HIGHWOODS PROPERTIES, INC., 10-Q filed on 7/23/2019
Quarterly Report
v3.19.2
Document and Entity Information Document - shares
6 Months Ended
Jun. 30, 2019
Jul. 16, 2019
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2019  
Document Transition Report false  
Entity Registrant Name HIGHWOODS PROPERTIES, INC.  
Entity Incorporation, State or Country Code MD  
Entity File Number 001-13100  
Entity Tax Identification Number 56-1871668  
Entity Address, Address Line One 3100 Smoketree Court  
Entity Address, Address Line Two Suite 600  
Entity Address, City or Town Raleigh  
Entity Address, State or Province NC  
Entity Address, Postal Zip Code 27604  
City Area Code 919  
Local Phone Number 872-4924  
Title of 12(b) Security Common Stock, $.01 par value, of Highwoods Properties, Inc.  
Trading Symbol HIW  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   103,724,379
Entity Central Index Key 0000921082  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Highwoods Realty Limited Partnership [Member]    
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS REALTY LIMITED PARTNERSHIP  
Entity Incorporation, State or Country Code NC  
Entity File Number 000-21731  
Entity Tax Identification Number 56-1869557  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0000941713  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Amendment Flag false  
v3.19.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Real estate assets, at cost:    
Land $ 495,753 $ 491,441
Buildings and tenant improvements 4,835,323 4,676,862
Development in-process 63,118 165,537
Land held for development 137,340 128,248
Total real estate assets 5,531,534 5,462,088
Less-accumulated depreciation (1,360,108) (1,296,562)
Net real estate assets 4,171,426 4,165,526
Real estate and other assets, net, held for sale 8,839 0
Cash and cash equivalents 4,530 3,769
Restricted cash 8,977 6,374
Accounts receivable 37,703 25,952
Mortgages and notes receivable, net of allowance of $28 and $44, respectively 1,583 5,599
Accrued straight-line rents receivable 226,614 220,088
Investments in and advances to unconsolidated affiliates 23,584 23,585
Deferred leasing costs, net of accumulated amortization of $152,334 and $149,275, respectively 195,863 195,273
Prepaid expenses and other assets, net of accumulated depreciation of $19,418 and $18,074, respectively 63,494 28,843
Total Assets 4,742,613 4,675,009
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,161,965 2,085,831
Accounts payable, accrued expenses and other liabilities 257,338 218,922
Total Liabilities 2,419,303 2,304,753
Commitments and contingencies
Noncontrolling interests in the Operating Partnership 112,778 105,960
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), 28,859 and 28,877 shares issued and outstanding, respectively 28,859 28,877
Common Stock, $.01 par value, 200,000,000 authorized shares; 103,704,603 and 103,557,065 shares issued and outstanding, respectively 1,037 1,036
Additional paid-in capital 2,972,798 2,976,197
Distributions in excess of net income available for common stockholders (821,051) (769,303)
Accumulated other comprehensive income 6,488 9,913
Total Stockholders’ Equity 2,188,131 2,246,720
Noncontrolling interests in consolidated affiliates 22,401 17,576
Total Equity/Capital 2,210,532 2,264,296
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital 4,742,613 4,675,009
Highwoods Realty Limited Partnership [Member]    
Real estate assets, at cost:    
Land 495,753 491,441
Buildings and tenant improvements 4,835,323 4,676,862
Development in-process 63,118 165,537
Land held for development 137,340 128,248
Total real estate assets 5,531,534 5,462,088
Less-accumulated depreciation (1,360,108) (1,296,562)
Net real estate assets 4,171,426 4,165,526
Real estate and other assets, net, held for sale 8,839 0
Cash and cash equivalents 4,530 3,769
Restricted cash 8,977 6,374
Accounts receivable 37,703 25,952
Mortgages and notes receivable, net of allowance of $28 and $44, respectively 1,583 5,599
Accrued straight-line rents receivable 226,614 220,088
Investments in and advances to unconsolidated affiliates 23,584 23,585
Deferred leasing costs, net of accumulated amortization of $152,334 and $149,275, respectively 195,863 195,273
Prepaid expenses and other assets, net of accumulated depreciation of $19,418 and $18,074, respectively 63,494 28,843
Total Assets 4,742,613 4,675,009
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,161,965 2,085,831
Accounts payable, accrued expenses and other liabilities 257,338 218,922
Total Liabilities 2,419,303 2,304,753
Commitments and contingencies
Redeemable Operating Partnership Units:    
Common Units, 2,730,703 and 2,738,703 outstanding, respectively 112,778 105,960
Series A Preferred Units (liquidation preference $1,000 per unit), 28,859 and 28,877 units issued and outstanding, respectively 28,859 28,877
Total Redeemable Operating Partnership Units 141,637 134,837
Equity/Capital:    
General partner Common Units, 1,060,265 and 1,058,870 outstanding, respectively 21,528 22,078
Limited partner Common Units, 102,235,529 and 102,089,386 outstanding, respectively 2,131,256 2,185,852
Accumulated other comprehensive income 6,488 9,913
Noncontrolling interests in consolidated affiliates 22,401 17,576
Total Equity/Capital 2,181,673 2,235,419
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital $ 4,742,613 $ 4,675,009
v3.19.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2019
Dec. 31, 2018
Assets:    
Mortgages and notes receivable allowance $ 28 $ 44
Deferred leasing costs, accumulated amortization 152,334 149,275
Prepaid expenses and other assets, accumulated depreciation $ 19,418 $ 18,074
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) 28,859 28,877
Series A Preferred Stock, shares outstanding (in shares) 28,859 28,877
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) 103,704,603 103,557,065
Common Stock, shares outstanding (in shares) 103,704,603 103,557,065
Highwoods Realty Limited Partnership [Member]    
Assets:    
Mortgages and notes receivable allowance $ 28 $ 44
Deferred leasing costs, accumulated amortization 152,334 149,275
Prepaid expenses and other assets, accumulated depreciation $ 19,418 $ 18,074
Redeemable Operating Partnership Units: [Abstract]    
Redeemable Common Units outstanding (in shares) 2,730,703 2,738,703
Series A Preferred Units, liquidation preference (in dollars per share) $ 1,000 $ 1,000
Series A Preferred Units, issued (in shares) 28,859 28,877
Series A Preferred Units, outstanding (in shares) 28,859 28,877
Common Units: [Abstract]    
General partners' capital account, units outstanding (in shares) 1,060,265 1,058,870
Limited partners' capital account, units outstanding (in shares) 102,235,529 102,089,386
v3.19.2
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Rental and other revenues $ 184,070 $ 178,792 $ 356,433 $ 359,230
Operating expenses:        
Rental property and other expenses 60,558 59,663 121,109 119,095
Depreciation and amortization 59,460 56,694 128,664 114,262
