Highwoods Properties

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   For the fiscal year ended December 31, 2024
or
☐    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
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Highwoods Properties, Inc.  Yes  ☒    No ☐    Highwoods Realty Limited Partnership  Yes  ☒    No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Highwoods Properties, Inc.  Yes  ☐    No ☒    Highwoods Realty Limited Partnership  Yes  ☐    No ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
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 Act).
Highwoods Properties, Inc.  Yes  ☐    No ☒    Highwoods Realty Limited Partnership  Yes  ☐    No ☒
If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements.
Highwoods Properties, Inc.  ☐        Highwoods Realty Limited Partnership   ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Highwoods Properties, Inc.  ☐        Highwoods Realty Limited Partnership   ☐
The aggregate market value of shares of Common Stock of Highwoods Properties, Inc. held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on
June 30, 2024 was approximately $2.7 billion. As of January 31, 2025, there were 107,623,777 shares of Common Stock outstanding.
There is no public trading market for the Common Units of Highwoods Realty Limited Partnership. As a result, an aggregate market value of the Common Units of Highwoods
Realty Limited Partnership cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Highwoods Properties, Inc. to be filed in connection with its Annual Meeting of Stockholders to be held May 13, 2025 are incorporated by
reference in Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14.

EXPLANATORY NOTE
We refer to Highwoods Properties, Inc. as the “Company,” Highwoods Realty Limited Partnership as the “Operating Partnership,” the Company’s common
stock as “Common Stock” or “Common Shares,” the Company’s preferred stock as “Preferred Stock” or “Preferred Shares,” the Operating Partnership’s common
partnership interests as “Common Units” and the Operating Partnership’s preferred partnership interests as “Preferred Units.” References to “we” and “our” mean
the Company and the Operating Partnership, collectively, unless the context indicates otherwise.
The Company conducts its activities through the Operating Partnership and is its sole general partner. The partnership agreement provides that the Operating
Partnership will assume and pay when due, or reimburse the Company for payment of, all costs and expenses relating to the ownership and operations of, or for the
benefit of, the Operating Partnership. The partnership agreement further provides that all expenses of the Company are deemed to be incurred for the benefit of the
Operating Partnership.
Certain information contained herein is presented as of January 31, 2025, the latest practicable date for financial information prior to the filing of this Annual
Report.
Except as otherwise noted, all property-level operational information presented herein, including the information set forth in “Part I, Item 2. Properties,”
includes in-service wholly owned properties and in-service properties owned by consolidated and unconsolidated joint ventures (at our share). 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%.
This report combines the Annual Reports on Form 10-K for the period ended December 31, 2024 of the Company and the Operating Partnership. We believe
combining the annual 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:
•
Item 9A - Controls and Procedures;
•
Item 15 - Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act;
•
Consolidated Financial Statements; and
•
the following Notes to Consolidated Financial Statements:
•
Note 10 - Equity; and
•
Note 13 - Earnings Per Share and Per Unit.

