 million outstanding balance of the loan we have provided to the joint venture. The outstanding balance on the loan is recorded in investments in and ~~$0.5 million, respectively.~~advances to unconsolidated affiliates on our Consolidated Balance Sheets. The assets of the 2827 Peachtree joint venture can be used only to settle obligations of the joint venture, and its creditors have no recourse to our wholly owned assets.

Consolidated ~~Variable Interest Entity~~Affiliate

- HRLP MTW, LLC (“Midtown West joint venture”)

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.~~Tampa with Bromley. We ~~also committed to provide a $46.3 million interest-only secured construction loan to the Midtown West~~own an 80.0% interest in this 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.~~

venture. 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~~investments provided by us and ~~The~~ Bromley ~~Companies is~~were 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 Midtown West joint venture included on our Consolidated Balance Sheets:


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022

Net real estate assets	Net real estate assets	$	60,917	$	53,191	Net real estate assets	$	60,588	$	59,854

Cash and cash equivalents	Cash and cash equivalents	$	1,246	$	389	Cash and cash equivalents	$	1,375	$	1,009
Accounts receivable	Accounts receivable	$	166	$	—	Accounts receivable	$	420	$	1,490
Accrued straight-line rents receivable	Accrued straight-line rents receivable	$	720	$	121	Accrued straight-line rents receivable	$	4,666	$	1,921
Deferred leasing costs, net	Deferred leasing costs, net	$	2,251	$	1,519	Deferred leasing costs, net	$	2,826	$	2,677
Prepaid expenses and other assets, net	Prepaid expenses and other assets, net	$	160	$	163	Prepaid expenses and other assets, net	$	1,036	$	153

Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	$	1,476	$	646	Accounts payable, accrued expenses and other liabilities	$	2,756	$	1,212

The assets of the Midtown West joint venture can be used only to settle obligations of the joint venture, and its creditors have no recourse to our wholly owned assets.

~~Table of Contents~~

~~Unconsolidated Variable Interest Entities~~

During the fourth quarter of 2021, we and 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 2827 Peachtree 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 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 with respect to 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 its creditors have no recourse to our wholly owned assets.

We also determined that we 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 risk of loss with respect to these 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 $37.9 million at September 30, 2022 for Granite Park Six and 23Springs, respectively. The assets of the Granite Park Six and 23Springs joint ventures can be used only to settle obligations of the respective joint venture and their creditors have no recourse to our wholly owned assets.

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4. Real Estate Assets

Acquisitions

During ~~the third~~2021, we acquired development land in Nashville for a purchase price, including capitalized acquisition costs, of $16.0 million, which was fully paid in or prior to the second quarter of 2022, we acquired SIX50 at Legacy Union, a 367,000 square foot trophy office building in Charlotte’s Uptown CBD submarket, for a net purchase price of $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.2023.

During the second quarter of ~~2022,~~2023, we acquired land in ~~Charlotte~~Raleigh for ~~an aggregate~~a purchase price, including capitalized acquisition costs, of ~~$27.0~~$2.7 million.

Dispositions

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

~~During the~~ second quarter of ~~2022,~~2023, we sold ~~office~~three buildings in Tampa and ~~land in Atlanta, Greensboro and Tampa~~Raleigh for an aggregate sales price of ~~$100.7~~$51.3 million ~~(before closing credits to buyers of $1.1 million)~~ and recorded aggregate gains on disposition of property of ~~$50.0~~$19.4 million.

~~During the first quarter of 2022, we sold land in Tampa for a sales price of $9.6 million and recorded a gain on disposition of property of $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 2022, we recorded an impairment charge of $1.5 million to lower the carrying amount of 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 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 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.

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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			September 30, 2023		December 31, 2022
Assets:	Assets:					Assets:
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)	Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)	$	413,036	$	402,013	Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)	$	407,005	$	416,579
Less accumulated amortization	Less accumulated amortization	(157,205)		(143,111)		Less accumulated amortization	(173,926)		(163,751)
		$	255,831	$	258,902		$	233,079	$	252,828
Liabilities (in accounts payable, accrued expenses and other liabilities):	Liabilities (in accounts payable, accrued expenses and other liabilities):					Liabilities (in accounts payable, accrued expenses and other liabilities):
Acquisition-related below market lease liabilities	Acquisition-related below market lease liabilities	$	55,371	$	57,703	Acquisition-related below market lease liabilities	$	52,271	$	55,304
Less accumulated amortization	Less accumulated amortization	(28,633)		(28,978)		Less accumulated amortization	(30,620)		(29,859)
		$	26,738	$	28,725		$	21,651	$	25,445

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)	Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)	$	11,425	$	10,070	$	33,603	$	27,267	Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)	$	10,696	$	11,425	$	32,409	$	33,603
Amortization of lease incentives (in rental and other revenues)	Amortization of lease incentives (in rental and other revenues)	$	500	$	424	$	1,369	$	1,317	Amortization of lease incentives (in rental and other revenues)	$	655	$	500	$	1,983	$	1,369
Amortization of acquisition-related intangible assets (in rental and other revenues)	Amortization of acquisition-related intangible assets (in rental and other revenues)	$	797	$	636	$	2,448	$	1,154	Amortization of acquisition-related intangible assets (in rental and other revenues)	$	823	$	797	$	2,523	$	2,448

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)	Amortization of acquisition-related below market lease liabilities (in rental and other revenues)	$	(1,473)	$	(1,391)	$	(4,159)	$	(4,241)	Amortization of acquisition-related below market lease liabilities (in rental and other revenues)	$	(1,260)	$	(1,473)	$	(3,794)	$	(4,159)

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)			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)
October 1 through December 31, 2023										October 1 through December 31, 2023	$	10,963	$	609	$	779	$	(1,225)
2024	2024	35,514		1,554		3,065		(4,278)		2024	38,910		1,984		3,088		(4,240)
2025	2025	28,586		1,478		2,202		(2,764)		2025	31,262		1,879		2,220		(2,727)
2026	2026	24,614		1,279		1,868		(2,464)		2026	26,969		1,677		1,860		(2,431)
2027										2027	23,248		1,476		1,518		(2,062)
Thereafter	Thereafter	86,384		4,089		7,179		(11,039)		Thereafter	74,830		4,209		5,598		(8,966)
		$	226,862	$	10,511	$	18,458	$	(26,738)		$	206,182	$	11,834	$	15,063	$	(21,651)
Weighted average remaining amortization periods as of September 30, 2022 (in years)		7.9		7.9		7.7		8.4
Weighted average remaining amortization periods as of September 30, 2023 (in years)										Weighted average remaining amortization periods as of September 30, 2023 (in years)	7.5		7.3		7.2		8.2

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~~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			September 30, 2023		December 31, 2022
Secured indebtedness	Secured indebtedness	$	486,003	$	491,942	Secured indebtedness	$	677,839	$	483,988
Unsecured indebtedness	Unsecured indebtedness	2,503,252		2,312,180		Unsecured indebtedness	2,549,495		2,729,620
Less-unamortized debt issuance costs	Less-unamortized debt issuance costs	(15,886)		(15,207)		Less-unamortized debt issuance costs	(15,149)		(16,393)
Total mortgages and notes payable, net	Total mortgages and notes payable, net	$	2,973,369	$	2,788,915	Total mortgages and notes payable, net	$	3,212,185	$	3,197,215

AtAs of September 30, ~~2022,~~2023, our secured mortgage loans were collateralized by real estate assets with an undepreciated book value of ~~$742.1~~$1,170.7 million.