Impairments of real estate assets 531 0 531 0
General and administrative 9,560 9,540 21,941 21,318
Total operating expenses 130,109 125,897 272,245 254,675
Interest expense 20,356 17,877 39,095 36,268
Other income/(loss) 321 462 (3,445) 917
Gains on disposition of property 6,703 16,972 6,703 16,972
Equity in earnings of unconsolidated affiliates 765 546 1,429 1,068
Net income 41,394 52,998 49,780 87,244
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,044) (1,381) (1,237) (2,269)
Net (income) attributable to noncontrolling interests in consolidated affiliates (306) (308) (622) (594)
Dividends on Preferred Stock (622) (623) (1,244) (1,246)
Net income available for common stockholders $ 39,422 $ 50,686 $ 46,677 $ 83,135
Earnings per Common Share – basic:        
Net income available for common stockholders (in dollars per share) $ 0.38 $ 0.49 $ 0.45 $ 0.80
Weighted average Common Shares outstanding - basic (in shares) 103,693 103,428 103,647 103,376
Earnings per Common Share - diluted:        
Net income available for common stockholders (in dollars per share) $ 0.38 $ 0.49 $ 0.45 $ 0.80
Weighted average Common Shares outstanding - diluted (in shares) 106,445 106,267 106,402 106,216
Highwoods Realty Limited Partnership [Member]        
Rental and other revenues $ 184,070 $ 178,792 $ 356,433 $ 359,230
Operating expenses:        
Rental property and other expenses 60,558 59,663 121,109 119,095
Depreciation and amortization 59,460 56,694 128,664 114,262
Impairments of real estate assets 531 0 531 0
General and administrative 9,560 9,540 21,941 21,318
Total operating expenses 130,109 125,897 272,245 254,675
Interest expense 20,356 17,877 39,095 36,268
Other income/(loss) 321 462 (3,445) 917
Gains on disposition of property 6,703 16,972 6,703 16,972
Equity in earnings of unconsolidated affiliates 765 546 1,429 1,068
Net income 41,394 52,998 49,780 87,244
Net (income) attributable to noncontrolling interests in consolidated affiliates (306) (308) (622) (594)
Distributions on Preferred Units (622) (623) (1,244) (1,246)
Net income available for common unitholders $ 40,466 $ 52,067 $ 47,914 $ 85,404
Earnings per Common Unit - basic:        
Net income available for common unitholders (in dollars per share) $ 0.38 $ 0.49 $ 0.45 $ 0.81
Weighted average Common Units outstanding - basic (in shares) 106,017 105,826 105,973 105,778
Earnings per Common Unit - diluted:        
Net income available for common unitholders (in dollars per share) $ 0.38 $ 0.49 $ 0.45 $ 0.81
Weighted average Common Units outstanding - diluted (in shares) 106,036 105,858 105,993 105,807
v3.19.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Comprehensive income:        
Net income $ 41,394 $ 52,998 $ 49,780 $ 87,244
Other comprehensive income/(loss):        
Unrealized gains/(losses) on cash flow hedges (646) 862 (2,550) 8,739
Amortization of cash flow hedges (360) (515) (875) (621)
Total other comprehensive income/(loss) (1,006) 347 (3,425) 8,118
Total comprehensive income 40,388 53,345 46,355 95,362
Less-comprehensive (income) attributable to noncontrolling interests (1,350) (1,689) (1,859) (2,863)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders 39,038 51,656 44,496 92,499
Highwoods Realty Limited Partnership [Member]        
Comprehensive income:        
Net income 41,394 52,998 49,780 87,244
Other comprehensive income/(loss):        
Unrealized gains/(losses) on cash flow hedges (646) 862 (2,550) 8,739
Amortization of cash flow hedges (360) (515) (875) (621)
Total other comprehensive income/(loss) (1,006) 347 (3,425) 8,118
Total comprehensive income 40,388 53,345 46,355 95,362
Less-comprehensive (income) attributable to noncontrolling interests (306) (308) (622) (594)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders $ 40,082 $ 53,037 $ 45,733 $ 94,768
v3.19.2
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, 2017     103,266,875                  
Balance at Dec. 31, 2017 $ 2,237,234 $ 2,208,342 $ 1,033 $ 28,892 $ 21,830 $ 2,161,258 $ 2,929,399 $ 7,838 $ 7,838 $ 17,416 $ 17,416 $ (747,344)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   415     4 411            
Distributions on Common Units   (97,800)     (978) (96,822)            
Distributions on Preferred Units   (1,246)     (12) (1,234)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     (3,396)                  
Issuances of Common Stock, net of issuance costs and tax withholdings 415   $ 0       415          
Conversions of Common Units to Common Stock - Shares     23,196                  
Conversions of Common Units to Common Stock 1,084           1,084          
Dividends on Common Stock (95,579)                     (95,579)
Dividends on Preferred Stock (1,246)                     (1,246)
Adjustment of noncontrolling interests in the Operating Partnership to fair value 272           272          
Distributions to noncontrolling interests in consolidated affiliates (543) (543)               (543) (543)  
Issuances of restricted stock - shares     172,440                  
Issuances of restricted stock 0                      
Redemptions/repurchases of Preferred Stock (5)     (5)                
Share-based compensation expense, net of forfeitures 5,468 5,468 $ 2   55 5,413 5,466          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   1,308     13 1,295            
Net (income) attributable to noncontrolling interests in the Operating Partnership (2,269)                     (2,269)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (6) (588)       594 594 (594)
Comprehensive income:                        
Net income 87,244 87,244     872 86,372           87,244
Other comprehensive income/(loss) 8,118 8,118           8,118 8,118      
Total comprehensive income 95,362 95,362                    
Balance (in shares) at Jun. 30, 2018     103,459,115                  
Balance at Jun. 30, 2018 2,240,193 2,211,306 $ 1,035 28,887 21,778 2,156,105 2,936,636 15,956 15,956 17,467 17,467 (759,788)
Balance (in shares) at Mar. 31, 2018     103,421,754                  
Balance at Mar. 31, 2018 2,253,500 2,224,613 $ 1,034 28,887 21,915 2,169,625 2,953,148 15,609 15,609 17,464 17,464 (762,642)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   1,444     14 1,430            
Distributions on Common Units   (48,942)     (490) (48,452)            
Distributions on Preferred Units   (623)     (6) (617)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     33,361                  
Issuances of Common Stock, net of issuance costs and tax withholdings 1,444   $ 0       1,444          
Conversions of Common Units to Common Stock - Shares     4,000                  
Conversions of Common Units to Common Stock 182           182          
Dividends on Common Stock (47,832)                     (47,832)
Dividends on Preferred Stock (623)                     (623)
Adjustment of noncontrolling interests in the Operating Partnership to fair value (19,310)           (19,310)          
