HIGHWOODS PROPERTIES, INC., 10-Q filed on 10/25/2016
Quarterly Report
v3.5.0.2
Document and Entity Information Document - shares
9 Months Ended
Sep. 30, 2016
Oct. 17, 2016
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS PROPERTIES INC.  
Entity Central Index Key 0000921082  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Sep. 30, 2016  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   100,204,106
Entity Well-known Seasoned Issuer Yes  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
Highwoods Realty Limited Partnership [Member]    
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS REALTY LIMITED PARTNERSHIP  
Entity Central Index Key 0000941713  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Type 10-Q  
Document Period End Date Sep. 30, 2016  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Well-known Seasoned Issuer Yes  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
v3.5.0.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2016
Dec. 31, 2015
Real estate assets, at cost:    
Land $ 474,375 $ 443,705
Buildings and tenant improvements 4,278,303 4,063,328
Development in-process 227,573 194,050
Land held for development 79,603 68,244
Total real estate assets 5,059,854 4,769,327
Less-accumulated depreciation (1,098,492) (1,007,104)
Net real estate assets 3,961,362 3,762,223
Real estate and other assets, net, held for sale 260 240,948
Cash and cash equivalents 6,387 5,036
Restricted cash 37,763 16,769
Accounts receivable, net of allowance of $791 and $928, respectively 26,756 29,077
Mortgages and notes receivable, net of allowance of $0 and $287, respectively 9,525 2,096
Accrued straight-line rents receivable, net of allowance of $703 and $257, respectively 167,503 150,392
Investments in and advances to unconsolidated affiliates 18,697 20,676
Deferred leasing costs, net of accumulated amortization of $136,292 and $115,172, respectively 218,976 231,765
Prepaid expenses and other assets, net of accumulated amortization of $20,008 and $17,830, respectively 28,581 26,649
Total Assets 4,475,810 4,485,631
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 1,901,066 2,491,813
Accounts payable, accrued expenses and other liabilities 258,638 233,988
Liabilities held for sale 0 14,119
Total Liabilities 2,159,704 2,739,920
Commitments and contingencies
Noncontrolling interests in the Operating Partnership 148,005 126,429
Equity/Capital:    
Preferred Stock, $.01 par value, 50,000,000 authorized shares; 8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 28,920 and 29,050 shares issued and outstanding, respectively 28,920 29,050
Common Stock, $.01 par value, 200,000,000 authorized shares; 100,204,106 and 96,091,932 shares issued and outstanding, respectively 1,002 961
Additional paid-in capital 2,780,443 2,598,242
Distributions in excess of net income available for common stockholders (650,954) (1,023,135)
Accumulated other comprehensive loss (9,260) (3,811)
Total Stockholders’ Equity 2,150,151 1,601,307
Noncontrolling interests in consolidated affiliates 17,950 17,975
Total Equity/Capital 2,168,101 1,619,282
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital 4,475,810 4,485,631
Highwoods Realty Limited Partnership [Member]    
Real estate assets, at cost:    
Land 474,375 443,705
Buildings and tenant improvements 4,278,303 4,063,328
Development in-process 227,573 194,050
Land held for development 79,603 68,244
Total real estate assets 5,059,854 4,769,327
Less-accumulated depreciation (1,098,492) (1,007,104)
Net real estate assets 3,961,362 3,762,223
Real estate and other assets, net, held for sale 260 240,948
Cash and cash equivalents 6,387 5,036
Restricted cash 37,763 16,769
Accounts receivable, net of allowance of $791 and $928, respectively 26,756 29,077
Mortgages and notes receivable, net of allowance of $0 and $287, respectively 9,525 2,096
Accrued straight-line rents receivable, net of allowance of $703 and $257, respectively 167,503 150,392
Investments in and advances to unconsolidated affiliates 18,697 20,676
Deferred leasing costs, net of accumulated amortization of $136,292 and $115,172, respectively 218,976 231,765
Prepaid expenses and other assets, net of accumulated amortization of $20,008 and $17,830, respectively 28,581 26,649
Total Assets 4,475,810 4,485,631
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 1,901,066 2,491,813
Accounts payable, accrued expenses and other liabilities 258,638 233,988
Liabilities held for sale 0 14,119
Total Liabilities 2,159,704 2,739,920
Commitments and contingencies
Redeemable Operating Partnership Units:    
Common Units, 2,839,704 and 2,899,752 outstanding, respectively 148,005 126,429
Series A Preferred Units (liquidation preference $1,000 per unit), 28,920 and 29,050 units issued and outstanding, respectively 28,920 29,050
Total Redeemable Operating Partnership Units 176,925 155,479
Equity/Capital:    
General partner Common Units, 1,026,350 and 985,829 outstanding, respectively 21,303 15,759
Limited partner Common Units, 98,768,947 and 94,697,294 outstanding, respectively 2,109,188 1,560,309
Accumulated other comprehensive loss (9,260) (3,811)
Noncontrolling interests in consolidated affiliates 17,950 17,975
Total Equity/Capital 2,139,181 1,590,232
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital $ 4,475,810 $ 4,485,631
v3.5.0.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2016
Dec. 31, 2015
Assets:    
Accounts receivable allowance $ 791 $ 928
Mortgages and notes receivable allowance 0 287
Accrued straight-line rents receivable allowance 703 257
Deferred leasing costs, accumulated amortization 136,292 115,172
Prepaid expenses and other assets, accumulated amortization $ 20,008 $ 17,830
Equity/Capital:    
Series A Preferred Stock, dividend rate percentage (in hundredths) 8.625% 8.625%
Series A Preferred Stock, par value (in dollars per share) $ 0.01 $ 0.01
Series A Preferred Stock, authorized shares (in shares) 50,000,000 50,000,000
Series A Preferred Stock, liquidation preference (in dollars per share) $ 1,000 $ 1,000
Series A Preferred Stock, shares issued (in shares) 28,920 29,050
Series A Preferred Stock, shares outstanding (in shares) 28,920 29,050
Common Stock, par value (in dollars per share) $ 0.01 $ 0.01
Common Stock, authorized shares (in shares) 200,000,000 200,000,000
Common Stock, shares issued (in shares) 100,204,106 96,091,932
Common Stock, shares outstanding (in shares) 100,204,106 96,091,932
Highwoods Realty Limited Partnership [Member]    
Assets:    
Accounts receivable allowance $ 791 $ 928
Mortgages and notes receivable allowance 0 287
Accrued straight-line rents receivable allowance 703 257
Deferred leasing costs, accumulated amortization 136,292 115,172
Prepaid expenses and other assets, accumulated amortization $ 20,008 $ 17,830
Redeemable Operating Partnership Units: [Abstract]    
Redeemable Common Units outstanding (in shares) 2,839,704 2,899,752
Series A Preferred Units, liquidation preference (in dollars per share) $ 1,000 $ 1,000
Series A Preferred Units, issued (in shares) 28,920 29,050
Series A Preferred Units, outstanding (in shares) 28,920 29,050