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item No.
Page
PART I
1. BUSINESS
4
1A. RISK FACTORS
9
1B. UNRESOLVED STAFF COMMENTS
20
1C. CYBERSECURITY
20
2. PROPERTIES
22
3. LEGAL PROCEEDINGS
25
4. MINE SAFETY DISCLOSURES
25
X. INFORMATION ABOUT OUR EXECUTIVE OFFICERS
26
PART II
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
27
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
29
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
45
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
45
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
45
9A. CONTROLS AND PROCEDURES
46
9B. OTHER INFORMATION
49
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
49
PART III
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
50
11. EXECUTIVE COMPENSATION
50
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
50
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
50
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
50
PART IV
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
51
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PART I
ITEM 1. BUSINESS
General
Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded real estate investment trust (“REIT”). The Company is a fully integrated office
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. Our Common Stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “HIW.”
As of December 31, 2024, the Company owned all of the Preferred Units and 107.2 million, or 98.0%, of the Common Units in the Operating Partnership.
Limited partners owned the remaining 2.2 million Common Units. Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of
the unitholder for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding
the notice date of such redemption, provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one
share of Common Stock. The Common Units owned by the Company are not redeemable.
The Company was incorporated in Maryland in 1994. The Operating Partnership was formed in North Carolina in 1994. Our executive offices are located at
150 Fayetteville Street, Suite 1400, Raleigh, NC 27601, and our telephone number is (919) 872-4924.
Our primary business is the operation, acquisition and development of office properties. There are no material inter-segment transactions. See Note 15 to our
Consolidated Financial Statements for a summary of the rental and other revenues, rental property and other expenses, net operating income and assets for each
reportable segment.
Our website is www.highwoods.com. In addition to this Annual Report, all quarterly and current reports, proxy statements, interactive data and other
information are made available, without charge, on our website as soon as reasonably practicable after they are filed or furnished with the Securities and Exchange
Commission (“SEC”). Information on our website is not considered part of this Annual Report.
During 2024, the Company filed unqualified Section 303A certifications with the NYSE. The Company and the Operating Partnership have also filed the CEO
and CFO certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as exhibits to this Annual Report.
Our Vision, Mission and Strategy
Our vision is to be a leader in the evolution of commercial real estate for the benefit of our customers, our communities and those who invest with us. Our
mission is to create environments and experiences that inspire our teammates and our customers to achieve more together. We are in the work-placemaking
business and believe that by creating exceptional environments and experiences, we can deliver greater value to our customers, their teammates and, in turn, our
shareholders. By creating and operating commute-worthy places, we support the growth and success of our customers and contribute to the vitality of our
communities. Our simple strategy is to own and 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 thesis 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 out of those properties that no longer meet our
criteria.
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Geographic Diversification. Our core portfolio consists primarily of office properties in Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond
and Tampa. We do not believe that our operations are significantly dependent upon any particular geographic market.
Conservative and Flexible Balance Sheet. We are committed to maintaining a conservative and flexible balance sheet with access to ample liquidity, multiple
sources of debt and equity capital and sufficient availability under our revolving credit facility to fund our short and long-term liquidity requirements. Our balance
sheet also allows us to proactively assure our existing and prospective customers that we are able to fund tenant improvements and maintain our properties in good
condition while retaining the flexibility to capitalize on favorable development and acquisition opportunities as they arise.
Competition
Our properties compete for customers with similar properties located in our markets primarily on the basis of location, rent, services provided and the design,
quality and condition of the facilities. We also compete with other domestic and foreign REITs, financial institutions, pension funds, partnerships, individual
investors and others when attempting to acquire, develop and operate properties.
Environmental Resiliency
We are firmly committed to our intrinsic and societal responsibility to routinely minimize all environmental impacts resulting from the development and
operation of our properties. Our plan is to continue minimizing our energy intensity, carbon emissions and water consumption and strive to mitigate pollution,
ensure environmental compliance and create healthy and productive workspaces for our customers and communities. To support and advance the environmental
component of our long-term resiliency initiatives, we have formed a management-level corporate resiliency team that is overseen by the investment committee of
the Company’s Board of Directors. The corporate resiliency team, comprised of a diverse group of disciplines including executive leadership, is charged with
refining our long-term resiliency strategy, driving performance improvements across our portfolio and establishing and tracking progress towards goals. More
information regarding our sustainability strategy and progress towards reaching our target goals is available in our annual corporate resiliency report that can be
found under the “Resiliency” section of our website. Information on our website is not considered part of this Annual Report.
Government Regulation
We are subject to laws, rules and regulations of the United States and the states and local municipalities in which we operate, including laws and regulations
relating to environmental protection and human health and safety. Compliance with these laws, rules and regulations has not had, and is not expected to have, a
material effect on our capital expenditures, results of operations and competitive position as compared to prior periods. For more information about environmental
laws and regulations, see “Item 1A. Risk Factors - Risks Related to our Operations - Costs of complying with governmental laws and regulations may adversely
affect our results of operations.”
Human Capital Resources
We focus our real estate activities in markets where we have extensive local knowledge and own a significant amount of assets. As a result, we operate division
offices in Atlanta, Nashville, Orlando, Raleigh, Richmond and Tampa, which are led by seasoned real estate professionals with significant commercial real estate
experience managing across multiple economic cycles. Over the long-term, we plan to open division offices in Charlotte and Dallas. Shared corporate services,
such as
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accounting, technology, development, engineering, customer experience, marketing, human resources, legal and tax, are primarily based in Raleigh. Our senior
leadership team, led by our CEO, is based in Raleigh and oversees all of the Company’s operations.
Fully-Integrated. Unlike REITs that outsource the leasing, management, maintenance and/or customer service of their properties entirely to third parties, we
are a fully-integrated REIT that generally staffs the leasing, management, maintenance and customer service of our own portfolio. We believe being a fully-
integrated REIT is in the best long-term interests of our stockholders for a number of reasons:
•
in-house services generally allow us to better anticipate and respond to the many real-time demands of our existing and potential customer base;
•
we are able to provide our customers with more cost-effective services such as build-to-suit construction and space modification, including tenant
improvements and expansions;
•
the depth and breadth of our capabilities and resources provide us with market information not generally available;
•
operating efficiencies achieved through our fully-integrated organization provide a competitive advantage in servicing our properties, retaining existing
customers and attracting new customers;
•
we can ensure the consistent deployment of a comprehensive preventative maintenance program;
•
our established detailed service request process creates chain of custody for a customer request and tracks status and response time, which enables
proactive identification of any underperforming equipment and vital reconnaissance for process improvement and leverage when specifying all aspects of
any new construction; and
•
our first-hand relationships with our customers lead to better experiences for our customers and their teammates and often result in customers seeking
renewals and additional space.
Above all, being a fully-integrated REIT across these diverse functional areas gives us the benefit of engaging and responding to our customers’ needs as an
owner versus a vendor. We believe this distinction, a core component of our value proposition, translates into improved customer experience and higher customer
retention.
As of both December 31, 2024 and December 31, 2023, we had approximately 350 full-time employees. Over the past three years, our average annual turnover
rate was 16%, substantially lower than the average national industry turnover rate of 25% as reported by the Bureau of Labor Statistics. Our turnover rate was 14%
for 2024. Through our efforts in providing internship and cooperative education opportunities for future real estate professionals, we have also identified a pool of
talented professionals capable of filling future hiring needs. As of December 31, 2024, the average tenure of our employees was ten years and the average age was
49 years.
Approximately 71% of our employees work in one of our division offices, most of which are directly involved in the management and maintenance of our
portfolio. These include property managers, maintenance engineers and technicians, HVAC technicians and project managers. Personnel salaries and related costs
of employees directly involved in the management and maintenance of our portfolio are allocated to our portfolio and recorded as rental property and other
expenses. Approximately 2% of our employees work in our corporate development department and are directly involved in our development pipeline. When
applicable, personnel salaries and related costs of such development employees are capitalized as a development expenditure. Approximately 3% of our employees
are leasing professionals principally responsible for leasing our portfolio. When applicable, commissions and related costs of such leasing employees are
capitalized as a leasing expenditure. Generally, all other employee costs are recorded as general and administrative expenses. In 2024, the total cost of our
workforce, including salaries, commissions, bonuses, equity and non-equity incentive compensation and employee benefits, was approximately $61 million.
We regularly conduct risk assessments of our human capital needs. Additionally, we prioritize succession planning across various levels of our company to
ensure seamless transitions as employees are promoted, retire or otherwise depart from their current positions. One of our most significant human capital risks,
which has been identified by many employers in our markets and throughout the country, is an expected shortage of trade professionals in the future, as there are
fewer younger trade professionals entering the workforce to replace retiring workers. Approximately 33% of our employees are highly specialized and skilled trade
professionals, such as maintenance engineers and technicians and HVAC technicians. The average age of our trade professionals is 52 years, which is
approximately five years older than the average age of the remainder of our employee
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base. To proactively combat the potential future shortage of skilled trade professionals, we have partnered with local trade schools in some of our markets to
implement an apprenticeship program to encourage and incentivize younger workers to obtain the technical skills necessary to become a trade professional. In turn,
we hope this program will create a pipeline of future maintenance engineers and technicians and HVAC technicians to join our company.
Total Rewards. We strive to provide career opportunities in an energized, inclusive and collaborative environment tailored to retain, attract and reward highly
performing employees.
Our total rewards program, which includes compensation and comprehensive benefits, is crafted to provide fair and competitive pay, insurance plans and other
programs to facilitate an overall work-life balance. The program is designed to incentivize and reward employees and emphasize our commitment to exemplary
work.
Our total rewards program is constructed to meet certain objectives, such as:
•
Competitiveness: Compensate with fair pay for comparable jobs within the current labor market in which we compete for talent (none of our full-time
employees earns less than $15.00 per hour);
•
Fairness: Reward positive and successful achievements through a consistent pay-for-performance approach administered throughout our company,
including fair and equitable pay for all employees;
•
Career: Communicate performance expectations and provide career enrichment and/or advancement opportunities to promote our long-term commitment
to employees;
•
Respect: Support a diverse and accepting team striving to maintain balance between career and personal life; and
•
Culture: Create and preserve an environment where employees are acknowledged, honored and rewarded for hard work, creativity, energy, collegiality,
teamwork, initiative and a measured drive to achieve, all in an honest and respectful manner.
In addition to offering competitive salaries and wages, we offer comprehensive, locally relevant and innovative benefits to all eligible employees. These
include, among other benefits:
•
Comprehensive health insurance coverage;
•
Attractive paid time off, including up to 25 vacation days (depending on tenure), two personal holidays, nine company-wide holidays, one volunteer day,
six days of sick leave and parental leave for all new caregivers;
•
Competitive match on contributions to our 401(k) retirement savings plan, in which over 94% of our employees participate; and
•
15% discount on purchasing Common Stock through our employee stock purchase plan, in which nearly 30% of our employees participate.
All employees are paid a base salary. Nearly 50% of employees are eligible to receive an annual bonus, which usually ranges from 5% to 20% of the
employee’s base salary. All employees are also eligible to receive a discretionary bonus from time to time to incentivize and reward excellent performance.
Approximately 20% to 40% of employees typically receive a discretionary bonus each year, which usually ranges from $500 to $2,000.
Approximately 8% of our employees, including officers, are also eligible to receive long-term equity incentive compensation. Equity incentive awards provide
such employees with an ownership interest in our company and a direct and demonstrable stake in our success. Equity incentive awards for non-officer employees
are comprised of time-based restricted stock, which serves as a retention tool to deter participants from seeking other employment opportunities. Time-based
restricted stock vests ratably on an annual basis, generally over a four-year term, and if an employee receiving such stock leaves, unvested shares are immediately
forfeited except in the event of death, disability or as otherwise provided in our retirement plan.
Other than as described below, we have no compensation policies or programs that reward employees solely on a transaction-specific basis.
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We have a development cash incentive plan pursuant to which all employees, excluding executive officers, can receive a cash payout from a development
incentive pool. The amount of funds available to be earned under the plan depends upon the timing and cash yields of a qualifying development project and is
included in the pro forma budget for the project. Payouts under the plan have generally ranged from $1,000 to $10,000 but could be higher under certain
circumstances.
We also pay our in-house leasing professionals commissions for signed leases. We believe such commissions, which are paid in cash, are comparable to what
we would pay in commission fees to outside brokers.
We do not believe our compensation policies or practices create risks that are reasonably likely to have a material adverse effect on our company. For example,
the development cash incentive program does not create an inappropriate risk because all development projects (inclusive of any such incentive compensation)
must be approved in advance by our executive officers and, in most cases, the full board or the investment committee of our board, none of whom are eligible to
receive such incentives. Likewise, the payment of leasing commissions does not create an inappropriate risk because amounts payable are derived from net
effective cash rents (which deducts leasing capital expenditures and operating expenses) and leases must be executed by an officer of our company who is
ineligible to receive such commissions. Generally, lease transactions of a particular size or that contain terms or conditions that exceed certain guidelines also must
be approved in advance by our senior leadership team. Additionally, we have an internal guideline whereby customers that account for more than 3% of our
annualized revenues are periodically reviewed with the board. As of December 31, 2024, only Bank of America (3.8%) and Asurion (3.5%) accounted for more
than 3% of our annualized GAAP revenues.
Health and Safety. Primarily because many of our employees are involved with the management and maintenance of our own portfolio, we have robust health
and safety processes and training protocols designed to mitigate workplace incidents, risks and hazards. Among other things, we routinely conduct:
•
regulatory-required training of affected employees regarding OSHA compliance;
•
training on fire and life safety systems affecting our buildings and building systems;
•
training on emergency response procedures affecting our people, our buildings and our customers;
•
simulations and table-top exercises to ensure our crisis management and business continuity plans are effective; and
•
training on pandemic safety affecting our people, our buildings and our customers.
Employee Well-being. We believe a resilient portfolio starts with having resilient employees. Our well-being initiatives focus on the “whole person,” as we
are concerned not only for the on-the-job health and safety of our employees, but also for their ability to lead healthy and productive personal lives. To that end, we
have established wellness committees in each of our locations and have a “HIW Well-being” program to promote holistic well-being. Our health benefit plans are
designed to improve the overall health of our employees by decreasing costs and improving access to quality healthcare.
Employee Empowerment. While we own and operate a collection of high-quality office assets, we believe our team of dedicated real estate professionals is
also critically important to our success. The Company has long demonstrated a commitment to individual career growth. For example, nearly half of our current
employees have had significant career advancement during their tenure with us. Through periodic career conversations and goal-setting exercises that are held at
least once a year with our employees, we create an environment that fosters and encourages an “ownership” mentality throughout our company and empowers our
employees to continuously seek new and better ways of doing business.
In addition to supporting the career growth of our employees, we also seek to grow as an employer. We periodically solicit feedback from our employees
through the use of employee engagement surveys to monitor and improve employee satisfaction in order to retain and recruit a talented workforce. During 2021,
we surveyed all of our employees with respect to diversity and inclusion and many of our employees with respect to work environment satisfaction. We conducted
an engagement survey in two of the last three years.
Diversity and Inclusion. Diversity and inclusion is a core value for our company. We strive to create a diverse and inclusive environment in an authentic and
meaningful way. We are an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion,
sex, sexual orientation, gender identity, national origin, disability or protected veteran status. As of December 31, 2024, 37% of our employees were female and
29% of our employees were persons of color. Of the new employees hired during 2024, 57% were female and 39% were persons of color.
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We have a robust diversity and inclusion program, called the “Heart of Highwoods,” with the overall goal of creating opportunities for all people in the
commercial real estate industry, in the local communities in which we operate and among our own teammates at the Company. First, like all Federal government
contractors, we have established goals and methods to be sure we are providing opportunities to small and minority vendors to compete for work with our
company. Second, we are providing opportunities for our employees to volunteer within their communities through the recently added paid volunteer time off
benefit and an additional paid holiday on Martin Luther King, Jr. Day, a national day of service. Third, we have a diversity and inclusion group, called the “DIG,”
made up of employees who advocate for diversity and inclusion throughout our company. In 2024, the DIG focused its efforts on fostering Company-wide
communication and inclusion, supporting our partnerships with local schools and programs that support students with limited economic resources and continuing to
expand and diversify our vendor base.
Core Values. Our core values serve as our foundation. We believe our culture makes the difference in this highly competitive, ever-changing commercial real
estate industry. Owning and shaping our culture is the job of each teammate. Culture is not defined by words on a page. Rather, it is the collection of our behaviors,
attitudes and actions.
Our employees bring their personal values, skills, experiences and knowledge to life through the lens of our core values. Together, we use our mission and
values to create a thriving workplace to support success for everyone and drive our culture and business forward.
ITEM 1A. RISK FACTORS
An investment in our securities involves various risks. Investors should carefully consider the following risk factors in conjunction with the other information
contained in this Annual Report before trading in our securities. If any of these risks actually occur, our business, results of operations, prospects and financial
condition could be adversely affected.
Risks Related to our Operations
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. The COVID-19 pandemic had, and another pandemic in the future could have, repercussions
across regional and global economies and financial markets. Most countries, including the United States, reacted to the pandemic by restricting many business and
travel activities, mandating the partial or complete closures of certain businesses and schools and taking other actions to mitigate the spread of the virus, most of
which had a disruptive effect on economic activity, including the use of and demand for office space. Many private businesses, including some of our customers,
continue to permit some or all of their employees to work from home some or all of the time even after the pandemic has subsided. The continued social
acceptance, desirability and perceived economic benefits of work-from-home arrangements initially prompted by the pandemic could materially and negatively
impact future demand for office space over the long-term.
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Adverse economic conditions in our markets that negatively impact the demand for office space, such as high unemployment, may result in lower
occupancy and rental rates for our portfolio, which would adversely affect our results of operations. Our operating results heavily depend 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.
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. In addition, the timing of changes in occupancy levels tends to lag the timing of changes in overall economic activity and
employment levels. Occupancy in our office portfolio decreased from 88.9% as of December  31, 2023 to 87.1% as of December  31, 2024. For additional
information regarding our average occupancy and rental rate trends over the past five years, see “Item 2. Properties.” Lower rental revenues that result from lower
average occupancy or lower rental rates with respect to our same property portfolio will adversely affect our results of operations unless offset by the impact of any
newly acquired or developed properties or lower variable operating expenses, general and administrative expenses and/or interest expense.
In addition, prolonged market uncertainty and sustained economic downturns increase the likelihood that we will have to recognize a non-cash impairment in
the value of our properties. Impairment charges adversely affect our results of operations. We record impairments of our real estate assets classified as held for use
when the carrying amount of the asset exceeds the sum of its undiscounted future operating and residual cash flows at the difference between estimated fair value
of the asset and the carrying amount. With respect to assets classified as held for use, we perform an impairment analysis if our evaluation of events or changes in
circumstances indicate that the carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or
environmental factors, change in our designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value
to an amount less than cost. This analysis consists of determining whether the asset’s carrying amount will be recovered from its undiscounted estimated future
operating and residual cash flows. These cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties
including, among others, demand for space, competition for customers, changes in market rental rates, costs to operate each property and estimated hold periods.
Changes in any of these inputs, such as decreases in projected cash flows, increases in estimated capitalization rates or shortened hold periods for any reason such
as positive or negative shifts in the commercial real estate sales market or anticipated changes in use, would increase the likelihood of an impairment being
recorded with respect to any particular asset.
We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to the existing
leases, or we may spend significant capital in our efforts to renew and re-let space, which may adversely affect our results of operations. In addition to
seeking to increase our average occupancy by leasing current vacant space, we also concentrate our leasing efforts on renewing existing leases. Because we
compete with a number of other developers, owners and operators of office and office-oriented, mixed-use properties, we may be unable to renew leases with our
existing customers and, if our current customers do not renew their leases, we may be unable to re-let the space to new customers. To the extent that we are able to
renew existing leases or re-let such space to new customers, heightened competition resulting from adverse market conditions may require us to utilize rent
concessions and tenant improvements to a greater extent than we anticipate or have historically. Further, changes in space utilization by our customers due to
technology, economic conditions, business culture and/or the prevalence of work-from-home arrangements also affect the occupancy of our properties. As a result,
customers may seek to downsize by leasing less space from us upon any renewal.
If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our customers, we may lose existing and
potential customers, and we may be pressured to reduce our rental rates below those we currently charge in order to retain customers upon expiration of their
existing leases. Even if our customers renew their leases or we are able to re-let the space, the terms and other costs of renewal or re-letting, including the cost of
required renovations, increased tenant improvement allowances, leasing commissions, reduced rental rates and other potential concessions, may be less favorable
than the terms of our current leases and could require significant capital expenditures. From time to time, we may also agree to modify the terms of existing leases
to incentivize customers to renew their leases. If we are unable to renew leases or re-let space in a reasonable time, or if our rental rates decline or our tenant
improvement costs, leasing commissions or other costs increase, our financial condition and results of operations would be adversely affected.
Difficulties or delays in renewing leases with large customers or re-leasing space vacated by large customers could materially impact our results of
operations. Our 20 largest customers account for a meaningful portion of our revenues. See
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“Item 2. Properties - Customers” and “Item 2. Properties - Lease Expirations.” There are no assurances that these customers, or any of our other large customers,
will renew all or any of their space upon expiration of their current leases.
Some of our leases provide customers with the right to terminate their leases early, which could have an adverse effect on our financial condition and
results of operations. Certain of our leases permit our customers to terminate their leases as to all or a portion of the leased premises prior to their stated lease
expiration dates under certain circumstances, such as providing notice by a certain date and, in many cases, paying a termination fee. To the extent that our
customers exercise early termination rights, our results of operations will be adversely affected, and we can provide no assurances that we will be able to generate
an equivalent amount of net effective rent by leasing the vacated space to others. As part of ongoing efforts to reduce waste, the U.S. Department of Government
Efficiency (“DOGE”) and the U.S. General Services Administration (“GSA”) are reaching out to all tenant agencies with non-firm term leases to see if there are
opportunities to reduce space usage. We currently have 30 leases with 23 different agencies of the Federal government across five different markets, which
encompass an aggregate of 737,000 square feet. See “Item 2. Properties – Customers.” While most are firm term leases that do not permit the Federal government
to terminate the lease prior to the stated lease expiration date, we can provide no assurances that the Federal government will not seek to terminate any of these
leases.
Our results of operations and financial condition could be adversely affected by financial difficulties experienced by a major customer, or by a
number of smaller customers, including bankruptcies, insolvencies or general downturns in business. Our operations depend on the financial stability of our
customers. A default by a significant customer on its lease payments would cause us to lose the revenue and any other amounts due under such lease. In the event of
a customer default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs re-leasing the property. We cannot
evict a customer solely because of its bankruptcy. On the other hand, a court might authorize the customer to reject and terminate its lease. In such case, our claim
against the bankrupt customer for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed
under the lease. As a result, our claim for unpaid rent would likely not be paid in full and we may be required to write-off deferred leasing costs and recognize
credit losses on accrued straight-line rents receivable. These events could adversely impact our financial condition and results of operations.
An oversupply of space in our markets often causes rental rates and occupancies to decline, making it more difficult for us to lease space at attractive
rental rates, if at all. Undeveloped land in many of the markets in which we operate is generally more readily available and less expensive than in higher barrier-
to-entry markets. As a result, even during times of positive economic growth, we and/or our competitors could construct new buildings that would compete with
our existing properties. Any such oversupply could result in lower occupancy and rental rates in our portfolio, which would have a negative impact on our results of
operations.
In order to maintain and/or increase the quality of our properties and successfully compete against other properties, we regularly must spend money
to maintain, repair, renovate and improve our properties, which could negatively impact our financial condition and results of operations. If our properties
are not as attractive to customers as properties owned by our competitors due to physical condition, lack of suitable nearby amenities or other similar factors, we
could lose customers or suffer lower rental rates. As a result, we may from time to time make significant capital expenditures to maintain or enhance the
competitiveness of our properties. There can be no assurances that any such expenditures would result in higher occupancy or higher rental rates or deter existing
customers from relocating to properties owned by our competitors.
Costs of complying with governmental laws and regulations may adversely affect our results of operations. All real property and the operations
conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of
these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated
properties, regardless of fault or whether the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly
remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings.
Compliance with new laws or regulations or stricter interpretation of existing laws may require us to incur significant expenditures. Future laws or regulations
may impose significant environmental liability. Additionally, our customers’ operations, operations in the vicinity of our properties such as the presence of
underground storage tanks, or activities of unrelated third parties may affect our properties. In addition, there are various local, state and federal fire, health, life-
safety and similar regulations with which we may be required to comply and that may subject us to liability in the form of fines or damages for noncompliance.
Any expenditures, fines or damages we must pay would adversely affect our results of operations.
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Discovery of previously undetected environmentally hazardous conditions may adversely affect our financial condition and results of operations. Under
various federal, state and local environmental laws and regulations, a current or previous property owner or operator may be liable for the cost to remove or
remediate hazardous or toxic substances on such property. These costs could be significant. Such laws often impose liability whether or not the owner or operator
knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which
property may be used or businesses may be operated, and these restrictions may require significant expenditures or prevent us from entering into leases with
prospective customers that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental
agencies or private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous
substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for personal injury or property damage
associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory
requirements, of remediating any contaminated property, or of paying personal injury claims could adversely affect our financial condition and results of
operations.
Our same property results of operations would suffer if costs of operating our properties, such as real estate taxes, utilities, insurance, maintenance
and other costs, rise faster than our ability to increase rental revenues and/or cost recovery income. While we receive additional rent from our customers that
is based on recovering a portion of operating expenses, increased operating expenses will negatively impact our results of operations. Our revenues, including cost
recovery income, are subject to longer-term leases and may not be quickly increased enough to recover an increase in operating costs and expenses. Furthermore,
the costs associated with owning and operating a property are not necessarily reduced when circumstances such as market factors and competition cause a
reduction in rental revenues from the property. Increases in same property operating expenses would adversely affect our results of operations unless offset by
higher rental rates, higher cost recovery income, the impact of any newly acquired or developed properties, lower general and administrative expenses and/or lower
interest expense.
Natural disasters and climate change could have an adverse impact on our cash flow and operating results. Climate change may add to the
unpredictability and frequency of natural disasters and severe weather conditions and create additional uncertainty as to future trends and exposures. Many of our
buildings are located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, earthquakes, droughts, snow storms, floods and
fires. The impact of climate change or the occurrence of natural disasters can delay new development projects, increase investment costs to repair or replace
damaged properties, increase operating costs, necessitate additional investment costs to make improvements to existing properties to comply with climate change
regulations or otherwise reduce the carbon footprint of our portfolio, increase future property insurance costs and negatively impact the demand for office space.
Our insurance coverage on our properties may be inadequate. We carry insurance on all of our properties, including insurance for liability, fire,
windstorms, floods, earthquakes, environmental concerns and business interruption. Insurance companies, however, limit or exclude coverage against certain types
of losses, such as losses due to terrorist acts, named windstorms, earthquakes and toxic mold. Thus, we may not have insurance coverage, or sufficient insurance
coverage, against certain types of losses and/or there may be decreases in the insurance coverage available. Should an uninsured loss or a loss in excess of our
insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future operating income
from the property or properties. If any of our properties were to experience a catastrophic loss, it could disrupt our operations, delay revenue, result in large
expenses to repair or rebuild the property and/or damage our reputation among our customers and investors generally. Further, if any of our insurance carriers were
to become insolvent, we would be forced to replace the existing insurance coverage with another suitable carrier, and any outstanding claims would be at risk for
collection. In such an event, we cannot be certain that we would be able to replace the coverage at similar or otherwise favorable terms. Such events could
adversely affect our results of operations and financial condition.
We have obtained title insurance policies for each of our properties, typically in an amount equal to its original purchase price. However, these policies may be
for amounts less than the current or future value of our properties, particularly for land parcels on which we subsequently construct a building. In such event, if
there is a title defect relating to any of our properties, we could lose some of the capital invested in and anticipated profits from such properties.
Failure to comply with Federal government contractor requirements could result in substantial costs and loss of substantial revenue. We are subject to
compliance with a wide variety of complex legal requirements because we are a Federal government contractor. These laws regulate how we conduct business,
require us to administer various compliance programs and require us to impose compliance responsibilities on some of our contractors. Our failure to comply with
these laws could subject us to fines and penalties, cause us to be in default of our leases and other contracts with the Federal government and bar us from entering
into future leases and other contracts with the Federal government.
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We face risks associated with security breaches through cyber attacks, cyber intrusions, ransomware or otherwise, as well as other significant
disruptions of our information technology (“IT”) networks and related systems. We face risks associated with security breaches through cyber attacks or cyber
intrusions over the Internet, malware, ransomware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems
inside our organization, and other significant disruptions of IT networks and related systems owned or used by us. The risk of a security breach or disruption,
particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the
number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to
the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the
operations of certain customers of ours. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems and have
implemented various measures to manage the risk of a cybersecurity incident, there can be no assurance that our security efforts and measures will be effective or
that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities
remain potentially vulnerable because the techniques used in such attempted security breaches evolve and are not generally recognized until launched against a
target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or
implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate cybersecurity risks.
A cybersecurity incident involving IT networks and related systems owned or used by us could:
•
disrupt the proper functioning of our networks and systems and therefore our operations and/or our customers' operations;
•
result in misstated financial reports, violations of loan covenants, missed reporting deadlines and/or missed permitting deadlines;
•
result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;
•
result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable
information, which hackers could use to compete against us or expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful
purposes and outcomes;
•
result in our inability to maintain the building systems relied upon by our customers for the efficient use of their leased space;
•
require significant management attention and resources to remedy any damages that result;
•
subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or
•
damage our reputation among our customers and investors generally.
Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.
Risks Related to our Investment Activities
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 the normal course of business, we typically evaluate potential acquisitions, enter into non-binding letters of intent,
and may, at any time, enter into contracts to acquire additional properties. Acquired properties may fail to perform in accordance with our expectations due to lease-
up risk, renovation cost risks and other factors. In addition, the renovation and improvement costs we incur in bringing an acquired property up to our standards
may exceed our original estimates. We may not have the financial resources to make suitable acquisitions or renovations on favorable terms or at all.
Further, we face significant competition for attractive investment opportunities from an indeterminate number of other real estate investors, including investors
with significantly greater capital resources and access to capital than we have, such as domestic and foreign corporations and financial institutions, publicly-traded
and privately-held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds. Moreover, owners of office
properties
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may be reluctant to sell, resulting in fewer acquisition opportunities. As a result of such increased competition and limited opportunities, we may be unable to
acquire additional properties or the purchase price of such properties may be significantly elevated, which would reduce our expected return from making any such
acquisitions.
In addition to acquisitions, we periodically consider developing or re-developing properties. Risks associated with development and re-development activities
include:
•
the unavailability of favorable financing;
•
construction costs exceeding original estimates;
•
construction and lease-up delays resulting in increased debt service expense and construction costs; and
•
lower than anticipated occupancy rates and rents causing a property to be unprofitable or less profitable than originally estimated.
Development and re-development activities are also subject to risks relating to our ability to obtain, or delays in obtaining, any necessary zoning, land-use,
building, occupancy and other required governmental and utility company authorizations. Further, we hold and expect to continue to acquire non-income producing
land for future development. See “Item 2. Properties - Land Held for Development.” No assurances can be provided as to when, if ever, we will commence
development projects on such land or if any such development projects would be on favorable terms. The fixed costs of acquiring and owning development land,
such as the ongoing payment of property taxes, adversely affects our results of operations until such land is either placed in service or sold.
Illiquidity of real estate investments and the tax effect of dispositions could significantly impede our ability to sell assets or respond to favorable or
adverse changes in the performance of our properties. Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties
in our portfolio in response to changing economic, financial and investment conditions is limited. We intend to continue to sell some of our properties in the future
as part of our investment strategy and activities. However, we cannot predict whether we will be able to sell any property for the price or on the terms set by us, or
whether the price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing
purchaser and close the sale of a property.
Certain of our properties have low tax bases relative to their estimated current market values, and accordingly, the sale of such assets would generate
significant taxable gains unless we sold such properties in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-
deferred transaction. For an exchange to qualify for tax-deferred treatment under Section 1031, the net proceeds from the sale of a property must be held by an
escrow agent until applied toward the purchase of real estate qualifying for gain deferral. Given the competition for properties meeting our investment criteria,
there could be a delay in reinvesting such proceeds or we may be unable to reinvest such proceeds at all. Any delay or limitation in using the reinvestment proceeds
to acquire additional income producing assets could adversely affect our near-term results of operations. Additionally, in connection with tax-deferred 1031
transactions, our restricted cash balances may be commingled with other funds being held by any such escrow agent, which subjects our balance to the credit risk
of the institution. If we sell properties outright in taxable transactions, we may elect to distribute some or all of the taxable gain to our stockholders under the
requirements of the Internal Revenue Code for REITs, which in turn could negatively affect our future results of operations and may increase our leverage. If a
transaction’s gain that is intended to qualify as a Section 1031 deferral is later determined to be taxable, we may face adverse consequences, and if the laws
applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis.
Our use of joint ventures may limit our control over and flexibility with jointly owned investments. From time to time, we own, develop and acquire
properties in joint ventures with other persons or entities when circumstances warrant the use of these structures. Types of joint venture investments include
noncontrolling ownership interests in entities such as partnerships and limited liability companies and tenant-in-common interests in which we own less than 100%
of the undivided interests in a real estate asset. In some cases, we rely on our joint venture partners to manage and lease the properties. Our participation in joint
ventures is subject to the risks that:
•
we could become engaged in a dispute with any of our joint venture partners that might affect our ability to develop or operate a property;
•
some of our joint ventures are subject to debt and the refinancing of such debt may require equity capital calls;
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•
our joint venture partners may default on their obligations necessitating that we fulfill their obligation ourselves;
•
our joint ventures may be unable to repay any amounts that we may loan to them;
•
we may need our joint venture partner’s approval to take certain actions and, therefore, we may be unable to cause a joint venture to implement decisions
that we consider advisable;
•
our joint venture partners may have different objectives than we have regarding the appropriate timing and terms of any renovation, sale or refinancing of
properties;
•
with respect to certain joint ventures, our joint venture partner has a right to sell its interest to us under certain circumstances for fair market value at
various dates in the future;
•
with respect to certain joint ventures, our joint venture partner has a right to receive additional consideration from us or the joint venture under certain
circumstances if and to the extent the internal rate of return on the applicable development project exceeds certain thresholds;
•
our joint venture partners may be structured differently than us for tax purposes, which could create conflicts of interest; and
•
we or our joint venture partners may have competing interests in our markets that could create conflicts of interest.
We face risks associated with the development of mixed-use commercial properties. We operate, are currently developing and may in the future develop
properties that are known as “mixed-use” developments. This means that in addition to the development of office space, the project may also include space for
residential, retail, hotel or other commercial purposes. We have less experience in developing and managing non-office real estate than we do with office real
estate. As a result, if a development project includes a non-office use, we may seek to develop that component ourselves, sell the rights to that component to a third-
party developer with experience in that use or we may seek to partner with such a developer. If we do not sell the rights or partner with such a developer, or if we
choose to develop the other component ourselves, we would be exposed not only to those risks typically associated with the development of commercial real estate
generally, but also to specific risks associated with the development and ownership of non-office real estate. In addition, even if we sell the rights to develop the
other component or elect to participate in the development through a joint venture, we may be exposed to the risks associated with the failure of the other party to
complete the development as expected. These include the risk that the other party would default on its obligations necessitating that we complete the other
component ourselves (including providing any necessary financing).
We own certain properties subject to ground leases that limit our uses of the properties, restrict our ability to sell or otherwise transfer the properties
and expose us to the loss of the properties if such agreements are breached by us, terminated or not renewed. As of December 31, 2024, we owned 1.2
million square feet of office space located on various land parcels that we lease on a long-term basis. Many of these ground leases impose significant limitations on
our uses of the subject property, restrict our ability to sell or otherwise transfer our interests in the property or restrict our leasing of the property. These restrictions
may limit our ability to timely sell or exchange the properties, impair the properties’ value or negatively impact our ability to find suitable customers for the
properties. In addition, if we default under the terms of any particular ground lease, we may lose the ownership rights to the property subject to the ground lease.
Upon expiration of a ground lease, we may not be able to renegotiate a new ground lease on favorable terms, if at all. The loss of the ownership rights to these
properties or an increase of rental expense could have a material adverse effect on our results of operations, financial condition and cash flows.
Risks Related to our Financing Activities
Our use of debt could have a material adverse effect on our financial condition and results of operations. We are subject to risks associated with debt
financing, such as the sufficiency of cash flow to meet required payment obligations, ability to comply with financial ratios and other covenants and the availability
of capital to refinance existing indebtedness or fund important business initiatives. If we breach covenants in our debt agreements, the lenders can declare a default
and, if the debt is secured, can take possession of the property securing the defaulted loan. 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. Unwaived defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.
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Further, we obtain credit ratings from Moody’s Investors Service and Standard and Poor’s Rating Services based on their evaluation of our creditworthiness.
These agencies’ ratings are based on a number of factors, some of which are not within our control. In addition to factors specific to our financial strength and
performance, the rating agencies also consider conditions affecting REITs generally. We cannot assure you that our credit ratings will not be downgraded. If our
credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and fees on outstanding
borrowings under our revolving credit facility and bank term loans.
We generally do not intend to reserve funds to retire existing debt upon maturity. We may not be able to repay, refinance or extend any or all of our debt at
maturity or upon any acceleration. If any refinancing is done at higher interest rates, the increased interest expense would adversely affect our cash flow and ability
to pay distributions. Any such refinancing could also 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. If we do
not meet our mortgage financing obligations, any properties securing such indebtedness could be foreclosed on.
We depend on 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 upon maturity. Our ability to borrow under the revolving credit facility also allows us to quickly capitalize on
opportunities at short-term interest rates. If our lenders default on their obligations under the revolving credit facility or we become unable to borrow additional
funds under the facility for any reason, we would be required to seek alternative equity or debt capital, which could be more costly and adversely impact our
financial condition. If such alternative capital were unavailable, we may not be able to make new investments and could have difficulty repaying other debt.
Increases in interest rates would increase our interest expense. As of December 31, 2024, we had $454.0 million of variable rate debt outstanding not
protected by interest rate hedge contracts. We may incur additional variable rate debt in the future. If interest rates increase, then so would the interest expense on
our unhedged variable rate debt, which would adversely affect our financial condition and results of operations. From time to time, we manage our exposure to
interest rate risk with interest rate hedge contracts that effectively fix or cap a portion of our variable rate debt. In addition, we utilize fixed rate debt at market rates.
If interest rates decrease, the fair market value of any existing interest rate hedge contracts on outstanding fixed-rate debt would decline.
Our efforts to manage these exposures may not be successful. Our use of interest rate hedge contracts to manage risk associated with interest rate volatility
may expose us to additional risks, including the risk that a counterparty to a hedge contract may fail to honor its obligations. Developing an effective interest rate
risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging
activities will have the desired beneficial impact on our results of operations or financial condition. Termination of interest rate hedge contracts typically involves
costs, such as transaction fees or breakage costs.
We face the risk that third parties will not be able to service or repay loans we make to them. From time to time, we have loaned, and in the future may
loan, funds to a buyer to facilitate the sale of an asset or in connection with the formation of a joint venture to acquire and/or develop a property. Making these
loans subjects us to the following risks, each of which could have a material adverse effect on our cash flow, results of operations and/or financial condition:
•
the third party may be unable to make full and timely payments of interest and principal on the loan when due;
•
if a buyer to whom we provide seller financing does not manage the property well, or the property otherwise fails to meet financial projections, performs
poorly or declines in value, then the buyer may not have the funds or ability to raise new debt with which to make required payments of interest and
principal to us and, if the seller financing is non-recourse, our only remedy in the event of a default would be to foreclose on the asset;
•
if we loan funds to a joint venture, and the joint venture is unable to make required payments of interest or principal, or both, or there are disagreements
with respect to the repayment of the loan or other matters, then we could have a resulting dispute with our partner, and such a dispute could harm our
relationship with our partner and cause delays in developing or selling the property or the failure to properly manage the property; and
•
if we loan funds to a joint venture and the joint venture is unable to make required payments of interest and principal, or both, then we may exercise
remedies available to us in the joint venture agreement that could allow us to increase our ownership interest or our control over major decisions, or both,
which could result in an unconsolidated joint venture becoming consolidated with our financial statements; doing so could require us to reallocate the
purchase price
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among the various asset and liability components and this could result in material changes to our reported results of operations and financial condition.
Risks Related to our Status as a REIT
The Company may be subject to taxation as a regular corporation if it fails to maintain its REIT status, which could have a material adverse effect on
the Company’s stockholders and on the Operating Partnership. We may be subject to adverse consequences if the Company fails to continue to qualify as a
REIT for federal income tax purposes. While we intend to operate in a manner that will allow the Company to continue to qualify as a REIT, we cannot provide any
assurances that the Company will remain qualified as such in the future, which could have particularly adverse consequences to the Company’s stockholders. Many
of the requirements for taxation as a REIT are highly technical and complex and depend upon various factual matters and circumstances that may not be entirely
within our control. The fact that the Company holds its assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT
requirements. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the Internal Revenue Service might change the
tax laws and regulations and the courts might issue new rulings that make it more difficult, or impossible, for the Company to remain qualified as a REIT. If the
Company fails to qualify as a REIT, it would (a) not be allowed a deduction for dividends paid to stockholders in computing its taxable income, (b) be subject to
federal income tax at regular corporate rates (and state and local taxes) and (c) unless entitled to relief under the tax laws, not be able to re-elect REIT status until
the fifth calendar year after it failed to qualify as a REIT. Additionally, the Company would no longer be required to make distributions. As a result of these factors,
the Company’s failure to qualify as a REIT could impair our ability to expand our business and adversely affect the price of our Common Stock.
Even if we remain qualified as a REIT, we may face other tax liabilities that adversely affect our financial condition and results of operations. Even if
we remain qualified for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any
undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition,
our taxable REIT subsidiary is subject to regular corporate federal, state and local taxes. Any of these taxes would adversely affect our financial condition and
results of operations.
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments. To
remain qualified as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature
and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be
required to forego investments we might otherwise make. Compliance with the REIT requirements may limit our growth prospects.
In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities
and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of taxable REIT subsidiaries and
qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the
outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of taxable
REIT subsidiaries and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be
represented by the securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must
correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and
suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments, which could adversely affect our financial
condition and results of operations.
The prohibited transactions tax may limit our ability to sell properties. A REIT’s net income from prohibited transactions is subject to a 100% tax. In
general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. We may be subject
to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real
property by a REIT as a prohibited transaction is available, we cannot assure you that we can in all cases comply with the safe harbor or that we will avoid owning
property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain
sales of our properties or may conduct such sales through our taxable REIT subsidiary, which would be subject to federal and state income taxation.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. Dividends payable by REITs to U.S. stockholders are
taxed at a maximum individual rate of 33.4% (including the 3.8% net investment income tax and after factoring in a 20% deduction for pass-through income). The
more favorable rates applicable to regular
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corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than
investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.
We face possible tax audits. Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes. We are, however, subject
to federal, state and local taxes in certain instances. In the normal course of business, certain entities through which we own real estate have undergone tax audits.
While tax deficiency notices from the jurisdictions conducting previous audits have not been material, there can be no assurance that future audits will not occur
with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.
Risks Related to an Investment in our Securities
The price of our Common Stock is volatile and may decline. A number of factors may adversely influence the public market price of our Common Stock.
These factors include:
•
the level of institutional interest in us;
•
the perceived attractiveness of investment in us, in comparison to other REITs;
•
the attractiveness of securities of REITs, and office REITs in particular, in comparison to other asset classes;
•
our financial condition and performance;
•
the market’s perception of our business and growth prospects and potential future cash dividends;
•
government action or regulation, including changes in tax laws;
•
increases in market interest rates, which may lead investors to expect a higher annual yield from our distributions in relation to the price of our Common
Stock;
•
changes in our credit ratings;
•
the issuance of additional shares of Common Stock, or the perception that such issuances might occur, including under our equity distribution agreements;
and
•
any negative change in the level or stability of our dividend.
Tax elections regarding distributions may impact the future liquidity of the Company or our stockholders. Under certain circumstances, we may
consider making a tax election to treat future distributions to stockholders as distributions in the current year. This election, which is provided for in the Internal
Revenue Code, may allow us to avoid increasing our dividends or paying additional income taxes in the current year. However, this could result in a constraint on
our ability to decrease our dividends in future years without creating risk of either violating the REIT distribution requirements or generating additional income tax
liability.
Tax legislative or regulatory action could adversely affect us or our stockholders. In recent years, numerous legislative, judicial and administrative
changes have been made to the U.S. federal income tax laws applicable to investments similar to an investment in our Common Stock. Additional changes to tax
laws are likely to continue in the future, and we cannot assure you that any such changes will not adversely affect the taxation of us or our stockholders. Any such
changes could have an adverse effect on an investment in our Common Stock, on the market value of our properties or the attractiveness of securities of REITs
generally in comparison to other asset classes.
We cannot assure you that we will continue to pay dividends at historical rates. We generally expect to use cash flows from operating activities to fund
dividends. For information regarding our dividend payment history as well as a discussion of the factors that 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.” Changes in our future dividend payout level could have a material effect on the market price of our Common
Stock.
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Cash distributions reduce the amount of cash that would otherwise be available for other business purposes, including paying off debt, reinvesting in
our existing portfolio or funding future growth initiatives. For the Company to maintain its qualification as a REIT, it must annually distribute to its
stockholders at least 90% of REIT taxable income, excluding net capital gains. In addition, although capital gains are not required to be distributed to maintain
REIT status, taxable capital gains, if any, that are generated as part of our investment activities are subject to federal and state income tax unless such gains are
distributed to our stockholders. Cash distributions made to stockholders to maintain REIT status or to distribute otherwise taxable capital gains limit our ability to
accumulate capital for other business purposes, including paying off debt, reinvesting in our existing portfolio or funding future growth initiatives.
Further issuances of equity securities may adversely affect the market price of our Common Stock and may be dilutive to current stockholders. The
sales of a substantial number of Common Shares, or the perception that such sales could occur, could adversely affect the market price of our Common Stock. We
have filed a registration statement with the SEC allowing us to offer, from time to time, an indeterminate amount of equity securities (including Common Stock and
Preferred Stock) on an as-needed basis and subject to our ability to effect offerings on satisfactory terms based on prevailing conditions. In addition, the Company’s
Board of Directors has, from time to time, authorized the Company to issue shares of Common Stock pursuant to the Company’s equity sales agreements. The
interests of our existing stockholders could be diluted if additional equity securities are issued to finance future developments and acquisitions or repay
indebtedness. Our ability to execute our business strategy depends on our access to an appropriate blend of: non-core asset sales; debt financing, including
unsecured lines of credit and other forms of secured and unsecured debt; and equity financing, including common equity.
We may change our policies without obtaining the approval of our stockholders. Our operating and financial policies, including our policies with respect
to acquisitions of real estate, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by the Company’s Board of Directors.
Accordingly, our stockholders do not control these policies.
Limits on changes in control may discourage takeover attempts beneficial to stockholders. Provisions in the Company’s charter and bylaws as well as
Maryland general corporation law may have anti-takeover effects that delay, defer or prevent a takeover attempt. For example, these provisions may defer or
prevent tender offers for our Common Stock or purchases of large blocks of our Common Stock, thus limiting the opportunities for the Company’s stockholders to
receive a premium for their shares of Common Stock over then-prevailing market prices. These provisions include the following:
•
Ownership limit. The Company’s charter prohibits direct, indirect or constructive ownership by any person or entity of more than 9.8% of the Company’s
outstanding capital stock. Any attempt to own or transfer shares of capital stock in excess of the ownership limit without the consent of the Company’s
Board of Directors will be void.
•
Preferred Stock. The Company’s charter authorizes the Board of Directors to issue preferred stock in one or more classes and establish the preferences
and rights of any class of preferred stock issued. These actions can be taken without stockholder approval. The issuance of preferred stock could have the
effect of delaying or preventing someone from taking control of the Company, even if a change in control were in our best interest.
•
Business combinations. Pursuant to the Company’s charter and Maryland law, the Company cannot merge into or consolidate with another corporation or
enter into a statutory share exchange transaction in which the Company is not the surviving entity or sell all or substantially all of its assets unless the
Company’s Board of Directors adopts a resolution declaring the proposed transaction advisable and a majority of the stockholders voting together as a
single class approve the transaction. Maryland law prohibits stockholders from taking action by written consent unless all stockholders consent in writing.
The practical effect of this limitation is that any action required or permitted to be taken by the Company’s stockholders may only be taken if it is properly
brought before an annual or special meeting of stockholders. The Company’s bylaws further provide that in order for a stockholder to properly bring any
matter before a meeting, the stockholder must comply with requirements regarding advance notice. The foregoing provisions could have the effect of
delaying until the next annual meeting stockholder actions that the holders of a majority of the Company’s outstanding voting securities favor. These
provisions may also discourage another person from making a tender offer for the Company’s common stock, because such person or entity, even if it
acquired a majority of the Company’s outstanding voting securities, would likely be able to take action as a stockholder, such as electing new directors or
approving a merger, only at a duly called stockholders meeting. Maryland law also establishes special requirements with respect to business combinations
between Maryland corporations and interested stockholders unless exemptions apply. Among other things, the law prohibits for five years a merger and
other similar transactions between a corporation and an interested stockholder and requires a supermajority vote for such transactions after the end of the
five-year period. The Company’s charter contains a provision exempting the Company from the Maryland business combination statute. However, we
cannot assure you that this charter provision will not be amended or repealed at any point in the future.
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•
Control share acquisitions. Maryland general corporation law also provides that control shares of a Maryland corporation acquired in a control share
acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares
owned by the acquirer or by officers or employee directors. The control share acquisition statute does not apply to shares acquired in a merger,
consolidation or share exchange if the corporation is a party to the transaction, or to acquisitions approved or exempted by the corporation’s charter or
bylaws. The Company’s bylaws contain a provision exempting from the control share acquisition statute any stock acquired by any person. However, we
cannot assure you that this bylaw provision will not be amended or repealed at any point in the future.
•
Maryland unsolicited takeover statute. Under Maryland law, the Company’s Board of Directors could adopt various anti-takeover provisions without
the consent of stockholders. The adoption of such measures could discourage offers for the Company or make an acquisition of the Company more
difficult, even when an acquisition would be in the best interest of the Company’s stockholders.
•
Anti‑takeover protections of operating partnership agreement. Upon a change in control of the Company, the partnership agreement of the Operating
Partnership requires certain acquirers to maintain an umbrella partnership real estate investment trust structure with terms at least as favorable to the
limited partners as are currently in place. For instance, the acquirer would be required to preserve the limited partner’s right to continue to hold tax-
deferred partnership interests that are redeemable for capital stock of the acquirer. Exceptions would require the approval of two-thirds of the limited
partners of our Operating Partnership (other than the Company). These provisions may make a change of control transaction involving the Company more
complicated and therefore might decrease the likelihood of such a transaction occurring, even if such a transaction would be in the best interest of the
Company’s stockholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, and other significant disruptions of information
technology networks and related systems. See also “Item 1A. Risk Factors – Risks Related to our Operations – We face risks associated with security breaches
through cyber attacks, cyber intrusions, ransomware or otherwise, as well as other significant disruptions of our information technology (“IT”) networks and
related systems.” We have never experienced any cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our
business strategy, results of operations or financial condition. With the assistance of a third party technology consulting firm, we have adopted and implemented an
approach to identify and mitigate cybersecurity risks. For example, we have adopted and implemented, or are in the process of adopting and implementing, many
of the voluntary practices recommended under the National Institute of Standards and Technology cybersecurity framework 2.0, which we believe is a best practice
for U.S.-based real estate companies.
Management’s information technology steering committee, which is led by the chief information officer and includes all of our executive officers, is
responsible for assessing and managing material risks from cybersecurity threats from our own information technology networks and systems we use that are
owned by third party service providers. Ryan Hunt has served as our chief information officer since June 2021. Mr. Hunt joined us in 1997 and quickly transitioned
his focus to technology. He began his technology career on the IT help desk, served in various other roles within the technology department and most recently
served in the role of senior director of application development. Mr. Hunt earned his Bachelor of Science degree in Management Information Systems from North
Carolina State University.
Under the direction of our chief information officer with oversight from management’s steering committee, the Company has implemented a cybersecurity
incident response plan that sets forth a process for detecting and responding to cybersecurity incidents, determining their scope and risk, developing an appropriate
response to mitigate and remediate the incident, communicating effectively to all stakeholders and participants and reducing the likelihood of similar future
incidents. In the event of a real or perceived cybersecurity incident, the chief information officer would, as soon as practicable, inform management’s steering
committee, the members of which would then collaborate with the chief information officer to manage material risks.
As part of our overall enterprise risk management processes and to better evaluate our cybersecurity risks, we have conducted a business impact analysis by
leveraging our annual company-wide enterprise risk management assessment to understand the relationship between our critical business operations and our
information technology systems. We partner with a
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third party service provider to assist us on a real-time basis with detecting advanced threats, streamline and collaborate on investigations and recommend actions to
further strengthen our systems and, if and when necessary, respond to incidents. In addition, we regularly engage independent third parties to test our cybersecurity
processes and systems through consulting, independent audits and penetration testing. We also have a cyber risk insurance policy designed to help us mitigate risk
exposure by offsetting costs involved with recovery and remediation after a cybersecurity breach or similar event.
We regularly conduct cybersecurity training to ensure all employees are aware of cybersecurity risks and to enable them to take steps to mitigate such risks.
For example, all employees are required to successfully complete a cybersecurity risk module and assessment on a quarterly basis. As part of this program, we also
take reasonable steps to ensure any employee who may come into possession of confidential financial or health information has received appropriate cybersecurity
awareness training and, if applicable, payment card industry (PCI) training.
The audit committee of the Company’s Board of Directors is responsible for overseeing management’s information technology steering committee as well as
management’s risk assessment and risk management processes designed to monitor and control cybersecurity threats. Management’s steering committee, led by the
Company’s chief information officer, regularly briefs the audit committee on cybersecurity matters. These briefings generally occur on a quarterly basis. In the
event we experience a cybersecurity incident that could materially affect us, including our business strategy, results of operations or financial condition, the
Company’s chief information officer and other members of management’s steering committee (which include executive officers who are also part of our disclosure
committee) would review the incident with the audit committee to consider whether and to what extent disclosure is required under Item 1.05 of Form 8-K.
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ITEM 2. PROPERTIES
Properties
The following table sets forth information about our portfolio by geographic location as of December 31, 2024:
Market
Rentable
Square Feet
Occupancy
Percentage of
Annualized GAAP
Rental Revenue (1)
Nashville
5,098,000 
89.0  %
20.3  %
Raleigh
5,592,000 
88.6 
20.2 
Atlanta
4,935,000 
83.7 
16.5 
Tampa
3,196,000 
87.8 
12.3 
Charlotte
1,991,000 
96.3 
10.3 
Orlando
1,789,000 
88.3 
6.5 
Richmond
1,845,000 
85.4 
4.6 
Other
2,754,000 
79.5 
9.3 
Total
27,200,000 
87.1 %
100.0 %
__________
(1)
Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) from our office properties for the month of
December 2024 multiplied by 12.
The following table sets forth the net changes in rentable square footage of our portfolio:
Year Ended December 31,
2024
2023
2022
(in thousands)
Acquisitions
— 
— 
367 
Developments Placed In-Service
18 
— 
263 
Remeasurements/Other (1)
575 
5 
(11)
Dispositions
(605)
(383)
(437)
Net Change in Rentable Square Footage
(12)
(378)
182 
__________
(1)
Increase in square footage during 2024 is due to the inclusion of in-service properties owned by consolidated and unconsolidated joint ventures (at our share). See Explanatory
Note.
The following table sets forth operating information about our portfolio:
Average
Occupancy
Annualized GAAP
Rent
Per Square
Foot (1)
Annualized Cash
Rent
Per Square
Foot (2)
2020
90.7 %
$
29.23 
$
28.21 
2021
90.0 %
$
30.75 
$
29.63 
2022
90.8 %
$
31.89 
$
30.51 
2023
89.2 %
$
32.79 
$
32.18 
2024
88.0 %
$
33.73 
$
33.18 
__________
(1)
Annualized GAAP Rent Per Square Foot is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December of the respective
year multiplied by 12, divided by total occupied rentable square footage.
(2)
Annualized Cash Rent Per Square Foot is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December of the respective
year multiplied by 12, divided by total occupied rentable square footage.
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Customers
The following table sets forth information concerning the 20 largest customers in our portfolio as of December 31, 2024:
Customer
Rentable Square
Feet
Annualized
GAAP Rental
Revenue (1)
Percent of
Total
Annualized
GAAP Rental
Revenue (1)
Weighted
Average
Remaining
Lease Term in
Years
(in thousands)
Bank of America
648,440 
$
30,168 
3.78  %
9.2 
Asurion
543,794 
28,042 
3.51 
11.8 
Metropolitan Life Insurance
667,228 
21,228 
2.66 
6.2 
Federal Government
736,663 
21,120 
2.64 
4.0 
Bridgestone Americas
506,128 
19,684 
2.46 
12.7 
PPG Industries
370,927 
11,284 
1.41 
6.5 
Vanderbilt University
294,389 
9,672 
1.21 
4.9 
Mars Petcare
223,700 
9,194 
1.15 
6.4 
Albemarle Corporation
162,368 
7,154 
0.90 
9.1 
Bass, Berry & Sims
213,951 
6,987 
0.87 
0.1 
J.P. Morgan Chase & Co.
183,864 
6,508 
0.81 
3.4 
State of Georgia
302,443 
6,144 
0.77 
1.6 
Deloitte
132,328 
6,027 
0.75 
5.9 
Lifepoint Corporate Services
202,991 
5,814 
0.73 
4.2 
Delta Community Credit Union
128,589 
5,531 
0.69 
7.8 
CapFinancial Group
120,847 
5,495 
0.69 
8.6 
Regus
169,833 
5,368 
0.67 
5.6 
Fisher Asset Management
179,184 
5,255 
0.66 
5.3 
The Cigna Group
180,728 
5,187 
0.65 
3.0 
Global Payments
168,051 
5,055 
0.63 
8.2 
Total
6,136,446 
$
220,917 
27.64 %
7.3 
__________
(1)
Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December 2024 multiplied by 12.
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Lease Expirations
The following table sets forth scheduled lease expirations for existing leases in our portfolio as of December 31, 2024:
Lease Expiring (1)
Number of Leases
Expiring
Rentable
Square Feet
Subject to
Expiring
Leases
Percentage of
Leased Square
Footage
Represented
by Expiring
Leases
Annualized
GAAP Rental
Revenue
Under Expiring
Leases (2)
Average
Annual GAAP
Rental Rate
Per Square
Foot for
Expirations
Percent of
Annualized
GAAP Rental
Revenue
Represented
by Expiring
Leases (2)
(in thousands)
2025 (3)
523 
2,699,719 
11.4  %
$
80,251 
$
29.73 
10.0  %
2026
348 
2,218,130 
9.4 
72,868 
32.85 
9.1 
2027
349 
2,668,478 
11.3 
85,833 
32.17 
10.7 
2028
258 
2,411,216 
10.2 
80,393 
33.34 
10.1 
2029
228 
1,864,565 
7.9 
58,353 
31.30 
7.3 
2030
217 
2,951,965 
12.4 
90,918 
30.80 
11.4 
2031
107 
2,537,503 
10.7 
83,703 
32.99 
10.5 
2032
74 
1,089,158 
4.6 
44,056 
40.45 
5.5 
2033
62 
1,219,071 
5.1 
44,773 
36.73 
5.6 
2034
49 
1,502,307 
6.3 
61,645 
41.03 
7.7 
Thereafter
106 
2,531,399 
10.7 
96,339 
38.06 
12.1 
2,321 
23,693,511 
100.0 %
$
799,132 
$
33.73 
100.0 %
__________
(1)
Expirations that have been renewed are reflected above based on the renewal expiration date. Expirations include leases related to completed not stabilized development
properties but exclude leases related to developments in-process.
(2)
Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December 2024 multiplied by 12.
(3)
Includes 47,000 rentable square feet of leases that are on a month-to-month basis, which represent 0.2% of total annualized GAAP rental revenue.
In-Process Development
The following table summarizes our in-process office development activity as of December 31, 2024:
Property
Market
Own %
Consolidated
(Y/N)
Rentable
Square Feet
Anticipated Total
Investment (1)
Investment as of
December 31, 2024
Pre Leased %
Estimated
Completion
Estimated
Stabilization
($ in thousands)
23Springs
Dallas
50.0 %
N
642,000 
$
460,000 
$
299,422 
61.6 %
1Q 25
1Q 28
Midtown East
Tampa
50.0 %
N
143,000 
83,000 
53,510 
34.5 
1Q 25
2Q 26
GlenLake Two Retail (2)
Raleigh
100.0 %
Y
8,600 
8,100 
1,241 
100.0 
1Q 26
1Q 26
793,600 
$
551,100 
$
354,173 
57.1 %
__________
(1)
Includes estimated lease up costs for tenant improvements and lease commissions until the property has reached stabilization.
(2)
Will be recorded in development-in-process on our Consolidated Balance Sheets once we begin construction on the project.
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Land Held for Development
As of December 31, 2024, we estimate that we can develop approximately 4.6 million rentable square feet of office space on the wholly-owned development
land that we consider core assets for our future development needs. Our core office development land is zoned and available for development, and nearly all of the
land has utility infrastructure in place. We believe that our commercially zoned and unencumbered land gives us a development advantage over other commercial
office development companies in many of our markets. We also own additional development land on which we or third parties can develop approximately 2.8
million square feet of mixed-use real estate projects, including retail and multi-family.
Joint Venture Investments
The following table sets forth information about our in-service joint venture investments by geographic location as of December 31, 2024:
Rentable
Square Feet
Weighted
Average
Ownership
Interest (1)
Occupancy
Market
Dallas
542,000 
50.0 %
99.4 %
Kansas City (2)
292,000 
50.0 
89.4 
Richmond
354,000 
50.0 
100.0 
Tampa (3)
152,000 
80.0 
100.0 
Total
1,340,000 
53.4 %
97.5 %
__________
(1)
Weighted Average Ownership Interest is calculated using Rentable Square Feet.
(2)
Excludes our 26.5% unconsolidated ownership interest in a real estate brokerage services company.
(3)
The Midtown West joint venture in Tampa is consolidated.
In addition, we own 50.0% interests in 2827 Peachtree (Atlanta), Granite Park Six (Dallas), 23Springs (Dallas) and Midtown East (Tampa), four
unconsolidated joint ventures that are currently developing projects that have not yet been placed in service.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are a party to a variety of legal proceedings, claims and assessments arising in the ordinary course of our business. We regularly assess
the liabilities and contingencies in connection with these matters based on the latest information available. For matters where it is probable that we have incurred or
will incur a loss and the loss or range of loss can be reasonably estimated, the estimated loss is accrued and charged to income in our Consolidated Financial
Statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, a reasonable estimate of liability, if
any, cannot be made. Based on the current expected outcome of such matters, none of these proceedings, claims or assessments is expected to have a material
adverse effect on our business, financial condition, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM X. INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The Company is the sole general partner of the Operating Partnership. The following table sets forth information with respect to the Company’s executive
officers:
Name
Age
Position and Background
Theodore J. Klinck
59
Director, President and Chief Executive Officer.
Mr. Klinck became a director and our chief executive officer in September 2019. Prior to that, Mr.
Klinck was our president and chief operating officer since November 2018, our executive vice president
and chief operating and investment officer from September 2015 to November 2018 and was senior vice
president and chief investment officer from March 2012 to August 2015. Before joining us, Mr. Klinck
served as principal and chief investment officer with Goddard Investment Group, a privately owned real
estate investment firm. Previously, Mr. Klinck had been a managing director at Morgan Stanley Real
Estate. Mr. Klinck is a member of NAREIT's Executive Board and the Raleigh Chamber Board and is
chair of the First Tee of the Triangle.
Brian M. Leary
50
Executive Vice President and Chief Operating Officer.
Mr. Leary became chief operating officer in July 2019. Previously, Mr. Leary served as president of the
commercial and mixed-use business unit of Crescent Communities since 2014. Prior to joining
Crescent, Mr. Leary held senior management positions with Jacoby Development, Inc., Atlanta Beltline,
Inc., AIG Global Real Estate, Atlantic Station, LLC and Central Atlanta Progress.
Brendan C. Maiorana
49
Executive Vice President and Chief Financial Officer.
Mr. Maiorana became executive vice president of finance in July 2019 and assumed the roles of
treasurer in January 2021 and chief financial officer in January 2022. Prior to that, Mr. Maiorana was
our senior vice president of finance and investor relations since May 2016. Prior to joining Highwoods,
Mr. Maiorana spent 11 years in equity research at Wells Fargo Securities. Prior to that, Mr. Maiorana
worked four years at Ernst & Young LLP.
Jeffrey D. Miller
54
Executive Vice President, General Counsel and Secretary.
Prior to joining us in March 2007, Mr. Miller was a partner with DLA Piper US, LLP, where he
practiced since 2005. Previously, Mr. Miller had been a partner with Alston & Bird LLP. Mr. Miller is
admitted to practice in North Carolina. Mr. Miller served as lead independent director of Hatteras
Financial Corp., a publicly-traded mortgage REIT (NYSE:HTS), prior to its merger with Annaly Capital
Management, Inc. (NYSE:NLY) in July 2016. Mr. Miller is a trustee of Ravenscroft School and a
member of the Wake Forest School of Law Board of Visitors.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Our Common Stock is traded on the NYSE under the symbol “HIW.” On December 31, 2024, the Company had 571 common stockholders of record. There is
no public trading market for the Common Units. On December 31, 2024, the Operating Partnership had 100 holders of record of Common Units (other than the
Company). As of December 31, 2024, there were 107.6 million shares of Common Stock outstanding and 2.2 million Common Units outstanding not owned by the
Company.
For information regarding our dividend payment history as well as a discussion of the factors that 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.”
The following total return performance graph compares the performance of our Common Stock to the S&P 500 Index and the FTSE NAREIT Equity Office
Index. The total return performance graph assumes an investment of $100 in our Common Stock and the two indices on December 31, 2019, and further assumes
the reinvestment of all dividends. The FTSE NAREIT Equity Office Index consists of the REITs in the FTSE NAREIT All Equity REITs Index that principally
operate in the office sector. Total return performance is not necessarily indicative of future results.
For the Period from December 31, 2019 to December 31,
Index
2020
2021
2022
2023
2024
Highwoods Properties, Inc.
85.24 
100.26 
66.60 
59.85 
85.65 
S&P 500 Index
118.40 
152.39 
124.79 
157.59 
197.02 
FTSE NAREIT Equity Office Index
81.56 
99.51 
62.07 
63.34 
76.95 
The performance graph above is being furnished as part of this Annual Report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish the
Company’s stockholders with such information and, therefore, is not deemed to be filed, or incorporated by reference in any filing, by the Company or the
Operating Partnership under the Securities Act of 1933 or the Securities Exchange Act of 1934.
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The Company has a Dividend Reinvestment and Stock Purchase Plan (“DRIP”) under which holders of Common Stock may elect to automatically reinvest
their dividends in additional shares of Common Stock and make optional cash payments for additional shares of Common Stock. The Company satisfies its DRIP
obligations by instructing the DRIP administrator to purchase Common Stock in the open market.
The Company has an Employee Stock Purchase Plan (“ESPP”) pursuant to which employees may contribute up to 25% of their cash compensation for the
purchase of Common Stock. At the end of each quarter, each participant’s account balance, which includes accumulated dividends, is applied to acquire shares of
Common Stock at a cost that is calculated at 85% of the average closing price on the NYSE on the five consecutive days preceding the last day of the quarter.
Generally, shares purchased under the ESPP must be held at least one year. The Company satisfies its ESPP obligations by issuing additional shares of Common
Stock.
Information about the Company’s equity compensation plans and other related stockholder matters is incorporated herein by reference to the Company’s Proxy
Statement to be filed in connection with its annual meeting of stockholders to be held on May 13, 2025.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with the accompanying Consolidated Financial Statements and related notes contained
elsewhere herein.
Disclosure Regarding Forward-Looking Statements
Some of the information in this Annual Report may contain forward-looking statements. Such statements include, in particular, statements about our plans,
strategies and prospects under this section and under the heading “Item 1. Business.” 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:
•
the financial condition of our customers could deteriorate;
•
our assumptions regarding potential losses related to customer financial difficulties could prove incorrect;
•
counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful,
would reduce our available liquidity;
•
we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as
favorable terms as old leases;
•
we may not be able to lease 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;
•
increases in interest rates could increase our debt service costs;
•
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;
•
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 in this Annual Report. Given these uncertainties, you should not place undue reliance on forward-looking statements. We undertake no
obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the
occurrence of unanticipated events.
Executive Summary
Our vision is to be a leader in the evolution of commercial real estate for the benefit of our customers, our communities and those who invest with us. Our
mission is to create environments and experiences that inspire our teammates and our customers to achieve more together. We are in the work-placemaking
business and believe that by creating exceptional environments and experiences, we can deliver greater value to our customers, their teammates and, in turn, our
shareholders. By creating and
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operating commute-worthy places, we support the growth and success of our customers and contribute to the vitality of our communities. Our simple strategy is to
own and 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 thesis 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.
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. Asset acquisitions, dispositions and new developments placed in service 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. Another 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 “Item 2. Properties - Lease Expirations” and “Item 1A. Risk Factors – Risks Related to our Operations. 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.”
Occupancy in our office portfolio decreased from 88.9% as of December 31, 2023 to 87.1% as of December 31, 2024. We expect average occupancy in our
office portfolio to range from 85.0% to 86.5% for 2025.
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 fourth quarter
of 2024 (we define second generation office leases as leases with new customers and renewals of existing customers in both consolidated and unconsolidated office
space that has been previously occupied and leases with respect to vacant space in acquired buildings):
New
Renewal
All Office
Leased space (in rentable square feet)
348,797 
919,011 
1,267,808 
Average term (in years - rentable square foot weighted)
7.4 
6.2 
6.6 
Base rents (per rentable square foot) (1)
$
35.75 
$
34.64 
$
34.94 
Rent concessions (per rentable square foot) (1)
(2.01)
(1.47)
(1.62)
GAAP rents (per rentable square foot) (1)
$
33.74 
$
33.17 
$
33.32 
Tenant improvements (per rentable square foot) (1)
$
5.13 
$
3.78 
$
4.15 
Leasing commissions (per rentable square foot) (1)
$
1.32 
$
1.00 
$
1.09 
__________
(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 fourth quarter were $33.32 per rentable square foot, 12.2% 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
revenues are periodically reviewed with the Company's Board of Directors. As of December 31, 2024, only Bank of America (3.8%) and Asurion (3.5%) accounted
for more than 3% of our annualized GAAP revenues. See “Item 2. Properties - Customers.”
Expenses
Our expenses primarily consist of rental property expenses, depreciation and amortization, general and administrative expenses and interest expense. From
time to time, expenses also include impairments of real estate assets. Rental property expenses are expenses associated with our ownership and operation of rental
properties and include expenses that vary somewhat proportionately to occupancy and usage levels, such as janitorial services and utilities, and expenses that do not
vary based on occupancy, such as property taxes and insurance. Depreciation and amortization is a non-cash expense associated with the ownership of real property
and generally remains relatively consistent each year, unless we buy, develop or sell assets, since our properties and related building and tenant improvement assets
are depreciated on a straight-line basis over fixed lives. General and administrative expenses consist primarily of management and employee salaries and benefits,
corporate overhead and short and long-term incentive compensation.
Net Operating Income
Whether or not we record increasing 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. Consolidated same property NOI was $4.3 million, or 0.8%, lower in 2024 as compared to 2023 due to an increase of $8.3 million in
same property expenses offset by an increase of $4.0 million in same property revenues. We expect same property NOI to be lower in 2025 as compared to 2024
primarily due to lower anticipated average occupancy.
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
recently completed development projects exceeds the lost NOI from property dispositions. NOI was $11.5 million, or 2.0%, lower in 2024 as compared to 2023
primarily due to lost NOI from property dispositions and lower consolidated same property NOI, partially offset by NOI from recently completed development
projects in Raleigh and Charlotte. We expect NOI to be lower in 2025 as compared to 2024 due to lost NOI from property dispositions and an anticipated decrease
in same property NOI, partially offset by recently completed development projects.
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.”
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Liquidity and Capital Resources
We continue to maintain a conservative and flexible balance sheet and believe we have ample liquidity to fund our operations and growth prospects. As of
January 31, 2025, we had approximately $34 million of existing cash and $119.0 million drawn on our $750 million revolving credit facility, which is scheduled to
mature in January 2028 (but can be extended for two additional six-month periods at our option). As of December 31, 2024, our leverage ratio, as measured by the
ratio of our mortgages and notes payable and outstanding preferred stock to the undepreciated book value of our assets, was 42.1%, and there were 109.8 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. 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 our customers' specific needs. 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, the short-term funding of our development and acquisition activity and, in certain
instances, the repayment of other debt. The 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;
•
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. We generally believe we will be able to satisfy future 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
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projects are not placed in service until several years after 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 the return on the resulting use of proceeds does not exceed the capitalization rate on the sold properties.
Results of Operations
Comparison of 2024 to 2023
Rental and Other Revenues
Rental and other revenues were $8.1 million, or 1.0%, lower in 2024 as compared to 2023 primarily due to lost revenue from property dispositions in Raleigh,
which decreased rental and other revenues by $14.4 million. This decrease was partially offset by higher consolidated same property revenues and recently
completed development projects in Raleigh and Charlotte, which increased rental and other revenues by $4.0 million and $3.1 million, respectively. Same property
rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher cost recoveries and higher parking income,
partially offset by a decrease in average occupancy. We expect rental and other revenues to be lower in 2025 as compared to 2024 due to lower anticipated average
occupancy and lost revenue from property dispositions, partially offset by recently completed development projects in Raleigh and Charlotte.
Operating Expenses
Rental property and other expenses were $3.4 million, or 1.3%, higher in 2024 as compared to 2023 primarily due to $8.3 million of higher consolidated same
property operating expenses, partially offset by a $4.6 million decrease in operating expenses from property dispositions in Raleigh. Same property operating
expenses were higher primarily due to higher contract services, property insurance, repairs and maintenance and utilities, partially offset by lower taxes. We expect
operating expenses to be lower in 2025 as compared to 2024 primarily due to property dispositions.
Depreciation and amortization expense was $0.4 million, or 0.1%, lower in 2024 as compared to 2023 primarily due to property dispositions in Raleigh and
fully amortized acquisition-related intangible assets. These decreases were partially offset by accelerated depreciation and amortization of tenant improvements and
deferred leasing costs associated with the cancellation of a lease with a backfill customer for 110,000 square feet in the former Tivity building in Nashville that was
originally scheduled to commence in the third quarter of 2024 and recently completed development projects in Raleigh and Charlotte. We expect depreciation and
amortization to be lower in 2025 as compared to 2024 due to property dispositions, fully amortized acquisition-related intangible assets and the accelerated costs
relating to the Nashville lease cancellation in 2024.
In 2024, we recorded an impairment charge of $24.6 million to lower the carrying amount of EQT Plaza in Pittsburgh to its estimated fair value. EQT Plaza is
a 616,000 square foot non-core office building located in Pittsburgh’s CBD. We recorded no such impairment in 2023.
General and administrative expenses were $1.0 million, or 2.2%, lower in 2024 as compared to 2023, primarily due to lower predevelopment cost write-offs,
partially offset by higher incentive compensation. We expect general and administrative expenses to be lower in 2025 as compared to 2024 due to lower
predevelopment cost write-offs, partially offset by higher salaries and benefits.
Interest Expense
Interest expense was $10.5 million, or 7.7%, higher in 2024 as compared to 2023 primarily due to higher average interest rates and higher average debt
balances. We expect interest expense to be lower in 2025 as compared to 2024 due to lower average interest rates and lower average debt balances, partially offset
by lower capitalized interest.
Other Income
Other income was $7.9 million higher in 2024 as compared to 2023 primarily due to a refund of $5.8 million in the aggregate of Tennessee franchise taxes paid
for the 2020 through 2023 tax years. During the second quarter of 2024, the State of Tennessee modified the methodology for calculating franchise taxes. The
modification lowers our annual franchise tax obligation and was allowed to be applied retrospectively back to 2020. We also earned higher interest income from
seller financing and loans provided to the 2827 Peachtree and Midtown East joint ventures.
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Gains on Disposition of Property
Gains on disposition of property were $1.0 million lower in 2024 as compared to 2023. The gains during 2024 related to building dispositions in Raleigh and a
land disposition in Greensboro, while the gains during 2023 related to building dispositions in Nashville, Tampa and Raleigh and a land disposition in Nashville.
Gain on Deconsolidation of Affiliate
We recognized a gain on deconsolidation of $11.8 million in 2023 related to adjusting our retained interest in the Markel joint venture to fair value. We
recorded no such gain on deconsolidation in 2024.
Equity in Earnings of Unconsolidated Affiliates
Equity in earnings of unconsolidated affiliates was $3.1 million higher in 2024 as compared to 2023 primarily due to lower interest expense from our
McKinney and Olive joint venture due to the payoff of a mortgage loan in the third quarter of 2024, higher income from our 2827 Peachtree joint venture, which
was completed in the third quarter of 2023, and predevelopment cost write-offs on our Markel joint venture in 2023. These increases were partially offset by a
higher net loss from our Granite Park Six joint venture, which was completed in the third quarter of 2023 but is not yet stabilized.
Earnings Per Common Share - Diluted
Diluted earnings per common share was $0.45 lower in 2024 as compared to 2023 due to a decrease in net income for the reasons discussed above.
Comparison of 2023 to 2022
For a comparison of 2023 to 2022, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of
Operations” in our 2023 Annual Report on Form 10-K.
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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):
Year Ended December 31,
2024
2023
2022
2024-2023 Change
2023-2022 Change
Net Cash Provided By Operating Activities
$
403,584 
$
386,962 
$
421,779 
$
16,622 
$
(34,817)
Net Cash Used In Investing Activities
(302,435)
(169,686)
(614,799)
(132,749)
445,113 
Net Cash Provided By/(Used In) Financing Activities
(99,041)
(205,426)
187,927 
106,385 
(393,353)
Total Cash Flows
$
2,108 
$
11,850 
$
(5,093)
$
(9,742)
$
16,943 
Comparison of 2024 to 2023
The change in net cash provided by operating activities in 2024 as compared to 2023 was primarily due to net cash from the operations of consolidated same
properties, recently completed development projects in Raleigh and Charlotte and changes in operating assets and liabilities, partially offset by property
dispositions and higher interest expense. We expect net cash related to operating activities to be lower in 2025 as compared to 2024 due to lower anticipated
occupancy and property dispositions, partially offset by net cash from recently completed development projects in Raleigh and Charlotte.
The change in net cash used in investing activities in 2024 as compared to 2023 was primarily due to the redemption of our short-term preferred equity
investment in the McKinney and Olive joint venture in 2023, contributions to the McKinney and Olive joint venture in 2024 to pay off a mortgage loan,
contributions to the Granite Park Six joint venture in 2024 to pay down a construction loan, the acquisition of fee simple title to land underneath our Century
Center assets in Atlanta in 2024 and higher investments in tenant improvements and deferred leasing costs in 2024. These changes were partially offset by lower
investments in building improvements and development in process. We expect uses of cash for investing activities in 2025 to be primarily driven by whether or not
we acquire and commence development of additional office buildings in the BBDs of our markets. We expect these uses of cash for investing activities will be
partially offset by proceeds from property dispositions in 2025.
The change in net cash used in financing activities in 2024 as compared to 2023 was primarily due to higher net debt borrowings and proceeds from issuance
of common stock in 2024. Assuming the net effect of our acquisition, disposition and development activity in 2025 results in an increase to our assets, we would
expect outstanding debt and/or Common Stock balances to increase.
Comparison of 2023 to 2022
For a comparison of 2023 to 2022, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources” in our 2023 Annual Report on Form 10-K.
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Capitalization
The following table sets forth the Company’s capitalization (in thousands, except per share amounts):
December 31,
2024
2023
Mortgages and notes payable, net, at recorded book value
$
3,293,559 
$
3,213,206 
Preferred Stock, at liquidation value
$
28,811 
$
28,811 
Common Stock outstanding
107,624 
105,710 
Common Units outstanding (not owned by the Company)
2,151 
2,157 
Per share stock price at year end
$
30.58 
$
22.96 
Market value of Common Stock and Common Units
$
3,356,920 
$
2,476,626 
Total capitalization
$
6,679,290 
$
5,718,643 
As of December 31, 2024, our mortgages and notes payable and outstanding preferred stock represented 49.7% of our total capitalization and 42.1% of the
undepreciated book value of our assets. See also “Executive Summary - Liquidity and Capital Resources.”
Our mortgages and notes payable as of December 31, 2024 consisted of $712.2 million of secured indebtedness with a weighted average interest rate of 4.43%
and $2,595.8 million of unsecured indebtedness with a weighted average interest rate of 4.45%. The secured indebtedness was collateralized by real estate assets
with an undepreciated book value of $1,245.0 million. As of December 31, 2024, $454.0 million of our debt does not bear interest at fixed rates or is not protected
by interest rate hedge contracts.
Investment Activity
- Acquisitions
In the normal course of business, we regularly evaluate potential acquisitions. As a result, from time to time, we may have one or more potential acquisitions
under consideration that are in varying stages of evaluation, negotiation or due diligence, including potential acquisitions that are subject to non-binding letters of
intent or enforceable contracts. Consummation of any transaction is subject to a number of contingencies, including the satisfaction of customary closing
conditions. No assurances can be provided that we will acquire any properties in the future. See “Item 1A. Risk Factors – Risks Related to our Investment 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.”
During the fourth quarter of 2024, we acquired fee simple title to the land underneath our Century Center assets in Atlanta for a purchase price, including
capitalized acquisition costs, of $50.8 million. We previously held most of our buildings in Century Center, a 12-building office park encompassing 1.7 million
square feet and 13 acres of developable land, pursuant to a long-term ground lease with a third party who owned fee simple title to the land. Acquiring the land
underneath our Century Center assets consolidates our ownership of the buildings and the land, which provides us with more long-term flexibility and certainty.
- Dispositions
On February 3, 2025, we sold three buildings in Tampa for a sales price of $145.0 million and expect to record a gain on disposition of property of $82.3
million.
During the fourth quarter of 2024, we sold a building in Raleigh for a sales price of $21.4 million and recorded a gain on disposition of property of $4.2
million.
During the third quarter of 2024, we completed our exit from the Greensboro market by selling our last remaining land parcel for a sales price of $4.5 million
and recorded a gain on disposition of property of $0.4 million.
During the second quarter of 2024, we sold seven buildings in Raleigh for a sales price of $62.5 million and recorded a gain on disposition of property of $35.0
million.
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During the first quarter of 2024, we sold two buildings in Raleigh for an aggregate sales price of $16.9 million and recorded aggregate gains on disposition of
property of $7.2 million.
- Impairments
During the fourth quarter of 2024, we recorded an impairment charge of $24.6 million to lower the carrying amount of EQT Plaza to its estimated fair value.
- Joint Venture Investments
We have a 50% interest in the McKinney & Olive joint venture. During the third quarter of 2024, the McKinney & Olive joint venture paid off at maturity the
remaining $134.3 million balance on a secured mortgage loan with a stated interest rate of 4.5% and an effective interest rate of 5.3%. In connection with this loan
payoff, we and Granite each contributed $62.1 million to the joint venture.
We have a 50% interest in the Granite Park Six joint venture. During the third quarter of 2024, the Granite Park Six joint venture paid down the outstanding
$70.9 million balance with respect to a $115.0 million construction loan obtained in 2022. The loan, which matures in January 2026, has an interest rate of SOFR
plus 394 basis points. In connection with this loan paydown, we and Granite each contributed $35.5 million to the joint venture. In connection with this loan, the
Granite Park Six joint venture obtained interest rate hedge contracts that effectively cap the underlying SOFR rate at 3.5%. The initial contract capped the rate with
respect to $95.2 million of any outstanding amounts and expired in July 2024. The new contract caps the rate with respect to $38.8 million of any outstanding
amounts and expires in July 2025. As of December 31, 2024, $1.9 million was drawn on this loan.
We have a 50% interest in the 23Springs joint venture. 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 interest rate hedge contracts that
effectively cap the underlying SOFR rate at 3.5%. The initial contract capped the rate with respect to $83.0 million of any outstanding amounts and expired in April
2024. The new contract caps the rate with respect to $134.0 million of any outstanding amounts and expires in April 2025. As of December 31, 2024, $94.6 million
was drawn on this loan.
- In-Process Development
For a table summarizing our in-process office development activity, see “Item 2. Properties - In-Process Development.”
Financing Activity
During 2023, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, Jefferies
LLC, J.P. Morgan Securities LLC, Regions Securities LLC, TD Securities (USA) LLC and 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 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 fourth quarter of 2024, the Company issued 1.6 million shares of Common Stock under its equity distribution agreements at
an average gross sales price of $32.71 per share and received net proceeds, after sales commissions, of $51.3 million. We paid an aggregate of $0.8 million in sales
commissions to BTIG, LLC, TD Securities (USA) LLC and Truist Securities, Inc. during the fourth quarter of 2024.
Our $750.0 million unsecured revolving credit facility was modified during the first quarter of 2024 and is now scheduled to mature in January 2028 (but can
be extended for two additional six-month periods at our option assuming no defaults have occurred). The interest rate on our revolving credit facility 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 incurred $7.7 million of debt issuance costs during the first quarter of 2024, which will be amortized along with certain existing unamortized debt issuance
costs over the remaining term of our new revolving credit facility and recorded $0.2 million of loss on debt extinguishment. During the second quarter of 2024, we
modified the revolving credit facility to provide that the interest rate may be adjusted upward or downward by 2.5 basis points depending upon whether or not we
achieve certain pre-determined sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. There was $104.0 million and $119.0
million outstanding under our revolving credit facility as of December 31, 2024 and
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January  31, 2025, respectively. As of both December  31, 2024 and January  31, 2025, we had $0.1 million of outstanding letters of credit, which reduce the
availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility as of December 31, 2024 and January 31, 2025 was
$645.9 million and $630.9 million, respectively.
We regularly evaluate the financial condition of the financial institutions that participate in our credit facilities and as counterparties under any interest rate
swap agreements using publicly available information. Based on this review, we currently expect these financial institutions to perform their obligations under our
existing facilities and any swap agreements.
For information regarding our interest hedging activities and other market risks associated with our debt financing activities, see “Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.”
Covenant Compliance
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 provide any assurances that we will continue to be in compliance.
Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event
of default on 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 $35.0 million with respect to other loans in some circumstances.
As of December 31, 2024, the Operating Partnership had the following unsecured notes outstanding ($ in thousands):
Face Amount
Carrying Amount
Stated Interest Rate
Effective Interest Rate
(1)
Notes due March 2027
$
300,000 
$
299,134 
3.875 %
4.038 %
Notes due March 2028
$
350,000 
$
348,690 
4.125 %
4.271 %
Notes due April 2029
$
350,000 
$
349,583 
4.200 %
4.234 %
Notes due February 2030
$
400,000 
$
399,498 
3.050 %
3.079 %
Notes due February 2031
$
400,000 
$
399,048 
2.600 %
2.645 %
Notes due February 2034
$
350,000 
$
345,862 
7.650 %
7.836 %
__________
(1)
The effective rate included in the table above excludes the amortized impact of unrealized losses or gains associated with the termination of related forward-starting swaps, if
any, and underwriting fees and other expenses.
The indenture that governs these 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 any refinancing is done at higher interest rates,
the increased interest expense could adversely affect our cash flow and ability to pay distributions. Any such refinancing could also 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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Contractual Obligations
The following table sets forth a summary regarding our known material contractual obligations on a cash basis, including required interest payments for those
items that are interest bearing, as of December 31, 2024 (in thousands):
Amounts due during the years ending December 31,
Total
2025
2026
2027
2028
2029
Thereafter
Mortgages and Notes Payable:
Principal payments (1)
$
3,305,089 
$
7,268 
$
207,035 
$
458,755 
$
802,765 
$
517,210 
$
1,312,056 
Interest payments
718,889 
147,295 
139,851 
120,915 
90,155 
63,604 
157,069 
Purchase Obligations:
Lease and contractual commitments and contingent
consideration (2)
232,597 
180,832 
45,448 
3,660 
325 
1,513 
819 
Other Commitments:
Advances to unconsolidated affiliates (3)
35,514 
28,762 
6,659 
93 
— 
— 
— 
Operating and Finance Lease Obligations:
Ground leases
81,894 
2,071 
2,121 
2,172 
2,226 
2,067 
71,237 
Total
$
4,373,983 
$
366,228 
$
401,114 
$
585,595 
$
895,471 
$
584,394 
$
1,541,181 
__________
(1)
Excludes amortization of premiums, discounts, debt issuance costs and/or purchase accounting adjustments.
(2)
Consists primarily of commitments under signed leases and contracts for operating properties (excluding tenant-funded tenant improvements), contracts for
development/redevelopment projects and unfunded joint venture equity contributions agreed to at formation. Tenant improvements that can be used at the option of the customer
at any time during the remaining lease term have been reflected in 2025. The timing of these lease and contractual commitments may fluctuate.
(3)
Includes estimated draws on loan commitments to our joint ventures related to our unconsolidated development activity.
The interest payments due on mortgages and notes payable are based on the stated rates for the fixed rate debt and on the rates in effect as of December 31,
2024 for the variable rate debt. The weighted average interest rate on our fixed and variable rate debt was 4.31% and 5.33%, respectively, as of December 31, 2024.
For additional information about our operating and finance lease obligations, mortgages and notes payable and purchase obligations, see Notes 2, 6 and 7,
respectively, to our Consolidated Financial Statements.
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. See “Item 1A. Risk Factors – Risks Related to an Investment in our Securities –
Cash 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. The following factors will affect such cash flows
and, accordingly, influence the decisions of the Company’s Board of Directors regarding dividends and distributions:
•
projections with respect to future REIT taxable income expected to be generated by the Company;
•
debt service requirements after taking into account debt covenants and the repayment and restructuring of certain indebtedness and the availability of
alternative sources of debt and equity capital and their impact on our ability to refinance existing debt and grow our business;
•
scheduled increases in base rents of existing leases;
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•
changes in rents attributable to the renewal of existing leases or replacement leases;
•
changes in occupancy rates at existing properties and execution of leases for newly acquired or developed properties;
•
changes in operating expenses;
•
anticipated leasing capital expenditures attributable to the renewal of existing leases or new leases;
•
anticipated building improvements; and
•
expected cash flows from financing and investing activities, including from the sales of assets generating taxable gains to the extent such assets are not
sold in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction.
On January 29, 2025, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 11, 2025 to stockholders of
record as of February 18, 2025.
The Company declared and paid a cash dividend of $0.50 per share of Common Stock in each quarter of 2024.
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 $22.4 million of cash and cash equivalents as of December 31, 2024. The unused capacity of our revolving credit facility as of December 31, 2024 and
January 31, 2025, respectively, was $645.9 million and $630.9 million.
We have a currently effective automatic shelf registration statement on Form S-3 with the SEC pursuant to which, at any time and from time to time, in one or
more offerings on an as-needed basis, the Company may sell an indefinite amount of common stock, preferred stock and depositary shares and the Operating
Partnership may sell an indefinite amount of debt securities, subject to our ability to effect offerings on satisfactory terms based on prevailing market conditions.
The Company from time to time enters into equity distribution agreements with a variety of firms pursuant to which the Company may offer and sell shares of
common stock from time to time through such firms, acting as agents of the Company or as principals. Sales of the shares, if any, may be made by means of
ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated
prices or as otherwise agreed with any of such firms (which may include block trades).
During the remainder of 2025, we expect to sell up to an additional $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
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting
period. Actual results could differ from our estimates.
The policies used in the preparation of our Consolidated Financial Statements are described in Note 1 to our Consolidated Financial Statements. However,
certain of our significant accounting policies contain an increased level of assumptions used or
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estimates made in determining their impact in our Consolidated Financial Statements. Management has reviewed and determined the appropriateness of our critical
accounting policies and estimates with the audit committee of the Company’s Board of Directors.
We consider our critical accounting estimates to be those used in the determination of the reported amounts and disclosure related to the following:
•
Acquisition of real estate assets and liabilities;
•
Impairments of real estate assets; and
•
Credit losses on lease related receivables.
Acquisition of Real Estate Assets and Liabilities
Primarily all of our acquisitions of real estate assets and liabilities are accounted for as asset acquisitions. As such, the purchase prices of acquired tangible and
intangible assets and liabilities are recorded and allocated at fair value on a relative basis. The recorded allocations are based on estimated cash flow projections of
the properties acquired which incorporates discount, capitalization and interest rates as well as available comparable market information. See Note 1 to our
Consolidated Financial Statements for additional details regarding our specific procedures for purchase price allocation.
We use considerable judgement in our estimates of cash flow projections, discount, capitalization and interest rates, fair market lease rates, carrying costs
during hypothetical expected lease-up periods and costs to execute similar leases. While our methodology for purchase price allocation did not change during the
year ended December 31, 2024, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of
acquisition. Significant increases or decreases in these key estimates, particularly with regards to cash flow projections and discount and capitalization rates, would
result in a significantly lower or higher fair value measurement of the real estate assets being acquired.
Impairments of Real Estate Assets
We record impairments of our real estate assets classified as held for use when the carrying amount of the asset exceeds the sum of its undiscounted future
operating and residual cash flows at the difference between estimated fair value of the asset and the carrying amount. We record impairments of our real estate
assets classified as held for sale at the lower of the carrying amount or estimated fair value using the estimated or contracted sales price less costs to sell. See Note
1 to our Consolidated Financial Statements for additional details regarding our specific procedures with respect to impairments of our real estate assets classified as
held for use and held for sale.
Any real estate assets recorded at fair value on a non-recurring basis as a result of our impairment analysis are valued using unobservable local and national
industry market data such as comparable sales, appraisals, brokers’ opinions of value and/or terms of definitive sales contracts. Additionally, the analysis includes
considerable judgement in our estimates of hold periods, projected cash flows and discount and capitalization rates. Significant increases or decreases in any of
these inputs, particularly with regards to cash flow projections and discount and capitalization rates, would result in a significantly lower or higher fair value
measurement of the real estate assets being assessed.
Credit Losses on Lease Related Receivables
Credit losses on lease related receivables, which include accounts receivable and accrued straight-line rents receivable, are recorded as a reduction to rental and
other revenues when the amount recorded is determined, in management’s judgement, to not be probable of collection. Management’s evaluation of collectability
requires the exercise of considerable judgement in assessing the current credit quality of our customers using payment history and other available information about
the financial condition of the customers. During the year ended December 31, 2024, we have not experienced significant credit losses based on management’s
evaluation of collectability of our lease receivables. If management’s assumptions regarding the collectability of lease related receivables prove incorrect, we could
experience credit losses in excess of what was recognized in rental and other revenues.
Non-GAAP Information
The Company believes that FFO, FFO available for common stockholders and FFO available for common stockholders per share are beneficial to management
and investors and are important indicators of the performance of any equity REIT. Because
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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 (“NAREIT”), 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.
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):
Year Ended December 31,
2024
2023
2022
Funds from operations:
Net income
$
104,254 
$
151,330 
$
163,958 
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates
34 
549 
(1,230)
Depreciation and amortization of real estate assets
296,277 
296,705 
284,723 
Impairments of depreciable properties
24,600 
— 
35,000 
(Gains) on disposition of depreciable properties
(46,467)
(33,288)
(47,807)
(Gain) on deconsolidation of affiliate
— 
(11,778)
— 
Unconsolidated affiliates:
Depreciation and amortization of real estate assets
15,001 
12,223 
1,160 
Funds from operations
393,699 
415,741 
435,804 
Dividends on Preferred Stock
(2,485)
(2,485)
(2,486)
Funds from operations available for common stockholders
$
391,214 
$
413,256 
$
433,318 
Funds from operations available for common stockholders per share
$
3.61 
$
3.83 
$
4.03 
Weighted average shares outstanding (1)
108,319 
107,785 
107,567 
__________
(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.
In previous periods, our same property portfolio consisted only of wholly owned in-service properties. Beginning in 2024, we updated our same property
portfolio to include our share of in-service joint venture properties. As of December 31, 2024, our same property portfolio consisted of 152 wholly owned and joint
venture in-service properties encompassing 27.2 million rentable square feet that were owned during the entirety of the periods presented (from January 1, 2023 to
December 31, 2024). As of December 31, 2023, our same property portfolio consisted of 154 wholly owned in-service properties encompassing 26.6 million
rentable square feet that were owned during the entirety of the periods presented (from January 1, 2022 to December 31, 2023). The change in our same property
portfolio was due to the addition of six joint venture properties encompassing 0.7 million rentable square feet, one property acquired during 2022 encompassing 0.4
million rentable square feet and one newly developed property placed in service during 2022 encompassing 0.1 million rentable square feet, offset by the removal
of 10 properties that were sold during 2024 encompassing 0.6 million rentable square feet.
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The following table sets forth the Company’s NOI, same property NOI and same property cash NOI (in thousands):
Year Ended December 31,
2024
2023
Net income
$
104,254 
$
151,330 
Equity in earnings of unconsolidated affiliates
(4,158)
(1,107)
Gain on deconsolidation of affiliate
— 
(11,778)
Gains on disposition of property
(46,817)
(47,773)
Other income
(12,337)
(4,435)
Interest expense
147,198 
136,710 
General and administrative expenses
41,903 
42,857 
Impairments of real estate assets
24,600 
— 
Depreciation and amortization
299,046 
299,411 
Net operating income
553,689 
565,215 
Our share of unconsolidated joint venture same property net operating income
18,686 
18,436 
Partner's share of consolidated joint venture same property net operating income
(1,110)
(1,009)
Non same property and other net operating (income)/loss
(3,242)
(10,536)
Same property net operating income
$
568,023 
$
572,106 
Same property net operating income
$
568,023 
$
572,106 
Lease termination fees, straight-line rent and other non-cash adjustments
(13,961)
(25,782)
Same property cash net operating income
$
554,062 
$
546,324 
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ITEM 7A. 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 7. 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 generally limit 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.
As of December 31, 2024, we had $2,854.0 million principal amount of fixed rate debt outstanding, a $6.9 million decrease as compared to December 31,
2023. The estimated aggregate fair market value of this debt was $2,659.4 million. If interest rates had been 100 basis points higher, the aggregate fair market value
of our fixed rate debt would have been $117.3 million lower. If interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt
would have been $124.7 million higher.
As of December 31, 2024, we had $454.0 million of variable rate debt outstanding not protected by interest rate hedge contracts, an $84.0 million increase as
compared to December 31, 2023. If the weighted average interest rate on this variable rate debt had been 100 basis points higher or lower, the annual interest
expense as of December 31, 2024 would increase or decrease by $4.5 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See page 53 for Index to Consolidated Financial Statements of Highwoods Properties, Inc. and Highwoods Realty Limited Partnership.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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ITEM 9A. CONTROLS AND PROCEDURES
General
The purpose of this section is to discuss our controls and procedures. The statements in this section represent the conclusions of Theodore J. Klinck, the
Company’s President and Chief Executive Officer (“CEO”), and Brendan C. Maiorana, the Company’s Executive Vice President and Chief Financial Officer
(“CFO”).
The CEO and CFO evaluations of our controls and procedures include a review of the controls’ objectives and design, the controls’ implementation by us and
the effect of the controls on the information generated for use in this Annual Report. We seek to identify data errors, control problems or acts of fraud and confirm
that appropriate corrective action, including process improvements, is undertaken. Our controls and procedures are also evaluated on an ongoing basis by or
through the following:
•
activities undertaken and reports issued by employees responsible for testing our internal control over financial reporting;
•
quarterly sub-certifications by representatives from appropriate business and accounting functions to support the CEO’s and CFO’s evaluations of our
controls and procedures;
•
other personnel in our finance and accounting organization;
•
members of our internal disclosure committee; and
•
members of the audit committee of the Company’s Board of Directors.
We do not expect that our controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of controls and procedures must reflect the
fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of
any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Management’s Annual Report on the Company’s Internal Control Over Financial Reporting
The Company’s management is required 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 GAAP. Internal control over financial
reporting includes those policies and procedures that:
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect transactions and dispositions of assets;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that
receipts and expenditures are being made only in accordance with authorizations of management and directors; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material
effect on the financial statements.
Under the supervision of the Company’s CEO and CFO, we conducted an evaluation of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2024 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
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We have concluded that, as of December  31, 2024, the Company’s internal control over financial reporting was effective. Deloitte & Touche LLP, our
independent registered public accounting firm, has issued their attestation report, which is included below, on the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2024.
Management’s Annual Report on the Operating Partnership’s Internal Control Over Financial Reporting
 