Distributions to noncontrolling interests in consolidated affiliates (305) (305)               (305) (305)  
Share-based compensation expense, net of forfeitures 1,173 1,173 $ 1   12 1,161 1,172          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   (19,399)     (194) (19,205)            
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,381)                     (1,381)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (3) (305)       308 308 (308)
Comprehensive income:                        
Net income 52,998 52,998     530 52,468           52,998
Other comprehensive income/(loss) 347 347           347 347      
Total comprehensive income 53,345 53,345                    
Balance (in shares) at Jun. 30, 2018     103,459,115                  
Balance at Jun. 30, 2018 $ 2,240,193 2,211,306 $ 1,035 28,887 21,778 2,156,105 2,936,636 15,956 15,956 17,467 17,467 (759,788)
Balance (in shares) at Dec. 31, 2018 103,557,065   103,557,065                  
Balance at Dec. 31, 2018 $ 2,264,296 2,235,419 $ 1,036 28,877 22,078 2,185,852 2,976,197 9,913 9,913 17,576 17,576 (769,303)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   (731)     (7) (724)            
Distributions on Common Units   (100,634)     (1,006) (99,628)            
Distributions on Preferred Units   (1,244)     (12) (1,232)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     (23,705)                  
Issuances of Common Stock, net of issuance costs and tax withholdings (731)   $ 0       (731)          
Conversions of Common Units to Common Stock - Shares     8,000                  
Conversions of Common Units to Common Stock 353           353          
Dividends on Common Stock (98,425)                     (98,425)
Dividends on Preferred Stock (1,244)                     (1,244)
Adjustment of noncontrolling interests in the Operating Partnership to fair value (8,532)           (8,532)          
Distributions to noncontrolling interests in consolidated affiliates (784) (784)               (784) (784)  
Contributions from noncontrolling interests in consolidated affiliates 4,987 4,987               4,987 4,987  
Issuances of restricted stock - shares     164,190                  
Issuances of restricted stock 0                      
Redemptions/repurchases of Preferred Stock (18)     (18)                
Share-based compensation expense, net of forfeitures - shares     (947)                  
Share-based compensation expense, net of forfeitures 5,512 5,512 $ 1   55 5,457 5,511          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   (7,207)     (72) (7,135)            
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,237)                     (1,237)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (6) (616)       622 622 (622)
Comprehensive income:                        
Net income 49,780 49,780     498 49,282           49,780
Other comprehensive income/(loss) (3,425) (3,425)           (3,425) (3,425)      
Total comprehensive income $ 46,355 46,355                    
Balance (in shares) at Jun. 30, 2019 103,704,603   103,704,603                  
Balance at Jun. 30, 2019 $ 2,210,532 2,181,673 $ 1,037 28,859 21,528 2,131,256 2,972,798 6,488 6,488 22,401 22,401 (821,051)
Balance (in shares) at Mar. 31, 2019     103,690,619                  
Balance at Mar. 31, 2019 2,200,268 2,171,409 $ 1,037 28,859 21,463 2,124,868 2,956,517 7,494 7,494 17,584 17,584 (811,223)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   397     4 393            
Distributions on Common Units   (50,353)     (503) (49,850)            
Distributions on Preferred Units   (622)     (6) (616)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     9,672                  
Issuances of Common Stock, net of issuance costs and tax withholdings 397   $ 0       397          
Conversions of Common Units to Common Stock - Shares     5,000                  
Conversions of Common Units to Common Stock 222           222          
Dividends on Common Stock (49,250)                     (49,250)
Dividends on Preferred Stock (622)                     (622)
Adjustment of noncontrolling interests in the Operating Partnership to fair value 14,722           14,722          
Distributions to noncontrolling interests in consolidated affiliates (476) (476)               (476) (476)  
Contributions from noncontrolling interests in consolidated affiliates 4,987 4,987               4,987 4,987  
Share-based compensation expense, net of forfeitures - shares     (688)                  
Share-based compensation expense, net of forfeitures 940 940 $ 0   9 931 940          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   15,003     150 14,853            
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,044)                     (1,044)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (3) (303)       306 306 (306)
Comprehensive income:                        
Net income 41,394 41,394     414 40,980           41,394
Other comprehensive income/(loss) (1,006) (1,006)           (1,006) (1,006)      
Total comprehensive income $ 40,388 40,388                    
Balance (in shares) at Jun. 30, 2019 103,704,603   103,704,603                  
Balance at Jun. 30, 2019 $ 2,210,532 $ 2,181,673 $ 1,037 $ 28,859 $ 21,528 $ 2,131,256 $ 2,972,798 $ 6,488 $ 6,488 $ 22,401 $ 22,401 $ (821,051)
v3.19.2
Consolidated Statements of Equity/Capital (Parentheticals) - $ / shares
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Highwoods Properties, Inc. [Member]        
Dividends on Common Stock (per share) $ 0.475 $ 0.4625 $ 0.95 $ 0.925
Highwoods Properties, Inc. [Member] | Series A Cumulative Redeemable Preferred Shares [Member]        
Dividends on Preferred Stock (per share)/Distributions on Preferred Units (per unit) 21.5625 21.5625 43.125 43.125
Highwoods Realty Limited Partnership [Member]        
Distributions on Common Units (per unit) 0.475 0.4625 0.95 0.925
Highwoods Realty Limited Partnership [Member] | Series A Cumulative Redeemable Preferred Shares [Member]        
Dividends on Preferred Stock (per share)/Distributions on Preferred Units (per unit) $ 21.5625 $ 21.5625 $ 43.125 $ 43.125
v3.19.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Operating activities:    
Net income $ 49,780 $ 87,244
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 128,664 114,262
Amortization of lease incentives and acquisition-related intangible assets and liabilities 868 (960)
Share-based compensation expense 5,512 5,468
Credit losses on operating lease receivables 8,144 192
Write-off of mortgages and notes receivable 4,087 0
Accrued interest on mortgages and notes receivable (118) (225)
Amortization of debt issuance costs 1,455 1,408
Amortization of cash flow hedges (875) (621)
Amortization of mortgages and notes payable fair value adjustments 787 694
Impairments of real estate assets 531 0
Losses on debt extinguishment 375 0
Net gains on disposition of property (6,703) (16,972)
Equity in earnings of unconsolidated affiliates (1,429) (1,068)
Distributions of earnings from unconsolidated affiliates 669 1,706