Common Units: [Abstract]    
General partners' capital account, units outstanding (in shares) 1,026,350 985,829
Limited partners' capital account, units outstanding (in shares) 98,768,947 94,697,294
v3.5.0.2
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Rental and other revenues $ 166,269 $ 150,766 $ 497,988 $ 444,545
Operating expenses:        
Rental property and other expenses 58,620 54,430 173,715 159,314
Depreciation and amortization 52,923 50,963 161,734 145,758
General and administrative 9,863 8,990 29,327 28,898
Total operating expenses 121,406 114,383 364,776 333,970
Interest expense:        
Contractual 17,722 20,484 56,111 61,783
Amortization of debt issuance costs 844 873 2,645 2,501
Financing obligation 0 0 0 162
Total interest expense 18,566 21,357 58,756 64,446
Other income:        
Interest and other income 833 379 1,884 1,481
Losses on debt extinguishment 0 0 0 (220)
Total other income 833 379 1,884 1,261
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates 27,130 15,405 76,340 47,390
Gains on disposition of property 3,902 7,012 14,160 10,581
Gain on disposition of investment in unconsolidated affiliate 0 4,155 0 4,155
Equity in earnings of unconsolidated affiliates 2,808 780 5,010 4,367
Income from continuing operations 33,840 27,352 95,510 66,493
Discontinued operations:        
Income from discontinued operations 0 4,265 4,097 12,850
Net gains on disposition of discontinued operations 0 0 414,496 0
Total income from discontinued operations 0 4,265 418,593 12,850
Net income 33,840 31,617 514,103 79,343
Net (income) attributable to noncontrolling interests in the Operating Partnership (926) (918) (14,876) (2,296)
Net (income) attributable to noncontrolling interests in consolidated affiliates (319) (324) (941) (948)
Dividends on Preferred Stock (624) (626) (1,877) (1,879)
Net income available for common stockholders $ 31,971 $ 29,749 $ 496,409 $ 74,220
Earnings per Common Share – basic:        
Income from continuing operations available for common stockholders (in dollars per share) $ 0.32 $ 0.27 $ 0.92 $ 0.66
Income from discontinued operations available for common stockholders (in dollars per share) 0.00 0.04 4.16 0.13
Net income available for common stockholders (in dollars per share) $ 0.32 $ 0.31 $ 5.08 $ 0.79
Weighted average Common Shares outstanding - basic (in shares) 98,973 94,693 97,669 93,996
Earnings per Common Share - diluted:        
Income from continuing operations available for common stockholders (in dollars per share) $ 0.32 $ 0.27 $ 0.92 $ 0.66
Income from discontinued operations available for common stockholders (in dollars per share) 0.00 0.04 4.16 0.13
Net income available for common stockholders (in dollars per share) $ 0.32 $ 0.31 $ 5.08 $ 0.79
Weighted average Common Shares outstanding - diluted (in shares) [1] 101,939 97,661 100,645 97,003
Dividends declared per Common Share (in dollars per share) $ 0.425 $ 0.425 $ 1.275 $ 1.275
Net income available for common stockholders:        
Income from continuing operations available for common stockholders $ 31,971 $ 25,612 $ 90,081 $ 61,759
Income from discontinued operations available for common stockholders 0 4,137 406,328 12,461
Net income available for common stockholders 31,971 29,749 496,409 74,220
Highwoods Realty Limited Partnership [Member]        
Rental and other revenues 166,269 150,766 497,988 444,545
Operating expenses:        
Rental property and other expenses 58,620 54,430 173,715 159,314
Depreciation and amortization 52,923 50,963 161,734 145,758
General and administrative 9,863 8,990 29,327 28,898
Total operating expenses 121,406 114,383 364,776 333,970
Interest expense:        
Contractual 17,722 20,484 56,111 61,783
Amortization of debt issuance costs 844 873 2,645 2,501
Financing obligation 0 0 0 162
Total interest expense 18,566 21,357 58,756 64,446
Other income:        
Interest and other income 833 379 1,884 1,481
Losses on debt extinguishment 0 0 0 (220)
Total other income 833 379 1,884 1,261
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates 27,130 15,405 76,340 47,390
Gains on disposition of property 3,902 7,012 14,160 10,581
Gain on disposition of investment in unconsolidated affiliate 0 4,155 0 4,155
Equity in earnings of unconsolidated affiliates 2,808 780 5,010 4,367
Income from continuing operations 33,840 27,352 95,510 66,493
Discontinued operations:        
Income from discontinued operations 0 4,265 4,097 12,850
Net gains on disposition of discontinued operations 0 0 414,496 0
Total income from discontinued operations 0 4,265 418,593 12,850
Net income 33,840 31,617 514,103 79,343
Net (income) attributable to noncontrolling interests in consolidated affiliates (319) (324) (941) (948)
Distributions on Preferred Units (624) (626) (1,877) (1,879)
Net income available for common unitholders $ 32,897 $ 30,667 $ 511,285 $ 76,516
Earnings per Common Unit - basic:        
Income from continuing operations available for common unitholders (in dollars per share) $ 0.32 $ 0.27 $ 0.93 $ 0.66
Income from discontinued operations available for common unitholders (in dollars per share) 0.00 0.05 4.18 0.13
Net income available for common unitholders (in dollars per share) $ 0.32 $ 0.32 $ 5.11 $ 0.79
Weighted average Common Units outstanding - basic (in shares) 101,422 97,194 100,142 96,505
Earnings per Common Unit - diluted:        
Income from continuing operations available for common unitholders (in dollars per share) $ 0.32 $ 0.27 $ 0.92 $ 0.66
Income from discontinued operations available for common unitholders (in dollars per share) 0.00 0.05 4.18 0.13
Net income available for common unitholders (in dollars per share) $ 0.32 $ 0.32 $ 5.10 $ 0.79
Weighted average Common Units outstanding - diluted (in shares) [2] 101,530 97,252 100,236 96,594
Distributions declared per Common Unit (in dollars per unit) $ 0.425 $ 0.425 $ 1.275 $ 1.275
Net income available for common unitholders:        
Income from continuing operations available for common unitholders $ 32,897 $ 26,402 $ 92,692 $ 63,666
Income from discontinued operations available for common unitholders 0 4,265 418,593 12,850
Net income available for common unitholders $ 32,897 $ 30,667 $ 511,285 $ 76,516
[1] Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.
[2] Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.
v3.5.0.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Comprehensive income:        
Net income $ 33,840 $ 31,617 $ 514,103 $ 79,343
Other comprehensive income/(loss):        
Unrealized gains/(losses) on tax increment financing bond 0 (7) 0 187
Unrealized gains/(losses) on cash flow hedges 1,610 (3,021) (7,785) (5,666)
Amortization of cash flow hedges 758 932 2,336 2,781
Total other comprehensive income/(loss) 2,368 (2,096) (5,449) (2,698)
Total comprehensive income 36,208 29,521 508,654 76,645
Less-comprehensive (income) attributable to noncontrolling interests (1,245) (1,242) (15,817) (3,244)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders 34,963 28,279 492,837 73,401
Highwoods Realty Limited Partnership [Member]        
Comprehensive income:        
Net income 33,840 31,617 514,103 79,343