The Operating Partnership is also required 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 GAAP.
Under the supervision of the Company’s CEO and CFO, we conducted an evaluation of the effectiveness of the Operating Partnership’s internal control over
financial reporting as of December 31, 2024 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have concluded that, as of December 31, 2024, the Operating Partnership’s internal control over financial reporting was effective. SEC rules do not require
us to obtain an attestation report of Deloitte & Touche LLP on the effectiveness of the Operating Partnership’s internal control over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Highwoods Properties, Inc.:
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Highwoods Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2024, based on
criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control-Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial
statements as of and for the year ended December 31, 2024, of the Company and our report dated February 11, 2025, expressed an unqualified opinion on those
financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Annual Report on the Company’s Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process 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. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina
February 11, 2025
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Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2024 that materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting. There were also no changes in the Operating Partnership’s internal control over
financial reporting during the fourth quarter of 2024 that materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal
control over financial reporting.
Disclosure 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. As defined in
Rule 13a-15(e) under the Exchange Act, disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us is accumulated and communicated to our management, including the Company’s CEO and CFO, to allow for timely decisions
regarding required disclosure. The Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective at the end of the
period covered by this Annual Report. The Company’s CEO and CFO also concluded that the Operating Partnership’s disclosure controls and procedures were
effective at the end of the period covered by this Annual Report.
ITEM 9B. OTHER INFORMATION
Our current long-term equity incentive plan, pursuant to which our compensation and governance committee may grant stock options, shares of restricted stock
and restricted stock units, originally authorized the issuance of up to 3,000,000 shares of common stock, of which not more than 1,000,000 shares could be issued
in the form of restricted stock or restricted stock unit awards. To date, 757,640 shares of restricted stock have been issued and are outstanding under the plan. As a
result, immediately prior to February 10, 2025, there were 2,242,360 shares available for future issuance under the plan. On February 10, 2025, our board approved
an amendment to the plan to reduce the shares available for future issuance from 3,000,000 shares, of which not more than 1,000,000 shares could be issued in the
form of restricted stock or restricted stock unit awards, to 1,035,000 shares in the aggregate. As a result, there are now 277,360 shares available for future issuance
under our plan, all of which may be issued in the form of restricted stock or restricted stock unit awards.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information about the Company’s executive officers and directors, the code of ethics that applies to the Company’s chief executive officer and senior financial
officers, which is posted on our website, and certain corporate governance matters is incorporated herein by reference to the Company’s Proxy Statement to be filed
in connection with the Company's annual meeting of stockholders to be held on May  13, 2025. No changes have been made to the procedures by which
stockholders may recommend nominees to the Company’s board of directors since the 2024 annual meeting, which was held on May 14, 2024.
The Company has adopted insider trading policies and procedures governing the purchase, sale and/or other dispositions of our securities by directors, officers
and employees that are reasonably designed to promote compliance with insider trading laws, rules and regulations and NYSE listing standards. No director or
officer of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements.
See Item X in Part I of this Annual Report for biographical information regarding the Company’s executive officers. The Company is the sole general partner
of the Operating Partnership.
ITEM 11. EXECUTIVE COMPENSATION
Information about the compensation of the Company’s directors and executive officers is incorporated herein by reference to the Company’s Proxy Statement
to be filed in connection with its annual meeting of stockholders to be held on May 13, 2025.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information about the beneficial ownership of Common Stock and the Company’s equity compensation plans is incorporated herein by reference to the
Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 13, 2025.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Information about certain relationships and related transactions, if any, and the independence of the Company’s directors is incorporated herein by reference to
the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 13, 2025.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information about fees paid to and services provided by our independent registered public accounting firm is incorporated herein by reference to the
Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 13, 2025.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Reference is made to the Index to Consolidated Financial Statements on page 53 for a list of the Consolidated Financial Statements of Highwoods Properties,
Inc. and Highwoods Realty Limited Partnership included in this report.
Exhibits
Exhibit
Number
Description
3.1
Amended and Restated Charter of the Company (filed as part of the Company’s Current Report on Form 8-K dated May 15, 2008)
3.2
Amended and Restated Bylaws of the Company (filed as part of the Company’s Current Report on Form 8-K dated May 15, 2008)
4.1
Indenture among the Operating Partnership, the Company and U.S. Bank National Association (as successor in interest to Wachovia Bank,
N.A.) dated as of December 1, 1996 (filed as part of the Operating Partnership’s Current Report on Form 8-K dated December 2, 1996)
4.2
Form of 3.875% Notes due March 1, 2027 (filed as part of the Company’s Current Report on Form 8-K dated February 23, 2017)
4.3
Officers’ Certificate Establishing the Terms of the 3.875% Notes, dated February 23, 2017 (filed as part of the Company’s Current Report on
Form 8-K dated February 23, 2017)
4.4
Form of 4.125% Notes due March 15, 2028 (filed as part of the Company’s Current Report on Form 8-K dated March 5, 2018)
4.5
Officers’ Certificate Establishing the Terms of the 4.125% Notes, dated March 5, 2018 (filed as part of the Company’s Current Report on
Form 8-K dated March 5, 2018)
4.6
Form of 4.20% Notes due April 15, 2029 (filed as part of the Company’s Current Report on Form 8-K dated March 7, 2019)
4.7
Officers’ Certificate Establishing the Terms of the 4.20% Notes, dated March 7, 2019 (filed as part of the Company’s Current Report on Form
8-K dated March 7, 2019)
4.8
Form of 3.050% Notes due February 15, 2030 (filed as part of the Company’s Current Report on Form 8-K dated September 13, 2019)
4.9
Officers’ Certificate Establishing the Terms of the 3.050% Notes, dated September 13, 2019 (filed as part of the Company’s Current Report on
Form 8-K dated September 13, 2019)
4.10
Form of 2.600% Notes due February 1, 2031 (filed as part of the Company’s Current Report on Form 8-K dated August 13, 2020)
4.11
Officers’ Certificate Establishing the Terms of the 2.600% Notes, dated August 13, 2020 (filed as part of the Company’s Current Report on
Form 8-K dated August 13, 2020)
4.12
Description of Registered Securities (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019)
4.13
Form of 7.65% Notes due February 1, 2034 (filed as part of the Company’s Current Report on Form 8-K dated November 16, 2023)
4.14
Officers’ Certificate Establishing the Terms of the 7.65% Notes, dated November 21, 2023 (filed as part of the Company’s Current Report on
Form 8-K dated November 16, 2023)
10.1
Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the Operating Partnership (filed as part of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2004)
10.2
Amendment No. 1, dated as of July 22, 2004, to the Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the
Operating Partnership (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)
10.3
Amendment No. 2, dated as of July 19, 2018, to the Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the
Operating Partnership (filed as part of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018)
10.4
*
2015 Long-Term Equity Incentive Plan (filed as part of the Company’s Current Report on Form 8-K dated May 13, 2015)
10.5
Form of warrants to purchase Common Stock of the Company (filed as part of the Company’s Annual Report on Form 10-K for the year
ended December 31, 1997)
10.6
*
Highwoods Properties, Inc. Retirement Plan, effective as of March 1, 2006 (filed as part of the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007)
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Exhibit
Number
Description
10.7
*
Highwoods Properties, Inc. 2020 Employee Stock Purchase Plan (filed as part of the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2020)
10.8
*
Amendment No. 1, dated as of November 30, 2022, to the Highwoods Properties, Inc. 2020 Employee Stock Purchase Plan (filed as part of
the Company's Annual Report on Form 10-K for the year ended December 31, 2022)
10.9
*
Executive Supplemental Employment Agreement, dated as of September 1, 2015 between the Company and Theodore J. Klinck (filed as part
of the Company’s Current Report on Form 8-K dated September 1, 2015)
10.10
*
Amended and Restated Executive Supplemental Employment Agreement, dated as of February 12, 2013, between the Company and Jeffrey
D. Miller (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012)
10.11
*
Executive Supplemental Employment Agreement, dated as of July 19, 2019, between the Company and Brendan C. Maiorana (filed as part of
the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019)
10.12
*
Executive Supplemental Employment Agreement, dated as of July 19, 2019, between the Company and Brian M. Leary (filed as part of the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019)
10.13
*
2021 Long-Term Equity Incentive Plan (filed as part of the Company’s Current Report on Form 8-K dated May 11, 2021)
10.14
Third Amendment to Sixth Amended and Restated Credit Agreement, dated as of January 25, 2024, by and among the Company, the
Operating Partnership, Bank of America, N.A., as Administrative Agent, and the Other Lenders named therein (filed as part of the Company’s
Current Report on Form 8-K) dated January 25, 2024)
10.15
Fourth Amendment to Sixth Amended and Restated Credit Agreement, dated as of May 23, 2024, by and among the Company, the Operating
Partnership, Bank of America, N.A., as Administrative Agent, Wells Fargo Bank, National Association, as Co-Syndication Agent, PNC Bank,
National Association, as Co-Syndication Agent, and the Other Lenders named therein (filed as part of the Company's Current Report on Form
8-K dated May 23, 2024)
10.16
*
Amendment No. 1, dated as of February 10, 2025, to the Highwoods Properties, Inc. 2021 Long-Term Equity Incentive Plan
19
Insider Trading Policy and Procedures (filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 2023)
21
Schedule of Subsidiaries
23.1
Consent of Deloitte & Touche LLP for the Company
23.2
Consent of Deloitte & Touche LLP for the Operating Partnership
31.1
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company
31.2
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company
31.3
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership
31.4
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership
32.1
Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company
32.2
Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company
32.3
Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership
32.4
Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership
97
Policy Relating to Recovery of Erroneously Awarded Compensation (filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 2023)
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)
__________
* Represents management contract or compensatory plan.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Highwoods Properties, Inc.
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
54
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2024 and 2023
57
Consolidated Statements of Income for the Years Ended December 31, 2024, 2023 and 2022
58
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022
59
Consolidated Statements of Equity for the Years Ended December 31, 2024, 2023 and 2022
60
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
62
Highwoods Realty Limited Partnership:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
64
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2024 and 2023
67
Consolidated Statements of Income for the Years Ended December 31, 2024, 2023 and 2022
68
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022
69
Consolidated Statements of Capital for the Years Ended December 31, 2024, 2023 and 2022
70
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
71
Notes to Consolidated Financial Statements
73
Schedule III
103
__________
All other schedules are omitted because they are not applicable or because the required information is included in our Consolidated Financial Statements or
notes thereto.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Highwoods Properties, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Highwoods Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and
2023, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31,
2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal
control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission and our report dated February 11, 2025, expressed an unqualified opinion on the Company’s internal
control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Real Estate Assets – Determination of Impairment Indicators and Impairment —Refer to Note 1 and Note 3 to the financial statements
Critical Audit Matter Description
The Company performs an impairment analysis of properties which begins with an evaluation of events or changes in circumstances that may indicate that the
carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, a change in
the designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than carrying
value. When events or changes in circumstances indicate that the carrying value may not be recoverable, the Company evaluates its real estate assets for
impairment by comparing undiscounted future cash flows expected to be generated over the estimated hold period of each asset to the respective carrying amount.
If the carrying amount of an asset exceeds the undiscounted future cash flows, an analysis is performed to determine the fair value of the asset.
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The Company makes judgments that determine whether specific real estate assets possess indicators of impairment. Changes in those judgments could have a
material impact on the real estate assets that are identified for further analysis. For those real estate assets where impairment has been identified, the Company
makes significant estimates and assumptions to determine the fair value using discounted future cash flows expected to be generated over the life of the asset.
Given (1) the Company’s evaluation of possible indications of impairment of real estate assets requires management to make judgments, (2), the undiscounted
estimated future operating and residual cash flows to determine recoverability require management to make significant estimates and assumptions related to current
and projected trends in rental, occupancy, capitalization rates and estimated hold periods, and (3), the discounted estimated future operating and residual cash flows
to determine fair value also require management to make significant estimates and assumptions related to the current and projected trends discount rates,
performing audit procedures to evaluate (a) whether management appropriately identified events or changes in circumstances indicating that the carrying amounts
of real estate assets may not be recoverable, (b) the reasonableness of managements undiscounted future cash flow analysis, and (c) the reasonableness of
managements discounted future cash flow analysis, required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of real estate assets for possible indications of impairment and our procedures related to the undiscounted estimated
future operating and residual cash flows to determine recoverability, included the following, among others:
•
We tested the effectiveness of controls over management’s identification of possible circumstances that may indicate that the carrying amounts of real estate
assets are no longer recoverable, including controls over management’s designation of an asset as core or non-core, occupancy and management’s controls over
undiscounted estimated future operating and residual cash flows to determine recoverability.
•
We tested the effectiveness of controls over management’s determination of fair value utilized to record impairment charges.
•
We evaluated management’s identification of impairment indicators by developing an independent determination if properties exhibit an indicator of
impairment by:
–
Inquiring of management and reading investment committee and board minutes to identify properties that should be evaluated as non-core and therefore
may impact the anticipated holding period.
–
Testing real estate assets for possible indications of impairment, including searching for adverse asset-specific circumstances and/or market conditions by
reviewing questionnaires to regional property managers and using reputable market surveys.
–
Developing an independent expectation of impairment indicators and comparing such expectation to management’s analysis.
•
We evaluated the Company’s determination of the undiscounted estimated future operating and residual cash flows to determine recoverability for those assets
where an indicator had been identified by performing the following:
–
Comparing the projections included in management’s cash flow estimates to determine recoverability to the Company’s historical results and external
market sources.
–
We evaluated the reasonableness of the significant assumptions used in the undiscounted estimated future operating and residual cash flows, including the
estimated hold period, rental rates, growth rates, and capitalization rate assumptions.
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•
We evaluated the Company’s determination of fair value for those assets where impairment had been identified by performing the following:
–
With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the market prices for comparable
properties, and we developed a range of independent estimates of fair value and compared our estimates to those used by management.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina
February 11, 2025
We have served as the Company’s auditor since 2006.
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HIGHWOODS PROPERTIES, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31,
2024
2023
Assets:
Real estate assets, at cost:
Land
$
570,286 
$
540,050 
Buildings and tenant improvements
5,826,603 
5,960,895 
Development in-process
— 
8,918 
Land held for development
221,048 
227,058 
6,617,937 
6,736,921 
Less-accumulated depreciation
(1,796,586)
(1,743,390)
Net real estate assets
4,821,351 
4,993,531 
Real estate and other assets, net, held for sale
55,409 
— 
Cash and cash equivalents
22,412 
25,123 
Restricted cash
11,265 
6,446 
Accounts receivable
28,287 
28,094 
Mortgages and notes receivable
11,064 
4,795 
Accrued straight-line rents receivable
308,853 
310,649 
Investments in and advances to unconsolidated affiliates
485,726 
343,241 
Deferred leasing costs, net of accumulated amortization of $170,312 and $175,697, respectively
209,967 
225,924 
Prepaid expenses and other assets, net of accumulated depreciation of $20,626 and $22,142, respectively
75,021 
65,125 
Total Assets
$
6,029,355 
$
6,002,928 
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
Mortgages and notes payable, net
$
3,293,559 
$
3,213,206 
Accounts payable, accrued expenses and other liabilities
304,551 
302,180 
Total Liabilities
3,598,110 
3,515,386 
Commitments and contingencies
Noncontrolling interests in the Operating Partnership
65,791 
49,520 
Equity:
Preferred Stock, $0.01 par value, 50,000,000 authorized shares;
8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 28,811 shares issued
and outstanding
28,811 
28,811 
Common Stock, $0.01 par value, 200,000,000 authorized shares;
107,623,777 and 105,710,315 shares issued and outstanding, respectively
1,076 
1,057 
Additional paid-in capital
3,144,130 
3,103,446 
Distributions in excess of net income available for common stockholders
(810,608)
(698,020)
Accumulated other comprehensive loss
(2,246)
(1,997)
Total Stockholders’ Equity
2,361,163 
2,433,297 
Noncontrolling interests in consolidated affiliates
4,291 
4,725 
Total Equity
2,365,454 
2,438,022 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity
$
6,029,355 
$
6,002,928 
See accompanying notes to consolidated financial statements.
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Table on Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Income
(in thousands, except per share amounts)
Year Ended December 31,
2024
2023
2022
Rental and other revenues
$
825,862 
$
833,997 
$
828,929 
Operating expenses:
Rental property and other expenses
272,173 
268,782 
259,806 
Depreciation and amortization
299,046 
299,411 
287,610 
Impairments of real estate assets
24,600 
— 
36,515 
General and administrative
41,903 
42,857 
42,266 
Total operating expenses
637,722 
611,050 
626,197 
Interest expense
147,198 
136,710 
105,385 
Other income
12,337 
4,435 
1,530 
Gains on disposition of property
46,817 
47,773 
63,546 
Gain on deconsolidation of affiliate
— 
11,778 
— 
Equity in earnings of unconsolidated affiliates
4,158 
1,107 
1,535 
Net income
104,254 
151,330 
163,958 
Net (income) attributable to noncontrolling interests in the Operating Partnership
(2,040)
(3,164)
(3,670)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates
34 
549 
(1,230)
Dividends on Preferred Stock
(2,485)
(2,485)
(2,486)
Net income available for common stockholders
$
99,763 
$
146,230 
$
156,572 
Earnings per Common Share – basic:
Net income available for common stockholders
$
0.94 
$
1.39 
$
1.49 
Weighted average Common Shares outstanding – basic
106,167 
105,529 
105,120 
Earnings per Common Share – diluted:
Net income available for common stockholders
$
0.94 
$
1.39 
$
1.49 
Weighted average Common Shares outstanding – diluted
108,319 
107,785 
107,567 
See accompanying notes to consolidated financial statements.
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Table on Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Comprehensive Income
(in thousands)
Year Ended December 31,
2024
2023
2022
Comprehensive income:
Net income
$
104,254 
$
151,330 
$
163,958 
Other comprehensive income/(loss):
Settlement of cash flow hedges
— 
(493)
— 
Amortization of cash flow hedges
(249)
(293)
(238)
Total other comprehensive loss
(249)
(786)
(238)
Total comprehensive income
104,005 
150,544 
163,720 
Less-comprehensive (income) attributable to noncontrolling interests
(2,006)
(2,615)
(4,900)
Comprehensive income attributable to common stockholders
$
101,999 
$
147,929 
$
158,820 
See accompanying notes to consolidated financial statements.
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Table of Contents    
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Equity
(in thousands, except share amounts)
Number of
Common Shares
Common
Stock
Series A
Cumulative
Redeemable
Preferred Shares
Additional Paid-
In Capital
Accumulated
Other Compre-
hensive
Income/(Loss)
Non-controlling
Interests in
Consolidated
Affiliates
Distributions in
Excess of Net
Income Available
for Common
Stockholders
Total
Balance as of 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
106,141 
1 
— 
5,166 
— 
— 
— 
5,167 
Conversions of Common Units to Common Stock
30,909 
— 
— 
1,251 
— 
— 
— 
1,251 
Dividends on Common Stock ($2.00 per share)
— 
— 
— 
— 
— 
(210,183)
(210,183)
Dividends on Preferred Stock ($86.25 per share)
— 
— 
— 
— 
— 
(2,486)
(2,486)
Adjustment of noncontrolling interests in the Operating Partnership to
fair value
— 
— 
39,502 
— 
— 
— 
39,502 
Distributions to noncontrolling interests in consolidated affiliates
— 
— 
— 
— 
(1,411)
— 
(1,411)
Issuances of restricted stock
181,807 
— 
— 
— 
— 
— 
— 
— 
Share-based compensation expense, net of forfeitures
(779)
2 
— 
7,550 
— 
— 
— 
7,552 
Net (income) attributable to noncontrolling interests in the Operating
Partnership
— 
— 
— 
— 
— 
(3,670)
(3,670)
Net (income) attributable to noncontrolling interests in consolidated
affiliates
— 
— 
— 
— 
1,230 
(1,230)
— 
Comprehensive income:
Net income
— 
— 
— 
— 
— 
163,958 
163,958 
Other comprehensive loss
— 
— 
— 
(238)
— 
— 
(238)
Total comprehensive income
163,720 
Balance as of 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
27,064 
2 
— 
188 
— 
— 
— 
190 
Conversions of Common Units to Common Stock
193,907 
— 
— 
4,795 
— 
— 
— 
4,795 
Dividends on Common Stock ($2.00 per share)
— 
— 
— 
— 
— 
(211,023)
(211,023)
Dividends on Preferred Stock ($86.25 per share)
— 
— 
— 
— 
— 
(2,485)
(2,485)
Adjustment of noncontrolling interests in the Operating Partnership to
fair value
— 
— 
10,152 
— 
— 
— 
10,152 
Contributions from noncontrolling interests in consolidated affiliates
— 
— 
— 
— 
320 
— 
320 
Issuances of restricted stock
282,453 
— 
— 
— 
— 
— 
— 
— 
Redemptions/repurchases of Preferred Stock
— 
(10)
— 
— 
— 
— 
(10)
Share-based compensation expense, net of forfeitures
(3,967)
3 
— 
6,981 
— 
— 
— 
6,984 
Net (income) attributable to noncontrolling interests in the Operating
Partnership
— 
— 
— 
— 
— 
(3,164)
(3,164)
Net loss attributable to noncontrolling interests in consolidated
affiliates
— 
— 
— 
— 
(549)
549 
— 
Deconsolidation of affiliate
— 
— 
— 
— 
(17,281)
— 
(17,281)
Comprehensive income:
Net income
— 
— 
— 
— 
— 
151,330 
151,330 
Other comprehensive loss
— 
— 
— 
(786)
— 
— 
(786)
Total comprehensive income
150,544 
Balance as of December 31, 2023
105,710,315 
$
1,057 
$
28,811 
$
3,103,446 
$
(1,997)
$
4,725 
$
(698,020)
$
2,438,022 
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HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Equity - Continued
(in thousands, except share amounts)
Number of
Common Shares
Common
Stock
Series A
Cumulative
Redeemable
Preferred Shares
Additional Paid-
In Capital
Accumulated
Other Compre-
hensive
Income/(Loss)
Non-controlling
Interests in
Consolidated
Affiliates
Distributions in
Excess of Net
Income Available
for Common
Stockholders
Total
Balance as of December 31, 2023
105,710,315 
$
1,057 
$
28,811 
$
3,103,446 
$
(1,997)
$
4,725 
$
(698,020)
$
2,438,022 
Issuances of Common Stock, net of issuance costs and tax
withholdings
1,583,545 
16 
— 
51,221 
— 
— 
— 
51,237 
Conversions of Common Units to Common Stock
5,385 
— 
— 
132 
— 
— 
— 
132 
Dividends on Common Stock ($2.00 per share)
— 
— 
— 
— 
— 
(212,351)
(212,351)
Dividends on Preferred Stock ($86.25 per share)
— 
— 
— 
— 
— 
(2,485)
(2,485)
Adjustment of noncontrolling interests in the Operating Partnership to
fair value
— 
— 
(18,666)
— 
— 
— 
(18,666)
Distributions to noncontrolling interests in consolidated affiliates
— 
— 
— 
— 
(400)
— 
(400)
Issuances of restricted stock
324,532 
— 
— 
— 
— 
— 
— 
— 
Share-based compensation expense, net of forfeitures
— 
3 
— 
7,997 
— 
— 
— 
8,000 
Net (income) attributable to noncontrolling interests in the Operating
Partnership
— 
— 
— 
— 
— 
(2,040)
(2,040)
Net loss attributable to noncontrolling interests in consolidated
affiliates
— 
— 
— 
— 
(34)
34 
— 
Comprehensive income:
Net income
— 
— 
— 
— 
— 
104,254 
104,254 
Other comprehensive loss
— 
— 
— 
(249)
— 
— 
(249)
Total comprehensive income
104,005 
Balance as of December 31, 2024
107,623,777 
$
1,076 
$
28,811 
$
3,144,130 
$
(2,246)
$
4,291 
$
(810,608)
$
2,365,454 
See accompanying notes to consolidated financial statements.
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Table on Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
2024
2023
2022
Operating activities:
Net income
$
104,254 
$
151,330 
$
163,958 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
299,046 
299,411 
287,610 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
1,413 
1,135 
(42)
Share-based compensation expense
8,000 
6,984 
7,552 
Net credit losses on operating lease receivables
2,289 
3,834 
3,199 
Accrued interest on mortgages and notes receivable
(548)
(805)
(88)
Amortization of debt issuance costs
5,638 
4,884 
4,324 
Amortization of cash flow hedges
(249)
(293)
(238)
Amortization of mortgages and notes payable fair value adjustments
112 
(288)
(70)
Impairments of real estate assets
24,600 
— 
36,515 
Losses on debt extinguishment
173 
602 
— 
Net gains on disposition of property
(46,817)
(47,773)
(63,546)
Gain on deconsolidation of affiliate
— 
(11,778)
— 
Equity in earnings of unconsolidated affiliates
(4,158)
(1,107)
(1,535)
Distributions of earnings from unconsolidated affiliates
5,973 
1,246 
614 
Settlement of cash flow hedges
— 
(493)
— 
Changes in operating assets and liabilities:
Accounts receivable
(3,222)
(547)
(10,955)
Prepaid expenses and other assets
2,669 
1,259 
1,685 
Accrued straight-line rents receivable
(9,626)
(24,510)
(29,421)
Accounts payable, accrued expenses and other liabilities
14,037 
3,871 
22,217 
Net cash provided by operating activities
403,584 
386,962 
421,779 
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired
(50,835)
(18,544)
(224,934)
Investments in development in-process
(4,149)
(33,848)
(44,352)
Investments in tenant improvements and deferred leasing costs
(143,824)
(112,290)
(120,739)
Investments in building improvements
(41,005)
(64,312)
(76,415)
Net proceeds from disposition of real estate assets
100,934 
101,829 
130,038 
Distributions of capital from unconsolidated affiliates
8,484 
6,594 
— 
Investments in mortgages and notes receivable
(6,229)
(14,463)
(24)
Repayments of mortgages and notes receivable
63 
9,888 
288 
Investments in and advances to unconsolidated affiliates
(153,361)
(132,609)
(261,772)
Repayments of preferred equity from unconsolidated affiliates
— 
80,000 
— 
Changes in earnest money deposits
(10,000)
15,500 
(15,500)
Changes in other investing activities
(2,513)
(7,431)
(1,389)
Net cash used in investing activities
$
(302,435)
$
(169,686)
$
(614,799)
62