Settlement of cash flow hedges (5,144) 7,216
Changes in operating assets and liabilities:    
Accounts receivable (5,507) 4,469
Prepaid expenses and other assets (3,305) (5,232)
Accrued straight-line rents receivable (14,273) (12,707)
Accounts payable, accrued expenses and other liabilities 9,771 (916)
Net cash provided by operating activities 173,289 183,958
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (12,795) (50,649)
Investments in development in-process (50,884) (85,717)
Investments in tenant improvements and deferred leasing costs (78,449) (61,990)
Investments in building improvements (24,113) (34,652)
Net proceeds from disposition of real estate assets 31,510 33,453
Distributions of capital from unconsolidated affiliates 29 105
Repayments of mortgages and notes receivable 147 758
Changes in other investing activities (4,272) (3,147)
Net cash used in investing activities (138,827) (201,839)
Financing activities:    
Dividends on Common Stock (98,425) (95,579)
Redemptions/repurchases of Preferred Stock (18) (5)
Dividends on Preferred Stock (1,244) (1,246)
Distributions to noncontrolling interests in the Operating Partnership (2,598) (2,599)
Distributions to noncontrolling interests in consolidated affiliates (784) (543)
Proceeds from the issuance of Common Stock 1,049 2,052
Costs paid for the issuance of Common Stock 0 (28)
Repurchase of shares related to tax withholdings (1,780) (1,609)
Borrowings on revolving credit facility 169,400 257,400
Repayments of revolving credit facility (215,400) (360,400)
Borrowings on mortgages and notes payable 349,010 345,863
Repayments of mortgages and notes payable (225,929) (200,892)
Changes in debt issuance costs and other financing activities (4,379) (2,948)
Net cash used in financing activities (31,098) (60,534)
Net increase/(decrease) in cash and cash equivalents and restricted cash 3,364 (78,415)
Cash and cash equivalents and restricted cash at beginning of the period 10,143 88,333
Cash and cash equivalents and restricted cash at end of the period 13,507 9,918
Reconciliation of cash and cash equivalents and restricted cash:    
Cash and cash equivalents at end of the period 4,530 4,232
Restricted cash at end of the period 8,977 5,686
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 33,378 33,273
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized gains/(losses) on cash flow hedges (2,550) 8,739
Conversions of Common Units to Common Stock 353 1,084
Changes in accrued capital expenditures 2,027 (10,574)
Write-off of fully depreciated real estate assets 36,188 48,011
Write-off of fully amortized leasing costs 19,900 19,717
Write-off of fully amortized debt issuance costs 828 2,705
Adjustment of noncontrolling interests in the Operating Partnership to fair value 8,532 (272)
Contributions from noncontrolling interests in consolidated affiliates 4,987 0
Initial recognition of lease liabilities related to right of use assets 35,349 0
Highwoods Realty Limited Partnership [Member]    
Operating activities:    
Net income 49,780 87,244
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 128,664 114,262
Amortization of lease incentives and acquisition-related intangible assets and liabilities 868 (960)
Share-based compensation expense 5,512 5,468
Credit losses on operating lease receivables 8,144 192
Write-off of mortgages and notes receivable 4,087 0
Accrued interest on mortgages and notes receivable (118) (225)
Amortization of debt issuance costs 1,455 1,408
Amortization of cash flow hedges (875) (621)
Amortization of mortgages and notes payable fair value adjustments 787 694
Impairments of real estate assets 531 0
Losses on debt extinguishment 375 0
Net gains on disposition of property (6,703) (16,972)
Equity in earnings of unconsolidated affiliates (1,429) (1,068)
Distributions of earnings from unconsolidated affiliates 669 1,706
Settlement of cash flow hedges (5,144) 7,216
Changes in operating assets and liabilities:    
Accounts receivable (5,507) 4,469
Prepaid expenses and other assets (3,305) (5,232)
Accrued straight-line rents receivable (14,273) (12,707)
Accounts payable, accrued expenses and other liabilities 9,771 (916)
Net cash provided by operating activities 173,289 183,958
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (12,795) (50,649)
Investments in development in-process (50,884) (85,717)
Investments in tenant improvements and deferred leasing costs (78,449) (61,990)
Investments in building improvements (24,113) (34,652)
Net proceeds from disposition of real estate assets 31,510 33,453
Distributions of capital from unconsolidated affiliates 29 105
Repayments of mortgages and notes receivable 147 758
Changes in other investing activities (4,272) (3,147)
Net cash used in investing activities (138,827) (201,839)
Financing activities:    
Distributions on Common Units (100,634) (97,800)
Redemptions/repurchases of Preferred Units (18) (5)
Distributions on Preferred Units (1,244) (1,246)
Distributions to noncontrolling interests in consolidated affiliates (784) (543)
Proceeds from the issuance of Common Units 1,049 2,052
Costs paid for the issuance of Common Units 0 (28)
Repurchase of units related to tax withholdings (1,780) (1,609)
Borrowings on revolving credit facility 169,400 257,400
Repayments of revolving credit facility (215,400) (360,400)
Borrowings on mortgages and notes payable 349,010 345,863
Repayments of mortgages and notes payable (225,929) (200,892)
Changes in debt issuance costs and other financing activities (4,768) (3,326)
Net cash used in financing activities (31,098) (60,534)
Net increase/(decrease) in cash and cash equivalents and restricted cash 3,364 (78,415)
Cash and cash equivalents and restricted cash at beginning of the period 10,143 88,333
Cash and cash equivalents and restricted cash at end of the period 13,507 9,918
Reconciliation of cash and cash equivalents and restricted cash:    
Cash and cash equivalents at end of the period 4,530 4,232
Restricted cash at end of the period 8,977 5,686
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 33,378 33,273
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized gains/(losses) on cash flow hedges (2,550) 8,739
Changes in accrued capital expenditures (2,027) 10,574
Write-off of fully depreciated real estate assets 36,188 48,011
Write-off of fully amortized leasing costs 19,900 19,717
Write-off of fully amortized debt issuance costs 828 2,705
Adjustment of Redeemable Common Units to fair value 6,818 (1,686)
Contributions from noncontrolling interests in consolidated affiliates 4,987 0
Initial recognition of lease liabilities related to right of use assets $ 35,349 $ 0
v3.19.2
Description of Business and Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
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 June 30, 2019, we owned or had an interest in 31.1 million rentable square feet of in-service properties, 1.2 million rentable square feet of office properties under development and approximately 325 acres of development land.
 