Our $750.0 million unsecured revolving credit facility is scheduled to mature in March 2025 and includes an accordion feature that currently allows for an additional ~~$400.0~~$200.0 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~~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~~The interest rate on our revolving credit facility ~~was converted from LIBOR plus 90 basis points to~~is 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 and facility fee 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 point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. There was ~~$110.0 million and $170.0~~$205.0 million outstanding under our revolving credit facility ~~at September 30, 2022 and October 18, 2022, respectively. At~~as of both September 30, ~~2022~~2023 and October ~~18, 2022,~~17, 2023. As of both September 30, 2023 and October 17, 2023, we had ~~$0.1~~$0.9 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility atas of both September 30, ~~2022~~2023 and October ~~18, 2022~~17, 2023 was ~~$639.9 million and $579.9 million, respectively.~~$544.1 million.

During the ~~second~~first quarter of ~~2022,~~2023, we ~~modified our~~obtained a $200.0 million, ~~unsecured bank term~~five-year secured mortgage loan ~~to extend the maturity date~~ from ~~November 2022 to May 2026. As part~~a third party lender, with an effective fixed interest rate of ~~this modification, we also obtained a $150.0 million delayed-draw term~~5.69%. This 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 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.April 2028. We incurred ~~$2.7~~$1.3 million of debt issuance costs, which ~~are being~~will be amortized ~~along with certain existing unamortized debt issuance costs~~ over the ~~remaining~~ term of ~~our modified term~~the loan.

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

We are currently in compliance with financial covenants with respect to our consolidated debt.

We have considered our short-term liquidity needs within one year from October ~~25, 2022~~24, 2023 (the date of issuance of the quarterly financial statements) and the adequacy of our estimated cash flows from operating activities and other 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 unsecured bank term loan that is scheduled to mature in October 2024 (but which can be extended for one additional year at our option). 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;

•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.

~~7. Derivative Financial Instruments~~

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 fixed the underlying one month LIBOR rate at a weighted average rate of 1.693%. During the first quarter of 2022, these interest rate swaps expired.

Our interest rate swaps were designated as and accounted for as cash flow hedges with changes in fair value recorded in other comprehensive income/(loss) each reporting period. We had no collateral requirements related to our interest rate swaps.

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

~~The following table sets forth the 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

~~The following table sets forth the effect of our cash flow hedges on accumulated other comprehensive 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

2423

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7. Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates

AtAs of September 30, ~~2022,~~2023, our noncontrolling ~~interests~~interest in consolidated affiliates ~~relate~~relates to our joint venture ~~partners’ 50.0% interest in office properties in Richmond and~~partner's 20.0% interest in the Midtown West joint venture. Our joint venture ~~partners are~~partner is an unrelated third ~~parties.~~party.

Noncontrolling Interests in the Operating Partnership

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Beginning noncontrolling interests in the Operating Partnership	Beginning noncontrolling interests in the Operating Partnership	$	84,583	$	128,180	$	111,689	$	112,499	Beginning noncontrolling interests in the Operating Partnership	$	56,206	$	84,583	$	65,977	$	111,689
Adjustment of noncontrolling interests in the Operating Partnership to fair value	Adjustment of noncontrolling interests in the Operating Partnership to fair value	(16,952)		(4,262)		(42,480)		11,072		Adjustment of noncontrolling interests in the Operating Partnership to fair value	(6,334)		(16,952)		(15,521)		(42,480)

Conversions of Common Units to Common Stock	Conversions of Common Units to Common Stock	—		(234)		(1,251)		(278)		Conversions of Common Units to Common Stock	(4,795)		—		(4,795)		(1,251)
Redemptions of Common Units	Redemptions of Common Units	(3,101)		—		(3,101)		—		Redemptions of Common Units	—		(3,101)		(163)		(3,101)
Net income attributable to noncontrolling interests in the Operating Partnership	Net income attributable to noncontrolling interests in the Operating Partnership	881		1,967		3,049		5,084		Net income attributable to noncontrolling interests in the Operating Partnership	453		881		2,386		3,049
Distributions to noncontrolling interests in the Operating Partnership	Distributions to noncontrolling interests in the Operating Partnership	(1,192)		(1,418)		(3,687)		(4,144)		Distributions to noncontrolling interests in the Operating Partnership	(1,078)		(1,192)		(3,432)		(3,687)
Total noncontrolling interests in the Operating Partnership	Total noncontrolling interests in the Operating Partnership	$	64,219	$	124,233	$	64,219	$	124,233	Total noncontrolling interests in the Operating Partnership	$	44,452	$	64,219	$	44,452	$	64,219

The following table sets forth net income available for common stockholders and transfers from the 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,
	2023		2022		2023		2022
Net income available for common stockholders	$	22,101	$	38,251	$	108,233	$	129,022
Increase in additional paid in capital from conversions of Common Units to Common Stock	4,795		—		4,795		1,251
Redemptions of Common Units	—		3,101		163		3,101

Change from net income available for common stockholders and transfers from noncontrolling interests	$	26,896	$	41,352	$	113,191	$	133,374

9.8. Disclosure About Fair Value of Financial Instruments

The following summarizes the 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 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. Our Level 2 liabilities include the fair value of our mortgages and notes payable and 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

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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 include any real estate assets recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis, which are valued 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. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement.

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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					Level 1		Level 2
		Total		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Observable Inputs		Significant Unobservable Inputs			Total		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Observable Inputs
Fair Value at September 30, 2022:
Fair Value as of September 30, 2023:										Fair Value as of September 30, 2023:
Assets:	Assets:									Assets:
Mortgages and notes receivable, at fair value (1)	Mortgages and notes receivable, at fair value (1)	$	1,103	$	—	$	1,103	$	—	Mortgages and notes receivable, at fair value (1)	$	9,783	$	—	$	9,783

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,364		2,364		—		—		Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,056		2,056		—
Impaired real estate assets		1,665		—		—		1,665

Total Assets	Total Assets	$	5,132	$	2,364	$	1,103	$	1,665	Total Assets	$	11,839	$	2,056	$	9,783
Noncontrolling Interests in the Operating Partnership	Noncontrolling Interests in the Operating Partnership	$	64,219	$	64,219	$	—	$	—	Noncontrolling Interests in the Operating Partnership	$	44,452	$	44,452	$	—
Liabilities:	Liabilities:									Liabilities:
Mortgages and notes payable, net, at fair value (1)	Mortgages and notes payable, net, at fair value (1)	$	2,630,788	$	—	$	2,630,788	$	—	Mortgages and notes payable, net, at fair value (1)	$	2,794,265	$	—	$	2,794,265

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,364		2,364		—		—		Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,056		2,056		—

Total Liabilities	Total Liabilities	$	2,633,152	$	2,364	$	2,630,788	$	—	Total Liabilities	$	2,796,321	$	2,056	$	2,794,265


Fair Value at December 31, 2021:
Fair Value as of December 31, 2022:										Fair Value as of December 31, 2022:
Assets:	Assets:									Assets:
Mortgages and notes receivable, at fair value (1)	Mortgages and notes receivable, at fair value (1)	$	1,227	$	—	$	1,227	$	—	Mortgages and notes receivable, at fair value (1)	$	1,051	$	—	$	1,051

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,866		2,866		—		—		Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,564		2,564		—