Table on Contents
HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows – Continued
(in thousands)
Year Ended December 31,
2024
2023
2022
Financing activities:
Dividends on Common Stock
$
(212,351)
$
(211,023)
$
(210,183)
Redemptions/repurchases of Preferred Stock
— 
(10)
— 
Redemptions of Common Units
— 
(163)
(3,763)
Dividends on Preferred Stock
(2,485)
(2,485)
(2,486)
Distributions to noncontrolling interests in the Operating Partnership
(4,303)
(4,511)
(4,866)
Distributions to noncontrolling interests in consolidated affiliates
(400)
— 
(1,411)
Proceeds from the issuance of Common Stock
53,518 
1,741 
7,570 
Costs paid for the issuance of Common Stock
(843)
(226)
(247)
Repurchase of shares related to tax withholdings
(1,438)
(1,325)
(2,156)
Borrowings on revolving credit facility
339,000 
249,000 
675,000 
Repayments of revolving credit facility
(255,000)
(615,000)
(359,000)
Borrowings on mortgages and notes payable
— 
590,352 
550,000 
Repayments of mortgages and notes payable
(7,056)
(206,726)
(456,444)
Contributions from noncontrolling interests in consolidated affiliates
— 
320 
— 
Payments for debt issuance costs and other financing activities
(7,683)
(5,370)
(4,087)
Net cash provided by/(used in) financing activities
(99,041)
(205,426)
187,927 
Net increase/(decrease) in cash and cash equivalents and restricted cash
2,108 
11,850 
(5,093)
Cash from deconsolidation of affiliate
— 
(6,386)
— 
Cash and cash equivalents and restricted cash at beginning of the period
31,569 
26,105 
31,198 
Cash and cash equivalents and restricted cash at end of the period
$
33,677 
$
31,569 
$
26,105 
Reconciliation of cash and cash equivalents and restricted cash:
Year Ended December 31,
2024
2023
2022
Cash and cash equivalents at end of the period
$
22,412 
$
25,123 
$
21,357 
Restricted cash at end of the period
11,265 
6,446 
4,748 
Cash and cash equivalents and restricted cash at end of the period
$
33,677 
$
31,569 
$
26,105 
Supplemental disclosure of cash flow information:
Year Ended December 31,
2024
2023
2022
Cash paid for interest, net of amounts capitalized
$
133,584 
$
129,764 
$
102,501 
Supplemental disclosure of non-cash investing and financing activities:
Year Ended December 31,
2024
2023
2022
Conversions of Common Units to Common Stock
132 
4,795 
1,251 
Changes in accrued capital expenditures (1)
(2,667)
2,342 
(1,426)
Write-off of fully depreciated real estate assets
93,636 
76,722 
58,905 
Write-off of fully amortized leasing costs
47,644 
36,051 
29,083 
Write-off of fully amortized debt issuance costs
4,083 
1,356 
3,292 
Adjustment of noncontrolling interests in the Operating Partnership to fair value
18,666 
(10,152)
(39,502)
Derecognition of lease liabilities related to right of use assets
(4,027)
— 
— 
__________
(1)
Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities as of December 31, 2024, 2023 and 2022 were $52.9 million, $55.7 million
and $53.2 million, respectively.
See accompanying notes to consolidated financial statements.
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of the General Partner of Highwoods Realty Limited Partnership:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Highwoods Realty Limited Partnership and subsidiaries (the “Operating Partnership”) as of
December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, capital, and cash flows for each of the three years in the
period ended December 31, 2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Operating Partnership as of December 31, 2024 and 2023, and
the results of its operations and its cash flows for each of the three years in the period ended December  31, 2024, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on the Operating
Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Operating Partnership is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Operating Partnership’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Real Estate Assets – Determination of Impairment Indicators and Impairment —Refer to Note 1 and Note 3 to the financial statements
Critical Audit Matter Description
The Operating Partnership performs an impairment analysis of properties which begins with an evaluation of events or changes in circumstances that may indicate
that the carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, a
change in the designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than
carrying value. When events or changes in circumstances indicate that the carrying value may not be recoverable, the Operating Partnership evaluates its real estate
assets for impairment by comparing undiscounted future cash flows expected to be generated over the estimated hold period of each asset to the respective carrying
amount. If the carrying amount of an asset exceeds the undiscounted future cash flows, an analysis is performed to determine the fair value of the asset.
64