The Company is the sole general partner of the Operating Partnership. At June 30, 2019, the Company owned all of the Preferred Units and 103.3 million, or 97.4%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.7 million Common Units. During the six months ended June 30, 2019, the Company redeemed 8,000 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. At June 30, 2019, we have involvement with, and are the primary beneficiary in, an entity that we concluded to be a variable interest entity (see Note 3). All intercompany transactions and accounts have been eliminated.
 
The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in the opinion of management, contain all adjustments (including normal recurring accruals) necessary for a fair presentation of our financial position, results of operations and cash flows. We have condensed or omitted certain notes and other information from the interim Consolidated Financial Statements presented in this Quarterly Report as permitted by SEC rules and regulations. These Consolidated Financial Statements should be read in conjunction with our 2018 Annual Report on Form 10-K.
 
Certain amounts within the Consolidated Statements of Income for the three and six months ended June 30, 2018 were removed and/or combined to conform to the current year presentation.

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.
 
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 initial fixed terms of the respective leases, which generally are from three to 10 years. Depreciation expense for real estate assets was $50.1 million and $46.9 million for the three months ended June 30, 2019 and 2018, respectively, and $108.4 million and $94.3 million for the six months ended June 30, 2019 and 2018, respectively.
 
Leases
 
See Note 2 for policies and related disclosures with respect to our leases as both a lessee and lessor.

Insurance
 
We are primarily self-insured for health care claims for participating employees. We have stop-loss coverage to limit our exposure to significant claims on a per claim and annual aggregate basis. We determine our liabilities for claims, including incurred but not reported losses, based on all relevant information, including actuarial estimates of claim liabilities. At June 30, 2019, a reserve of $0.6 million was recorded to cover estimated reported and unreported claims.

Other Events
 
During the first quarter of 2019, Laser Spine Institute, which leased a 176,000 square foot building with structured parking in Tampa’s Westshore submarket, suddenly ceased operations. As a result of this sudden closure, we incurred $5.6 million of credit losses on operating lease receivables and $2.3 million of write-offs of lease incentives (in rental and other revenues), $4.1 million of write-offs of notes receivable (in other income/(loss)) and $11.6 million of write-offs of tenant improvements and deferred leasing costs (in depreciation and amortization).

Recently Issued Accounting Standards
 
The Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item when the hedged item affects earnings. We adopted the ASU as of January 1, 2019 with no material effect on our Consolidated Financial Statements.
 
The FASB issued an ASU that changes certain disclosure requirements for fair value measurements. The ASU is required to be adopted in 2020 and applied prospectively. We do not expect such adoption to have a material effect on our Notes to Consolidated Financial Statements.
v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases
Leases
 
On January 1, 2019, we adopted Accounting Standards Codification Topic 842 “Leases” (“ASC 842”), which supersedes Accounting Standards Codification Topic 840 “Leases” (“ASC 840”). Information in this Note 2 with respect to our leases and lease related costs as both lessee and lessor and lease related receivables as lessor is presented under ASC 842 as of June 30, 2019 and for the three and six months ended June 30, 2019 and under ASC 840 as of and for the year ended December 31, 2018.
 
We adopted ASC 842 using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of this adoption. ASC 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. We operate as both a lessor and a lessee. As a lessor, we are required under ASC 842 to account for leases using an approach that is substantially equivalent to ASC 840's guidance for operating leases and other leases such as sales-type leases and direct financing leases. In addition, ASC 842 requires lessors to capitalize and amortize only incremental direct leasing costs. As a lessee, we are required under the new standard to apply a dual approach, classifying leases, such as ground leases, as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASC 842 also requires lessees to record a right of use asset and a lease liability for all leases with a term of greater than a year regardless of their classification. We have also elected the practical expedient not to recognize right of use assets and lease liabilities for leases with a term of a year or less.
 