Total Assets	Total Assets	$	4,093	$	2,866	$	1,227	$	—	Total Assets	$	3,615	$	2,564	$	1,051
Noncontrolling Interests in the Operating Partnership	Noncontrolling Interests in the Operating Partnership	$	111,689	$	111,689	$	—	$	—	Noncontrolling Interests in the Operating Partnership	$	65,977	$	65,977	$	—
Liabilities:	Liabilities:									Liabilities:
Mortgages and notes payable, net, at fair value (1)	Mortgages and notes payable, net, at fair value (1)	$	2,907,492	$	—	$	2,907,492	$	—	Mortgages and notes payable, net, at fair value (1)	$	2,832,973	$	—	$	2,832,973
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)	Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,866		2,866		—		—		Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,564		2,564		—

Total Liabilities	Total Liabilities	$	2,910,418	$	2,866	$	2,907,552	$	—	Total Liabilities	$	2,835,537	$	2,564	$	2,832,973

__________

(1) Amounts are not recorded at fair value on our Consolidated Balance Sheets atas of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

~~The Level~~As of January 1, 2023, there was a level 3 ~~impaired real estate assets~~investment in Markel that was measured at a fair value of ~~$1.7~~$57.1 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.upon deconsolidation. The estimated fair value was calculated using a broker ~~opinions~~opinion of value, which ~~incorporate~~incorporates an income approach, as observable inputs were not available. Key assumptions used in the ~~impairment~~fair value calculation ~~were estimated selling costs of 3.5% (including seller’s share of anticipated transfer taxes),~~for the ~~high end of~~operating buildings were an estimated discount rate ~~ranging from 13.2% to 16.2%~~of 10.8% and an estimated terminal capitalization rate of ~~8.0%~~8.8%. The estimated fair value of the surrounding land currently used for parking was calculated based on its multifamily development potential, which was determined to be the highest and best use of the land.

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~~10.~~9. Share-Based Payments

During the nine months ended September 30, ~~2022,~~2023, the Company granted ~~99,975~~155,717 shares of time-based restricted stock and ~~81,832~~126,736 shares of total return-based restricted stock with weighted average grant date fair values per share of ~~$43.58~~$26.42 and ~~$41.94,~~$27.06, respectively. We recorded share-based compensation expense of ~~$0.7~~$0.8 million and ~~$1.9~~$0.7 million during the three months ended September 30, 2023 and 2022, respectively, and ~~2021,~~$6.2 million and $6.8 million during ~~each of~~ the nine months ended September 30, 2023 and 2022, ~~and 2021. At~~respectively. As of September 30, ~~2022,~~2023, there was ~~$4.3~~$4.9 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of ~~2.0~~2.2 years.

~~11. Accumulated Other Comprehensive Loss~~

~~The following table sets forth the components of accumulated other comprehensive loss:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Cash flow hedges:
Beginning balance $ (1,062) $ (1,225) $ (973) $ (1,462)
Unrealized losses on cash flow hedges — (6) — (17)
Amortization of cash flow hedges (1)
(75) 129 (164) 377
Total accumulated other comprehensive loss $ (1,137) $ (1,102) $ (1,137) $ (1,102)

~~__________~~

~~(1) Amounts reclassified out of accumulated other comprehensive loss into interest expense.~~

~~12.~~10. Real Estate and Other Assets Held For Sale

The following table sets forth the assets held for sale atas of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, which are considered non-core:


	September 30, ~~2022~~2023		December 31, ~~2021~~2022
Assets:
Land	$	513	$	—
Buildings and tenant improvements	846		—

Land held for development	—3,294		$		~~3,482~~—
Less-accumulated depreciation	(131)		—
Net real estate assets	—4,522		~~3,482~~—


Prepaid expenses and other assets, net	—184		36—
Real estate and other assets, net, held for sale	$	—4,706	$	~~3,518~~—

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~~13.~~11. 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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Earnings per Common Share - basic:	Earnings per Common Share - basic:									Earnings per Common Share - basic:
Numerator:	Numerator:									Numerator:
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815
Net (income) attributable to noncontrolling interests in the Operating Partnership	Net (income) attributable to noncontrolling interests in the Operating Partnership	(881)		(1,967)		(3,049)		(5,084)		Net (income) attributable to noncontrolling interests in the Operating Partnership	(453)		(881)		(2,386)		(3,049)
Net (income) attributable to noncontrolling interests in consolidated affiliates		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Dividends on Preferred Stock	Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)		Dividends on Preferred Stock	(622)		(621)		(1,864)		(1,864)
Net income available for common stockholders	Net income available for common stockholders	$	38,251	$	72,105	$	129,022	$	185,869	Net income available for common stockholders	$	22,101	$	38,251	$	108,233	$	129,022
Denominator:	Denominator:									Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)	Denominator for basic earnings per Common Share – weighted average shares (1)	105,184		104,277		105,094		104,117		Denominator for basic earnings per Common Share – weighted average shares (1)	105,671		105,184		105,473		105,094
Net income available for common stockholders	Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79	Net income available for common stockholders	$	0.21	$	0.36	$	1.03	$	1.23
Earnings per Common Share - diluted:	Earnings per Common Share - diluted:									Earnings per Common Share - diluted:
Numerator:	Numerator:									Numerator:
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815
Net (income) attributable to noncontrolling interests in consolidated affiliates		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Dividends on Preferred Stock	Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)		Dividends on Preferred Stock	(622)		(621)		(1,864)		(1,864)
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership	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	Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership	$	22,554	$	39,132	$	110,619	$	132,071
Denominator:	Denominator:									Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)	Denominator for basic earnings per Common Share – weighted average shares (1)	105,184		104,277		105,094		104,117		Denominator for basic earnings per Common Share – weighted average shares (1)	105,671		105,184		105,473		105,094
Add:	Add:									Add:
Stock options using the treasury method	Stock options using the treasury method	—		25		7		17		Stock options using the treasury method	—		—		—		7
Noncontrolling interests Common Units	Noncontrolling interests Common Units	2,417		2,837		2,469		2,838		Noncontrolling interests Common Units	2,161		2,417		2,289		2,469
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions	Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions	107,601		107,139		107,570		106,972		Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions	107,832		107,601		107,762		107,570
Net income available for common stockholders	Net income available for common stockholders	$	0.36	$	0.69	$	1.23	$	1.79	Net income available for common stockholders	$	0.21	$	0.36	$	1.03	$	1.23

__________

(1)Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.

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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,
		2022		2021		2022		2021			2023		2022		2023		2022
Earnings per Common Unit - basic:	Earnings per Common Unit - basic:									Earnings per Common Unit - basic:
Numerator:	Numerator:									Numerator:
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815
Net (income) attributable to noncontrolling interests in consolidated affiliates		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Distributions on Preferred Units	Distributions on Preferred Units	(621)		(621)		(1,864)		(1,864)		Distributions on Preferred Units	(622)		(621)		(1,864)		(1,864)

Net income available for common unitholders	Net income available for common unitholders	$	39,132	$	74,072	$	132,071	$	190,953	Net income available for common unitholders	$	22,554	$	39,132	$	110,619	$	132,071
Denominator:	Denominator:									Denominator:
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		Denominator for basic earnings per Common Unit – weighted average units (1)	107,423		107,192		107,353		107,154

Net income available for common unitholders	Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79	Net income available for common unitholders	$	0.21	$	0.37	$	1.03	$	1.23
Earnings per Common Unit - diluted:	Earnings per Common Unit - diluted:									Earnings per Common Unit - diluted:
Numerator:	Numerator:									Numerator:
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815
Net (income) attributable to noncontrolling interests in consolidated affiliates		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Distributions on Preferred Units	Distributions on Preferred Units	(621)		(621)		(1,864)		(1,864)		Distributions on Preferred Units	(622)		(621)		(1,864)		(1,864)