The Operating Partnership makes judgments that determine whether specific real estate assets possess indicators of impairment. Changes in those judgments could
have a material impact on the real estate assets that are identified for further analysis. For those real estate assets where impairment has been identified, the
Operating Partnership makes significant estimates and assumptions to determine the fair value using discounted future cash flows expected to be generated over the
life of the asset.
Given (1) the Operating Partnership’s evaluation of possible indications of impairment of real estate assets requires management to make judgments, (2), the
undiscounted estimated future operating and residual cash flows to determine recoverability require management to make significant estimates and assumptions
related to current and projected trends in rental, occupancy, capitalization rates and estimated hold periods, and (3), the discounted estimated future operating and
residual cash flows to determine fair value also require management to make significant estimates and assumptions related to the current and projected trends
discount rates, performing audit procedures to evaluate (a) whether management appropriately identified events or changes in circumstances indicating that the
carrying amounts of real estate assets may not be recoverable, (b) the reasonableness of managements undiscounted future cash flow analysis, and (c) the
reasonableness of managements discounted future cash flow analysis, required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of real estate assets for possible indications of impairment and our procedures related to the undiscounted estimated
future operating and residual cash flows to determine recoverability, included the following, among others:
•
We tested the effectiveness of controls over management’s identification of possible circumstances that may indicate that the carrying amounts of real estate
assets are no longer recoverable, including controls over management’s designation of an asset as core or non-core, occupancy and management’s controls over
undiscounted estimated future operating and residual cash flows to determine recoverability.
•
We tested the effectiveness of controls over management’s determination of fair value utilized to record impairment charges.
•
We evaluated management’s identification of impairment indicators by developing an independent determination if properties exhibit an indicator of
impairment by:
–
Inquiring of management and reading investment committee and board minutes to identify properties that should be evaluated as non-core and therefore
may impact the anticipated holding period.
–
Testing real estate assets for possible indications of impairment, including searching for adverse asset-specific circumstances and/or market conditions by
reviewing questionnaires to regional property managers and using reputable market surveys.
–
Developing an independent expectation of impairment indicators and comparing such expectation to management’s analysis.
•
We evaluated the Operating Partnership’s determination of the undiscounted estimated future operating and residual cash flows to determine recoverability for
those assets where an indicator had been identified by performing the following:
–
Comparing the projections included in management’s cash flow estimates to determine recoverability to the Operating Partnership’s historical results and
external market sources.
–
We evaluated the reasonableness of the significant assumptions used in the undiscounted estimated future operating and residual cash flows, including the
estimated hold period, rental rates, growth rates, and capitalization rate assumptions.
65