Other comprehensive income/(loss):        
Unrealized gains/(losses) on tax increment financing bond 0 (7) 0 187
Unrealized gains/(losses) on cash flow hedges 1,610 (3,021) (7,785) (5,666)
Amortization of cash flow hedges 758 932 2,336 2,781
Total other comprehensive income/(loss) 2,368 (2,096) (5,449) (2,698)
Total comprehensive income 36,208 29,521 508,654 76,645
Less-comprehensive (income) attributable to noncontrolling interests (319) (324) (941) (948)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders $ 35,889 $ 29,197 $ 507,713 $ 75,697
v3.5.0.2
Consolidated Statements of Equity/Capital - USD ($)
$ in Thousands
Total
Highwoods Realty Limited Partnership [Member]
Common Stock [Member]
Series A Cumulative Redeemable Preferred Shares [Member]
General Partners' Common Units [Member]
Highwoods Realty Limited Partnership [Member]
Limited Partners' Common Units [Member]
Highwoods Realty Limited Partnership [Member]
Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Highwoods Realty Limited Partnership [Member]
Noncontrolling Interests in Consolidated Affiliates [Member]
Noncontrolling Interests in Consolidated Affiliates [Member]
Highwoods Realty Limited Partnership [Member]
Distributions in Excess of Net Income Available for Common Stockholders [Member]
Balance (in shares) at Dec. 31, 2014     92,907,310                  
Balance at Dec. 31, 2014 $ 1,551,091 $ 1,522,223 $ 929 $ 29,060 $ 15,078 $ 1,492,948 $ 2,464,275 $ (3,912) $ (3,912) $ 18,109 $ 18,109 $ (957,370)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   93,216     932 92,284     0   0  
Distributions paid on Common Units   (122,929)     (1,230) (121,699)     0   0  
Distributions paid on Preferred Units   (1,879)     (19) (1,860)     0   0  
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     2,268,380                  
Issuances of Common Stock, net of issuance costs and tax withholdings 93,216   $ 23 0     93,193 0   0   0
Conversions of Common Units to Common Stock - Shares     26,820                  
Conversions of Common Units to Common Stock 1,206   $ 0 0     1,206 0   0   0
Dividends on Common Stock (119,729)   0 0     0 0   0   (119,729)
Dividends on Preferred Stock (1,879)   0 0     0 0   0   (1,879)
Adjustment of noncontrolling interests in the Operating Partnership to fair value 14,649   0 0     14,649 0   0   0
Distributions to noncontrolling interests in consolidated affiliates (1,070) (1,070) $ 0 0 0 0 0 0 0 (1,070) (1,070) 0
Issuances of restricted stock - shares     128,951                  
Issuances of restricted stock 0   $ 0 0     0 0   0   0
Redemptions/repurchases of Preferred Stock (10)   $ 0 (10)     0 0   0   0
Share-based compensation expense, net of forfeitures - shares     (1,703)                  
Share-based compensation expense, net of forfeitures 5,996 5,996 $ 1 0 60 5,936 5,995 0 0 0 0 0
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   16,567     166 16,401     0   0  
Net (income) attributable to noncontrolling interests in the Operating Partnership (2,296)   0 0     0 0   0   (2,296)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0 0 0 (9) (939) 0 0 0 948 948 (948)
Comprehensive income:                        
Net income 79,343 79,343 0 0 793 78,550 0 0 0 0 0 79,343
Other comprehensive loss (2,698) (2,698) $ 0 0 0 0 0 (2,698) (2,698) 0 0 0
Total comprehensive income 76,645 76,645                    
Balance (in shares) at Sep. 30, 2015     95,329,758                  
Balance at Sep. 30, 2015 $ 1,617,819 1,588,769 $ 953 29,050 15,771 1,561,621 2,579,318 (6,610) (6,610) 17,987 17,987 (1,002,879)
Balance (in shares) at Dec. 31, 2015 96,091,932   96,091,932                  
Balance at Dec. 31, 2015 $ 1,619,282 1,590,232 $ 961 29,050 15,759 1,560,309 2,598,242 (3,811) (3,811) 17,975 17,975 (1,023,135)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   187,214     1,872 185,342     0   0  
Distributions paid on Common Units   (127,391)     (1,274) (126,117)     0   0  
Distributions paid on Preferred Units   (1,877)     (19) (1,858)     0   0  
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     3,930,262                  
Issuances of Common Stock, net of issuance costs and tax withholdings 187,214   $ 39 0     187,175 0   0   0
Conversions of Common Units to Common Stock - Shares     60,048                  
Conversions of Common Units to Common Stock 3,006   $ 0 0     3,006 0   0   0
Dividends on Common Stock (124,228)   0 0     0 0   0   (124,228)
Dividends on Preferred Stock (1,877)   0 0     0 0   0   (1,877)
Adjustment of noncontrolling interests in the Operating Partnership to fair value (13,390)   0 0     (13,390) 0   0   0
Distributions to noncontrolling interests in consolidated affiliates (966) (966) $ 0 0 0 0 0 0 0 (966) (966) 0
Issuances of restricted stock - shares     130,752                  
Issuances of restricted stock 0   $ 0 0     0 0   0   0
Redemptions/repurchases of Preferred Stock (130)   $ 0 (130)     0 0   0   0
Share-based compensation expense, net of forfeitures - shares     (8,888)                  
Share-based compensation expense, net of forfeitures 5,412 5,412 $ 2 0 54 5,358 5,410 0 0 0 0 0
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   (22,097)     (221) (21,876)     0   0  
Net (income) attributable to noncontrolling interests in the Operating Partnership (14,876)   0 0     0 0   0   (14,876)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0 0 0 (9) (932) 0 0 0 941 941 (941)
Comprehensive income:                        
Net income 514,103 514,103 0 0 5,141 508,962 0 0 0 0 0 514,103
Other comprehensive loss (5,449) (5,449) $ 0 0 0 0 0 (5,449) (5,449) 0 0 0
Total comprehensive income $ 508,654 508,654                    
Balance (in shares) at Sep. 30, 2016 100,204,106   100,204,106                  
Balance at Sep. 30, 2016 $ 2,168,101 $ 2,139,181 $ 1,002 $ 28,920 $ 21,303 $ 2,109,188 $ 2,780,443 $ (9,260) $ (9,260) $ 17,950 $ 17,950 $ (650,954)
v3.5.0.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Operating activities:    
Net income $ 514,103 $ 79,343
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 161,734 156,200
Amortization of lease incentives and acquisition-related intangible assets and liabilities (1,599) 214
Share-based compensation expense 5,412 5,996
Allowance for losses on accounts and accrued straight-line rents receivable 1,846 1,851
Accrued interest on mortgages and notes receivable (364) (313)
Amortization of debt issuance costs 2,645 2,501
Amortization of cash flow hedges 2,336 2,781
Amortization of mortgages and notes payable fair value adjustments (175) 7
Losses on debt extinguishment 0 220
Net gains on disposition of property (428,656) (10,581)
Gain on disposition of investment in unconsolidated affiliate 0 (4,155)
Equity in earnings of unconsolidated affiliates (5,010) (4,367)
Changes in financing obligation 0 162
Distributions of earnings from unconsolidated affiliates 3,936 4,099
Changes in operating assets and liabilities:    
Accounts receivable 4,798 1,716
Prepaid expenses and other assets (2,243) (3,475)
Accrued straight-line rents receivable (18,931) (16,955)
Accounts payable, accrued expenses and other liabilities (7,447) (5,834)