Net income available for common unitholders	Net income available for common unitholders	$	39,132	$	74,072	$	132,071	$	190,953	Net income available for common unitholders	$	22,554	$	39,132	$	110,619	$	132,071
Denominator:	Denominator:									Denominator:
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		Denominator for basic earnings per Common Unit – weighted average units (1)	107,423		107,192		107,353		107,154
Add:	Add:									Add:
Stock options using the treasury method	Stock options using the treasury method	—		25		7		17		Stock options using the treasury method	—		—		—		7
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		Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions	107,423		107,192		107,353		107,161

Net income available for common unitholders	Net income available for common unitholders	$	0.37	$	0.69	$	1.23	$	1.79	Net income available for common unitholders	$	0.21	$	0.37	$	1.03	$	1.23

__________

(1)Includes all unvested restricted stock where distributions on such restricted stock are ~~non-forfeitable.~~non-forfeitable

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~~14.~~12. Segment Information

The following tables summarize ~~the~~ rental and other revenues and net operating income for our office properties. Net operating income is 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.expenses.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Rental and Other Revenues:	Rental and Other Revenues:									Rental and Other Revenues:
Office:

Atlanta	Atlanta	$	35,804	$	36,672	$	106,805	$	108,385	Atlanta	$	35,666	$	35,804	$	107,991	$	106,805
Charlotte	Charlotte	18,825		14,313		52,643		32,364		Charlotte	21,079		18,825		63,452		52,643
Nashville	Nashville	44,587		36,136		130,640		106,873		Nashville	42,884		44,587		130,084		130,640
Orlando	Orlando	13,634		12,852		40,298		38,141		Orlando	14,356		13,634		43,300		40,298

Raleigh	Raleigh	45,220		42,471		137,051		117,168		Raleigh	45,354		45,220		136,933		137,051
Richmond	Richmond	10,872		12,050		31,837		35,263		Richmond	8,746		10,872		27,103		31,837
Tampa	Tampa	23,590		23,856		71,169		74,166		Tampa	25,000		23,590		75,344		71,169
Total Office Segment	Total Office Segment	192,532		178,350		570,443		512,360		Total Office Segment	193,085		192,532		584,207		570,443
Other	Other	14,465		17,145		46,773		52,442		Other	14,010		14,465		42,931		46,773
Total Rental and Other Revenues	Total Rental and Other Revenues	$	206,997	$	195,495	$	617,216	$	564,802	Total Rental and Other Revenues	$	207,095	$	206,997	$	627,138	$	617,216


Net Operating Income:	Net Operating Income:									Net Operating Income:
Office:

Atlanta	Atlanta	$	22,524	$	24,157	$	69,472	$	71,779	Atlanta	$	21,796	$	22,524	$	68,289	$	69,472
Charlotte	Charlotte	14,275		11,159		40,132		25,446		Charlotte	16,388		14,275		47,719		40,132
Nashville	Nashville	33,154		27,355		97,093		78,172		Nashville	31,389		33,154		95,530		97,093
Orlando	Orlando	7,865		7,920		24,264		23,414		Orlando	8,734		7,865		26,358		24,264

Raleigh	Raleigh	32,822		31,425		101,557		88,005		Raleigh	32,523		32,822		99,799		101,557
Richmond	Richmond	7,112		7,805		21,700		24,092		Richmond	5,733		7,112		18,656		21,700
Tampa	Tampa	14,351		15,143		44,912		49,640		Tampa	15,574		14,351		47,614		44,912
Total Office Segment	Total Office Segment	132,103		124,964		399,130		360,548		Total Office Segment	132,137		132,103		403,965		399,130
Other	Other	8,560		9,964		27,961		31,272		Other	7,765		8,560		23,942		27,961
Total Net Operating Income	Total Net Operating Income	140,663		134,928		427,091		391,820		Total Net Operating Income	139,902		140,663		427,907		427,091
Reconciliation to net income:	Reconciliation to net income:									Reconciliation to net income:
Depreciation and amortization	Depreciation and amortization	(73,057)		(66,547)		(212,466)		(189,423)		Depreciation and amortization	(74,765)		(73,057)		(220,416)		(212,466)
Impairments of real estate assets	Impairments of real estate assets	(1,515)		—		(36,515)		—		Impairments of real estate assets	—		(1,515)		—		(36,515)
General and administrative expenses	General and administrative expenses	(9,586)		(10,350)		(32,733)		(30,409)		General and administrative expenses	(8,873)		(9,586)		(30,668)		(32,733)
Interest expense	Interest expense	(26,392)		(21,986)		(75,812)		(60,755)		Interest expense	(34,247)		(26,392)		(101,408)		(75,812)
Other income	Other income	138		424		621		1,068		Other income	754		138		3,082		621
Gains on disposition of property	Gains on disposition of property	9,402		38,572		63,546		80,371		Gains on disposition of property	—		9,402		19,818		63,546
Gain on deconsolidation of affiliate										Gain on deconsolidation of affiliate	—		—		11,778		—
Equity in earnings of unconsolidated affiliates	Equity in earnings of unconsolidated affiliates	457		546		1,083		1,614		Equity in earnings of unconsolidated affiliates	400		457		1,902		1,083
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815

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~~15.~~13. Subsequent Events

We own an 80.0% interest in the Midtown West joint venture, which is consolidated. On October ~~11, 2022, we~~23, 2023, the joint venture obtained a ~~$200.0~~$45.0 million, ~~two-year unsecured bank term~~five-year secured mortgage loan ~~that~~from a third party lender, with an effective fixed rate of 7.29%. This loan is scheduled to mature in ~~October 2024 and reduces~~November 2028. The joint venture is expected to incur $0.8 million of debt issuance costs, which will be amortized over 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 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 higherterm 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.loan.

On October 17, 2022, we used the additional $200.0 million of borrowings, together with available cash and borrowings under our revolving credit facility, to prepay without penalty $250.0 million principal amount of 3.625% unsecured notes that were scheduled to mature in January 2023.

~~On October 20, 2022,~~18, 2023, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on December ~~13, 2022~~12, 2023 to stockholders of record as of November ~~21, 2022.~~

20, 2023.

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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”) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Dallas, Nashville, Orlando, 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 important factors that could cause our actual results to differ materially from those contained in any forward-looking 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 or further worsen, which could be further exacerbated by the COVID-19 pandemic;~~deteriorate;

•our assumptions regarding potential losses related to customer financial difficulties ~~due~~could prove to ~~the COVID-19 pandemic or otherwise could prove~~be 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 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 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 “Item 1A. Risk Factors” set forth herein and in our ~~2021~~2022 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.

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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 can deliver greater value to our customers, their teammates and, in turn, our stockholders. Our simple ~~and straight-forward~~ strategy is to own and ~~manage~~operate 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 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. A core component of this strategy is to continuously strengthen the financial and operational performance, resiliency and long-term growth prospects of our existing in-service portfolio and recycle those properties that no longer meet our 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~~“Item 2. Properties - Lease Expirations” and “Item 1A. Risk Factors – Risks Related to our Operations – Potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, could materially and negatively impact the future demand for office space over the long-term” in our ~~2021~~2022 Annual Report on Form 10-K. Occupancy in our office portfolio decreased from ~~91.2% at~~91.0% as of December 31, ~~2021~~2022 to ~~90.7% at~~88.6% as of September 30, ~~2022.~~2023. We expect average occupancy for our office portfolio to be approximately ~~90.5%~~88.0% to ~~91.0%~~89.0% for the remainder of ~~2022.~~2023.