•
We evaluated the Operating Partnership’s determination of fair value for those assets where impairment had been identified by performing the following:
–
With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the market prices for comparable
properties, and we developed a range of independent estimates of fair value and compared our estimates to those used by management.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina
February 11, 2025
We have served as the Operating Partnership’s auditor since 2006.
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Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except unit and per unit data)
December 31,
2024
2023
Assets:
Real estate assets, at cost:
Land
$
570,286 
$
540,050 
Buildings and tenant improvements
5,826,603 
5,960,895 
Development in-process
— 
8,918 
Land held for development
221,048 
227,058 
6,617,937 
6,736,921 
Less-accumulated depreciation
(1,796,586)
(1,743,390)
Net real estate assets
4,821,351 
4,993,531 
Real estate and other assets, net, held for sale
55,409 
— 
Cash and cash equivalents
22,412 
25,123 
Restricted cash
11,265 
6,446 
Accounts receivable
28,287 
28,094 
Mortgages and notes receivable
11,064 
4,795 
Accrued straight-line rents receivable
308,853 
310,649 
Investments in and advances to unconsolidated affiliates
485,726 
343,241 
Deferred leasing costs, net of accumulated amortization of $170,312 and $175,697, respectively
209,967 
225,924 
Prepaid expenses and other assets, net of accumulated depreciation of $20,626 and $22,142, respectively
75,021 
65,125 
Total Assets
$
6,029,355 
$
6,002,928 
Liabilities, Redeemable Operating Partnership Units and Capital:
Mortgages and notes payable, net
$
3,293,559 
$
3,213,206 
Accounts payable, accrued expenses and other liabilities
304,551 
302,180 
Total Liabilities
3,598,110 
3,515,386 
Commitments and contingencies
Redeemable Operating Partnership Units:
Common Units, 2,151,423 and 2,156,808 outstanding, respectively
65,791 
49,520 
Series A Preferred Units (liquidation preference $1,000 per unit), 28,811 units issued and outstanding
28,811 
28,811 
Total Redeemable Operating Partnership Units
94,602 
78,331 
Capital:
Common Units:
General partner Common Units, 1,093,664 and 1,074,583 outstanding, respectively
23,345 
24,064 
Limited partner Common Units, 106,121,304 and 104,226,923 outstanding, respectively
2,311,253 
2,382,419 
Accumulated other comprehensive loss
(2,246)
(1,997)
Noncontrolling interests in consolidated affiliates
4,291 
4,725 
Total Capital
2,336,643 
2,409,211 
Total Liabilities, Redeemable Operating Partnership Units and Capital
$
6,029,355 
$
6,002,928 
See accompanying notes to consolidated financial statements.
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Table of Contents
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Income
(in thousands, except per unit amounts)
Year Ended December 31,
2024
2023
2022
Rental and other revenues
$
825,862 
$
833,997 
$
828,929 
Operating expenses:
Rental property and other expenses
272,173 
268,782 
259,806 
Depreciation and amortization
299,046 
299,411 
287,610 
Impairments of real estate assets
24,600 
— 
36,515 
General and administrative
41,903 
42,857 
42,266 
Total operating expenses
637,722 
611,050 
626,197 
Interest expense
147,198 
136,710 
105,385 
Other income
12,337 
4,435 
1,530 
Gains on disposition of property
46,817 
47,773 
63,546 
Gain on deconsolidation of affiliate
— 
11,778 
— 
Equity in earnings of unconsolidated affiliates
4,158 
1,107 
1,535 
Net income
104,254 
151,330 
163,958 
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates
34 
549 
(1,230)
Distributions on Preferred Units
(2,485)
(2,485)
(2,486)
Net income available for common unitholders
$
101,803 
$
149,394 
$
160,242 
Earnings per Common Unit – basic:
Net income available for common unitholders
$
0.94 
$
1.39 
$
1.50 
Weighted average Common Units outstanding – basic
107,910 
107,376 
107,153 
Earnings per Common Unit – diluted:
Net income available for common unitholders
$
0.94 
$
1.39 
$
1.50 
Weighted average Common Units outstanding – diluted
107,910 
107,376 
107,158 
See accompanying notes to consolidated financial statements.
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HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Comprehensive Income
(in thousands)
Year Ended December 31,
2024
2023
2022
Comprehensive income:
Net income
$
104,254 
$
151,330 
$
163,958 
Other comprehensive income/(loss):
Settlement of cash flow hedges
— 
(493)
— 
Amortization of cash flow hedges
(249)
(293)
(238)
Total other comprehensive loss
(249)
(786)
(238)
Total comprehensive income
104,005 
150,544 
163,720 
Less-comprehensive (income)/loss attributable to noncontrolling interests
34 
549 
(1,230)
Comprehensive income attributable to common unitholders
$
104,039 
$
151,093 
$
162,490 
See accompanying notes to consolidated financial statements.
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HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Capital
(in thousands)
Common Units
Accumulated
Other
Comprehensive
Income/(Loss)
Noncontrolling
Interests in
Consolidated
Affiliates
Total
General
Partners’
Capital
Limited
Partners’
Capital
Balance as of 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
52 
5,115 
— 
— 
5,167 
Redemptions of Common Units
(38)
(3,725)
— 
— 
(3,763)
Distributions on Common Units ($2.00 per unit)
(2,142)
(212,089)
— 
— 
(214,231)
Distributions on Preferred Units ($86.25 per unit)
(25)
(2,461)
— 
— 
(2,486)
Share-based compensation expense, net of forfeitures
76 
7,476 
— 
— 
7,552 
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
449 
44,445 
— 
— 
44,894 
Net (income) attributable to noncontrolling interests in consolidated affiliates
(12)
(1,218)
— 
1,230 
— 
Comprehensive income:
Net income
1,640 
162,318 
— 
— 
163,958 
Other comprehensive loss
— 
— 
(238)
— 
(238)
Total comprehensive income
163,720 
Balance as of 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
2 
188 
— 
— 
190 
Redemptions of Common Units
(2)
(161)
— 
— 
(163)
Distributions on Common Units ($2.00 per unit)
(2,147)
(212,569)
— 
— 
(214,716)
Distributions on Preferred Units ($86.25 per unit)
(25)
(2,460)
— 
— 
(2,485)
Share-based compensation expense, net of forfeitures
70 
6,914 
— 
— 
6,984 
Contributions from noncontrolling interests in consolidated affiliates
— 
— 
— 
320 
320 
Adjustment of Redeemable Common Units to fair value and
contributions/distributions from/to the General Partner
156 
15,483 
— 
— 
15,639 
Net loss attributable to noncontrolling interests in consolidated affiliates
5 
544 
— 
(549)
— 
Deconsolidation of affiliate
— 
— 
— 
(17,281)
(17,281)
Comprehensive income:
Net income
1,513 
149,817 
— 
— 
151,330 
Other comprehensive loss
— 
— 
(786)
— 
(786)
Total comprehensive income
150,544 
Balance as of December 31, 2023
24,064 
2,382,419 
(1,997)
4,725 
2,409,211 
Issuances of Common Units, net of issuance costs and tax withholdings
512 
50,725 
— 
— 
51,237 
Distributions on Common Units ($2.00 per unit)
(2,158)
(213,678)
— 
— 
(215,836)
Distributions on Preferred Units ($86.25 per unit)
(25)
(2,460)
— 
— 
(2,485)
Share-based compensation expense, net of forfeitures
80 
7,920 
— 
— 
8,000 
Distributions to noncontrolling interests in consolidated affiliates
— 
— 
— 
(400)
(400)
Adjustment of Redeemable Common Units to fair value and
contributions/distributions from/to the General Partner
(171)
(16,918)
— 
— 
(17,089)
Net loss attributable to noncontrolling interests in consolidated affiliates
— 
34 
— 
(34)
— 
Comprehensive income:
Net income
1,043 
103,211 
— 
— 
104,254 
Other comprehensive loss
— 
— 
(249)
— 
(249)
Total comprehensive income
104,005 
Balance as of December 31, 2024
$
23,345 
$
2,311,253 
$
(2,246)
$
4,291 
$
2,336,643 
See accompanying notes to consolidated financial statements.
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HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
2024
2023
2022
Operating activities:
Net income
$
104,254 
$
151,330 
$
163,958 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
299,046 
299,411 
287,610 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
1,413 
1,135 
(42)
Share-based compensation expense
8,000 
6,984 
7,552 
Net credit losses on operating lease receivables
2,289 
3,834 
3,199 
Accrued interest on mortgages and notes receivable
(548)
(805)
(88)
Amortization of debt issuance costs
5,638 
4,884 
4,324 
Amortization of cash flow hedges
(249)
(293)
(238)
Amortization of mortgages and notes payable fair value adjustments
112 
(288)
(70)
Impairments of real estate assets
24,600 
— 
36,515 
Losses on debt extinguishment
173 
602 
— 
Net gains on disposition of property
(46,817)
(47,773)
(63,546)
Gain on deconsolidation of affiliate
— 
(11,778)
— 
Equity in earnings of unconsolidated affiliates
(4,158)
(1,107)
(1,535)
Distributions of earnings from unconsolidated affiliates
5,973 
1,246 
614 
Settlement of cash flow hedges
— 
(493)
— 
Changes in operating assets and liabilities:
Accounts receivable
(3,222)
(547)
(10,955)
Prepaid expenses and other assets
2,669 
1,259 
1,685 
Accrued straight-line rents receivable
(9,626)
(24,510)
(29,421)
Accounts payable, accrued expenses and other liabilities
14,037 
3,871 
22,217 
Net cash provided by operating activities
403,584 
386,962 
421,779 
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired
(50,835)
(18,544)
(224,934)
Investments in development in-process
(4,149)
(33,848)
(44,352)
Investments in tenant improvements and deferred leasing costs
(143,824)
(112,290)
(120,739)
Investments in building improvements
(41,005)
(64,312)
(76,415)
Net proceeds from disposition of real estate assets
100,934 
101,829 
130,038 
Distributions of capital from unconsolidated affiliates
8,484 
6,594 
— 
Investments in mortgages and notes receivable
(6,229)
(14,463)
(24)
Repayments of mortgages and notes receivable
63 
9,888 
288 
Investments in and advances to unconsolidated affiliates
(153,361)
(132,609)
(261,772)
Repayments of preferred equity from unconsolidated affiliates
— 
80,000 
— 
Changes in earnest money deposits
(10,000)
15,500 
(15,500)
Changes in other investing activities
(2,513)
(7,431)
(1,389)
Net cash used in investing activities
$
(302,435)
$
(169,686)
$
(614,799)
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HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - Continued
(in thousands)
Year Ended December 31,
2024
2023
2022
Financing activities:
Distributions on Common Units
$
(215,836)
$
(214,716)
$
(214,231)
Redemptions/repurchases of Preferred Units
— 
(10)
— 
Redemptions of Common Units
— 
(163)
(3,763)
Distributions on Preferred Units
(2,485)
(2,485)
(2,486)
Distributions to noncontrolling interests in consolidated affiliates
(400)
— 
(1,411)
Proceeds from the issuance of Common Units
53,518 
1,741 
7,570 
Costs paid for the issuance of Common Units
(843)
(226)
(247)
Repurchase of units related to tax withholdings
(1,438)
(1,325)
(2,156)
Borrowings on revolving credit facility
339,000 
249,000 
675,000 
Repayments of revolving credit facility
(255,000)
(615,000)
(359,000)
Borrowings on mortgages and notes payable
— 
590,352 
550,000 
Repayments of mortgages and notes payable
(7,056)
(206,726)
(456,444)
Contributions from noncontrolling interests in consolidated affiliates
— 
320 
— 
Payments for debt issuance costs and other financing activities
(8,501)
(6,188)
(4,905)
Net cash provided by/(used in) financing activities
(99,041)
(205,426)
187,927 
Net increase/(decrease) in cash and cash equivalents and restricted cash
2,108 
11,850 
(5,093)
Cash from deconsolidation of affiliate
— 
(6,386)
— 
Cash and cash equivalents and restricted cash at beginning of the period
31,569 
26,105 
31,198 
Cash and cash equivalents and restricted cash at end of the period
$
33,677 
$
31,569 
$
26,105 
Reconciliation of cash and cash equivalents and restricted cash:
Year Ended December 31,
2024
2023
2022
Cash and cash equivalents at end of the period
$
22,412 
$
25,123 
$
21,357 
Restricted cash at end of the period
11,265 
6,446 
4,748 
Cash and cash equivalents and restricted cash at end of the period
$
33,677 
$
31,569 
$
26,105 
Supplemental disclosure of cash flow information:
Year Ended December 31,
2024
2023
2022
Cash paid for interest, net of amounts capitalized
$
133,584 
$
129,764 
$
102,501 
Supplemental disclosure of non-cash investing and financing activities:
Year Ended December 31,
2024
2023
2022
Changes in accrued capital expenditures (1)
(2,667)
2,342 
(1,426)
Write-off of fully depreciated real estate assets
93,636 
76,722 
58,905 
Write-off of fully amortized leasing costs
47,644 
36,051 
29,083 
Write-off of fully amortized debt issuance costs
4,083 
1,356 
3,292 
Adjustment of Redeemable Common Units to fair value
16,271 
(16,457)
(45,712)
Derecognition of lease liabilities related to right of use assets
(4,027)
— 
— 
__________
(1)
Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities as of December 31, 2024, 2023 and 2022 were $52.9 million, $55.7 million
and $53.2 million, respectively.
See accompanying notes to consolidated financial statements.
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HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024
(tabular dollar amounts in thousands, except per share and per unit data)
1.    Description of Business and Significant Accounting Policies
Description of Business
Highwoods Properties, Inc. (the “Company”) is a fully integrated real estate investment trust (“REIT”) that provides leasing, management, development,
construction and other customer-related services for its properties and for third parties. The Company conducts its activities through Highwoods Realty Limited
Partnership (the “Operating Partnership”). As of December 31, 2024, we owned or had an interest in 27.8 million rentable square feet of in-service properties, 1.6
million rentable square feet of office properties under development and development land with approximately 4.9 million rentable square feet of potential office
build out.
The Company is the sole general partner of the Operating Partnership. As of December 31, 2024, the Company owned all of the Preferred Units and 107.2
million, or 98.0%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.2 million Common Units. In the event the Company
issues shares of Common Stock, the net proceeds of the issuance are contributed to the Operating Partnership in exchange for additional Common Units. Generally,
the Operating Partnership is obligated to redeem each Common Unit at the request of the unitholder for cash equal to the value of one share of Common Stock
based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company, at its
option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock. The Common Units owned by the
Company are not redeemable. During 2024, the Company redeemed 5,385 Common Units for a like number of shares of Common Stock.
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.
As of December 31, 2024, we are involved with six entities we determined to be variable interest entities, one of which we are the primary beneficiary and is
consolidated and five of which we are not the primary beneficiary and are not consolidated.
All intercompany transactions and accounts have been eliminated.
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. 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 actuarial estimates of claim liabilities. When
determining our liabilities, we include claims for
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incurred losses, even if they are unreported. As of December 31, 2024, a reserve of $0.5 million was recorded to cover estimated reported and unreported claims.
Real Estate and Related Assets
Real estate and related assets are recorded at cost and stated at cost less accumulated depreciation. Renovations, replacements and other expenditures that
improve or extend the life of assets are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary maintenance and repairs are charged
to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful life of 40 years for buildings and depreciable land
infrastructure costs, 15 years for building improvements and five to seven years for furniture, fixtures and equipment. Tenant improvements are amortized using the
straight-line method over the initial fixed terms of the respective leases, which generally range from three to 10 years. Depreciation expense for real estate assets
was $256.0 million, $253.2 million and $240.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Expenditures directly related to the development and construction of real estate assets are included in net real estate assets and stated at depreciated cost.
Development expenditures include pre-construction costs essential to the development of properties, development and construction costs, interest costs on
qualifying assets, real estate taxes, development personnel salaries and related costs and other costs incurred during the period of development. Interest and other
carrying costs are capitalized until the building is ready for its intended use, but not later than a year from cessation of major construction activity. We consider a
construction project as substantially completed and ready for its intended use upon the completion of tenant improvements. We cease capitalization on the portion
that is substantially completed and occupied or held available for occupancy and capitalize only those costs associated with the portion under construction.
We record liabilities for the performance of asset retirement activities when the obligation to perform such activities is probable even when uncertainty exists
about the timing and/or method of settlement.
Upon the acquisition of real estate assets accounted for as asset acquisitions, we assess the fair value of acquired tangible assets such as land, buildings and
tenant improvements, intangible assets and liabilities such as above and below market leases, acquired in-place leases and other identifiable intangible assets and
assumed liabilities. We allocate fair value on a relative basis based on estimated cash flow projections that utilize discount and/or capitalization rates as well as
available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
The above and below market rate portions of leases acquired in connection with property acquisitions are recorded in deferred leasing costs and in accounts
payable, accrued expenses and other liabilities, respectively, at fair value and amortized into rental revenue over the remaining term of the respective leases as
described below. Fair value is calculated as the present value of the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and
(2) our estimate of fair market lease rates for each corresponding in-place lease, using a discount rate that reflects the risks associated with the leases acquired and
measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any renewal option
that the customer would be economically compelled to exercise for below-market leases.
In-place leases acquired are recorded at fair value in deferred leasing costs and amortized to depreciation and amortization expense over the remaining term of
the respective lease. The value of in-place leases is based on our evaluation of the specific characteristics of each customer’s lease. Factors considered include
estimates of carrying costs during hypothetical expected lease-up periods, current market conditions, the customer’s credit quality and costs to execute similar
leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the
expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider tenant improvements, leasing
commissions and legal and other related expenses.
Assumed debt, if any, is recorded at fair value based on the present value of the expected future payments.
Real estate and other assets are classified as long-lived assets held for use or as long-lived assets held for sale. Real estate is classified as held for sale when the
sale of the asset is probable, has been duly approved by the Company, a legally enforceable contract has been executed and the buyer’s due diligence period, if any,
has expired.
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Impairments of Real Estate Assets and Investments in Unconsolidated Affiliates
With respect to assets classified as held for use, we perform an impairment analysis if our evaluation of events or changes in circumstances indicate that the
carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, change in our
designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost. This
analysis is generally performed at the property level, except when an asset is part of an interdependent group such as an office park, and consists of determining
whether the asset’s carrying amount will be recovered from its undiscounted estimated future operating and residual cash flows. These cash flows are estimated
based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers,
changes in market rental rates, costs to operate each property and expected ownership periods. For properties under development, the cash flows are based on
expected service potential of the asset or asset group when development is substantially complete.
If the carrying amount of a held for use asset exceeds the sum of its undiscounted future operating and residual cash flows, an impairment loss is recorded for
the difference between estimated fair value of the asset and the carrying amount. We generally estimate the fair value of assets held for use by using discounted
cash flow analyses. In some instances, appraisal information may be available and is used in addition to a discounted cash flow analysis. As the factors used in
generating these cash flows are difficult to predict and subject to future events that may alter our assumptions, the discounted and/or undiscounted future operating
and residual cash flows estimated by us in our impairment analyses or those established by appraisal may not be achieved and we may be required to recognize
future impairment losses on properties held for use.
We record assets held for sale at the lower of the carrying amount or estimated fair value. Fair value of assets held for sale is equal to the estimated or
contracted sales price with a potential buyer less costs to sell. The impairment loss is the amount by which the carrying amount exceeds the estimated fair value.
We also analyze our investments in unconsolidated affiliates for impairment. This analysis consists of determining whether an expected loss in market value of
an investment is other than temporary by evaluating the length of time and the extent to which the market value has been less than cost, the financial condition and
near-term prospects of the investment, and our intent and ability to retain our investment for a period of time sufficient to allow for any anticipated recovery in
market value. As the factors used in this analysis are difficult to predict and subject to future events that may alter our assumptions, we may be required to
recognize future impairment losses on our investments in unconsolidated affiliates.
Sales of Real Estate
For sales of real estate where we have determined an enforceable contract exists and collection of the consideration to which we are entitled in exchange for
transferring the real estate is probable, the related assets and liabilities are removed from the balance sheet and the resultant gain or loss is recorded in the period
the transaction closes. Any post-sale involvement is accounted for as a separate performance obligation and the allocable sales price is recognized when the
separate performance obligation is satisfied.
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 (“CAM”). Our office properties that are under lease are primarily located in Atlanta, Charlotte, Dallas, Nashville,
Orlando, 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. Payments from customers for CAM are considered nonlease components that are separated from lease components and are generally accounted
for in accordance with the revenue recognition standard. However, we qualified for and elected the practical expedient related to combining the components
because the lease component is classified as an operating lease and the timing and pattern of transfer of CAM income, which is not the predominant component, is
the same as the lease component. As such, consideration for CAM is accounted for as part of the overall consideration in the lease. Payments from customers for
property taxes and insurance are considered noncomponents of the lease and therefore no consideration is allocated to them because they do not transfer a good or
service to the customer. Fixed contractual payments from our leases are recognized on a straight-line basis over the terms of the respective leases. This means that,
with respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental
revenue recognized for the period. Straight-line rental revenue is commenced when the customer assumes control of the leased premises. Accrued straight-line rents
receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements.
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Some of our leases are subject to annual changes in the Consumer Price Index (“CPI”). Although increases in the CPI are not estimated as part of our
measurement of straight-line rental revenue, to the extent that actual CPI is greater or less than the CPI at lease commencement, the amount of rent recognized in a
given year is affected accordingly.
Some of our leases have termination and/or extension options. Termination options allow the customer to terminate the lease prior to the end of the lease term
under certain circumstances. Termination options generally become effective halfway or further into the original lease term and require advance notification from
the customer and payment of a termination fee that reimburses us for a portion of the remaining rent under the original lease term and the undepreciated lease
inception costs such as commissions, tenant improvements and lease incentives. Termination fee income is recognized on a straight-line basis from the date of the
executed termination agreement through lease expiration when the amount of the fee is determinable and collectability of the fee is reasonably assured. Our
extension options generally require a re-negotiation with the customer at market rates.
Initial direct costs, primarily commissions, related to the leasing of our office properties are included in deferred leasing costs and are stated at amortized cost.
Such expenditures are part of the investment necessary to execute leases and are, therefore, classified as investment activities in the statement of cash flows. All
leasing commissions paid to third parties and our in-house personnel for new leases or lease renewals are capitalized. Capitalized leasing costs are amortized on a
straight-line basis over the initial fixed terms of the respective leases. All other costs to negotiate or arrange a lease are expensed as incurred.
Lease incentive costs, which are payments made to or on behalf of a customer as an incentive to sign a lease, are capitalized in deferred leasing costs and
amortized on a straight-line basis over the respective lease terms as a reduction of rental revenues.
Lease related receivables, which include accounts receivable and accrued straight-line rents receivable, are reduced for credit losses when the amount recorded
is determined, in management’s judgement, to not be probable of collection. Such amounts are recognized as a reduction to rental and other revenues. We regularly
evaluate the collectability of our lease related receivables. Our evaluation of collectability primarily consists of reviewing the credit quality of our customer,
historical trends of the customer and changes in customer payment terms. We do not maintain a general reserve to estimate amounts that may not be collectible. If
our assumptions regarding the collectability of lease related receivables prove incorrect, we could experience credit losses in excess of what was recognized in
rental and other revenues.
Discontinued Operations
Properties that are sold or classified as held for sale are classified as discontinued operations provided that the disposal represents a strategic shift that has (or
will have) a major effect on our operations and financial results. Interest expense is included in discontinued operations if a related loan securing the sold property
is to be paid off or assumed by the buyer in connection with the sale.
Investments in Unconsolidated Affiliates
We account for our joint venture investments using the equity method of accounting when our interests represent a general partnership interest but substantive
participating rights or substantive kick out rights have been granted to the limited partners or when our interests do not represent a general partnership interest and
we do not control the major operating and financial policies of the investment. These investments are initially recorded at cost as investments in unconsolidated
affiliates and are subsequently adjusted for our share of earnings and cash contributions and distributions. To the extent our cost basis at formation of the joint
venture is different than the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in our share of
equity in earnings of unconsolidated affiliates.
Cash Equivalents
We consider highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash represents cash deposits that are legally restricted or held by third parties on our behalf, such as construction-related escrows, property
disposition proceeds set aside and designated or intended to fund future tax-deferred
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exchanges of qualifying real estate investments and escrows and reserves for debt service, real estate taxes and property insurance established pursuant to certain
mortgage financing arrangements.
Redeemable Common Units and Preferred Units
Limited partners holding Common Units other than the Company (“Redeemable Common Units”) have the right to put any and all of the Common Units to the
Operating Partnership and the Company has the right to put any and all of the Preferred Units to the Operating Partnership in exchange for their liquidation
preference plus accrued and unpaid distributions in the event of a corresponding redemption by the Company of the underlying Preferred Stock. Consequently,
these Redeemable Common Units and Preferred Units are classified outside of permanent partners’ capital in the Operating Partnership’s accompanying balance
sheets. The recorded value of the Redeemable Common Units is based on fair value at the balance sheet date as measured by the closing price of Common Stock on
that date multiplied by the total number of Redeemable Common Units outstanding. The recorded value of the Preferred Units is based on their redemption value.
Income Taxes
The Company has elected and expects to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
“Code”). A corporate REIT is a legal entity that holds real estate assets and, through the payment of dividends to stockholders, is generally permitted to reduce or
avoid the payment of federal and state income taxes at the corporate level. To maintain qualification as a REIT, the Company is required to pay dividends to its
stockholders equal to at least 90.0% of its annual REIT taxable income, excluding net capital gains. The partnership agreement requires the Operating Partnership
to pay economically equivalent distributions on outstanding Common Units at the same time that the Company pays dividends on its outstanding Common Stock.
Other than income taxes related to its taxable REIT subsidiary, the Operating Partnership does not reflect any federal income taxes in its financial statements
since, as a partnership, the taxable effects of its operations are attributed to its partners. The Operating Partnership does record state income tax for states that tax
partnership income directly.
We conduct certain business activities through a taxable REIT subsidiary, as permitted under the Code. The taxable REIT subsidiary is subject to federal, state
and local income taxes on its taxable income. We record provisions for income taxes based on its income recognized for financial statement purposes, including the
effects of differences between such income and the amount recognized for tax purposes.
Concentration of Credit Risk
As of December 31, 2024, our consolidated properties were leased to approximately 1,500 customers. The geographic locations that comprise greater than
10.0% of our rental and other revenues are Atlanta, Charlotte, Nashville, Raleigh and Tampa. Our customers engage in a wide variety of businesses. No single
customer generated more than 4% of our consolidated revenues during 2024.
We maintain our cash and cash equivalents and our restricted cash at financial or other intermediary institutions. The combined account balances at each
institution may exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance
coverage. Additionally, from time to time in connection with tax-deferred 1031 transactions, our restricted cash balances may be commingled with other funds
being held by any such intermediary institution, which would subject our balance to the credit risk of the institution.
Derivative 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 generally limit 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. The
interest rate on all of our variable rate debt is generally adjusted at one or three month intervals, subject to settlements under these interest rate hedge contracts.
Interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements
without exchange of the underlying notional amount. Changes in the fair value of
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derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income/(loss) and are subsequently reclassified into
interest expense as interest payments are made on our debt.
We account for terminated derivative instruments by recognizing the related accumulated other comprehensive income/(loss) balance in current earnings,
unless the hedged forecasted transaction continues as originally planned, in which case we continue to amortize the accumulated other comprehensive
income/(loss) into interest expense over the originally designated hedge period.
Earnings Per Share and Per Unit
Basic earnings per share of the Company is computed by dividing net income available for common stockholders by the weighted Common Shares outstanding
- basic. Diluted earnings per share is computed by dividing net income available for common stockholders (inclusive of noncontrolling interests in the Operating
Partnership) by the weighted Common Shares outstanding - basic plus the dilutive effect of options, warrants and convertible securities outstanding, including
Common Units, using the treasury stock method. Weighted Common Shares outstanding - basic includes all unvested restricted stock where dividends received on
such restricted stock are non-forfeitable.
Basic earnings per unit of the Operating Partnership is computed by dividing net income available for common unitholders by the weighted Common Units
outstanding - basic. Diluted earnings per unit is computed by dividing net income available for common unitholders by the weighted Common Units outstanding -
basic plus the dilutive effect of options and warrants, using the treasury stock method. Weighted Common Units outstanding - basic includes all of the Company’s
unvested restricted stock where distributions received on such restricted stock are non-forfeitable.
Recently Issued Accounting Standards
The Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that provides temporary optional expedients and
exceptions to ease the financial reporting burdens related to the market transition from LIBOR and other interbank offered rates to alternative reference rates, such
as the Secured Overnight Financing Rate (“SOFR”). These optional expedients and exceptions provide guidance on contract modifications and hedge accounting.
We have completed the transition to SOFR rates for our applicable outstanding debt instruments with no material impact to our Consolidated Financial Statements.
The FASB issued an ASU that requires enhanced segment disclosures, primarily regarding significant segment expenses. We have adopted this ASU and
applied the new requirements retrospectively to all prior periods presented in the financial statements. Accordingly, our segment disclosures now include rental
property and other expenses for each of our reportable segments. See Note 15.
The FASB issued an ASU that requires disaggregated disclosure of income statement expenses. Certain expense captions will be disaggregated into specified
categories in disclosures within the Notes to Consolidated Financial Statements. The ASU is required to be adopted in our 2027 Annual Report. We do not expect
this adoption to have a material effect on our Consolidated Financial Statements.
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2.    Leases
Information as Lessor
We recognized rental and other revenues related to operating lease payments of $811.6 million, $819.9 million and $816.3 million, of which variable lease
payments were $75.3 million, $72.9 million and $69.8 million, during the years ended December 31, 2024, 2023 and 2022, respectively. The following table sets
forth the undiscounted cash flows for future minimum base rents to be received from customers for leases in effect as of December 31, 2024 for our consolidated
properties:
2025
$
674,112 
2026
652,377 
2027
600,978 
2028
526,898 
2029
475,256 
Thereafter
1,654,446 
$
4,584,067 
Information as Lessee
We have office assets encompassing 1.2 million rentable square feet subject to operating ground leases in Nashville, Orlando, Raleigh and Tampa with a
weighted average remaining term of 50 years. Rental payments on these leases are adjusted periodically based on either the CPI or on a pre-determined schedule.
The monthly payments on a pre-determined schedule are recognized on a straight-line basis over the terms of the respective leases. Changes in the CPI are not
estimated as part of our measurement of straight-line rental expense. We recognized $2.6 million of ground lease expense during each of the years ended
December 31, 2024, 2023, and 2022, and we paid $2.5 million, $2.4 million and $2.4 million in cash during 2024, 2023 and 2022, respectively.
The following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments on operating ground leases as of
December 31, 2024 and a reconciliation of those cash flows to the operating lease liability as of December 31, 2024:
2025
$
2,071 
2026
2,121 
2027
2,172 
2028
2,226 
2029
2,067 
Thereafter
66,237 
76,894 
Discount
(49,072)
Lease liability
$
27,822 
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3.    Real Estate Assets
Acquisitions
During 2024, we acquired fee simple title to the land underneath our Century Center assets in Atlanta for a purchase price, including capitalized acquisition
costs, of $50.8 million. We previously held most of our buildings in Century Center, a 12-building office park encompassing 1.7 million square feet and 13 acres of
developable land, pursuant to a long-term ground lease with a third party who owned fee simple title to the land.
During 2023, we acquired land in Raleigh for a purchase price, including capitalized acquisition costs, of $2.7 million.
During 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 2022, we also acquired land in Charlotte for an aggregate purchase price, including capitalized acquisition costs, of $27.0 million.
Dispositions
During 2024, we sold a total of 10 buildings in Raleigh and land in Greensboro for an aggregate sales price of $105.3 million and recorded aggregate gains on
disposition of property of $46.8 million. The land sale completed our exit from the Greensboro market.
During 2023, we sold a total of four buildings and various land parcels in Nashville, Raleigh and Tampa for an aggregate sales price of $103.8 million and
recorded aggregate gains on disposition of property of $47.8 million.
During 2022, we sold a total of five office buildings and various land parcels in Atlanta, Greensboro, Richmond and Tampa for an aggregate sales price of
$133.5 million (before closing credits to buyers of $1.1 million) and recorded aggregate gains on disposition of property of $63.5 million.
Seller Financed Transaction
During 2023, we sold a land parcel in Tampa for an aggregate sales price of $21.0 million. In connection with this disposition, we received cash of $2.0 million
and provided $19.0 million of non-recourse seller financing in the form of a two-year, interest-only first mortgage that bears interest at SOFR plus 100 basis points.
We have deemed repayment of the mortgage to be not probable primarily because the seller financing represents a significant portion of the aggregate sales price
and, since the seller financing is non-recourse, our only remedy in the event of a default would be to foreclose on the asset. As a result, the disposition does not
meet the contract criteria to be recognized as a sale. Until such time as the contract criteria are met, we will continue to account for the land parcel as land held for
development on our Consolidated Balance Sheets, and the mortgage associated with the seller financing will not be recorded on our Consolidated Balance Sheets.
The cash received at closing is recorded as a nonrefundable deposit in accounts payable, accrued expenses and other liabilities on our Consolidated Balance Sheets.
Impairments
During 2024, we recorded an impairment charge of $24.6 million to lower the carrying amount of EQT Plaza, a 616,000 square foot non-core building in CBD
Pittsburgh, to its estimated fair value.
During 2022, we recorded the following impairment charges:
•
During the third quarter of 2022, we recorded an impairment charge of $1.5 million to lower the carrying amount of a land parcel to its estimated fair
value; and
•
During the second quarter of 2022, we recorded an impairment charge of $35.0 million to lower the carrying amount of EQT Plaza to its estimated fair
value.
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4.    Investments in and Advances to Affiliates
Unconsolidated Affiliates
We have equity interests of up to 50.0% in various joint ventures with unrelated third parties that are accounted for using the equity method of accounting
because we have the ability to exercise significant influence over the operating and financial policies of the joint venture investment. The difference between the
cost of these investments and the net book value of the underlying net assets was $21.3 million and $18.9 million as of December 31, 2024 and 2023, respectively.
The following table sets forth our ownership in unconsolidated affiliates as of December 31, 2024:
Joint Venture
Location
Ownership
Interest
Highwoods-Markel Associates, LLC
Richmond
50.0%
Granite Park Six JV, LLC
Dallas
50.0%
GPI 23 Springs JV, LLC
Dallas
50.0%
M+O JV, LLC
Dallas
50.0%
Midtown East Tampa, LLC
Tampa
50.0%
Brand/HRLP 2827 Peachtree, LLC
Atlanta
50.0%
Plaza Colonnade, Tenant-in-Common
Kansas City
50.0%
Kessinger/Hunter & Company, LC
Kansas City
26.5%
- Highwoods-Markel Associates, LLC (“Markel joint venture”)
In 1999, we formed a joint venture with Markel Corporation in which we own a 50.0% interest. The Markel joint venture 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, the Markel joint venture 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 joint venture to fair value. The assets of the Markel joint venture can only be used 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, we entered the Dallas market through the formation of two joint ventures with Granite Properties (“Granite”) to develop Granite Park Six and
23Springs. In connection with the formation, we agreed to contribute our 50.0% share of the equity required to fund each development project. The Granite Park
Six joint venture has an anticipated total investment of $200.0 million and the 23Springs joint venture has an anticipated total investment of $460.0 million. As of
December 31, 2024, we have funded $76.2 million of our share of the equity for the Granite Park Six joint venture and $94.0 million of our share of the equity for
the 23Springs joint venture.
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 and therefore do not qualify as the primary beneficiary. Accordingly, the entities are not consolidated.
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 interest rate hedge contracts that effectively cap the underlying SOFR rate at
3.5%. The initial contract capped the rate with respect to $95.2 million of any outstanding amounts and expired in July 2024. The new contract caps the rate with
respect to $38.8 million of any outstanding amounts and expires in July 2025. During 2024, we and Granite each contributed $35.5
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million to the Granite Park Six joint venture to pay down the outstanding $70.9 million balance of the construction loan. This reconsideration event did not change
our initial conclusion that the Granite Park Six joint venture is a variable interest entity of which we are not the primary beneficiary. As such, the entity remains
unconsolidated. As of December 31, 2024, $1.9 million was drawn on this loan.
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 interest rate hedge contracts that effectively cap the underlying SOFR rate at 3.5%. The
initial contract capped the rate with respect to $83.0 million of any outstanding amounts and expired in April 2024. The new contract caps the rate with respect to
$134.0 million of any outstanding amounts and expires in April 2025. As of December 31, 2024, $94.6 million was drawn on this loan.
As of December 31, 2024, our risk of loss with respect to these arrangements was limited to the carrying value of each investment balance. Our investment
balances were $76.8 million and $101.5 million as of December 31, 2024 for the Granite Park Six and 23Springs joint ventures, respectively. The assets of the
Granite Park Six and 23Springs joint ventures can only be used 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 in which
we own a 50.0% interest. As part of the transaction, the McKinney & Olive joint venture assumed a secured loan recorded at fair value of $137.0 million, with a
stated interest rate of 4.5% and an effective interest rate of 5.3%. The remainder of the purchase price paid by the McKinney & Olive joint venture was funded with
$80.0 million of short-term preferred equity contributed by us and $86.4 million of common equity contributed by each of Granite and us.
We determined that we have 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 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 2024, the McKinney & Olive joint venture paid off at maturity the remaining $134.3 million balance on the secured mortgage loan. In connection with
this loan payoff, we and Granite each contributed $62.1 million to the joint venture.
During 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. Prior to the redemption, we received monthly distributions on
the preferred equity at a rate of SOFR plus 350 basis points.
These reconsideration events 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 December 31, 2024, our risk of loss with respect to this arrangement was limited to the carrying value of our investment balance of $182.1 million. The
assets of the McKinney & Olive joint venture can only be used to settle obligations of the joint venture, and its creditors have no recourse to our wholly owned
assets.
- Midtown East Tampa, LLC (“Midtown East joint venture”)
During 2022, we formed a joint venture with The Bromley Companies (“Bromley”) in which we own a 50.0% interest to construct Midtown East, a multi-
customer office development project located in the mixed-use Midtown Tampa project in Tampa’s Westshore submarket. Upon completion, the Midtown East joint
venture will own 143,000 square feet of an overall 432,000 square foot tower. The rest of Midtown East will be owned by and serve as the future headquarters of
Tampa Electric and Peoples Gas. The total anticipated investment for the Midtown East joint venture’s share of the overall project is $83.0 million. In connection
with the formation, we agreed to contribute our 50.0% share of the equity required to fund the development project, $14.2 million of which was funded as of
December 31, 2024. We also committed to provide a $52.3 million interest-only secured construction loan to the Midtown East joint venture that is scheduled to
mature on the third
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anniversary of completion. The loan bears interest at SOFR plus 450 basis points. As of December 31, 2024, $21.4 million was drawn on this loan.
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 to Bromley as an equity holder. The Midtown East 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 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 December 31, 2024, our risk of loss with respect to this arrangement was $35.5 million, which consists of the $14.1 million carrying value of our
investment balance plus the $21.4 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 advances to unconsolidated affiliates on our Consolidated Balance Sheets. The assets of the Midtown East joint venture can only be used 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 a joint venture with Brand Properties, LLC (“Brand”) to construct 2827 Peachtree, a 135,000 square foot, multi-customer office
building located in Atlanta’s Buckhead submarket. The 2827 Peachtree joint venture has an anticipated total investment of $79.0 million. 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. 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 $52.8 million interest-only secured
construction loan to the 2827 Peachtree joint venture that was originally scheduled to mature in December 2024 with an option to extend for one year. During 2024,
the joint venture exercised the option to extend the loan for one year. The loan bears interest at SOFR plus 310 basis points. As of December 31, 2024, $48.2
million was drawn on this loan.
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 to 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 December 31, 2024, our risk of loss with respect to this arrangement was $60.7 million, which consists of the $12.5 million carrying value of our
investment balance plus the $48.2 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 advances to unconsolidated affiliates on our Consolidated Balance Sheets. The assets of the 2827 Peachtree joint venture can only be used to
settle obligations of the joint venture, and its creditors have no recourse to our wholly owned assets.
- Other Activities
We receive development, management and leasing fees for services provided to certain of our joint ventures. These fees are recognized in income to the extent
of our respective joint venture partner’s interest. During the years ended December 31, 2024, 2023 and 2022, we recognized $0.9 million, $1.0 million and $0.6
million, respectively, of development/construction, management and leasing fees from our unconsolidated joint ventures.
Consolidated Affiliate
- HRLP MTW, LLC (“Midtown West joint venture”)
In 2019, we and Bromley formed a joint venture to construct Midtown West, a 152,000 square foot, multi-customer office building located in the mixed-use
Midtown Tampa project in Tampa’s Westshore submarket. 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 Bromley contributed land valued at $5.0 million in exchange for the remaining 20.0% interest. We also
provided a
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$46.3 million interest-only secured construction loan to the Midtown West joint venture. All of the amounts outstanding under this loan were repaid in 2023.
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 and Bromley as equity holders. 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 investments provided by us and Bromley 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. As such, the Midtown West
joint venture is consolidated and all intercompany transactions and accounts are eliminated.
During 2023, the Midtown West joint venture obtained a $45.0 million, five-year secured mortgage loan from a third party lender, with an effective fixed rate
of 7.29%. This loan is scheduled to mature in November 2028. The joint venture incurred $0.8 million of debt issuance costs, which will be amortized over the
term of the loan. The net proceeds were used by the joint venture to repay in full the secured construction loan we provided, as discussed above. This
reconsideration event did not change our initial conclusion that the Midtown West joint venture is a variable interest entity of which we are the primary beneficiary.
As such, the entity remains 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:
December 31,
2024
2023
Net real estate assets
$
58,443 
$
60,410 
Cash and cash equivalents
$
1,530 
$
1,096 
Restricted cash
$
— 
$
2,260 
Accrued straight-line rents receivable
$
5,192 
$
5,041 
Deferred leasing costs, net
$
2,596 
$
2,783 
Prepaid expenses and other assets
$
104 
$
124 
Mortgages and notes payable, net
$
44,325 
$
44,192 
Accounts payable, accrued expenses and other liabilities
$
1,297 
$
2,872 
The assets of the Midtown West joint venture can only be used to settle obligations of the joint venture, and its creditors have no recourse to our wholly owned
assets.
Joint Venture Rights and Obligations
With respect to some of our joint ventures, we have a right to buy, and our joint venture partner has a right to sell to us, such joint venture partner’s interest
under certain circumstances for fair market value during various timeframes in the future. For our Granite Park Six joint venture, such rights are exercisable during
the two-year period commencing on the 10th anniversary of the completion date. For each of our 23Springs and McKinney & Olive joint ventures, such rights are
exercisable during the two-year period commencing on the 12th anniversary of the stabilization date of 23Springs. For our 2827 Peachtree joint venture, such rights
are exercisable during the two-year period commencing on the earlier of: (1) the stabilization date; (2) the seventh anniversary of the completion date; and (3) the
maturity of the loan provided by us to the joint venture. For our Midtown West joint venture, our right to buy our partner’s interest is exercisable during the two-
year period commencing on the seventh anniversary of the completion date, and our partner’s right to sell its interest to us is exercisable during the period
commencing on the stabilization date and ending on the ninth anniversary of the completion date.
In addition to the foregoing, with respect to our Granite Park Six, 23Springs and Midtown West joint ventures, our joint venture partner has the right to receive
additional consideration from us or the joint venture under certain circumstances if and to the extent the internal rate of return on the applicable development
project exceeds certain thresholds.
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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:
December 31,
2024
2023
Assets:
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
$
380,279 
$
401,621 
Less accumulated amortization
(170,312)
(175,697)
$
209,967 
$
225,924 
Liabilities (in accounts payable, accrued expenses and other liabilities):
Acquisition-related below market lease liabilities
$
37,482 
$
50,842 
Less accumulated amortization
(21,296)
(30,416)
$
16,186 
$
20,426 
The following table sets forth amortization of intangible assets and below market lease liabilities:
Year Ended December 31,
2024
2023
2022
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
40,301 
$
43,511 
$
44,900 
Amortization of lease incentives (in rental and other revenues)
$
2,577 
$
2,816 
$
2,090 
Amortization of acquisition-related intangible assets (in rental and other revenues)
$
3,076 
$
3,338 
$
3,320 
Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(4,240)
$
(5,019)
$
(5,452)
The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities:
Years Ending December 31,
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)
2025
$
34,976 
$
2,255 
$
2,191 
$
(2,725)
2026
30,700 
2,061 
1,868 
(2,431)
2027
27,015 
1,835 
1,521 
(2,062)
2028
23,090 
1,633 
1,404 
(1,649)
2029
20,358 
1,346 
1,291 
(1,377)
Thereafter
49,172 
4,354 
2,897 
(5,942)
$
185,311 
$
13,484 
$
11,172 
$
(16,186)
Weighted average remaining amortization periods as of December 31, 2024 (in years)
7.2
8.0
6.8
8.0
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6.    Mortgages and Notes Payable
Our mortgages and notes payable consisted of the following:
December 31,
2024
2023
Secured indebtedness (1):
5.69% mortgage loan due 2028
$
200,000 
$
200,000 
7.29% mortgage loan due 2028 (2)
44,965 
45,000 
4.27% (3.61% effective rate) mortgage loan due 2028 (3)
107,584 
110,391 
4.00% mortgage loan due 2029
84,712 
87,003 
3.61% (3.19% effective rate) mortgage loan due 2029 (4)
84,054 
84,360 
3.40% (3.50% effective rate) mortgage loan due 2033 (5)
69,575 
69,524 
4.60% (3.73% effective rate) mortgage loan due 2037 (6)
121,296 
124,474 
712,186 
720,752 
Unsecured indebtedness:
3.875% (4.038% effective rate) notes due 2027 (7)
299,134 
298,734 
4.125% (4.271% effective rate) notes due 2028 (8)
348,690 
348,276 
4.200% (4.234% effective rate) notes due 2029 (9)
349,583 
349,484 
3.050% (3.079% effective rate) notes due 2030 (10)
399,498 
399,400 
2.600% (2.645% effective rate) notes due 2031 (11)
399,048 
398,892 
7.650% (7.836% effective rate) notes due 2034 (12)
345,862 
345,407 
Variable rate term loan due 2026 (13)
200,000 
200,000 
Variable rate term loan due 2027 (13)
150,000 
150,000 
Revolving credit facility due 2028 (14)
104,000 
20,000 
2,595,815 
2,510,193 
Less-unamortized debt issuance costs
(14,442)
(17,739)
Total mortgages and notes payable, net
$
3,293,559 
$
3,213,206 
__________
(1)
Our secured mortgage loans were collateralized by real estate assets with an undepreciated book value of $1,245.0 million as of December 31, 2024. We paid down $7.1 million
of secured loan balances through principal amortization during 2024.
(2)
The borrower under this loan is our Midtown West joint venture, a consolidated 80.0% owned joint venture. See Note 4.
(3)
Net of unamortized fair market value premium of $2.1 million and $2.7 million as of December 31, 2024 and 2023, respectively.
(4)
Net of unamortized fair market value premium of $1.4 million and $1.7 million as of December 31, 2024 and 2023, respectively.
(5)
Net of unamortized fair market value discount of $0.4 million and $0.5 million as of December 31, 2024 and 2023, respectively.
(6)
Net of unamortized fair market value premium of $8.0 million and $8.6 million as of December 31, 2024 and 2023, respectively.
(7)
Net of unamortized original issuance discount of $0.9 million and $1.3 million as of December 31, 2024 and 2023, respectively.
(8)
Net of unamortized original issuance discount of $1.3 million and $1.7 million as of December 31, 2024 and 2023, respectively.
(9)
Net of unamortized original issuance discount of $0.4 million and $0.5 million as of December 31, 2024 and 2023, respectively.
(10) Net of unamortized original issuance discount of $0.5 million and $0.6 million as of December 31, 2024 and 2023, respectively.
(11) Net of unamortized original issuance discount of $1.0 million and $1.1 million as of December 31, 2024 and 2023, respectively.
(12) Net of unamortized original issuance discount of $4.1 million and $4.6 million as of December 31, 2024 and 2023, respectively.
(13) The interest rate was 5.35% as of December 31, 2024.
(14) The interest rate was 5.25% as of December 31, 2024.
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The following table sets forth scheduled future principal payments, including amortization, due on our mortgages and notes payable as of December 31, 2024:
Years Ending December 31,
Amount
2025
$
7,156 
2026
206,922 
2027
458,976 
2028
803,168 
2029
517,267 
Thereafter
1,314,512 
Less-unamortized debt issuance costs
(14,442)
$
3,293,559 
Our $750.0 million unsecured revolving credit facility was modified during the first quarter of 2024 and is now scheduled to mature in January 2028 (but can
be extended for two additional six-month periods at our option assuming no defaults have occurred). The interest rate on our revolving credit facility 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 incurred $7.7 million of debt issuance costs during the first quarter of 2024, which will be amortized along with certain existing unamortized debt issuance
costs over the remaining term of our new revolving credit facility and recorded $0.2 million of loss on debt extinguishment. During the second quarter of 2024, we
modified the revolving credit facility to provide that the interest rate may be adjusted upward or downward by 2.5 basis points depending upon whether or not we
achieve certain pre-determined sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. There was $104.0 million and $119.0
million outstanding under our revolving credit facility as of December 31, 2024 and January 31, 2025, respectively. As of both December 31, 2024 and January 31,
2025, we had $0.1 million of outstanding letters of credit, which reduce the availability on our revolving credit facility. As a result, the unused capacity of our
revolving credit facility as of December 31, 2024 and January 31, 2025 was $645.9 million and $630.9 million, respectively.
During 2023, the Operating Partnership issued $350.0 million aggregate principal amount of 7.650% notes due February 2034, less original issuance discount
of $4.6 million. These notes were priced to yield 7.836%. During 2023, we obtained an aggregate of $200.0 million notional amount of forward-starting swaps that
effectively locked the underlying 10-year treasury rate at 4.498%. Upon the subsequent issuance of the notes, we terminated the forward-starting swaps and paid
cash upon settlement. The unrealized loss of $0.5 million will be classified to interest expense as interest payments are made on the debt. Underwriting fees and
other expenses totaled $3.2 million and will be amortized over the term of the notes. The net proceeds from the issuance were used: (1) to prepay, without penalty, a
$200.0 million unsecured bank term loan that was scheduled to mature in October 2024; (2) to repay amounts outstanding under our revolving credit facility; and
(3) for general corporate purposes. We recorded $0.6 million of loss on debt extinguishment related to the term loan prepayment.
During 2023, we obtained a $200.0 million, five-year secured mortgage loan from a third party lender, with an effective fixed interest rate of 5.69%. This loan
is scheduled to mature in April 2028. We incurred $1.3 million of debt issuance costs, which will be amortized over the term of the loan.
During 2022, we obtained a $200.0 million, two-year unsecured bank term loan that was originally scheduled to mature in October 2024. This loan was
prepaid in full without penalty during the fourth quarter of 2023. The interest rate, based on current credit ratings, was SOFR plus a related spread adjustment of 10
basis points and a borrowing spread of 95 basis points. The interest rate was based on the higher of the publicly announced ratings from Moody’s Investors Service
or Standard & Poor’s Ratings Services. We were entitled to a temporary reduction in the interest rate of one basis point provided we met certain sustainability goals
with respect to the ongoing reduction of greenhouse gas emissions. 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.
During 2022, we modified our other $200.0 million unsecured bank term loan to extend the maturity date from November 2022 to May 2026. As part of this
modification, we also obtained a $150.0 million delayed-draw term loan, which was drawn in its entirety in the third quarter of 2022, that is scheduled to mature in
May 2027. The interest rate, based on current credit ratings, is SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 95 basis points.
The interest rate is based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings
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Services. Subject to written consent of the lenders, we may elect to amend this term loan no later than May 15, 2024 to provide that the interest rate may be
adjusted upward or downward by up to 2.5 basis points subject to satisfaction of certain to-be-determined sustainability goals with respect to the ongoing reduction
of greenhouse gas emissions. We incurred $2.7 million of debt issuance costs, which are being amortized along with certain existing unamortized debt issuance
costs over the remaining term of our modified term loan.
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 2022, these interest rate swaps expired.
We are currently in compliance with financial covenants with respect to our consolidated debt.
Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event
of default on the revolving credit facility, the lenders having at least 51.0% of the total commitments under the 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 Operating Partnership had $2,141.8 million carrying amount of various notes outstanding as of December 31, 2024, as detailed in the table above. The
indenture that governs these 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 have considered our short-term liquidity needs within one year from February 11, 2025 (the date of issuance of the annual financial statements) and the
adequacy of our estimated cash flows from operating activities and other available financing sources to meet these needs. Importantly, we have no scheduled debt
maturities during such one-year period. We have concluded it is probable we will meet these short-term liquidity requirements through a combination of the
following:
•
available cash and cash equivalents;
•
cash flows from operating activities;
•
issuance of debt securities by the Operating Partnership;
•
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.
Capitalized Interest
Total interest capitalized to wholly-owned and joint venture development and significant building and tenant improvement projects was $8.5 million, $9.0
million and $4.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.
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7.    Commitments and Contingencies
Lease and Contractual Commitments
We had $232.6 million of lease and contractual commitments as of December 31, 2024. Lease and contractual commitments represent commitments under
signed leases and contracts for operating properties (excluding tenant-funded tenant improvements), contracts for development/redevelopment projects and
unfunded joint venture equity contributions agreed to at formation, of which $59.7 million was recorded on our Consolidated Balance Sheets as of December 31,
2024.
Contingent Consideration
We had $0.8 million of contingent consideration related to a parcel of acquired development land as of both December 31, 2024 and 2023. The contingent
consideration is payable in cash to a third party if and to the extent future development milestones as outlined in the purchase agreement are met.
Environmental Matters
Substantially all of our in-service and development properties have been subjected to Phase I environmental assessments and, in certain instances, Phase II
environmental assessments. Such assessments and/or updates have not revealed, nor are we aware of, any environmental liability that we believe would have a
material adverse effect in our Consolidated Financial Statements.
Litigation, Claims and Assessments
From time to time, we are a party to a variety of legal proceedings, claims and assessments arising in the ordinary course of our business. We regularly assess
the liabilities and contingencies in connection with these matters based on the latest information available. For matters where it is probable that we have incurred or
will incur a loss and the loss or range of loss can be reasonably estimated, the estimated loss is accrued and charged to income in our Consolidated Financial
Statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, a reasonable estimate of liability, if
any, cannot be made. Based on the current expected outcome of such matters, none of these proceedings, claims or assessments is expected to have a material effect
on our business, financial condition, results of operations or cash flows.
Joint Venture Buyout Rights and Obligations
With respect to certain of our joint ventures, we have a right to buy, and our joint venture partner has a right to sell to us, such joint venture partner's interest
under certain circumstances for fair market value at various timeframes in the future. See Note 4.
In addition, with respect to certain of our joint ventures, our joint venture partner has a right to receive additional consideration from us or the joint venture
under certain circumstances if and to the extent the internal rate of return on the applicable development project exceeds certain thresholds. See Note 4.
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8.    Noncontrolling Interests
Noncontrolling Interests in Consolidated Affiliates
As of December 31, 2024, our noncontrolling interest in consolidated affiliates relates to our joint venture partner’s 20.0% interest in the Midtown West joint
venture. See Note 4. Our joint venture partner is an unrelated third party.
Noncontrolling Interests in the Operating Partnership
Noncontrolling interests in the Operating Partnership relate to the ownership of Redeemable Common Units. Net income attributable to noncontrolling
interests in the Operating Partnership is computed by applying the weighted average percentage of Redeemable Common Units during the period, as a percent of
the total number of outstanding Common Units, to the Operating Partnership’s net income for the period after deducting distributions on Preferred Units. When a
noncontrolling unitholder redeems a Common Unit for a share of Common Stock or cash, the noncontrolling interests in the Operating Partnership are reduced and
the Company’s share in the Operating Partnership is increased by the fair value of each security at the time of redemption.
The following table sets forth the Company’s noncontrolling interests in the Operating Partnership:
Year Ended December 31,
2024
2023
Beginning noncontrolling interests in the Operating Partnership
$
49,520 
$
65,977 
Adjustment of noncontrolling interests in the Operating Partnership to fair value
18,666 
(10,152)
Conversions of Common Units to Common Stock
(132)
(4,795)
Redemptions of Common Units
— 
(163)
Net income attributable to noncontrolling interests in the Operating Partnership
2,040 
3,164 
Distributions to noncontrolling interests in the Operating Partnership
(4,303)
(4,511)
Total noncontrolling interests in the Operating Partnership
$
65,791 
$
49,520 
The following table sets forth net income available for common stockholders and transfers from the Company’s noncontrolling interests in the Operating
Partnership:
Year Ended December 31,
2024
2023
2022
Net income available for common stockholders
$
99,763 
$
146,230 
$
156,572 
Increase in additional paid in capital from conversions of Common Units to Common Stock
132 
4,795 
1,251 
Redemptions of Common Units
— 
163 
3,763 
Change from net income available for common stockholders and transfers from noncontrolling interests
$
99,895 
$
151,188 
$
161,586 
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9.    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 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 interest rate swaps is
determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The
variable cash payments of interest rate swaps are based on the expectation of future interest rates (forward curves) derived from observed market interest rate
curves. In addition, credit valuation adjustments are considered in the fair values to account for potential nonperformance risk, but were concluded to not be
significant inputs to the calculation for the periods presented.
Level 3. Unobservable inputs that are supported by little or no market activity and 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
Total
Quoted Prices
in Active
Markets for
Identical Assets or
Liabilities
Significant
Observable Inputs
Significant
Unobservable
Inputs
Fair Value as of December 31, 2024:
Assets:
Mortgages and notes receivable, at fair value (1)
$
11,064 
$
— 
$
11,064 
$
— 
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and
other assets)
2,295 
2,295 
— 
— 
Impaired real estate assets
26,740 
— 
— 
26,740 
Total Assets
$
40,099 
$
2,295 
$
11,064 
$
26,740 
Noncontrolling Interests in the Operating Partnership
$
65,791 
$
65,791 
$
— 
$
— 
Liabilities:
Mortgages and notes payable, net, at fair value (1)
$
3,097,323 
$
— 
$
3,097,323 
$
— 
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and
other liabilities)
2,295 
2,295 
— 
— 
Total Liabilities
$
3,099,618 
$
2,295 
$
3,097,323 
$
— 
Fair Value as of December 31, 2023:
Assets:
Mortgages and notes receivable, at fair value (1)
$
4,795 
$
— 
$
4,795 
$
— 
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and
other assets)
2,294 
2,294 
— 
— 
Total Assets
$
7,089 
$
2,294 
$
4,795 
$
— 
Noncontrolling Interests in the Operating Partnership
$
49,520 
$
49,520 
$
— 
$
— 
Liabilities:
Mortgages and notes payable, net, at fair value (1)
$
2,927,330 
$
— 
$
2,927,330 
$
— 
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and
other liabilities)
2,294 
2,294 
— 
— 
Total Liabilities
$
2,929,624 
$
2,294 
$
2,927,330 
$
— 
__________
(1)    Amounts are not recorded at fair value on our Consolidated Balance Sheets as of December 31, 2024 and 2023.
The Level 3 impaired real estate assets measured at a fair value of $26.7 million in the fourth quarter of 2024 included EQT Plaza, a non-core office building in
CBD Pittsburgh. This impairment resulted from a change in our assumptions about the use of the asset. We estimated the fair value using a discounted cash flow
analysis. We also used information from a broker’s opinion of value, which incorporates an income approach, as observable inputs were not available. Key
assumptions used in the impairment calculation were an estimated discount rate ranging from 16.7% to 19.9% and an estimated terminal capitalization rate of
9.5%.
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10.    Equity
Common Stock Issuances
During 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 2024, the Company issued 1.6 million shares of Common Stock under its equity distribution agreements at an average
gross sales price of $32.71 per share and received net proceeds, after sales commissions, of $51.3 million. There were no shares issued under these agreements in
2023. As of December 31, 2024, the Company had 92.4 million remaining shares of Common Stock authorized to be issued under its charter.
Common Stock Dividends
Dividends of the Company declared per share of Common Stock were $2.00 for each of the years ended December 31, 2024, 2023 and 2022.
The following table sets forth the Company’s estimated taxability to the common stockholders of dividends per share for federal income tax purposes:
Year Ended December 31,
2024
2023
2022
Ordinary dividend
$
1.67 
$
1.58 
$
1.82 
Capital gains
0.18 
0.42 
0.18 
Return of capital
0.15 
— 
— 
Total
$
2.00 
$
2.00 
$
2.00 
The Company’s tax returns have not been examined by the Internal Revenue Service (“IRS”) and, therefore, the taxability of dividends is subject to change.
Preferred Stock
The following table sets forth the Company’s outstanding Preferred Stock as of both December 31, 2024 and 2023 :
Issue Date
Number of Shares
Outstanding
Carrying
Value
Liquidation
Preference Per
Share
Optional
Redemption Date
Annual
Dividends
Payable Per
Share
(in thousands)
8.625% Series A Cumulative Redeemable
2/12/1997
29 
$
28,811 
$
1,000 
2/12/2027
$
86.25 
The following table sets forth the Company’s estimated taxability to the preferred stockholders of dividends per share for federal income tax purposes:
Year Ended December 31,
2024
2023
2022
8.625% Series A Cumulative Redeemable:
Ordinary dividend
$
77.94 
$
68.02 
$
78.48 
Capital gains
8.31 
18.23 
7.77 
Total
$
86.25 
$
86.25 
$
86.25 
The Company’s tax returns have not been examined by the IRS and, therefore, the taxability of dividends is subject to change.
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Warrants
As of both December 31, 2024 and 2023, we had 15,000 warrants outstanding with an exercise price of $32.50 per share. Upon exercise of a warrant, the
Company will contribute the exercise price to the Operating Partnership in exchange for Common Units. Therefore, the Operating Partnership accounts for such
warrants as if issued by the Operating Partnership. These warrants have no expiration date.
Common Unit Distributions
Distributions of the Operating Partnership declared per Common Unit were $2.00 for each of the years ended December 31, 2024, 2023 and 2022.
Redeemable Common Units
Generally, the Operating Partnership is obligated to redeem each Redeemable Common Unit at the request of the holder thereof for cash equal to the value of
one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided
that the Company, at its option, may elect to acquire any such Redeemable Common Unit presented for redemption for cash or one share of Common Stock. When
a holder redeems a Redeemable Common Unit for a share of Common Stock or cash, the Company’s share in the Operating Partnership will be increased. The
Common Units owned by the Company are not redeemable.
Preferred Units
The following table sets forth the Operating Partnership’s outstanding Preferred Units as of both December 31, 2024 and 2023:
Issue Date
Number of
Units
Outstanding
Carrying
Value
Liquidation
Preference
Per Unit
Optional
Redemption
Date
Annual
Distributions
Payable
Per Unit
(in thousands)
8.625% Series A Cumulative Redeemable
2/12/1997
29 
$
28,811 
$
1,000 
2/12/2027
$
86.25 
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11.    Employee Benefit Plans
Officer, Management and Director Compensation Programs
Officers of the Company participate in an annual non-equity incentive program pursuant to which they are eligible to earn cash payments based on a
percentage of their annual base salary in effect for December of the applicable year. Under this component of our executive compensation program, officers are
eligible to earn additional cash compensation generally to the extent specific performance-based metrics are achieved during the most recently completed year. The
position held by each officer has a target annual incentive percentage that ranges from 35% to 140% of base salary. The more senior the position, the greater the
portion of compensation that varies with performance. The percentage amount an officer may earn under the annual non-equity incentive plan is the product of the
target annual incentive percentage times an “actual performance factor,” which can range from zero to 200%. Amounts under our annual non-equity incentive plan
are accrued and expensed in the year earned, but are typically paid early in the following year.
Certain other employees participate in a similar annual non-equity incentive program. Incentive eligibility ranges from 5% to 20% of annual base salary. These
amounts are also accrued and expensed in the year earned, but are typically paid early in the following year.
The Company’s officers are eligible to receive a mix of long-term equity incentive awards on or about March 1 of each year. Prior to 2018, the mix generally
consisted of stock options, time-based restricted stock and total return-based restricted stock. Since 2018, the mix has consisted of time-based restricted stock and
total return-based restricted stock. Time-based restricted stock grants are also made annually to directors and certain other employees. Dividends received on
restricted stock are non-forfeitable and are paid at the same rate and on the same date as on shares of Common Stock, except that, with respect to shares of total
return-based restricted stock issued to the Company’s chief executive officer, dividends accumulate and are payable only if and to the extent the shares vest.
Dividends paid on subsequently forfeited shares are expensed. Additional shares of total return-based restricted stock may be issued at the end of the applicable
measurement periods if and to the extent actual performance exceeds certain levels of performance. Such additional shares, if any, would be fully vested when
issued. No expense is recorded for additional shares of total return-based restricted stock that may be issued at the end of the applicable measurement period since
that possibility is reflected in the grant date fair value. The following table sets forth the number of shares of Common Stock reserved for future issuance under the
Company’s long-term equity incentive plans:
December 31,
2024
2023
Outstanding stock options and warrants
467,291 
527,067 
Possible future issuance under equity incentive plans
2,242,360 
2,537,816 
2,709,651 
3,064,883 
Of the possible future issuance under the Company’s long-term equity incentive plans as of December 31, 2024, no more than an additional 0.2 million shares
can be in the form of restricted stock.
During the years ended December 31, 2024, 2023 and 2022, we recognized share-based compensation expense of $8.0 million, $7.0 million and $7.6 million,
respectively. Because REITs generally do not pay income taxes, we do not realize tax benefits on share-based payments. As of December 31, 2024, there was $4.1
million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 2.0 years.
- Stock Options
Outstanding stock options vest ratably on an annual basis over four years and expire after 10 years. All stock options have an exercise price equal to the last
reported stock price of our Common Stock on the New York Stock Exchange (“NYSE”) on the last trading day prior to grant. The value of all options as of the date
of grant is calculated using the Black-Scholes option-pricing model and is amortized over the respective vesting period or the service period, if shorter, for
employees who are or will become eligible under the Company’s retirement plan.
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The following table sets forth stock option activity:
Options Outstanding
Number of
Options
Weighted Average
Exercise Price
Stock options outstanding as of December 31, 2023 (1)
512,067 
$
46.18 
Expired
(59,776)
37.71 
Stock options outstanding at December 31, 2024 (2)
452,291 
$
47.30 
__________
(1)
There were no options granted, canceled, exercised, expired or forfeited during the years ended December 31, 2023 and 2022.
(2)
The Company had 452,291 options exercisable as of December 31, 2024 with a weighted average exercise price of $47.30 and a weighted average remaining life of 1.3 years.
As of December 31, 2024, all of these options had exercise prices higher than the market price of our common stock.
No options were exercised during the years ended December 31, 2024, 2023 and 2022. The Company generally does not permit the net cash settlement of
exercised stock options, but does permit net share settlement so long as the shares received are held for at least a year. The Company has a practice of issuing new
shares to satisfy stock option exercises.
- Time-Based Restricted Stock
Shares of time-based restricted stock granted to employees vest ratably on an annual basis generally over four years. Beginning in 2019, shares of time-based
restricted stock granted to non-employee directors vest on the first anniversary of the grant date. The value of grants of time-based restricted stock is based on the
market value of Common Stock as of the date of grant and is amortized to expense over the respective vesting period or the service period, if shorter, for employees
who are or will become eligible under the Company’s retirement plan.
The following table sets forth time-based restricted stock activity:
Number of Shares
Weighted Average
Grant Date Fair
Value
Restricted shares outstanding as of December 31, 2021
219,719 
$
42.63 
Awarded and issued (1)
99,975 
43.58 
Vested (2)
(101,082)
42.80 
Forfeited
(779)
42.37 
Restricted shares outstanding as of December 31, 2022
217,833 
43.00 
Awarded and issued (1)
155,717 
26.42 
Vested (2)
(95,423)
43.57 
Forfeited
(1,819)
34.11 
Restricted shares outstanding as of December 31, 2023
276,308 
33.51 
Awarded and issued (1)
181,540 
24.45 
Vested (2)
(114,233)
34.79 
Restricted shares outstanding as of December 31, 2024
343,615 
$
28.30 
__________
(1)
The weighted average fair value at grant date of time-based restricted stock issued during the years ended December 31, 2024, 2023 and 2022 was $4.4 million, $4.1 million and
$4.4 million, respectively.
(2)
The vesting date fair value of time-based restricted stock that vested during the years ended December 31, 2024, 2023 and 2022 was $2.8 million, $2.5 million and $4.4 million,
respectively. Vested shares include those shares surrendered by employees to satisfy tax withholding obligations in connection with such vesting.
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Table of Contents
- Total Return-Based Restricted Stock
Shares of total return-based restricted stock vest to the extent the Company’s absolute total returns for certain pre-determined three-year periods exceed
predetermined goals. The amount subject to vesting ranges from zero to 150%. For total return-based restricted stock issued prior to 2022, notwithstanding the
Company’s absolute total return, if the Company’s total return exceeds 100% of the average peer group total return index, 100% of total return-based restricted
stock issued will vest at the end of the applicable period. For total return-based restricted stock issued since 2022, notwithstanding the Company’s absolute total
return, if the Company’s total return is in the 50th percentile or greater as compared to all of the companies included in the FTSE NAREIT Equity Office Index,
100% of total return-based restricted stock issued will vest at the end of the applicable period. The weighted average grant date fair value of such shares of total
return-based restricted stock issued in 2024, 2023 and 2022 was determined to be $25.22, $27.06 and $41.94, respectively, and is amortized over the respective
three-year period or the service period, if shorter, for employees who are or will become eligible under the Company’s retirement plan. The fair values of the total
return-based restricted stock granted were determined at the grant dates using a Monte Carlo simulation model and the following assumptions:
2024
2023
2022
Risk free interest rate (1) 
4.3 %
4.4 %
1.6 %
Common stock dividend yield (2) 
8.7 %
6.9 %
4.5 %
Expected volatility (3) 
29.3 %
27.2 %
25.8 %
__________
(1)
Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the total return-based restricted stock grants.
(2)
The dividend yield is calculated utilizing the then current regular dividend rate for a one-year period and the average per share price of Common Stock during the three-month
period preceding the date of grant.
(3)
Based on the historical volatility of Common Stock over a period relevant to the related total return-based restricted stock grant.
The following table sets forth total return-based restricted stock activity:
Number of Shares
Weighted Average
Grant Date Fair
Value
Restricted shares outstanding as of December 31, 2021
229,292 
$
38.00 
Awarded and issued (1)
81,832 
41.94 
Vested (2)
(62,985)
45.90 
Forfeited (3)
(20,995)
45.90 
Restricted shares outstanding as of December 31, 2022
227,144 
38.93 
Awarded and issued (1)
126,736 
27.06 
Vested (2)
(65,140)
44.88 
Forfeited (3)
(2,148)
35.83 
Restricted shares outstanding as of December 31, 2023
286,592 
34.03 
Awarded and issued (1)
142,992 
25.22 
Vested (2)
(79,588)
39.98 
Restricted shares outstanding as of December 31, 2024
349,996 
$
29.80 
__________
(1)
The fair value at grant date of total return-based restricted stock issued during the years ended December 31, 2024, 2023 and 2022 was $3.6 million, $3.4 million and $3.4
million, respectively, at target.
(2)
The vesting date fair value of total return-based restricted stock that vested during the years ended December 31, 2024, 2023 and 2022 was $1.9 million, $1.7 million and $2.7
million, respectively, based on the performance of the specific plans. Vested shares include those shares surrendered by employees to satisfy tax withholding obligations in
connection with such vesting.
(3)
The 2022 amount includes 20,995 shares that were forfeited at the end of the applicable measurement period because the applicable total return did not meet targeted levels. No
such shares were forfeited in 2023.
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401(k) Retirement Savings Plan
We have a 401(k) Retirement Savings Plan covering substantially all employees who meet certain age and employment criteria. We contribute amounts for
each participant at a rate of 75% of the employee’s contribution (up to 6% of each employee’s bi-weekly salary and cash incentives, subject to statutory limits).
During each of the years ended December 31, 2024, 2023 and 2022, we contributed $1.4 million to the 401(k) savings plan. The assets of this qualified plan are not
included in our Consolidated Financial Statements since the assets are not owned by us.
Retirement Plan
The Company has a retirement plan for employees with at least 30 years of continuous service or who are at least 55 years old with at least 10 years of
continuous service. Subject to advance written notice and a non-compete agreement, eligible retirees would be entitled to receive a pro rata amount of any annual
non-equity incentive compensation earned during the year of retirement and stock options and time-based restricted stock would be non-forfeitable and vest
according to the terms of their original grants. Eligible retirees would also be entitled to retain any total return-based restricted stock that subsequently vests after
the retirement date according to the terms of their original grants. For employees who meet the age and service eligibility requirements, 100% of their annual grants
are expensed at the grant date as if fully vested. For employees who will meet the age and service eligibility requirements within the normal vesting periods, the
grants are amortized over the shorter service period.
Deferred Compensation
Prior to 2010, officers could elect to defer all or a portion of their cash compensation, which was then invested in unrelated mutual funds under a non-qualified
deferred compensation plan. These investments are recorded at fair value, which aggregated $2.3 million as of both December 31, 2024 and 2023, and are included
in prepaid expenses and other assets, with an offsetting deferred compensation liability recorded in accounts payable, accrued expenses and other liabilities.
Deferred amounts ultimately payable to the participants are based on the value of the related mutual fund investments. Accordingly, changes in the value of the
unrelated mutual funds are recorded in interest and other income and the corresponding offsetting changes in the deferred compensation liability are recorded in
general and administrative expense. As a result, there is no effect on our net income.
The following table sets forth our deferred compensation liability:
Year Ended December 31,
2024
2023
2022
Beginning deferred compensation liability
$
2,294 
$
2,564 
$
2,866 
Mark-to-market adjustment to deferred compensation (in general and administrative expenses)
575 
243 
(302)
Distributions from deferred compensation plans
(574)
(513)
— 
Total deferred compensation liability
$
2,295 
$
2,294 
$
2,564 
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (“ESPP”) pursuant to which employees may contribute up to 25% of their cash compensation for the
purchase of Common Stock. At the end of each quarter, each participant’s account balance, which includes accumulated dividends, is applied to acquire shares of
Common Stock at a cost that is calculated at 85% of the average closing price on the NYSE on the five consecutive days preceding the last day of the quarter. In
the years ended December 31, 2024, 2023 and 2022, the Company issued 51,711, 77,086 and 46,656 shares, respectively, of Common Stock under the ESPP. The
15% discount on newly issued shares, which is taxable income to the participants and is recorded by us as additional compensation expense, aggregated $0.2
million, $0.3 million and $0.2 million in the years ended December 31, 2024, 2023 and 2022, respectively. Generally, shares purchased under the ESPP must be
held for at least one year. The Company satisfies its ESPP obligations by issuing additional shares of Common Stock.
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Table of Contents
12.    Real Estate and Other Assets Held For Sale
The following table sets forth the assets held for sale as of December 31, 2024 and 2023, which are considered non-core:
December 31,
2024
2023
Assets:
Land
$
6,232 
$
— 
Buildings and tenant improvements
98,081 
— 
Less-accumulated depreciation
(58,511)
— 
Net real estate assets
45,802 
— 
Accrued straight-line rents receivable
6,581 
— 
Deferred leasing costs, net
2,784 
— 
Prepaid expenses and other assets
242 
— 
Real estate and other assets, net, held for sale
$
55,409 
$
— 
13.    Earnings Per Share and Per Unit
The following table sets forth the computation of basic and diluted earnings per share of the Company:
Year Ended December 31,
2024
2023
2022
Earnings per Common Share - basic:
Numerator:
Net income
$
104,254 
$
151,330 
$
163,958 
Net (income) attributable to noncontrolling interests in the Operating Partnership
(2,040)
(3,164)
(3,670)
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates
34 
549 
(1,230)
Dividends on Preferred Stock
(2,485)
(2,485)
(2,486)
Net income available for common stockholders
$
99,763 
$
146,230 
$
156,572 
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)
106,167 
105,529 
105,120 
Net income available for common stockholders
$
0.94 
$
1.39 
$
1.49 
Earnings per Common Share - diluted:
Numerator:
Net income
$
104,254 
$
151,330 
$
163,958 
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates
34 
549 
(1,230)
Dividends on Preferred Stock
(2,485)
(2,485)
(2,486)
Net income available for common stockholders before net (income) attributable to noncontrolling
interests in the Operating Partnership
$
101,803 
$
149,394 
$
160,242 
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)
106,167 
105,529 
105,120 
Add:
Stock options using the treasury method
— 
— 
5 
Noncontrolling interests Common Units
2,152 
2,256 
2,442 
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed
conversions
108,319 
107,785 
107,567 
Net income available for common stockholders
$
0.94 
$
1.39 
$
1.49 
__________
(1)
Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.
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Table of Contents
The following table sets forth the computation of basic and diluted earnings per unit of the Operating Partnership:
Year Ended December 31,
2024
2023
2022
Earnings per Common Unit - basic:
Numerator:
Net income
$
104,254 
$
151,330 
$
163,958 
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates
34 
549 
(1,230)
Distributions on Preferred Units
(2,485)
(2,485)
(2,486)
Net income available for common unitholders
$
101,803 
$
149,394 
$
160,242 
Denominator:
Denominator for basic earnings per Common Unit – weighted average units (1)
107,910 
107,376 
107,153 
Net income available for common unitholders
$
0.94 
$
1.39 
$
1.50 
Earnings per Common Unit - diluted:
Numerator:
Net income
$
104,254 
$
151,330 
$
163,958 
Net (income)/loss attributable to noncontrolling interests in consolidated affiliates
34 
549 
(1,230)
Distributions on Preferred Units
(2,485)
(2,485)
(2,486)
Net income available for common unitholders
$
101,803 
$
149,394 
$
160,242 
Denominator:
Denominator for basic earnings per Common Unit – weighted average units (1)
107,910 
107,376 
107,153 
Add:
Stock options using the treasury method
— 
— 
5 
Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed
conversions
107,910 
107,376 
107,158 
Net income available for common unitholders
$
0.94 
$
1.39 
$
1.50 
__________
(1)
Includes all unvested restricted stock where distributions on such restricted stock are non-forfeitable.
14.    Income Taxes
Our Consolidated Financial Statements include the operations of the Company’s taxable REIT subsidiary, which is not entitled to the dividends paid deduction
and is subject to federal, state and local income taxes on its taxable income.
The minimum dividend per share of Common Stock required for the Company to maintain its REIT status was $1.42, $1.42 and $1.60 per share in 2024, 2023
and 2022, respectively. Continued qualification as a REIT depends on the Company’s ability to satisfy the dividend distribution tests, stock ownership requirements
and various other qualification tests. The tax basis of the Company’s assets (net of accumulated tax depreciation and amortization) and liabilities was
approximately $5.7 billion and $3.6 billion, respectively, as of December 31, 2024 and $5.6 billion and $3.5 billion, respectively, as of December 31, 2023. The tax
basis of the Operating Partnership’s assets (net of accumulated tax depreciation and amortization) and liabilities was approximately $5.6 billion and $3.6 billion,
respectively, as of December 31, 2024 and $5.4 billion and $3.5 billion, respectively, as of December 31, 2023.
During the years ended December 31, 2024, 2023 and 2022, the Company qualified as a REIT and incurred no federal income tax expense; accordingly, the
only federal income taxes included in the accompanying Consolidated Financial Statements relate to activities of the Company’s taxable REIT subsidiary.
The Company had no net deferred tax asset or liability as of December 31, 2024 or December 31, 2023.
For each of the years ended December 31, 2024 and 2023, there were no unrecognized tax benefits. The Company is subject to federal, state and local income
tax examinations by taxing authorities for 2021 through 2024. The Company does not expect that the total amount of unrecognized benefits will materially change
within the next year.
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Table of Contents
15.    Segment Information
Our principal business is the operation, acquisition and development of rental office properties. We evaluate our business by geographic location, which is why
our primary geographic locations are included as reportable segments below. The operating results by geographic grouping are regularly reviewed by our chief
operating decision maker for assessing performance and other purposes. Our chief executive officer is our chief operating decision maker. There are no material
inter-segment transactions.
Our accounting policies of the segments are the same as those used in our Consolidated Financial Statements. All operations are within the United States.
The following tables summarize rental and other revenues, rental property and other expenses, net operating income and total assets for each of our reportable
segments. Net operating income is the primary industry property-level performance metric used by our chief operating decision maker and is defined as rental and
other revenues less rental property and other expenses. Our chief operating decision maker uses net operating income to help assess segment performance and
decide how to allocate resources accordingly.
Year Ended December 31,
2024
2023
2022
Rental and other revenues:
Atlanta
$
146,168 
$
143,741 
$
143,904 
Charlotte
88,003 
85,984 
73,721 
Nashville
169,158 
171,797 
174,341 
Orlando
58,442 
58,002 
54,802 
Raleigh
173,156 
181,964 
182,990 
Richmond
35,265 
35,918 
43,084 
Tampa
98,887 
99,421 
94,726 
Rental and other revenues for reportable segments
769,079 
776,827 
767,568 
Other
56,783 
57,170 
61,361 
Total rental and other revenues
825,862 
833,997 
828,929 
Rental property and other expenses:
Atlanta
57,453 
54,041 
51,607 
Charlotte
24,419 
22,063 
18,032 
Nashville
45,143 
46,380 
45,124 
Orlando
23,094 
22,840 
22,471 
Raleigh
47,046 
49,702 
48,086 
Richmond
11,140 
11,162 
14,205 
Tampa
37,603 
37,039 
35,035 
Rental property and other expenses for reportable segments
245,898 
243,227 
234,560 
Other
26,275 
25,555 
25,246 
Total rental property and other expenses
272,173  272173000
268,782 
259,806 
Net operating income:
Atlanta
88,715 
89,700 
92,297 
Charlotte
63,584 
63,921 
55,689 
Nashville
124,015 
125,417 
129,217 
Orlando
35,348 
35,162 
32,331 
Raleigh
126,110 
132,262 
134,904 
Richmond
24,125 
24,756 
28,879 
Tampa
61,284 
62,382 
59,691 
Net operating income for reportable segments
523,181 
533,600 
533,008 
Other
30,508 
31,615 
36,115 
Total net operating income
$
553,689 
$
565,215 
$
569,123 
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Table of Contents
Year Ended December 31,
2024
2023
2022
Reconciliation to net income:
Depreciation and amortization
$
(299,046)
$
(299,411)
$
(287,610)
Impairments of real estate assets
(24,600)
— 
(36,515)
General and administrative expenses
(41,903)
(42,857)
(42,266)
Interest expense
(147,198)
(136,710)
(105,385)
Other income
12,337 
4,435 
1,530 
Gains on disposition of property
46,817 
47,773 
63,546 
Gain on deconsolidation of affiliate
— 
11,778 
— 
Equity in earnings of unconsolidated affiliates
4,158 
1,107 
1,535 
Net income
$
104,254 
$
151,330 
$
163,958 
December 31,
2024
2023
Total assets:
Atlanta
$
958,101 
$
907,421 
Charlotte
950,068 
974,846 
Nashville
1,231,940 
1,259,272 
Orlando
276,070 
286,781 
Raleigh
1,182,217 
1,255,978 
Richmond
157,431 
157,299 
Tampa
463,884 
473,800 
Total assets for reportable segments
5,219,711 
5,315,397 
Other
809,644 
687,531 
Total assets
$
6,029,355 
$
6,002,928 
16.    Subsequent Events
On January 29, 2025, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 11, 2025 to stockholders of
record as of February 18, 2025.
On February 3, 2025, we sold three buildings in Tampa for a sales price of $145.0 million and expect to record a gain on disposition of property of $82.3
million.
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Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTE TO SCHEDULE III
(in thousands)
The following table sets forth the activity of real estate assets and accumulated depreciation:
December 31,
2024
2023
2022
Real estate assets:
Beginning balance
$
6,728,003 
$
6,689,692 
$
6,486,136 
Acquisitions, development and improvements
210,024 
226,066 
378,587 
Cost of real estate sold, retired and deconsolidated
(215,777)
(187,755)
(175,031)
Ending balance (a)
$
6,722,250 
$
6,728,003 
$
6,689,692 
Accumulated depreciation:
Beginning balance
$
1,743,390 
$
1,609,502 
$
1,457,511 
Depreciation expense
255,979 
253,151 
240,273 
Real estate sold, retired and deconsolidated
(144,272)
(119,263)
(88,282)
Ending balance (b)
$
1,855,097 
$
1,743,390 
$
1,609,502 
(a) Reconciliation of total real estate assets to balance sheet caption:
2024
2023
2022
Total per Schedule III
$
6,722,250 
$
6,728,003 
$
6,689,692 
Development in-process exclusive of land included in Schedule III
— 
8,918 
46,735 
Real estate assets, net, held for sale
(104,313)
— 
— 
Total real estate assets
$
6,617,937 
$
6,736,921 
$
6,736,427 
(b) Reconciliation of total accumulated depreciation to balance sheet caption:
2024
2023
2022
Total per Schedule III
$
1,855,097 
$
1,743,390 
$
1,609,502 
Real estate assets, net, held for sale
(58,511)
— 
— 
Total accumulated depreciation
$
1,796,586 
$
1,743,390 
$
1,609,502 
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Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
December 31, 2024
Initial Costs
Costs Capitalized
Subsequent to
Acquisition
Gross Value at Close of Period
Life on
Which
Depreciation
is
Calculated
Description
Property
Type
2024
Encumbrance
Land
Bldg &
Improv
Land
Bldg &
Improv
Land
Bldg &
Improv
Total
Assets (1)
Accumulated
Depreciation
Date of
Construction
Atlanta, GA
1700 Century Circle
Office
$
— 
$
2,482 
$
823 
$
816 
$
823 
$
3,298 
$
4,121 
$
1,784 
1983
 5-40 yrs.
1800 Century Boulevard
Office
1,444 
29,081 
1,504 
6,296 
2,948 
35,377 
38,325 
23,603 
1975
 5-40 yrs.
1825 Century Boulevard
Office
864 
— 
3,422 
15,599 
4,286 
15,599 
19,885 
8,653 
2002
 5-40 yrs.
1875 Century Boulevard
Office
— 
8,924 
3,090 
5,913 
3,090 
14,837 
17,927 
8,777 
1976
 5-40 yrs.
1900 Century Boulevard
Office
— 
4,744 
13,036 
340 
13,036 
5,084 
18,120 
5,084 
1971
 5-40 yrs.
2200 Century Parkway
Office
— 
14,432 
4,433 
8,373 
4,433 
22,805 
27,238 
14,270 
1971
 5-40 yrs.
2400 Century Parkway
Office
— 
— 
4,589 
14,967 
4,589 
14,967 
19,556 
9,238 
1998
 5-40 yrs.
2500 Century Parkway
Office
— 
— 
3,919 
16,118 
3,919 
16,118 
20,037 
5,421 
2005
 5-40 yrs.
2500/2635 Parking Garage
Office
— 
— 
— 
6,447 
— 
6,447 
6,447 
3,103 
2005
 5-40 yrs.
2600 Century Parkway
Office
— 
10,679 
3,062 
6,389 
3,062 
17,068 
20,130 
10,376 
1973
 5-40 yrs.
2635 Century Parkway
Office
— 
21,643 
6,714 
21,509 
6,714 
43,152 
49,866 
25,658 
1980
 5-40 yrs.
2800 Century Parkway
Office
— 
20,449 
7,281 
12,453 
7,281 
32,902 
40,183 
21,697 
1983
 5-40 yrs.
Century Plaza I
Office
1,290 
8,567 
— 
5,274 
1,290 
13,841 
15,131 
8,234 
1981
 5-40 yrs.
Century Plaza II
Office
1,380 
7,733 
— 
4,532 
1,380 
12,265 
13,645 
6,803 
1984
 5-40 yrs.
Riverwood 100
Office
5,785 
64,913 
(29)
36,203 
5,756 
101,116 
106,872 
38,857 
1989
5-40 yrs.
Tradeport - Land
Office
5,243 
— 
(4,733)
— 
510 
— 
510 
— 
N/A
 N/A
Two Alliance Center
Office
9,579 
125,549 
— 
6,013 
9,579 
131,562 
141,141 
39,264 
2009
5-40 yrs.
One Alliance Center
Office
14,775 
123,071 
— 
25,920 
14,775 
148,991 
163,766 
48,286 
2001
5-40 yrs.
10 Glenlake North
Office
5,349 
26,334 
— 
7,630 
5,349 
33,964 
39,313 
12,158 
2000
5-40 yrs.
10 Glenlake South
Office
5,103 
22,811 
— 
14,616 
5,103 
37,427 
42,530 
10,640 
1999
5-40 yrs.
Riverwood 200
Office
4,777 
89,708 
450 
1,843 
5,227 
91,551 
96,778 
22,363 
2017
5-40 yrs.
Riverwood 300 - Land
Office
400 
— 
— 
710 
400 
710 
1,110 
141 
2017
5-40 yrs.
Monarch Tower
Office
22,717 
143,068 
— 
28,102 
22,717 
171,170 
193,887 
47,748 
1997
5-40 yrs.
Monarch Plaza
Office
27,678 
88,962 
— 
20,359 
27,678 
109,321 
136,999 
28,149 
1983
5-40 yrs.
Galleria 75 - Land
Office
19,740 
— 
(3,000)
1,031 
16,740 
1,031 
17,771 
294 
2022
5-40 yrs.
Charlotte, NC
Bank of America Tower
Office
200,000 
29,273 
354,749 
— 
27,132 
29,273 
381,881 
411,154 
59,543 
2019
 5-40 yrs.
One Morrocroft
Office
(2)
3,655 
28,357 
(198)
5,146 
3,457 
33,503 
36,960 
4,033 
1992
 5-40 yrs.
Two Morrocroft
Office
(2)
3,530 
28,804 
(190)
1,619 
3,340 
30,423 
33,763 
3,726 
1998
5-40 yrs.
Three Morrocroft
Office
(2)
3,566 
30,505 
(192)
309 
3,374 
30,814 
34,188 
3,678 
2000
5-40 yrs.
104