On adoption of the standard, we elected the package of practical expedients provided for in ASC 842, including:
 
No reassessment of whether any expired or existing contracts were or contained leases;
 
No reassessment of the lease classification for any expired or existing leases; and
 
No reassessment of initial direct costs for any existing leases.
 
The package of practical expedients was made as a single election and was consistently applied to all existing leases as of January 1, 2019. We also elected the practical expedient provided to lessors in a subsequent amendment to ASC 842 that removed the requirement to separate lease and nonlease components, provided certain conditions were met.
 
Information as Lessor Under ASC 842
 
To generate positive cash flow, as a lessor, we 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”). Office properties owned by us that are under lease are located in Atlanta, Greensboro, Memphis, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa and are leased to a wide variety of lessees across many industries. Our leases were determined to be operating leases and generally 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.
 
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 straight-line rent recognized in a given year is affected accordingly.
 
Some of our leases have termination options 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 half way
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 at the later of when the customer has vacated the space or the lease has expired and a fully executed lease termination agreement has been delivered, 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, therefore, are 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. 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 past due account balances and considering such factors as the credit quality of our customer, historical trends of the customer and changes in customer payment terms. Additionally, with respect to customers in bankruptcy, we estimate the probable recovery through bankruptcy claims and reduce the related receivable balance for amounts deemed uncollectible. 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.
 
We recognized rental and other revenues related to operating lease payments of $180.7 million and $350.1 million, respectively, during the three and six months ended June 30, 2019, of which variable lease payments were $16.4 million and $31.9 million, respectively. The following table sets forth the undiscounted cash flows for future minimum base rents to be received from customers for leases in effect at June 30, 2019 for the properties that we wholly own:
 
July 1 through December 31, 2019
 
$
312,569

2020
 
603,436

2021
 
556,132

2022
 
520,992

2023
 
461,440

2024
 
401,060

Thereafter
 
1,751,410

 
 
$
4,607,039


 
Information as Lessor Under ASC 840
 
Minimum contractual rents from 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. Contingent rental revenue, such as percentage rent, is accrued when the contingency is removed. Termination fee income is recognized at the later of when the customer has vacated the space or the lease has expired and a fully executed lease termination agreement has been delivered, the amount of the fee is determinable and collectability of the fee is reasonably assured.
 
Cost recovery income is determined on a calendar year and a lease-by-lease basis. The most common types of cost recovery income in our leases are CAM and real estate taxes, for which a customer typically pays its pro-rata share of operating and administrative expenses and real estate taxes in excess of the costs incurred during a contractually specified base year. The computation of cost recovery income is complex and involves numerous judgments, including the interpretation of lease provisions. Leases are not uniform in dealing with such cost recovery income and there are many variations in the computation. Many customers make monthly fixed payments of CAM, real estate taxes and other cost reimbursement items. We accrue income related to these payments each month. We make quarterly accrual adjustments, positive or negative, to cost recovery income to adjust the recorded amounts to our best estimate of the final annual amounts to be billed and collected. After the end of the calendar year, we compute
each customer's final cost recovery income and, after considering amounts paid by the customer during the year, issue a bill or credit for the appropriate amount to the customer. The differences between the amounts billed less previously received payments and the accrual adjustment are recorded as increases or decreases to cost recovery income when the final bills are prepared, which occurs during the first half of the subsequent year.
  
Accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable are reduced by an allowance for amounts that may become uncollectible in the future. We regularly evaluate the adequacy of our allowance for doubtful accounts. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of our customer, historical trends of the customer and changes in customer payment terms. Additionally, with respect to customers in bankruptcy, we estimate the probable recovery through bankruptcy claims and adjust the allowance for amounts deemed uncollectible. If our assumptions regarding the collectability of receivables prove incorrect, we could experience losses in excess of our allowance for doubtful accounts. The allowance and its related receivable are written-off when we have concluded there is a low probability of collection and we have discontinued collection efforts.
 
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.
 
Our real estate assets are leased to customers under operating leases. The minimum rental amounts under the leases are generally subject to scheduled fixed increases. Generally, the leases also provide that we receive cost recovery income from customers for increases in certain costs above the costs incurred during a contractually specified base year.  
 
The following table sets forth our scheduled future minimum base rents to be received from customers for leases in effect at December 31, 2018 for the properties that we wholly own:
 
2019
 
$
618,014

2020
 
581,399

2021
 
524,381

2022
 
488,157

2023
 
428,461

Thereafter
 
2,068,891

 
 
$
4,709,303


 
Information as Lessee Under ASC 842
 
We have 20 properties subject to operating ground leases in Atlanta, Nashville, Orlando, Raleigh and Tampa with a weighted average remaining term of 52 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. Upon initial adoption of ASC 842, we recognized a lease liability of $35.3 million (in accounts payable, accrued expenses and other liabilities) and a related right of use asset of $29.7 million (in prepaid expenses and other assets) on our Consolidated Balance Sheets equal to the present value of the minimum lease payments required under each ground lease. The difference between the recorded lease liability and right of use asset represents the accrued straight-line rent liability previously recognized under ASC 840. We used a discount rate of approximately 4.5%, which was derived from our assessment of the credit quality of the Company and adjusted to reflect secured borrowing, estimated yield curves and long-term spread adjustments over appropriate tenors. Some of our ground leases contain extension options; however, these did not impact our calculation of the right of use asset and liability as they extend beyond the useful life of the properties subject to the operating ground leases. We recognized $0.6 million and $1.2 million of ground lease expense during the three and six months ended June 30, 2019, respectively. Cash payments related to these leases were $0.7 million and $1.2 million during the three and six months ended June 30, 2019, respectively.
 