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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 ~~2022~~2023 (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)	Leased space (in rentable square feet)	518,438		516,871		1,035,309		Leased space (in rentable square feet)	152,105		502,955		655,060
Average term (in years - rentable square foot weighted)	Average term (in years - rentable square foot weighted)	9.5		4.8		7.2		Average term (in years - rentable square foot weighted)	6.8		4.8		5.3
Base rents (per rentable square foot) (1)	Base rents (per rentable square foot) (1)	$	37.45	$	34.82	$	36.14	Base rents (per rentable square foot) (1)	$	35.76	$	31.26	$	32.31
Rent concessions (per rentable square foot) (1)	Rent concessions (per rentable square foot) (1)	(2.30)		(1.06)		(1.68)		Rent concessions (per rentable square foot) (1)	(2.14)		(1.01)		(1.27)
GAAP rents (per rentable square foot) (1)	GAAP rents (per rentable square foot) (1)	$	35.15	$	33.76	$	34.46	GAAP rents (per rentable square foot) (1)	$	33.62	$	30.25	$	31.04
Tenant improvements (per rentable square foot) (1)	Tenant improvements (per rentable square foot) (1)	$	4.86	$	3.11	$	3.99	Tenant improvements (per rentable square foot) (1)	$	7.87	$	1.86	$	3.26
Leasing commissions (per rentable square foot) (1)	Leasing commissions (per rentable square foot) (1)	$	1.27	$	0.83	$	1.05	Leasing commissions (per rentable square foot) (1)	$	1.40	$	0.74	$	0.89

__________

(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 ~~$34.46~~$31.04 per rentable square foot, ~~13.4%~~10.2% higher compared to previous leases in the same office spaces.

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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 Board of Directors. As of September 30, ~~2022,~~2023, Bank of America ~~(3.8%~~(4.0%) and Asurion ~~(3.7%~~(3.5%) accounted for more than 3% of our annualized ~~cash~~GAAP 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~~properties. Some of these expenses ~~that~~ vary somewhat proportionately to occupancy and usage levels, such as janitorial services and ~~utilities, and~~utilities. Other 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, sinceSince our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed ~~lives.~~lives, depreciation and amortization, which is a non-cash expense associated with the ownership of real property, generally remains relatively consistent each year, unless we buy, place in service or sell assets. 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 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 was ~~$0.6~~$1.1 million, or ~~0.5%~~0.8%, ~~higher~~lower in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 primarily due to an increase ~~of $7.1 million in same property revenues offset by an increase of $6.4 million~~ in same property expenses.

In addition to the effect of same property NOI, whether or not NOI increases typically depends upon whether the NOI from our acquired properties and development properties placed in service exceeds the NOI from property dispositions. NOI was ~~$5.7~~$0.8 million, or ~~4.3%~~0.5%, ~~higher~~lower in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 primarily due to ~~development properties placed in service,~~lower same property NOI, NOI lost from property dispositions and the ~~acquisition~~deconsolidation of ~~real estate assets from Preferred Apartment Communities, Inc.~~our Highwoods-Markel Associates, LLC joint venture (“~~PAC”~~Markel”) ~~in the third quarter of 2021,~~, partially offset by the acquisition of SIX50 at Legacy Union and development properties placed in ~~the third quarter of 2022 and higher same property NOI, partially offset by NOI lost from property dispositions.~~service.

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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

WeOur plan is to continue to maintain a ~~conservative and~~ flexible balance sheet ~~and believe we have~~with ample liquidity to fund our operations and growth prospects. As of October ~~18, 2022,~~17, 2023, we had approximately ~~$32.0~~$16 million of ~~available~~existing cash and ~~$170.0~~$205.0 million drawn on our $750.0 million revolving credit facility, which is scheduled to mature in March ~~2026, assuming we exercise our option to extend the maturity date~~2025 (but which can be extended for two additional six-month ~~periods. At~~periods at our option). As of September 30, ~~2022,~~2023, our leverage ratio, as measured by the ratio of our mortgages and notes

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payable and outstanding preferred stock to the undepreciated book value of our assets, was ~~40.4%~~41.9%, and there were ~~107.6~~107.9 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 revolving credit facility, which had ~~$579.9~~$544.1 million of availability atas of October ~~18, 2022.~~17, 2023. 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. 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 (including our proportionate share of joint venture developments) and land infrastructure projects and funding acquisitions of buildings and development land. Additionally, we may, from time to time, retire outstanding equity and/or 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 flows from operating activities;

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•issuance of debt securities by the Operating 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.

We have no debt scheduled to mature prior to ~~2026~~2025 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~~2024 (but which can be extended for one additional ~~year.~~year at our option). We generally believe we will be able to satisfy these obligations with existing cash, borrowings under our revolving credit facility, new bank term loans, issuance of other unsecured debt, mortgage debt and/or proceeds from the sale of 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”) 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.~~commencement in some cases. Sales of non-core assets could result in lower per share net income or FFO in any given period ~~in the event~~if 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.~~

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

Deconsolidation of Markel

Markel is a joint venture in which we own a 50.0% interest that was consolidated as of December 31, 2022 because we controlled the major operating and financial policies of the entity. Effective January 1, 2023, the agreement governing the joint venture was modified to require the consent of both partners for major operating and financial policies of the entity. As a result, Markel was deconsolidated effective January 1, 2023, and this joint venture is now accounted for using the equity method of accounting.

Three Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

Rental and Other Revenues

Rental and other revenues were ~~$11.5 million, or 5.9%, higher~~relatively unchanged in the third quarter of ~~2022~~2023 as compared to ~~2021 primarily~~2022. Rental and other revenues increased due to ~~the development properties placed in service, higher same property revenues, the acquisition of real estate assets from PAC and~~ the acquisition of SIX50 at Legacy Union and development properties placed in service, which increased rental and other revenues by ~~$7.2 million, $7.1~~$2.1 million and ~~$6.4~~$1.1 million, respectively. ~~Same~~These increases were offset by the deconsolidation of our Markel joint venture and lost revenue from property dispositions, which decreased rental and other revenues ~~were higher primarily due to higher average GAAP rents per rentable square foot, cost recoveries, parking income~~by $1.6 million and ~~termination fees. These increases were partially offset by lost revenue of $9.3~~$1.4 million, ~~from property dispositions.~~respectively.

Operating Expenses

Rental property and other expenses were ~~$5.8~~$0.9 million, or ~~9.5%~~1.3%, higher in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 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~~$1.6 million, ~~$1.9~~$0.4 million and ~~$1.2~~$0.2 million, respectively. Same property operating expenses were higher primarily due to higher ~~property taxes, utilities,~~ contract services, ~~and~~property insurance, repairs and ~~maintenance.~~maintenance and utilities. These increases were partially offset by ~~a $3.6 million decrease~~decreases in operating expenses from the deconsolidation of our Markel joint venture and property ~~dispositions.~~dispositions, which decreased operating expenses by $0.7 million and $0.5 million, respectively.

Depreciation and amortization was ~~$6.5~~$1.7 million, or ~~9.8%~~2.3%, higher in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 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.~~dispositions and the deconsolidation of our Markel joint venture.