Net cash provided by operating activities 232,385 209,410
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (110,249) (408,634)
Investments in development in-process (122,839) (87,222)
Investments in tenant improvements and deferred leasing costs (63,715) (85,234)
Investments in building improvements (51,714) (38,295)
Net proceeds from disposition of real estate assets 680,994 22,781
Net proceeds from disposition of investment in unconsolidated affiliate 0 6,919
Distributions of capital from unconsolidated affiliates 2,639 10,227
Investments in mortgages and notes receivable (7,934) (1,772)
Repayments of mortgages and notes receivable 869 9,301
Investments in and advances to unconsolidated affiliates (105) (384)
Repayments from unconsolidated affiliates 448 20,800
Changes in restricted cash and other investing activities (23,310) (12,582)
Net cash provided by/(used in) investing activities 305,084 (564,095)
Financing activities:    
Dividends on Common Stock (124,228) (119,729)
Redemptions/repurchases of Preferred Stock (130) (10)
Dividends on Preferred Stock (1,877) (1,879)
Distributions to noncontrolling interests in the Operating Partnership (3,684) (3,721)
Distributions to noncontrolling interests in consolidated affiliates (966) (1,070)
Proceeds from the issuance of Common Stock 194,518 98,485
Costs paid for the issuance of Common Stock (2,888) (1,518)
Repurchase of shares related to tax withholdings (4,416) (3,751)
Borrowings on revolving credit facility 257,800 393,900
Repayments of revolving credit facility (528,800) (337,900)
Borrowings on mortgages and notes payable 75,000 375,000
Repayments of mortgages and notes payable (395,455) (43,076)
Payments on financing obligation 0 (1,722)
Changes in debt issuance costs and other financing activities (992) (1,972)
Net cash provided by/(used in) financing activities (536,118) 351,037
Net increase/(decrease) in cash and cash equivalents 1,351 (3,648)
Cash and cash equivalents at beginning of the period 5,036 8,832
Cash and cash equivalents at end of the period 6,387 5,184
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 58,138 62,661
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized losses on cash flow hedges (7,785) (5,666)
Conversions of Common Units to Common Stock 3,006 1,206
Changes in accrued capital expenditures 25,037 1,759
Write-off of fully depreciated real estate assets 28,783 44,742
Write-off of fully amortized debt issuance and leasing costs 16,991 27,658
Adjustment of noncontrolling interests in the Operating Partnership to fair value 13,390 (14,649)
Unrealized gains on tax increment financing bond 0 187
Assumption of mortgages and notes payable related to acquisition activities 0 19,277
Contingent consideration in connection with the acquisition of land 0 900
Highwoods Realty Limited Partnership [Member]    
Operating activities:    
Net income 514,103 79,343
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 161,734 156,200
Amortization of lease incentives and acquisition-related intangible assets and liabilities (1,599) 214
Share-based compensation expense 5,412 5,996
Allowance for losses on accounts and accrued straight-line rents receivable 1,846 1,851
Accrued interest on mortgages and notes receivable (364) (313)
Amortization of debt issuance costs 2,645 2,501
Amortization of cash flow hedges 2,336 2,781
Amortization of mortgages and notes payable fair value adjustments (175) 7
Losses on debt extinguishment 0 220
Net gains on disposition of property (428,656) (10,581)
Gain on disposition of investment in unconsolidated affiliate 0 (4,155)
Equity in earnings of unconsolidated affiliates (5,010) (4,367)
Changes in financing obligation 0 162
Distributions of earnings from unconsolidated affiliates 3,523 4,099
Changes in operating assets and liabilities:    
Accounts receivable 4,798 1,716
Prepaid expenses and other assets (2,243) (3,475)
Accrued straight-line rents receivable (18,931) (16,955)
Accounts payable, accrued expenses and other liabilities (7,447) (5,748)
Net cash provided by operating activities 231,972 209,496
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (110,249) (408,634)
Investments in development in-process (122,839) (87,222)
Investments in tenant improvements and deferred leasing costs (63,715) (85,234)
Investments in building improvements (51,714) (38,295)
Net proceeds from disposition of real estate assets 680,994 22,781
Net proceeds from disposition of investment in unconsolidated affiliate 0 6,919
Distributions of capital from unconsolidated affiliates 3,052 10,227
Investments in mortgages and notes receivable (7,934) (1,772)
Repayments of mortgages and notes receivable 869 9,301
Investments in and advances to unconsolidated affiliates (105) (384)
Repayments from unconsolidated affiliates 448 20,800
Changes in restricted cash and other investing activities (23,310) (12,582)
Net cash provided by/(used in) investing activities 305,497 (564,095)
Financing activities:    
Distributions on Common Units (127,391) (122,929)
Redemptions/repurchases of Preferred Units (130) (10)
Distributions on Preferred Units (1,877) (1,879)
Distributions to noncontrolling interests in consolidated affiliates (966) (1,070)
Proceeds from the issuance of Common Units 194,518 98,485
Costs paid for the issuance of Common Units (2,888) (1,518)
Repurchase of units related to tax withholdings (4,416) (3,751)
Borrowings on revolving credit facility 257,800 393,900
Repayments of revolving credit facility (528,800) (337,900)
Borrowings on mortgages and notes payable 75,000 375,000
Repayments of mortgages and notes payable (395,455) (43,076)
Payments on financing obligation 0 (1,722)
Changes in debt issuance costs and other financing activities (1,513) (2,685)
Net cash provided by/(used in) financing activities (536,118) 350,845
Net increase/(decrease) in cash and cash equivalents 1,351 (3,754)
Cash and cash equivalents at beginning of the period 5,036 8,938
Cash and cash equivalents at end of the period 6,387 5,184
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 58,138 62,661
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized losses on cash flow hedges (7,785) (5,666)
Changes in accrued capital expenditures 25,037 1,759
Write-off of fully depreciated real estate assets 28,783 44,742
Write-off of fully amortized debt issuance and leasing costs 16,991 27,658
Adjustment of Redeemable Common Units to fair value 21,576 (17,280)
Unrealized gains on tax increment financing bond 0 187
Assumption of mortgages and notes payable related to acquisition activities 0 19,277
Contingent consideration in connection with the acquisition of land $ 0 $ 900
v3.5.0.2
Description of Business and Significant Accounting Policies
9 Months Ended
Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business and Significant Accounting Policies
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”). At September 30, 2016, we owned or had an interest in 31.1 million rentable square feet of in-service properties, 1.1 million rentable square feet of properties under development and approximately 450 acres of development land.
 