The following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments on operating ground leases at June 30, 2019 and a reconciliation of those cash flows to the operating lease liability at June 30, 2019:
 
July 1 through December 31, 2019
 
$
1,030

2020
 
2,086

2021
 
2,127

2022
 
2,169

2023
 
2,167

2024
 
2,123

Thereafter
 
83,697

 
 
95,399

Discount
 
(60,269
)
Lease liability
 
$
35,130


 
Information as Lessee Under ASC 840
 
Certain of our properties are subject to operating ground leases. Rental payments on these leases are adjusted periodically based on either the CPI or on a pre-determined schedule. Total rental property expense recorded for operating ground leases was $2.5 million, $2.5 million and $2.9 million for the years ended December 31, 2018, 2017 and 2016, respectively.
 
The following table sets forth our scheduled obligations for future minimum payments on operating ground leases at December 31, 2018:
 
2019
 
$
2,184

2020
 
2,223

2021
 
2,263

2022
 
2,305

2023
 
2,308

Thereafter
 
86,577

 
 
$
97,860


v3.19.2
Consolidated Variable Interest Entities
6 Months Ended
Jun. 30, 2019
Variable Interest Entities [Abstract]  
Consolidated Variable Interest Entity Consolidated Variable Interest Entity
 
During the second quarter of 2019, we and The Bromley Companies formed a joint venture (the "Midtown One joint venture”) to construct Midtown One, a 150,000 square foot, multi-customer office building located in the mixed-use Midtown Tampa project in Tampa’s Westshore submarket. Midtown One has an anticipated total investment of $71.3 million. Construction of Midtown One is projected to begin in the fourth quarter of 2019 with a scheduled completion date in the second quarter of 2021. At closing, we agreed to contribute cash of $20.0 million ($12.8 million of which was funded and/or placed in escrow as of June 30, 2019) in exchange for an 80.0% interest in the Midtown One joint venture and The Bromley Companies contributed land valued at $5.0 million in exchange for the remaining 20.0% interest. We also committed to provide a $46.3 million interest-only secured construction loan to the Midtown One joint venture that is scheduled to mature on the second anniversary of completion. The loan bears interest at LIBOR plus 250 basis points. As of June 30, 2019, no amounts under the loan have been funded.

We determined that we have a variable interest in the Midtown One joint venture primarily because the entity was designed to pass along interest rate risk, equity price risk and operation risk to us as both a debt and an equity holder and The Bromley Companies as an equity holder. The Midtown One joint venture was further determined to be a variable interest entity as it requires additional subordinated financial support in the form of a loan because the initial equity investment provided by us and The Bromley Companies is not sufficient to finance its planned investments and operations. We, as majority owner and managing member and through our control rights as set forth in the joint venture's governance documents, were determined to be the primary beneficiary as we have both the power to direct the activities that most significantly affect the entity (primarily lease rates, property operations and capital expenditures) and significant economic exposure through our equity investment and loan commitment. As such, the Midtown One joint venture was consolidated as of June 30, 2019 and for the period May 29, 2019 through June 30, 2019 and all intercompany transactions and accounts were eliminated. The following table sets forth the assets and liabilities of the Midtown One joint venture included on our Consolidated Balance Sheets:

 
June 30,
2019
Land held for development
$
16,565

Prepaid expenses and other assets
$
1,537

Accounts payable, accrued expenses and other liabilities
$
235



The assets of the Midtown One joint venture can be used only to settle obligations of the joint venture and its creditors have no recourse to our wholly owned assets.
v3.19.2
Real Estate Assets
6 Months Ended
Jun. 30, 2019
Real Estate [Abstract]  
Real Estate Assets Real Estate Assets
 
Dispositions
 
During the second quarter of 2019, we sold two buildings and land for an aggregate sale price of $32.5 million and recorded aggregate gains on disposition of property of $6.7 million.

Impairments
 
During the second quarter of 2019, we recorded an impairment of real estate assets of $0.5 million, which resulted from a change in market-based inputs and our assumptions about the use of the assets.
v3.19.2
Intangible Assets and Below Market Lease Liabilities
6 Months Ended
Jun. 30, 2019
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:
 
 
June 30,
2019
 
December 31,
2018
Assets:
 
 
 
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
$
348,197

 
$
344,548

Less accumulated amortization
(152,334
)
 
(149,275
)
 
$
195,863

 
$
195,273

Liabilities (in accounts payable, accrued expenses and other liabilities):
 
 
 
Acquisition-related below market lease liabilities
$
56,355

 
$
57,955

Less accumulated amortization
(34,124
)
 
(32,307
)
 
$
22,231

 
$
25,648

 
The following table sets forth amortization of intangible assets and below market lease liabilities:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
8,759

 
$
9,207

 
$
19,074

 
$
18,702

Amortization of lease incentives (in rental and other revenues)
$
460

 
$
476

 
$
3,308

 
$
905

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
343

 
$
429

 
$
700

 
$
877

Amortization of acquisition-related intangible assets (in rental property and other expenses)
$
139

 
$
139

 
$
276

 
$
276

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(1,763
)
 
$
(1,495
)
 
$
(3,416
)
 
$
(3,018
)

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)
July 1 through December 31, 2019
 
$
19,120

 
$
779

 
$
560

 
$
277

 
$
(2,885
)
2020
 
34,072

 
1,318

 
957

 
514

 
(5,005
)
2021
 
29,482

 
1,071

 
631

 

 
(4,204
)
2022
 
25,090

 
840

 
462

 

 
(3,133
)
2023
 
21,630

 
763

 
308

 

 
(2,753
)
Thereafter
 
53,368

 
3,521

 
1,100

 

 
(4,251
)
 
 
$
182,762

 
$
8,292

 
$
4,018

 
$
791

 
$
(22,231
)
Weighted average remaining amortization periods as of June 30, 2019 (in years)
 
7.2

 
9.1

 
6.5

 
1.5

 
5.4


v3.19.2
Mortgages and Notes Payable
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Mortgages and Notes Payable Mortgages and Notes Payable
 
The following table sets forth our mortgages and notes payable:
 
 
June 30,
2019
 
December 31,
2018
Secured indebtedness
$
96,250

 
$
97,179

Unsecured indebtedness
2,076,613

 
1,997,816

Less-unamortized debt issuance costs
(10,898
)
 
(9,164
)
Total mortgages and notes payable, net
$
2,161,965

 
$
2,085,831


 
At June 30, 2019, our secured mortgage loan was collateralized by real estate assets with an undepreciated book value of $146.2 million.
 