~~Because we classified all of our assets in Pittsburgh as non-core, we~~We recorded an impairment charge of $1.5 million on a non-core land parcel in Pittsburgh in the third quarter of 2022. We recorded no such impairment in ~~2021.~~2023.

General and administrative expenses were ~~$0.8~~$0.7 million, or 7.4%, lower in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 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~~$7.9 million, or ~~20.0%~~29.8%, higher in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 primarily due to higher average ~~debt balances, higher average~~ interest rates and ~~lower~~higher average debt balances, partially offset by higher capitalized interest.

Other Income

Other income was ~~$0.3~~$0.6 million ~~lower~~higher in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 primarily due to ~~losses~~interest income on ~~deferred compensation plan investments (which is fully offset by a corresponding decrease in general and administrative expenses).~~the loan provided to the 2827 Peachtree joint venture.

Gains on Disposition of Property

Gains on disposition of property were ~~$29.2~~$9.4 million lower in the third quarter of ~~2022~~2023 as compared to ~~2021.~~2022.

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Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates was $0.1 million lower in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 primarily due to ~~higher property taxes.~~expenses on Granite Park Six which was placed in service in the third quarter of 2023, partially offset by the deconsolidation of our Markel joint venture and the acquisition of McKinney and Olive.

Earnings Per Common Share - Diluted

Diluted earnings per common share was ~~$0.33~~$0.15 lower in the third quarter of ~~2022~~2023 as compared to ~~2021~~2022 due to a decrease in net income for the reasons discussed above.

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Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

Rental and Other Revenues

Rental and other revenues were ~~$52.4~~$9.9 million, or ~~9.3%~~1.6%, higher in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to ~~the acquisition of real estate assets from PAC,~~ the acquisition of SIX50 at Legacy Union, higher same property revenues and development properties placed in service, ~~and higher same property revenues,~~ which increased rental and other revenues by ~~$39.0~~$8.9 million, ~~$23.5~~$7.0 million and ~~$16.1~~$4.7 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher cost recovery and parking income and lower credit losses, partially offset by a decrease in average occupancy and ~~higher cost recoveries, parking income and~~lower termination ~~fees, partially offset by higher credit losses.~~fees. These increases were partially offset by lost revenue ~~of $26.6 million~~ from property ~~dispositions.~~dispositions and the deconsolidation of our Markel joint venture, which decreased rental and other revenues by $6.0 million and $4.4 million, respectively.

Operating Expenses

Rental property and other expenses were ~~$17.1~~$9.1 million, or ~~9.9%~~4.8%, higher in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to higher same property operating expenses, the acquisition of ~~real estate assets from PAC and the acquisition of~~ SIX50 at Legacy Union, carry costs for acquired land parcels and development properties placed in service, which increased operating expenses by ~~$12.4~~$10.2 million, ~~$10.5~~$1.9 million, $0.8 million and ~~$3.7~~$0.5 million, respectively. Same property operating expenses were higher primarily due to higher contract services, utilities, ~~property taxes and~~ repairs and ~~maintenance.~~maintenance, property insurance and property taxes. These increases were partially offset by ~~a $9.6 million decrease~~decreases in operating expenses from property ~~dispositions.~~dispositions and the deconsolidation of our Markel joint venture, which decreased operating expenses by $2.3 million and $1.7 million, respectively.

Depreciation and amortization was ~~$23.0~~$8.0 million, or ~~12.2%~~3.7%, higher in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to ~~the acquisition of real estate assets from PAC~~higher same property depreciation and amortization, the acquisition of SIX50 at Legacy Union and development properties placed in service, ~~and higher same property lease related depreciation and amortization,~~ partially offset by ~~fully amortized acquisition-related intangible assets~~property dispositions and ~~property dispositions.~~the deconsolidation of our Markel joint venture.

~~Because we classified all of our assets in Pittsburgh as non-core, we~~We recorded an impairment charge of $36.5 million in the nine months ended September 30, 2022, primarily to lower the carrying amount of EQT Plaza to its estimated fair value less ~~costs~~cost 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.~~2023.

General and administrative expenses were ~~$2.3~~$2.1 million, or ~~7.6%~~6.3%, ~~higher~~lower in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to ~~higher salaries, benefits~~lower equity incentive compensation and office ~~rent.~~rent, partially offset by gains on deferred compensation plan investments (which is fully offset by a corresponding increase in other income).

Interest Expense

Interest expense was ~~$15.1~~$25.6 million, or ~~24.8%~~33.8%, higher in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to higher average ~~debt balances, higher average~~ interest rates and ~~lower~~higher average debt balances, partially offset by higher capitalized interest.

Other Income

Other income was ~~$0.4~~$2.5 million ~~lower~~higher in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to ~~losses~~dividend income from short-term preferred equity contributed to the McKinney and Olive joint venture, interest income on the loan provided to the 2827 Peachtree joint venture and gains on deferred compensation plan investments (which is fully offset by a corresponding ~~decrease~~increase in general and administrative expenses)~~, partially offset by losses on debt extinguishment in 2021.~~.

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Gains on Disposition of Property

Gains on disposition of property were ~~$16.8~~$43.7 million lower in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021.~~2022.

Gain on Deconsolidation of Affiliate

We recognized a gain on deconsolidation of $11.8 million in the nine months ended September 30, 2023 related to adjusting our retained interest in Markel to fair value.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates was ~~$0.5~~$0.8 million ~~lower~~higher in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 primarily due to the deconsolidation of our Markel joint venture and the acquisition of ~~our joint venture partner’s 75.0% interest~~McKinney and Olive, partially offset by expenses on Granite Park Six which was placed in ~~our Highwoods DLF Forum, LLC joint venture~~service in the ~~first~~third quarter of ~~2021 and higher property taxes.~~2023.

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Earnings Per Common Share - Diluted

Diluted earnings per common share was ~~$0.56~~$0.20 lower in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 due to a decrease in net income for the reasons discussed above.

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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 thousands):


		Nine Months Ended September 30,							Nine Months Ended September 30,
		2022		2021		Change			2023		2022		Change
Net Cash Provided By Operating Activities	Net Cash Provided By Operating Activities	$	319,879	$	309,218	$	10,661	Net Cash Provided By Operating Activities	$	284,171	$	319,879	$	(35,708)
Net Cash Used In Investing Activities	Net Cash Used In Investing Activities	(341,593)		(373,225)		31,632		Net Cash Used In Investing Activities	(130,967)		(341,593)		210,626
Net Cash Provided By/(Used In) Financing Activities	Net Cash Provided By/(Used In) Financing Activities	19,609		(84,339)		103,948		Net Cash Provided By/(Used In) Financing Activities	(152,213)		19,609		(171,822)
Total Cash Flows	Total Cash Flows	$	(2,105)	$	(148,346)	$	146,241	Total Cash Flows	$	991	$	(2,105)	$	3,096

The change in net cash provided by operating activities in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 was primarily due to higher interest expense, property dispositions and changes in operating assets and liabilities, partially offset by net cash from the operations of ~~acquired real estate assets from PAC, the acquisition of~~ SIX50 at Legacy Union ~~same properties~~acquired in the prior year and development properties placed in ~~service, partially offset by property dispositions.~~service.

The change in net cash used in investing activities in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 was primarily due to lower acquisition activity, the redemption of our short-term preferred equity investment in the McKinney and Olive joint venture and lower investments in ~~development in-process in 2022,~~tenant improvements, partially offset by ~~investments in the 2827 Peachtree, Granite Park Six and 23Springs joint ventures in 2022,~~ lower net proceeds from disposition activity, higher investments in ~~2022~~the 2827 Peachtree, 23Springs and Midtown East joint ventures and higher investments in ~~tenant and~~ building ~~improvements in 2022.~~improvements.