The Company is the sole general partner of the Operating Partnership. At September 30, 2016, the Company owned all of the Preferred Units and 99.8 million, or 97.2%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.8 million Common Units. During the nine months ended September 30, 2016, the Company redeemed 60,048 Common Units for a like number of shares of Common Stock.

Common Stock Offerings
 
During the three and nine months ended September 30, 2016, the Company issued 1,547,457 and 3,624,528 shares, respectively, of Common Stock under its equity distribution agreements at an average gross sales price of $52.79 and $49.67 per share, respectively, and received net proceeds, after sales commissions, of $80.5 million and $177.3 million, respectively. As a result of this activity and the redemptions discussed above, the percentage of Common Units owned by the Company increased from 97.1% at December 31, 2015 to 97.2% at September 30, 2016.

Basis of Presentation
 
Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Our Consolidated Statements of Income for the three and nine months ended September 30, 2015 were retrospectively revised from previously reported amounts to reclassify the operations for those properties classified as discontinued operations. 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. In addition, we consolidate those entities deemed to be variable interest entities in which we are determined to be the primary beneficiary. At September 30, 2016, we had involvement with, but are not the primary beneficiary in, an entity that we concluded to be a variable interest entity. All intercompany transactions and accounts have been eliminated.

The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in the opinion of management, contain all adjustments (including normal recurring accruals) necessary for a fair presentation of our financial position, results of operations and cash flows. We have condensed or omitted certain notes and other information from the interim Consolidated Financial Statements presented in this Quarterly Report as permitted by SEC rules and regulations. These Consolidated Financial Statements should be read in conjunction with our 2015 Annual Report on Form 10-K.

Use of Estimates

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

1.    Description of Business and Significant Accounting Policies – Continued

Recently Issued Accounting Standards

The Financial Accounting Standards Board ("FASB") recently issued an accounting standards update ("ASU") that requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that we identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when we satisfy the performance obligations. We will also be required to disclose information regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is required to be adopted in 2018. Retrospective application is required either to all periods presented or with the cumulative effect of initial adoption recognized in the period of adoption. We are in the process of evaluating this ASU.
 