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
Initial Costs
Costs Capitalized
Subsequent to
Acquisition
Gross Value at Close of Period
Life on
Which
Depreciation
is
Calculated
Description
Property
Type
2024
Encumbrance
Land
Bldg &
Improv
Land
Bldg &
Improv
Land
Bldg &
Improv
Total
Assets (1)
Accumulated
Depreciation
Date of
Construction
Capitol Towers North
Office
(3)
8,642 
96,254 
— 
1,112 
8,642 
97,366 
106,008 
10,390 
2017
 5-40 yrs.
Capitol Towers South
Office
(3)
9,095 
95,458 
— 
810 
9,095 
96,268 
105,363 
10,273 
2015
5-40 yrs.
1426 S. Tryon - Land
Office
26,702 
— 
(825)
— 
25,877 
— 
25,877 
— 
N/A
N/A
SIX50 at Legacy Union
Office
16,504 
166,305 
— 
4,068 
16,504 
170,373 
186,877 
13,657 
2020
 5-40 yrs.
Four Morrocroft
Office
(2)
— 
— 
837 
8,993 
837 
8,993 
9,830 
252 
2024
5-40 yrs.
Nashville, TN
3322 West End
Office
3,025 
27,490 
— 
12,919 
3,025 
40,409 
43,434 
23,264 
1986
 5-40 yrs.
3401 West End
Office
5,862 
22,917 
— 
7,224 
5,862 
30,141 
36,003 
20,438 
1982
 5-40 yrs.
5310 Maryland Way
Office
1,863 
7,201 
— 
5,870 
1,863 
13,071 
14,934 
8,732 
1994
 5-40 yrs.
Cool Springs I & II Deck
Office
— 
— 
— 
3,990 
— 
3,990 
3,990 
1,718 
2007
 5-40 yrs.
Cool Springs III & IV Deck
Office
— 
— 
— 
4,461 
— 
4,461 
4,461 
1,988 
2007
 5-40 yrs.
Cool Springs I
Office
1,583 
— 
15 
16,828 
1,598 
16,828 
18,426 
10,227 
1999
 5-40 yrs.
Cool Springs II
Office
1,824 
— 
346 
25,538 
2,170 
25,538 
27,708 
13,749 
1999
 5-40 yrs.
Cool Springs III
Office
1,631 
— 
804 
22,859 
2,435 
22,859 
25,294 
8,374 
2006
 5-40 yrs.
Cool Springs IV
Office
1,715 
— 
— 
29,093 
1,715 
29,093 
30,808 
9,168 
2008
 5-40 yrs.
Cool Springs V
Office
3,688 
— 
295 
56,353 
3,983 
56,353 
60,336 
18,495 
2007
 5-40 yrs.
Harpeth Two
Office
1,419 
5,677 
— 
9,672 
1,419 
15,349 
16,768 
6,312 
1984
 5-40 yrs.
Harpeth Three
Office
1,660 
6,649 
— 
10,100 
1,660 
16,749 
18,409 
7,556 
1987
 5-40 yrs.
Harpeth Four
Office
1,713 
6,842 
— 
11,085 
1,713 
17,927 
19,640 
7,852 
1989
 5-40 yrs.
Harpeth Five
Office
662 
— 
197 
11,159 
859 
11,159 
12,018 
3,788 
1998
 5-40 yrs.
Hickory Trace
Office
1,164 
— 
164 
6,731 
1,328 
6,731 
8,059 
3,276 
2001
 5-40 yrs.
Highwoods Plaza I
Office
1,552 
— 
307 
9,142 
1,859 
9,142 
11,001 
5,898 
1996
 5-40 yrs.
Highwoods Plaza II
Office
1,448 
— 
307 
8,696 
1,755 
8,696 
10,451 
4,764 
1997
 5-40 yrs.
Seven Springs I
Office
2,076 
— 
592 
14,773 
2,668 
14,773 
17,441 
7,459 
2002
 5-40 yrs.
SouthPointe
Office
1,655 
— 
310 
9,514 
1,965 
9,514 
11,479 
5,949 
1998
 5-40 yrs.
Westwood South
Office
2,106 
— 
382 
9,552 
2,488 
9,552 
12,040 
5,970 
1999
 5-40 yrs.
100 Winners Circle
Office
1,497 
7,258 
— 
8,296 
1,497 
15,554 
17,051 
6,977 
1987
 5-40 yrs.
Symphony Place
Office
84,712 
— 
141,469 
— 
6,045 
— 
147,514 
147,514 
54,976 
2010
 5-40 yrs.
Seven Springs East
Office
2,525 
37,587 
— 
528 
2,525 
38,115 
40,640 
13,373 
2013
 5-40 yrs.
The Shops at Seven Springs
Office
803 
8,223 
— 
(996)
803 
7,227 
8,030 
2,259 
2013
 5-40 yrs.
Seven Springs West
Office
2,439 
51,306 
— 
4,197 
2,439 
55,503 
57,942 
13,403 
2016
 5-40 yrs.
Seven Springs II
Office
2,356 
30,048 
— 
3,435 
2,356 
33,483 
35,839 
8,937 
2017
 5-40 yrs.
Bridgestone Tower
Office
19,223 
169,582 
— 
465 
19,223 
170,047 
189,270 
36,042 
2017
 5-40 yrs.
Virginia Springs II
Office
4,821 
26,448 
— 
3,870 
4,821 
30,318 
35,139 
4,527 
2020
 5-40 yrs.
MARS Campus
Office
7,010 
87,474 
— 
147 
7,010 
87,621 
94,631 
18,644 
2019
 5-40 yrs.
105