The change in net cash provided by/(used in) financing activities in the nine months ended September 30, ~~2022~~2023 as compared to ~~2021~~2022 was primarily due to lower net debt ~~borrowings in 2022.~~borrowings.

Capitalization

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


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022

Mortgages and notes payable, net, at recorded book value	Mortgages and notes payable, net, at recorded book value	$	2,973,369	$	2,788,915	Mortgages and notes payable, net, at recorded book value	$	3,212,185	$	3,197,215

Preferred Stock, at liquidation value	Preferred Stock, at liquidation value	$	28,821	$	28,821	Preferred Stock, at liquidation value	$	28,811	$	28,821
Common Stock outstanding	Common Stock outstanding	105,198		104,893		Common Stock outstanding	105,693		105,211
Common Units outstanding (not owned by the Company)	Common Units outstanding (not owned by the Company)	2,382		2,505		Common Units outstanding (not owned by the Company)	2,157		2,358
Per share stock price at period end	Per share stock price at period end	$	26.96	$	44.59	Per share stock price at period end	$	20.61	$	27.98
Market value of Common Stock and Common Units	Market value of Common Stock and Common Units	$	2,900,357	$	4,788,877	Market value of Common Stock and Common Units	$	2,222,789	$	3,009,781
Total capitalization	Total capitalization	$	5,902,547	$	7,606,613	Total capitalization	$	5,463,785	$	6,235,817

AtAs of September 30, ~~2022,~~2023, our mortgages and notes payable and outstanding preferred stock represented ~~50.9%~~59.3% of our total capitalization and ~~40.4%~~41.9% of the undepreciated book value of our assets. See also “Executive Summary - Liquidity and Capital Resources.”

Our mortgages and notes payable as of September 30, ~~2022~~2023 consisted of ~~$486.0~~$677.8 million of secured indebtedness with a weighted average interest rate of ~~3.62%~~4.23% and ~~$2,503.3~~$2,549.5 million of unsecured indebtedness with a weighted average interest rate of ~~3.67%~~4.39%. The secured indebtedness was collateralized by real estate assets with an undepreciated book value of ~~$742.1~~$1,170.7 million. As of September 30, ~~2022, $460.0~~2023, $755.0 million of our debt ~~does not bear~~bears interest at ~~fixed rates or is not protected by interest rate hedge contracts.~~floating rates.

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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,

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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 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” in our ~~2021~~2022 Annual Report on Form ~~10-K.~~

During the third quarter of 2022, we acquired SIX50 at Legacy Union, a 367,000 square foot trophy office building in Charlotte’s Uptown CBD submarket, for a net purchase price of $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 third quarter of 2022, we sold land in Richmond for a sales price of $23.3 million and recorded a gain on disposition of property of $9.4 million.~~10-K

As of September 30, ~~2022,~~2023, we were developing ~~1.4~~0.8 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	Own %		Consolidated (Y/N)	Rentable Square Feet	Anticipated Total Investment (1)		Investment as of September 30, 2023		Pre Leased %		Estimated Completion	Estimated Stabilization
						($ in thousands)
23Springs	Dallas	50.0	%	N	642,000	$	460,000	$	123,181	17.1	%	1Q 25	1Q 28


Midtown East	Tampa	50.0	%	N	143,000	83,000		21,785		16.1		1Q 25	2Q 26

Four Morrocroft (2)	Charlotte	100.0	%	Y	18,000	12,000		6,678		100.0		2Q 24	2Q 24





					803,000	$	555,000	$	151,644	18.8	%

__________

(1)Includes estimated lease up costs for tenant improvements and lease commissions until the property has reached stabilization.

(2)Investment includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheet.

~~(2)Investment includes capitalized interest only on the construction loan portion of the project.~~

~~(3)Retail portion recorded on our Consolidated Balance Sheet as land held for development, not development in-process.~~

Financing Activity

During ~~2020,~~the first quarter of 2023, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, ~~Capital One Securities, Inc., Fifth Third Securities, Inc.,~~ Jefferies LLC, J.P. Morgan Securities LLC, Regions Securities LLC, TD Securities (USA) LLC and ~~SunTrust Robinson Humphrey,~~Truist Securities, Inc. 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 (which may include block trades). ~~There~~During the third quarter of 2023, there were no shares of ~~Common Stock~~common stock issued under these ~~agreements during the third quarter of 2022.~~agreements.

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Our $750.0 million unsecured revolving credit facility is scheduled to mature in March 2025 and includes an accordion feature that currently allows for an additional ~~$400.0~~$200.0 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~~The interest rate on our revolving credit facility ~~was converted from LIBOR plus 90 basis points to~~is 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 and facility fee 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 point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. There was ~~$110.0 million and $170.0~~$205.0 million outstanding under our revolving credit facility ~~at September 30, 2022 and October 18, 2022, respectively. At~~as of both September 30, ~~2022~~2023 and October ~~18, 2022,~~17, 2023. As of both September 30, 2023 and October 17, 2023, we had ~~$0.1~~$0.9 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility atas of both September 30, ~~2022~~2023 and October ~~18, 2022~~17, 2023 was ~~$639.9 million and $579.9 million, respectively.~~$544.1 million.

~~During~~We own an 80.0% interest in the ~~second quarter of 2022, we modified our $200.0 million unsecured bank term loan to extend~~Midtown West joint venture, which is consolidated. On October 23, 2023, the ~~maturity date from November 2022 to May 2026. As part of this modification, we also~~joint venture obtained a ~~$150.0~~$45.0 million, ~~delayed-draw term~~five-year secured mortgage loan ~~which was drawn in its entirety in the~~from a third ~~quarter~~party lender, with an effective fixed rate of ~~2022, that~~7.29%. This loan is scheduled to mature in ~~May 2027.~~November 2028. The ~~interest rate, based on current credit ratings,~~joint venture 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 entitledexpected 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 $2.7~~incur $0.8 million of debt issuance costs, which ~~are being~~will be amortized ~~along with certain existing unamortized debt issuance costs~~ over the ~~remaining~~ term of ~~our modified term~~the loan.

On October 11, 2022, we obtained a $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 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 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 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~~provide any assurances that we will continue to be in compliance.

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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 our revolving credit facility, the lenders having at least 51.0% of the total commitments under 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 $35.0 million with respect to other loans in some circumstances.

The indenture that governs the Operating Partnership’s outstanding 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 ~~debt~~refinancing is done at higher interest rates, the increased interest expense could adversely affect our cash flow and ability to pay distributions. ~~We may~~Any such refinancing could also ~~be subject to~~impose 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 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”). 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 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 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and Distributions” in our ~~2021~~2022 Annual Report on Form 10-K.

On October ~~20, 2022,~~18, 2023, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on December ~~13, 2022~~12, 2023 to stockholders of record as of November ~~21, 2022.~~20, 2023.

During the third quarter of ~~2022,~~2023, 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 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 building improvement costs, tenant improvement costs and lease commissions.

We had ~~$23.1~~$16.9 million of cash and cash equivalents as of September 30, ~~2022.~~2023. The unused capacity of our revolving credit facility atas of both September 30, ~~2022~~2023 and October ~~18, 2022~~17, 2023 was ~~$639.9~~$544.1 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.