The FASB recently issued an ASU that amended consolidation requirements. The amendments significantly change the consolidation analysis required under GAAP and require companies to reevaluate all previous consolidation conclusions. We adopted the ASU as of January 1, 2016 and there was no impact to consolidated entities included in our Consolidated Financial Statements. However, in reevaluating our previous consolidation conclusions upon adoption of the ASU, we determined our 12.5% equity interest in an unconsolidated affiliate to be an interest in a variable interest entity because certain of its limited partners do not have substantive kick-out or participating rights. We do not qualify as the primary beneficiary since our obligation to absorb losses and receive benefits of the variable interest entity is less than that of the other general partner and we do not have the power to direct the activities that most significantly affect the economic performance of the entity. Accordingly, the entity is not consolidated. At September 30, 2016, our maximum exposure to loss with respect to this arrangement is limited to the less than $0.1 million carrying value of our 12.5% investment in the unconsolidated affiliate.
 
The FASB recently issued an ASU that requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability to which they relate, consistent with debt discounts, as opposed to being presented as assets. For debt issuance costs related to revolving credit facilities, the FASB allows the presentation of debt issuance costs as an asset. We adopted the ASU as of January 1, 2016 with retrospective application to our December 31, 2015 Consolidated Balance Sheets. The effect of the adoption was to reclassify debt issuance costs from deferred financing and leasing costs, net of accumulated amortization, as follows: $7.8 million to a contra account as a deduction from the related mortgages and notes payable and $2.1 million to prepaid expenses and other assets. There was no effect on our Consolidated Statements of Income.

The FASB recently issued an ASU which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.  The ASU requires lessors to account for leases using an approach that is substantially equivalent to the existing guidance and is effective for reporting periods beginning in 2019 with early adoption permitted.  We are in the process of evaluating this ASU.

The FASB recently issued an ASU that requires, among other things, the use of a new current expected credit loss ("CECL") model in determining our allowances for doubtful accounts with respect to accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable. The CECL model requires that we estimate our lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. We will also be required to disclose information about how we developed the allowances, including changes in the factors (e.g., portfolio mix, credit trends, unemployment, gross domestic product, etc.) that influenced our estimate of expected credit losses and the reasons for those changes. We will apply the ASU’s provisions as a cumulative-effect adjustment to retained earnings upon adoption in 2020. We are in the process of evaluating this ASU.

The FASB recently issued an ASU that adds to and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The ASU is required to be adopted in 2018 with retrospective application required. We are in the process of evaluating this ASU.
v3.5.0.2
Real Estate Assets
9 Months Ended
Sep. 30, 2016
Real Estate [Abstract]  
Real Estate Assets
Real Estate Assets
 
Acquisitions
 
During the third quarter of 2016, we acquired a building in Raleigh, NC, which delivered in 2015 and encompasses 243,000 rentable square feet, for a net purchase price of $76.9 million. We expensed $0.3 million of acquisition costs (included in general and administrative expenses) related to this acquisition. The assets acquired and liabilities assumed were recorded at fair value as determined by management based on information available at the acquisition date and on current assumptions as to future operations.

During the third quarter of 2016, we also acquired:

fee simple title to the land underneath one of our buildings in Pittsburgh, PA that was previously subject to a ground lease for a purchase price of $18.5 million. We expensed $0.5 million of acquisition costs (included in general and administrative expenses) related to this acquisition; and

an acre of development land in Raleigh, NC for a purchase price, including capitalized acquisition costs, of $5.8 million.

During the second quarter of 2016, we acquired 14 acres of development land in Nashville, TN for a purchase price, including capitalized acquisition costs, of $9.1 million.
 
Pro Forma Disclosure

The following table sets forth a summary of the fair value of the major assets acquired and liabilities assumed relating to the acquisition of two buildings in Atlanta, GA encompassing 896,000 rentable square feet during the third quarter of 2015:

 
Total
Purchase Price Allocation
Real estate assets
$
275,639

Acquisition-related intangible assets (in deferred leasing costs)
23,722

Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)
(9,076
)
Total allocation
$
290,285


 
The following table sets forth the Company's revenues and net income, adjusted for interest expense, straight-line rental income, depreciation and amortization related to purchase price allocations and acquisition costs, assuming the above-referenced acquisition of two buildings in Atlanta, GA during the third quarter of 2015 had been completed as of January 1, 2014:
 
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
Pro forma revenues
$
157,618

 
$
465,476

Pro forma net income
$
33,354

 
$
80,647

Pro forma net income available for common stockholders
$
31,486

 
$
75,524

Pro forma earnings per share - basic
$
0.33

 
$
0.80

Pro forma earnings per share - diluted
$
0.33

 
$
0.80


 

2.    Real Estate Assets - Continued

Dispositions
 
During the third quarter of 2016, we sold land for a sale price of $6.8 million and recorded a gain on disposition of property of $3.9 million. We deferred $0.4 million of gain related to a portion of the sale price that was escrowed for contingent future infrastructure work.
 
During the second quarter of 2016, we sold a building for a sale price of $14.2 million and recorded a gain on disposition of property of $5.9 million.

During the first quarter of 2016, we sold:
 
substantially all of our wholly-owned Country Club Plaza assets in Kansas City (which we refer to as the “Plaza assets”) for a sale price of $660.0 million (before closing credits to buyer of $4.8 million). We recorded gains on disposition of discontinued operations of $414.5 million and a gain on disposition of property of $1.3 million related to the land;
 
a 32,000 square foot building for a sale price of $4.7 million (before closing credits to buyer of $0.1 million) and recorded a gain on disposition of property of $1.1 million. The buyer, which leased 79% of the building, is a family business controlled by a director of the Company. The sale price exceeded the value set forth in an appraisal performed by a reputable independent commercial real estate services firm that has no relationship with the director or any of his affiliates; and
 
a building for a sale price of $6.4 million (before closing credits to buyer of $0.5 million) and recorded a gain on disposition of property of $2.0 million.
v3.5.0.2
Mortgages and Notes Receivable
9 Months Ended
Sep. 30, 2016
Receivables [Abstract]  
Mortgages and Notes Receivable
Mortgages and Notes Receivable
Mortgages and notes receivable were $9.5 million and $2.1 million at September 30, 2016 and December 31, 2015, respectively. We evaluate the ability to collect our mortgages and notes receivable by monitoring the leasing statistics and/or market fundamentals of these assets. As of September 30, 2016, our mortgages and notes receivable were not in default and there were no other indicators of impairment.
v3.5.0.2
Investments In and Advances To Unconsolidated Affiliates
9 Months Ended
Sep. 30, 2016
Equity Method Investments and Joint Ventures [Abstract]  
Investments In and Advances To Unconsolidated Affiliates
Investments in and Advances to 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 their operating and financial policies.
 