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
Initial Costs
Costs Capitalized
Subsequent to
Acquisition
Gross Value at Close of Period
Life on
Which
Depreciation
is
Calculated
Description
Property
Type
2024
Encumbrance
Land
Bldg &
Improv
Land
Bldg &
Improv
Land
Bldg &
Improv
Total
Assets (1)
Accumulated
Depreciation
Date of
Construction
Virginia Springs I
Office
4,534 
25,632 
— 
308 
4,534 
25,940 
30,474 
5,720 
2018
 5-40 yrs.
1100 Broadway - Land
Office
29,845 
— 
(259)
— 
29,586 
— 
29,586 
— 
N/A
 N/A
Asurion
Office
33,219 
230,569 
— 
2,778 
33,219 
233,347 
266,566 
24,670 
2021
 5-40 yrs.
Ovation - Land
Office
89,231 
— 
215 
— 
89,446 
— 
89,446 
— 
N/A
 N/A
Broadway Stem - Land
Office
6,218 
— 
(1,335)
526 
4,883 
526 
5,409 
44 
2021
 5-40 yrs.
YMCA Site - Land
Office
16,121 
— 
(28)
— 
16,093 
— 
16,093 
— 
N/A
 N/A
Orlando, FL
Capital Plaza Three - Land
Office
2,994 
— 
18 
— 
3,012 
— 
3,012 
— 
N/A
 N/A
1800 Eller Drive
Office
— 
9,851 
— 
1,927 
— 
11,778 
11,778 
8,372 
1983
 5-40 yrs.
201 South Orange
Office
3,893 
29,541 
— 
16,392 
3,893 
45,933 
49,826 
15,068 
1982
 5-40 yrs.
Capital Plaza Two
Office
4,346 
43,394 
— 
15,556 
4,346 
58,950 
63,296 
18,008 
1999
 5-40 yrs.
Capital Plaza One
Office
3,482 
27,321 
— 
10,864 
3,482 
38,185 
41,667 
12,232 
1975
 5-40 yrs.
Landmark Center Two
Office
4,743 
22,031 
— 
11,634 
4,743 
33,665 
38,408 
12,521 
1985
 5-40 yrs.
Landmark Center One
Office
6,207 
22,655 
— 
12,542 
6,207 
35,197 
41,404 
14,113 
1983
 5-40 yrs.
Bank of America Plaza
Office
3,490 
56,079 
— 
11,841 
3,490 
67,920 
71,410 
18,237 
2000
 5-40 yrs.
Eola Centre
Office
5,785 
11,160 
— 
15,579 
5,785 
26,739 
32,524 
8,304 
1969
 5-40 yrs.
Pittsburgh, PA
One PPG Place
Office
9,819 
107,643 
— 
60,276 
9,819 
167,919 
177,738 
64,888 
1983-1985
 5-40 yrs.
Two PPG Place
Office
2,302 
10,978 
— 
16,110 
2,302 
27,088 
29,390 
9,970 
1983-1985
 5-40 yrs.
Three PPG Place
Office
501 
2,923 
— 
5,311 
501 
8,234 
8,735 
3,855 
1983-1985
 5-40 yrs.
Four PPG Place
Office
620 
3,239 
— 
3,378 
620 
6,617 
7,237 
3,134 
1983-1985
 5-40 yrs.
Five PPG Place
Office
803 
4,924 
— 
3,056 
803 
7,980 
8,783 
3,207 
1983-1985
 5-40 yrs.
Six PPG Place
Office
3,353 
25,602 
— 
17,450 
3,353 
43,052 
46,405 
17,869 
1983-1985
 5-40 yrs.
EQT Plaza
Office
16,457 
83,812 
(11,000)
(35,444)
5,457 
48,368 
53,825 
30,597 
1987
 5-40 yrs.
East Liberty - Land
Office
2,478 
— 
(1,204)
— 
1,274 
— 
1,274 
— 
N/A
 N/A
Raleigh, NC
3600 Glenwood Avenue
Office
— 
10,994 
— 
4,176 
— 
15,170 
15,170 
9,818 
1986
 5-40 yrs.
3737 Glenwood Avenue
Office
— 
— 
318 
18,987 
318 
18,987 
19,305 
10,529 
1999
 5-40 yrs.
801 Raleigh Corporate Center
Office
828 
— 
272 
13,105 
1,100 
13,105 
14,205 
7,005 
2002
 5-40 yrs.
2000 CentreGreen
Office
1,529 
— 
(391)
14,074 
1,138 
14,074 
15,212 
7,317 
2000
 5-40 yrs.
4000 CentreGreen
Office
1,653 
— 
(389)
12,520 
1,264 
12,520 
13,784 
6,566 
2001
 5-40 yrs.
5000 CentreGreen
Office
1,291 
34,572 
— 
1,878 
1,291 
36,450 
37,741 
10,904 
2017
 5-40 yrs.
3000 CentreGreen
Office
1,779 
— 
(397)
14,752 
1,382 
14,752 
16,134 
6,583 
2002
 5-40 yrs.
1000 CentreGreen
Office
1,280 
— 
55 
13,574 
1,335 
13,574 
14,909 
5,974 
2008
 5-40 yrs.
GlenLake - Land
Office
13,003 
— 
(12,382)
114 
621 
114 
735 
68 
2001
5-40 yrs.
106

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
Initial Costs
Costs Capitalized
Subsequent to
Acquisition
Gross Value at Close of Period
Life on
Which
Depreciation
is
Calculated
Description
Property
Type
2024
Encumbrance
Land
Bldg &
Improv
Land
Bldg &
Improv
Land
Bldg &
Improv
Total
Assets (1)
Accumulated
Depreciation
Date of
Construction
GlenLake One
Office
924 
— 
1,324 
24,855 
2,248 
24,855 
27,103 
12,824 
2002
 5-40 yrs.
GlenLake Four
Office
1,659 
— 
493 
20,969 
2,152 
20,969 
23,121 
9,665 
2006
 5-40 yrs.
GlenLake Six
Office
941 
— 
(365)
24,841 
576 
24,841 
25,417 
9,060 
2008
 5-40 yrs.
701 Corporate Center
Office
1,304 
— 
540 
20,615 
1,844 
20,615 
22,459 
11,539 
1996
 5-40 yrs.
7001 Weston Parkway
Office
531 
— 
(267)
7,524 
264 
7,524 
7,788 
4,831 
1998
 5-40 yrs.
Inveresk Parcel 2 - Land
Office
657 
— 
38 
103 
695 
103 
798 
24 
2015
 5-40 yrs.
4620 Creekstone Drive
Office
149 
— 
107 
5,901 
256 
5,901 
6,157 
2,530 
2001
 5-40 yrs.
751 Corporate Center
Office
2,665 
16,939 
— 
(442)
2,665 
16,497 
19,162 
4,488 
2018
 5-40 yrs.
PNC Plaza
Office
1,206 
— 
— 
66,613 
1,206 
66,613 
67,819 
29,133 
2008
5-40 yrs.
4700 Six Forks Road
Office
666 
2,665 
— 
1,965 
666 
4,630 
5,296 
2,838 
1982
 5-40 yrs.
4700 Homewood Court
Office
1,086 
4,533 
— 
1,786 
1,086 
6,319 
7,405 
4,213 
1983
 5-40 yrs.
4800 Six Forks Road
Office
862 
4,411 
— 
2,282 
862 
6,693 
7,555 
4,659 
1987
 5-40 yrs.
4601 Creekstone Drive
Office
255 
— 
217 
6,593 
472 
6,593 
7,065 
3,710 
1997
5-40 yrs.
Weston - Land
Office
22,771 
— 
(19,528)
— 
3,243 
— 
3,243 
— 
N/A
N/A
4625 Creekstone Drive
Office
458 
— 
268 
6,731 
726 
6,731 
7,457 
4,115 
1995
5-40 yrs.
11000 Weston Parkway
Office
2,651 
18,850 
— 
16,993 
2,651 
35,843 
38,494 
12,858 
1998
5-40 yrs.
GlenLake Five
Office
2,263 
30,264 
— 
(49)
2,263 
30,215 
32,478 
8,656 
2014
5-40 yrs.
11800 Weston Parkway
Office
826 
13,188 
— 
89 
826 
13,277 
14,103 
4,879 
2014
5-40 yrs.
CentreGreen Café
Office
41 
3,509 
— 
15 
41 
3,524 
3,565 
887 
2014
5-40 yrs.
CentreGreen Fitness Center
Office
27 
2,322 
— 
14 
27 
2,336 
2,363 
587 
2014
5-40 yrs.
One City Plaza
Office
11,288 
68,375 
— 
23,001 
11,288 
91,376 
102,664 
30,262 
1986
5-40 yrs.
Edison - Land
Office
5,984 
— 
1,244 
— 
7,228 
— 
7,228 
— 
N/A
 N/A
Charter Square
Office
7,267 
65,881 
— 
4,617 
7,267 
70,498 
77,765 
17,804 
2015
5-40 yrs.
MetLife Global Technology Campus
Office
21,580 
149,889 
— 
797 
21,580 
150,686 
172,266 
38,282 
2015
 5-40 yrs.
GlenLake Seven
Office
1,662 
37,332 
— 
(24)
1,662 
37,308 
38,970 
5,406 
2020
 5-40 yrs.
Hargett - Land
Office
9,248 
— 
(833)
— 
8,415 
— 
8,415 
— 
N/A
 N/A
Forum 1
Office
1,278 
27,809 
— 
1,635 
1,278 
29,444 
30,722 
4,563 
1985
5-40 yrs.
Forum 2
Office
1,327 
18,088 
— 
(518)
1,327 
17,570 
18,897 
2,186 
1988
5-40 yrs.
Forum 3
Office
994 
23,931 
— 
1,517 
994 
25,448 
26,442 
4,639 
1995
5-40 yrs.
Forum 4
Office
2,118 
43,889 
— 
925 
2,118 
44,814 
46,932 
6,671 
2000
5-40 yrs.
Forum 5
Office
1,552 
26,263 
— 
1,583 
1,552 
27,846 
29,398 
4,991 
2007
5-40 yrs.
Captrust Tower
Office
84,054 
9,670 
124,530 
— 
4,138 
9,670 
128,668 
138,338 
12,734 
2010
5-40 yrs.
150 Fayetteville
Office
107,584 
7,677 
130,049 
— 
22,978 
7,677 
153,027 
160,704 
17,817 
1991
5-40 yrs.
GlenLake III
Office
3,981 
65,660 
29 
4,152 
4,010 
69,812 
73,822 
2,551 
2023
5-40 yrs.
107

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
Initial Costs
Costs Capitalized
Subsequent to
Acquisition
Gross Value at Close of Period
Life on
Which
Depreciation
is
Calculated
Description
Property
Type
2024
Encumbrance
Land
Bldg &
Improv
Land
Bldg &
Improv
Land
Bldg &
Improv
Total
Assets (1)
Accumulated
Depreciation
Date of
Construction
2205 Evans Road - Land
Office
2,676 
— 
— 
— 
2,676 
— 
2,676 
— 
N/A
N/A
Other Property
Other
27,260 
20,868 
(13,375)
103,939 
13,885 
124,807 
138,692 
70,766 
N/A
5-40 yrs.
Richmond, VA
4900 Cox Road
Office
1,324 
5,311 
15 
3,285 
1,339 
8,596 
9,935 
4,878 
1991
 5-40 yrs.
Colonnade Building
Office
1,364 
6,105 
— 
3,833 
1,364 
9,938 
11,302 
4,540 
2003
 5-40 yrs.
Highwoods Commons
Office
521 
— 
458 
5,270 
979 
5,270 
6,249 
2,688 
1999
 5-40 yrs.
Highwoods One
Office
1,688 
— 
22 
16,375 
1,710 
16,375 
18,085 
8,642 
1996
 5-40 yrs.
Highwoods Two
Office
786 
— 
226 
10,138 
1,012 
10,138 
11,150 
5,290 
1997
 5-40 yrs.
Highwoods Five
Office
783 
— 
11 
8,839 
794 
8,839 
9,633 
5,323 
1998
 5-40 yrs.
Highwoods Plaza
Office
909 
— 
187 
6,723 
1,096 
6,723 
7,819 
3,435 
2000
 5-40 yrs.
Innslake Center
Office
845 
— 
125 
7,706 
970 
7,706 
8,676 
4,623 
2001
 5-40 yrs.
4101 Cox Road
Office
1,205 
4,825 
— 
3,093 
1,205 
7,918 
9,123 
4,496 
1990
 5-40 yrs.
North Park
Office
2,163 
8,659 
6 
3,314 
2,169 
11,973 
14,142 
7,536 
1989
 5-40 yrs.
North Shore Commons I
Office
951 
— 
137 
14,641 
1,088 
14,641 
15,729 
6,981 
2002
 5-40 yrs.
North Shore Commons II
Office
2,067 
— 
(89)
13,036 
1,978 
13,036 
15,014 
4,992 
2007
 5-40 yrs.
North End - Land
Office
1,497 
— 
55 
10 
1,552 
10 
1,562 
3 
2020
5-40 yrs.
One Shockoe Plaza
Office
— 
— 
356 
22,271 
356 
22,271 
22,627 
13,864 
1996
 5-40 yrs.
Lake Brook Commons
Office
1,600 
8,864 
(179)
400 
1,421 
9,264 
10,685 
4,502 
1996
 5-40 yrs.
Highwoods Three
Office
1,918 
— 
358 
12,697 
2,276 
12,697 
14,973 
5,939 
2005
 5-40 yrs.
Stony Point I
Office
1,384 
11,630 
(267)
4,867 
1,117 
16,497 
17,614 
10,274 
1990
 5-40 yrs.
Stony Point II
Office
1,240 
— 
103 
14,679 
1,343 
14,679 
16,022 
8,338 
1999
 5-40 yrs.
Stony Point III
Office
995 
— 
— 
10,718 
995 
10,718 
11,713 
5,947 
2002
 5-40 yrs.
Stony Point IV
Office
955 
— 
— 
13,735 
955 
13,735 
14,690 
5,712 
2006
 5-40 yrs.
4480 Cox Road
Office
1,301 
6,036 
15 
3,583 
1,316 
9,619 
10,935 
4,987 
1996
 5-40 yrs.
Innsbrook Centre
Office
914 
8,249 
— 
1,144 
914 
9,393 
10,307 
4,643 
1987
 5-40 yrs.
Tampa, FL
Meridian Three
Office
2,673 
16,470 
— 
7,026 
2,673 
23,496 
26,169 
10,196 
1989
 5-40 yrs.
Bayshore Place
Office
2,276 
11,817 
— 
3,821 
2,276 
15,638 
17,914 
9,179 
1990
 5-40 yrs.
Highwoods Bay Center I
Office
3,565 
— 
(64)
38,199 
3,501 
38,199 
41,700 
17,462 
2007
 5-40 yrs.
Horizon
Office
— 
6,257 
— 
4,902 
— 
11,159 
11,159 
6,332 
1980
 5-40 yrs.
Lakeside
Office
— 
7,369 
— 
7,126 
— 
14,495 
14,495 
9,953 
1978
 5-40 yrs.
Lakeside/Parkside Garage
Office
— 
— 
— 
5,817 
— 
5,817 
5,817 
3,446 
2004
 5-40 yrs.
One Harbour Place
Office
2,016 
25,252 
— 
16,127 
2,016 
41,379 
43,395 
23,894 
1985
 5-40 yrs.
Parkside
Office
— 
9,407 
— 
3,827 
— 
13,234 
13,234 
8,080 
1979
 5-40 yrs.
Pavilion
Office
— 
16,394 
— 
5,196 
— 
21,590 
21,590 
13,917 
1982
 5-40 yrs.
108

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
Initial Costs
Costs Capitalized
Subsequent to
Acquisition
Gross Value at Close of Period
Life on
Which
Depreciation
is
Calculated
Description
Property
Type
2024
Encumbrance
Land
Bldg &
Improv
Land
Bldg &
Improv
Land
Bldg &
Improv
Total
Assets (1)
Accumulated
Depreciation
Date of
Construction
Pavilion Parking Garage
Office
— 
— 
— 
5,922 
— 
5,922 
5,922 
3,675 
1999
 5-40 yrs.
Tower Place
Office
3,218 
19,898 
— 
9,818 
3,218 
29,716 
32,934 
17,897 
1988
 5-40 yrs.
Westshore Square
Office
1,126 
5,186 
— 
1,467 
1,126 
6,653 
7,779 
4,369 
1976
 5-40 yrs.
Meridian One
Office
1,849 
22,363 
— 
5,635 
1,849 
27,998 
29,847 
9,525 
1984
 5-40 yrs.
Meridian Two
Office
1,302 
19,588 
— 
6,550 
1,302 
26,138 
27,440 
9,014 
1986
 5-40 yrs.
Avion
Office
— 
— 
6,310 
44,142 
6,310 
44,142 
50,452 
10,847 
2016
 5-40 yrs.
Truist Place
Office
1,980 
102,138 
— 
32,622 
1,980 
134,760 
136,740 
37,976 
1992
 5-40 yrs.
Truist Place - Land
Office
2,225 
— 
— 
— 
2,225 
— 
2,225 
— 
N/A
 N/A
Midtown West
Office
44,965 
16,543 
34,818 
(218)
9,986 
16,325 
44,804 
61,129 
5,693 
2021
 5-40 yrs.
$798,902 
$4,268,554 
$ (1,336)
$1,656,130 
$797,566 
$5,924,684 
$6,722,250 
$1,855,097 
__________
(1)
The cost basis for income tax purposes of aggregate land and buildings and tenant improvements as of December 31, 2024 is $6.4 billion.
(2)
These assets are pledged as collateral for a $69.6 million first mortgage loan.
(3)
These assets are pledged as collateral for a $121.3 million first mortgage loan.
109

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on February 11, 2025.
Highwoods Properties, Inc.
 
By: 
 
/s/ Theodore J. Klinck
 
Theodore J. Klinck
 
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacity and on the dates indicated.
Signature
Title
Date
 
 
 
/s/ Carlos E. Evans
Chairman of the Board of Directors
February 11, 2025
Carlos E. Evans
/s/ Theodore J. Klinck
President, Chief Executive Officer and Director
February 11, 2025
Theodore J. Klinck
 
 
 
/s/ Charles A. Anderson
Director
February 11, 2025
Charles A. Anderson
 
 
 
/s/ Gene H. Anderson
Director
February 11, 2025
Gene H. Anderson
/s/ Thomas P. Anderson
Director
February 11, 2025
Thomas P. Anderson
/s/ David L. Gadis
Director
February 11, 2025
David L. Gadis
/s/ David J. Hartzell
Director
February 11, 2025
David J. Hartzell
 
 
 
/s/ Anne H. Lloyd
Director
February 11, 2025
Anne H. Lloyd
/s/ Candice W. Todd
Director
February 11, 2025
Candice W. Todd
 
 
 
/s/ Brendan C. Maiorana
Executive Vice President and Chief Financial Officer
February 11, 2025
Brendan C. Maiorana
 
 
 
/s/ Daniel L. Clemmens
Vice President and Chief Accounting Officer
February 11, 2025
Daniel L. Clemmens
110

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on February 11, 2025.
Highwoods Realty Limited Partnership
 
By:
Highwoods Properties, Inc., its sole general partner
By: 
 
/s/ Theodore J. Klinck
 
Theodore J. Klinck
 
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacity and on the dates indicated.
Signature
Title
Date
 
 
 
/s/ Carlos E. Evans
Chairman of the Board of Directors of the General Partner
February 11, 2025
Carlos E. Evans
 
 
 
/s/ Theodore J. Klinck
President, Chief Executive Officer and Director of the General
Partner
February 11, 2025
Theodore J. Klinck
/s/ Charles A. Anderson
Director of the General Partner
February 11, 2025
Charles A. Anderson
 
 
 
/s/ Gene H. Anderson
Director of the General Partner
February 11, 2025
Gene H. Anderson
/s/ Thomas P. Anderson
Director of the General Partner
February 11, 2025
Thomas P. Anderson
/s/ David L. Gadis
Director of the General Partner
February 11, 2025
David L. Gadis
/s/ David J. Hartzell
Director of the General Partner
February 11, 2025
David J. Hartzell
 
 
 
/s/ Anne H. Lloyd
Director of the General Partner
February 11, 2025
Anne H. Lloyd
/s/ Candice W. Todd
Director of the General Partner
February 11, 2025
Candice W. Todd
/s/ Brendan C. Maiorana
Executive Vice President and Chief Financial Officer of the General
Partner
February 11, 2025
Brendan C. Maiorana
 
 
 
/s/ Daniel L. Clemmens
Vice President and Chief Accounting Officer of the General Partner
February 11, 2025
Daniel L. Clemmens
111

Exhibit 10
AMENDMENT NO. 1 TO THE
HIGHWOODS PROPERTIES, INC.
2021 LONG-TERM EQUITY INCENTIVE PLAN
This Amendment No. 1 (this “Amendment”), dated as of February 10, 2025, is hereby made to the 2021 Long-Term Equity Incentive Plan
(the “Plan”) of Highwoods Properties, Inc. (the “Company”).
WHEREAS, the Plan was approved by the holders of a majority of the outstanding Shares at a duly authorized meeting of the Company’s
stockholders on May 11, 2021;
WHEREAS, the Plan originally provided that the total number of Shares available for grant under the Plan shall not exceed 3,000,000 and
that no more than 1,000,000 Shares may be granted as Restricted Stock and Restricted Stock Units;
WHEREAS, the Company has to date granted 757,640 Shares to Participants since adoption of the Plan by stockholders that remain
outstanding as of the date hereof, all of which have been in the form of Shares of Restricted Stock;
WHEREAS, the Board has the power to amend the Plan without the consent of any other person so long as such amendment (1) does not
permit the repricing, replacing or regranting of an Option either in connection with the cancellation of such Option or by amending an Award
Agreement to lower the exercise price of such Option; and (2) is not a “material revision” to the Plan as such term is defined by Section 303A.08 of
the New York Stock Exchange Listed Company Manual (or any successor rule); and
WHEREAS, after having made a reasonable determination that the Amendment meets the criteria for adoption and approval without the
consent of any other person, the Board has approved and adopted this Amendment.
NOW, THEREFORE, the Plan is hereby amended as follows:
SECTION 1
DEFINED TERMS
The capitalized terms used herein shall have the meanings ascribed thereto in the Plan, except as otherwise defined or limited herein.
SECTION 2
EFFECTIVE TIME OF THE AMENDMENT
The Amendment shall become effective as of February 10, 2025.
SECTION 3
AMENDMENT OF SECTION 5.1
Section 5.1 of the Plan is hereby amended and restated in its entirety as follows:
5.1    Number of Shares. Subject to adjustment as provided in Section 5.3, the total number of Shares available for grant under the
Plan shall not exceed 1,035,000 Shares.
Except as amended by this Amendment, the Plan is hereby ratified and confirmed in all other respects and shall otherwise remain
unmodified and in full force and effect.
1

Exhibit 21
Subsidiaries of Highwoods Properties, Inc.
Highwoods Realty Limited Partnership, a North Carolina limited partnership
HRLP Fourth Avenue, LLC, a Delaware limited liability company
HRLP Capitol Towers, L.P., a Delaware limited partnership
HRLP BOAT, LLC, a Delaware limited liability company
HRLP Fayetteville, L.P., a Delaware limited partnership
Akros Insurance, LLC, a Washington DC limited liability company
* We have omitted the names of other direct and indirect subsidiaries of Highwoods Properties, Inc. because such other subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.
Subsidiaries of Highwoods Realty Limited Partnership
HRLP Fourth Avenue, LLC, a Delaware limited liability company
HRLP Capitol Towers, L.P., a Delaware limited partnership
HRLP BOAT, LLC, a Delaware limited liability company
HRLP Fayetteville, L.P., a Delaware limited partnership
Akros Insurance, LLC, a Washington DC limited liability company
* We have omitted the names of other direct and indirect subsidiaries of Highwoods Realty Limited Partnership because such other
subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements Nos. 333-262597, 333-239289, 333-204128, 333-168356 and 333-160521 on Form S-8
and Registration Statement Nos. 333-269624 and 333-193865 on Form S-3 of our reports dated February 11, 2025, relating to the consolidated financial statements
and financial statement schedule of Highwoods Properties, Inc. and subsidiaries (the “Company”) and the effectiveness of the Company’s internal control over
financial reporting appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2024.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina
February 11, 2025

Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-269624-01 on Form S-3 of our report dated February 11, 2025, relating to the
consolidated financial statements and financial statement schedules of Highwoods Realty Limited Partnership and subsidiaries (the “Operating Partnership”)
appearing in this Annual Report on Form 10-K of the Operating Partnership for the year ended December 31, 2024.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina
February 11, 2025

Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT
I, Theodore J. Klinck, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Highwoods Properties, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
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;
(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal
quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over
financial reporting.
Date: February 11, 2025
/s/ Theodore J. Klinck
Theodore J. Klinck
President and Chief Executive Officer

Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT
I, Brendan C. Maiorana, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Highwoods Properties, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
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;
(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal
quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over
financial reporting.
Date: February 11, 2025
/s/ Brendan C. Maiorana
Brendan C. Maiorana
Executive Vice President and Chief Financial Officer

Exhibit 31.3
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT
I, Theodore J. Klinck, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Highwoods Realty Limited Partnership;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
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;
(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal
quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over
financial reporting.
Date: February 11, 2025
/s/ Theodore J. Klinck
Theodore J. Klinck
President and Chief Executive Officer of the General Partner

Exhibit 31.4
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT
I, Brendan C. Maiorana, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Highwoods Realty Limited Partnership;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
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;
(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal
quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over
financial reporting.
Date: February 11, 2025
/s/ Brendan C. Maiorana
Brendan C. Maiorana
Executive Vice President and Chief Financial Officer of the
General Partner

Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
In connection with the Annual Report of Highwoods Properties, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2024 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Theodore J. Klinck, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Theodore J. Klinck
Theodore J. Klinck
President and Chief Executive Officer
February 11, 2025

Exhibit 32.2
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
In connection with the Annual Report of Highwoods Properties, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2024 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Brendan C. Maiorana, Executive Vice President and Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Brendan C. Maiorana
Brendan C. Maiorana
Executive Vice President and Chief Financial Officer
February 11, 2025

Exhibit 32.3
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
In connection with the Annual Report of Highwoods Realty Limited Partnership (the “Operating Partnership”) on Form 10-K for the period ended
December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Theodore J. Klinck, President and Chief Executive
Officer of Highwoods Properties, Inc., general partner of the Operating Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating
Partnership.
/s/ Theodore J. Klinck
Theodore J. Klinck
President and Chief Executive Officer of the General Partner
February 11, 2025

Exhibit 32.4
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
In connection with the Annual Report of Highwoods Realty Limited Partnership (the “Operating Partnership”) on Form 10-K for the period ended
December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brendan C. Maiorana, Executive Vice President and
Chief Financial Officer of Highwoods Properties, Inc., general partner of the Operating Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §
906 of the Sarbanes-Oxley Act of 2002, that:
1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating
Partnership.
/s/ Brendan C. Maiorana
Brendan C. Maiorana
Executive Vice President and Chief Financial Officer of the General Partner
February 11, 2025