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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).

During the remainder of 2023, we expect to sell up to $150 million of properties no longer considered to be core assets due to location, age, quality and/or overall strategic fit. We can make no assurance, however, that we will sell any additional non-core assets or, if we do, what the timing or terms of any such sale will be.

See also “Executive Summary - Liquidity and Capital Resources.”

Critical Accounting Estimates

There were no changes made by management to the critical accounting policies in the nine months ended September 30, ~~2022.~~2023. For a description of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” in our ~~2021~~2022 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 metrics that 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 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 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’ 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 operating performance.

The 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, or plus net loss, 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.

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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 FFO, FFO available for common stockholders and FFO available for common stockholders per share (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,
		2022		2021		2022		2021			2023		2022		2023		2022
Funds from operations:	Funds from operations:									Funds from operations:
Net income	Net income	$	40,110	$	75,587	$	134,815	$	194,286	Net income	$	23,171	$	40,110	$	111,995	$	134,815
Net (income) attributable to noncontrolling interests in consolidated affiliates		(357)		(894)		(880)		(1,469)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates										Net (income)/loss attributable to noncontrolling interests in consolidated affiliates	5		(357)		488		(880)
Depreciation and amortization of real estate assets	Depreciation and amortization of real estate assets	72,323		65,823		210,362		187,344		Depreciation and amortization of real estate assets	74,048		72,323		218,423		210,362
Impairments of depreciable properties	Impairments of depreciable properties	—		—		35,000		—		Impairments of depreciable properties	—		—		—		35,000
(Gains) on disposition of depreciable properties	(Gains) on disposition of depreciable properties	—		(37,309)		(47,807)		(79,108)		(Gains) on disposition of depreciable properties	—		—		(19,368)		(47,807)
(Gain) on deconsolidation of affiliate										(Gain) on deconsolidation of affiliate	—		—		(11,778)		—

Unconsolidated affiliates:	Unconsolidated affiliates:									Unconsolidated affiliates:
Depreciation and amortization of real estate assets	Depreciation and amortization of real estate assets	181		185		548		584		Depreciation and amortization of real estate assets	3,209		181		8,655		548

Funds from operations	Funds from operations	112,257		103,392		332,038		301,637		Funds from operations	100,433		112,257		308,415		332,038
Dividends on Preferred Stock	Dividends on Preferred Stock	(621)		(621)		(1,864)		(1,864)		Dividends on Preferred Stock	(622)		(621)		(1,864)		(1,864)

Funds from operations available for common stockholders	Funds from operations available for common stockholders	$	111,636	$	102,771	$	330,174	$	299,773	Funds from operations available for common stockholders	$	99,811	$	111,636	$	306,551	$	330,174
Funds from operations available for common stockholders per share	Funds from operations available for common stockholders per share	$	1.04	$	0.96	$	3.07	$	2.80	Funds from operations available for common stockholders per share	$	0.93	$	1.04	$	2.84	$	3.07
Weighted average shares outstanding (1)	Weighted average shares outstanding (1)	107,601		107,139		107,570		106,972		Weighted average shares outstanding (1)	107,832		107,601		107,762		107,570

__________

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

In addition, the Company believes NOI 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 less rental property and other 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, 2023, our same property portfolio consisted of 155 in-service properties encompassing 26.7 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2022 to September 30, 2023). As of December 31, 2022, our same property portfolio consisted of 148 in-service properties encompassing 24.4 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2021 to ~~September 30, 2022). As of~~ December 31, 2021, our same property portfolio consisted of 148 in-service properties encompassing 24.2 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2020 to December 31, 2021)2022). The change in our same property portfolio was due to the addition of ~~five~~seven acquired properties encompassing ~~0.6~~1.6 million rentable square feet acquired during 2021 and three newly developed properties encompassing 0.9 million rentable square feet placed in service during 2021, offset by the removal of ~~five~~three properties encompassing ~~0.4~~0.3 million rentable square feet that were sold during ~~2022.~~2023.

Rental and other revenues related to properties not in our same property portfolio were ~~$29.2~~$5.5 million and ~~$24.8~~$5.9 million for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$88.4~~$19.1 million and ~~$52.1~~$16.2 million for the nine months ended September 30, ~~2022~~2023, and ~~2021,~~2022, respectively. Rental property and other expenses related to properties not in our same property portfolio were ~~$7.2~~$1.4 million and ~~$7.8~~$2.2 million for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$21.5~~$5.9 million and ~~$16.8~~$7.0 million for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

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The following table sets forth the Company’s NOI, same property NOI and same property 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,
	2023		2022		2023		2022
Net income	$	23,171	$	40,110	$	111,995	$	134,815
Equity in earnings of unconsolidated affiliates	(400)		(457)		(1,902)		(1,083)
Gain on deconsolidation of affiliate	—		—		(11,778)		—
Gains on disposition of property	—		(9,402)		(19,818)		(63,546)
Other income	(754)		(138)		(3,082)		(621)
Interest expense	34,247		26,392		101,408		75,812
General and administrative expenses	8,873		9,586		30,668		32,733
Impairments of real estate assets	—		1,515		—		36,515
Depreciation and amortization	74,765		73,057		220,416		212,466
Net operating income	139,902		140,663		427,907		427,091
Non same property and other net operating income	(4,009)		(3,712)		(13,254)		(9,213)
Same property net operating income	$	135,893	$	136,951	$	414,653	$	417,878







Same property net operating income	$	135,893	$	136,951	$	414,653	$	417,878
Lease termination fees, straight-line rent and other non-cash adjustments	(3,294)		(6,892)		(13,008)		(18,883)
Same property cash net operating income	$	132,599	$	130,059	$	401,645	$	398,995

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

AtAs of September 30, ~~2022,~~2023, we had ~~$2,529.3~~$2,472.3 million principal amount of fixed rate debt outstanding, a ~~$4.9~~$194.7 million ~~decrease~~increase as compared to December 31, ~~2021, excluding debt with a variable rate that is effectively fixed by related interest rate hedge contracts.~~2022. The estimated aggregate fair market value of this debt was ~~$2,187.1~~$2,054.6 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~~$99.2 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~~$105.6 million higher.

AtAs of September 30, ~~2022,~~2023, we had ~~$460.0~~$755.0 million of variable rate debt outstanding, a ~~$240.0~~$181.0 million ~~increase~~decrease as compared to December 31, ~~2021, not protected by interest rate hedge contracts.~~2022. If the weighted average interest rate on this variable rate debt had been 100 basis points higher or lower, the annual interest expense atas of September 30, ~~2022~~2023 would increase or decrease by ~~$4.6~~$7.6 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 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 CEO and CFO have concluded that the disclosure controls and procedures of the Company and the Operating Partnership were each effective as of September 30, ~~2022.~~2023.

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 ended September 30, ~~2022~~2023 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There were also no changes in internal control over financial reporting during the three months ended September 30, ~~2022~~2023 that materially affected, or are reasonably likely to materially affect, the Operating 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 2023, the Company issued an aggregate of 193,907 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 6. EXHIBITS


Exhibit Number			Description



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)

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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
			Brendan C. Maiorana
			Executive Vice President and Chief Financial Officer


Highwoods Realty Limited Partnership
By:			Highwoods Properties, Inc., its sole general partner
By:			/s/ Brendan C. Maiorana
			Brendan C. Maiorana
			Executive Vice President and Chief Financial Officer

Date: October ~~25, 2022~~24, 2023

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