The following table sets forth the summarized income statements of our unconsolidated affiliates:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Income Statements:
 
 
 
 
 
 
 
Rental and other revenues
$
10,357

 
$
12,323

 
$
32,339

 
$
36,977

Expenses:
 
 
 
 
 
 
 
Rental property and other expenses
4,201

 
5,985

 
13,489

 
17,683

Depreciation and amortization
2,459

 
3,193

 
7,862

 
9,418

Interest expense
1,264

 
1,645

 
3,983

 
5,826

Total expenses
7,924

 
10,823

 
25,334

 
32,927

Income before disposition of property
2,433

 
1,500

 
7,005

 
4,050

Gains on disposition of property
21,345

 

 
22,247

 
18,181

Net income
$
23,778

 
$
1,500

 
$
29,252

 
$
22,231



4.    Investments in and Advances to Unconsolidated Affiliates - Continued

During the third quarter of 2016, 4600 Madison Associates, LP (a joint venture in which we own a 12.5% interest) sold a building to an unrelated third party for a sale price of $32.7 million and recorded a gain on disposition of property of $21.3 million. As our cost basis was different from the basis reflected at the joint venture level, we recorded $1.8 million of gain through equity in earnings of unconsolidated affiliates. Simultaneously with the sale, the joint venture used a portion of the proceeds to pay off all $6.3 million of its debt.

During the first quarter of 2016, Concourse Center Associates, LLC (a joint venture in which we own a 50.0% interest) sold two buildings and land to an unrelated third party for an aggregate sale price of $11.0 million and recorded losses on disposition of property of $0.1 million. As our cost basis was different from the basis reflected at the joint venture level, we recorded $0.4 million of gains through equity in earnings of unconsolidated affiliates. Simultaneously with the sale, the joint venture repaid all $6.6 million of its debt.

During the first quarter of 2016, 4600 Madison Associates, LP sold land to an unrelated third party for a sale price of $3.4 million and recorded a gain on disposition of property of $1.0 million. We recorded $0.1 million as our share of this gain through equity in earnings of unconsolidated affiliates. Simultaneously with the sale, the joint venture used all of the proceeds to pay down $3.4 million of its debt.
v3.5.0.2
Intangible Assets and Below Market Lease Liabilities
9 Months Ended
Sep. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets and Below Market Lease Liabilities
Intangible Assets and Below Market Lease Liabilities
 
The following table sets forth total intangible assets and acquisition-related below market lease liabilities, net of accumulated amortization:
 
 
September 30,
2016
 
December 31,
2015
Assets:
 
 
 
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
$
355,268

 
$
346,937

Less accumulated amortization
(136,292
)
 
(115,172
)
 
$
218,976

 
$
231,765

 
 
 
 
Liabilities (in accounts payable, accrued expenses and other liabilities):
 
 
 
Acquisition-related below market lease liabilities
$
63,712

 
$
63,830

Less accumulated amortization
(23,675
)
 
(17,927
)
 
$
40,037

 
$
45,903


The following table sets forth amortization of intangible assets and below market lease liabilities:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
10,111

 
$
10,858

 
$
33,177

 
$
30,747

Amortization of lease incentives (in rental and other revenues)
$
273

 
$
368

 
$
1,374

 
$
1,131

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
901

 
$
1,414

 
$
2,904

 
$
3,769

Amortization of acquisition-related intangible assets (in rental property and other expenses)
$
140

 
$
140

 
$
417

 
$
416

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(1,734
)
 
$
(1,727
)
 
$
(6,294
)
 
$
(5,133
)

5.    Intangible Assets and Below Market Lease Liabilities - Continued

The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities:
 
 
 
Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization)
 
Amortization of Lease Incentives (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets (in Rental Property and Other Expenses)
 
Amortization of Acquisition-Related Below Market Lease Liabilities (in Rental and Other Revenues)
October 1 through December 31, 2016
 
$
11,797

 
$
358

 
$
917

 
$
137

 
$
(1,737
)
2017
 
41,426

 
1,399

 
2,657

 
553

 
(6,231
)
2018
 
34,194

 
1,294

 
1,713

 
553

 
(6,022
)
2019
 
28,606

 
1,080

 
1,322

 
553

 
(5,549
)
2020
 
23,983

 
805

 
1,002

 
525

 
(5,223
)
Thereafter
 
58,905

 
2,544

 
2,653

 

 
(15,275
)
 
 
$
198,911

 
$
7,480

 
$
10,264

 
$
2,321

 
$
(40,037
)
Weighted average remaining amortization periods as of September 30, 2016 (in years)
 
6.7

 
7.4

 
6.2

 
4.2

 
7.5



The following table sets forth the intangible assets acquired and below market lease liabilities assumed as a result of 2016 acquisition activity:

 
 
Acquisition-Related Intangible Assets (amortized in Rental and Other Revenues)
 
Acquisition-Related Intangible Assets (amortized in Depreciation and Amortization)
 
Acquisition-Related Below Market Lease Liabilities (amortized in Rental and Other Revenues)
Amount recorded at acquisition
 
$
122

 
$
5,008

 
$
(428
)
Weighted average remaining amortization periods as of September 30, 2016 (in years)
 
9.8

 
10.2

 
11.2

v3.5.0.2
Mortgages and Notes Payable
9 Months Ended
Sep. 30, 2016
Debt Disclosure [Abstract]  
Mortgages and Notes Payable
Mortgages and Notes Payable
 
The following table sets forth our mortgages and notes payable:
 
 
September 30,
2016
 
December 31,
2015
Secured indebtedness
$
129,013

 
$
175,281

Unsecured indebtedness
1,778,942

 
2,324,333

Less-unamortized debt issuance costs
(6,889
)
 
(7,801
)
Total mortgages and notes payable, net
$
1,901,066

 
$
2,491,813


 
At September 30, 2016, our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $247.1 million.
 

6.    Mortgages and Notes Payable - Continued

Our $475.0 million unsecured revolving credit facility is scheduled to mature in January 2018 and includes an accordion feature that allows for an additional $75.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. The interest rate at our current credit ratings is LIBOR plus 110 basis points and the annual facility fee is 20 basis points. There was $28.0 million and $38.0 million outstanding under our revolving credit facility at September 30, 2016 and October 17, 2016, respectively. At both September 30, 2016 and October 17, 2016, we had $0.2 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at September 30, 2016 and October 17, 2016 was $446.8 million and $436.8 million, respectively.
 
During the second quarter of 2016, we prepaid without penalty the remaining $43.6 million balance on a secured mortgage loan with an effective interest rate of 7.5% that was originally scheduled to mature in August 2016.

During the second quarter of 2016, we executed a $150.0 million, 67-month unsecured term loan facility. The term loan facility is originally scheduled to mature in January 2022. The interest rate on the term loan facility at our current credit ratings is LIBOR plus 110 basis points. The purpose of the term loan facility is to repay amounts outstanding under our revolving credit facility and other general corporate purposes. There was $75.0 million outstanding under our term loan facility at both September 30, 2016 and October 17, 2016.
 
During the first quarter of 2016, we prepaid without penalty the $350.0 million balance on our unsecured bridge facility that was originally scheduled to mature in March 2016.
 
We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
v3.5.0.2
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
 
During the first quarter of 2016, we obtained $150.0 million notional amount of forward-starting swaps that effectively lock the underlying 10-year treasury rate at 1.90% with respect to a forecasted debt issuance expected to occur prior to March 15, 2017. The counterparties under the swaps are major financial institutions.
 
Our interest rate swaps have been designated as and are being accounted for as cash flow hedges with changes in fair value recorded in other comprehensive income/(loss) each reporting period. No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on our cash flow hedges during the nine months ended September 30, 2016 and 2015. We have no collateral requirements related to our interest rate swaps.
 
Amounts reported in accumulated other comprehensive loss ("AOCL") related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the period from October 1, 2016 through September 30, 2017, we estimate that $2.5 million will be reclassified to interest expense.
 
The following table sets forth the fair value of our derivatives:
 
 
September 30,
2016
 
December 31,
2015
Derivatives:
 
 
 
Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
 
 
 
Interest rate swaps
$
8,701

 
$
3,073


 

7.
Derivative Financial Instruments - Continued

The following table sets forth the effect of our cash flow hedges on AOCL and interest expense:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Derivatives Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Amount of unrealized gains/(losses) recognized in AOCL on derivatives (effective portion):
 
 
 
 
 
 
 
Interest rate swaps
$
1,610

 
$
(3,021
)
 
$
(7,785
)
 
$
(5,666
)
Amount of losses reclassified out of AOCL into contractual interest expense (effective portion):
 
 
 
 
 
 
 
Interest rate swaps
$
758

 
$
932

 
$
2,336

 
$
2,781

v3.5.0.2
Noncontrolling Interests
9 Months Ended
Sep. 30, 2016
Noncontrolling Interest [Abstract]  
Noncontrolling Interests
Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates
 
At September 30, 2016, our noncontrolling interests in consolidated affiliates relate to our joint venture partner's 50.0% interest in office properties in Richmond, VA. Our joint venture partner is an unrelated third party.

Noncontrolling Interests in the Operating Partnership

The following table sets forth the Company's noncontrolling interests in the Operating Partnership:
 
 
Nine Months Ended
September 30,
 
2016
 
2015
Beginning noncontrolling interests in the Operating Partnership
$
126,429

 
$
130,048

Adjustment of noncontrolling interests in the Operating Partnership to fair value
13,390

 
(14,649
)
Conversions of Common Units to Common Stock
(3,006
)
 
(1,206
)
Net income attributable to noncontrolling interests in the Operating Partnership
14,876

 
2,296

Distributions to noncontrolling interests in the Operating Partnership
(3,684
)
 
(3,721
)
Total noncontrolling interests in the Operating Partnership
$
148,005

 
$
112,768


The following table sets forth net income available for common stockholders and transfers from the Company's noncontrolling interests in the Operating Partnership:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Net income available for common stockholders
$
31,971

 
$
29,749

 
$
496,409

 
$
74,220

Increase in additional paid in capital from conversions of Common Units
to Common Stock
1,448

 

 
3,006

 
1,206

Change from net income available for common stockholders and transfers from noncontrolling interests
$
33,419

 
$
29,749

 
$
499,415

 
$
75,426

v3.5.0.2
Disclosure About Fair Value of Financial Instruments
9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Disclosure About Fair Value of Financial Instruments
Disclosure About Fair Value of Financial Instruments

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

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

Our Level 1 asset is our investment in marketable securities that we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 liability is our non-qualified deferred compensation obligation. The Company's 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 asset is 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 that are significant to the fair value of the assets or liabilities.
 
Our Level 3 asset included our tax increment financing bond, which was not routinely traded but whose fair value was determined by the income approach utilizing contractual cash flows and market-based interest rates to estimate the projected redemption value based on quoted bid/ask prices for similar unrated municipal bonds.
 
Our Level 3 liability was the fair value of our financing obligation, which was estimated by the income approach to approximate the price that would be paid in an orderly transaction between market participants, utilizing: (1) contractual cash flows; (2) market-based interest rates; and (3) a number of other assumptions including demand for space, competition for customers, changes in market rental rates, costs of operation and expected ownership periods.


9.
Disclosure About Fair Value of Financial Instruments - Continued

The following table sets forth our assets and liabilities and the Company's noncontrolling interests in the Operating Partnership that are measured at fair value within the fair value hierarchy.
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
Total
 
Quoted Prices
in Active
Markets for Identical Assets or Liabilities
 
Significant Observable Inputs
 
Significant Unobservable Inputs
Fair Value at September 30, 2016:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
9,525

 
$

 
$
9,525

 
$

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
2,426

 
2,426

 

 

Total Assets
 
$
11,951

 
$
2,426

 
$
9,525

 
$

Noncontrolling Interests in the Operating Partnership
 
$
148,005

 
$
148,005

 
$