Our $600.0 million unsecured revolving credit facility is scheduled to mature in January 2022 and includes an accordion feature that allows for an additional $400.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. The interest rate at our current credit ratings is LIBOR plus 100 basis points and the annual facility fee is 20 basis points. There was $136.0 million and $121.0 million outstanding under our revolving credit facility at June 30, 2019 and July 16, 2019, respectively. At both June 30, 2019 and July 16, 2019, we had $0.1 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 June 30, 2019 and July 16, 2019 was $463.9 million and $478.9 million, respectively.
 
During the first quarter of 2019, we prepaid without penalty our $225.0 million, seven-year unsecured bank term loan, which was scheduled to mature in June 2020. The interest rate on the term loan was LIBOR plus 110 basis points. We recorded $0.4 million of loss on debt extinguishment related to this prepayment.

During the first quarter of 2019, the Operating Partnership issued $350.0 million aggregate principal amount of 4.20% notes due April 2029, less original issuance discount of $1.0 million. These notes were priced to yield 4.234%. Underwriting fees and other expenses were incurred that aggregated $3.1 million; these costs were deferred and will be amortized over the term of the notes.
 
We are currently in compliance with financial covenants with respect to our consolidated debt.
 
We have considered our short-term liquidity needs and the adequacy of our estimated cash flows from operating activities and other available financing sources to meet these needs. We intend to 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.
v3.19.2
Derivative Financial Instruments
6 Months Ended
Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
 
During 2018, we entered into an aggregate of $225.0 million notional amount of forward-starting swaps that effectively locked the underlying 10-year treasury rate at a weighted average of 2.86% with respect to a planned issuance of debt securities by the Operating Partnership. Upon issuance of the $350.0 million aggregate principal amount of 4.20% notes due April 2029 during the first quarter of 2019, we terminated the forward-starting swaps and paid cash upon settlement. The unrealized loss of $5.1 million in accumulated other comprehensive income will be reclassified to interest expense as interest payments are made on the debt.

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

Our interest rate swaps have been 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. We have no collateral requirements related to our interest rate swaps.
 
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our debt. During the period from July 1, 2019 through June 30, 2020, we estimate that $1.0 million will be reclassified as a net decrease to interest expense.

The following table sets forth the gross fair value of our derivatives:
 
 
June 30,
2019
 
December 31,
2018
Derivatives:
 
 
 
Derivatives designated as cash flow hedges in prepaid expenses and other assets:
 
 
 
Interest rate swaps
$

 
$
1,146

Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
 
 
 
Interest rate swaps
$
86

 
$
3,581


 
The following table sets forth the effect of our cash flow hedges on accumulated other comprehensive income and interest expense:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Derivatives Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Amount of unrealized gains/(losses) recognized in accumulated other comprehensive income on derivatives:
 
 
 
 
 
 
 
Interest rate swaps
$
(646
)
 
$
862

 
$
(2,550
)
 
$
8,739

Amount of gains reclassified out of accumulated other comprehensive income into interest expense:
 
 
 
 
 
 
 
Interest rate swaps
$
(360
)
 
$
(515
)
 
$
(875
)
 
$
(621
)

v3.19.2
Noncontrolling Interests
6 Months Ended
Jun. 30, 2019
Noncontrolling Interest [Abstract]  
Noncontrolling Interests
Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates
 
At June 30, 2019, our noncontrolling interests in consolidated affiliates relate to our joint venture partners' 50.0% interest in office properties in Richmond and 20.0% interest in an office development property in Tampa. Our joint venture partners are unrelated third parties.

Noncontrolling Interests in the Operating Partnership

The following table sets forth the Company's noncontrolling interests in the Operating Partnership:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Beginning noncontrolling interests in the Operating Partnership
$
127,976

 
$
123,113

 
$
105,960

 
$
144,009

Adjustment of noncontrolling interests in the Operating Partnership to fair value
(14,722
)
 
19,310

 
8,532

 
(272
)
Conversions of Common Units to Common Stock
(222
)
 
(182
)
 
(353
)
 
(1,084
)
Net income attributable to noncontrolling interests in the Operating Partnership
1,044

 
1,381

 
1,237

 
2,269

Distributions to noncontrolling interests in the Operating Partnership
(1,298
)
 
(1,299
)
 
(2,598
)
 
(2,599
)
Total noncontrolling interests in the Operating Partnership
$
112,778

 
$
142,323

 
$
112,778

 
$
142,323


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
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net income available for common stockholders
$
39,422

 
$
50,686

 
$
46,677

 
$
83,135

Increase in additional paid in capital from conversions of Common Units to Common Stock
222

 
182

 
353

 
1,084

Change from net income available for common stockholders and transfers from noncontrolling interests
$
39,644

 
$
50,868

 
$
47,030

 
$
84,219


v3.19.2
Disclosure About Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Disclosure About Fair Value of Financial Instruments
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 and certain interest rate swaps. Our Level 2 liabilities include the fair value of our mortgages and notes payable and remaining 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 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 the terms of definitive sales contracts or the sales comparison approach.

The following table sets forth our assets and liabilities and the Company's noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy.
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
Total
 
Quoted Prices
in Active
Markets for Identical Assets or Liabilities
 
Significant Observable Inputs
 
Significant Unobservable Inputs
Fair Value at June 30, 2019:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
1,583

 
$

 
$
1,583

 
$

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
2,151

 
2,151

 

 

Impaired real estate assets
 
657

 

 

 
657

Total Assets
 
$
4,391

 
$
2,151

 
$
1,583

 
$
657

Noncontrolling Interests in the Operating Partnership
 
$
112,778

 
$
112,778

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, net, at fair value (1)
 
$
2,210,081

 
$

 
$
2,210,081

 
$

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
86

 

 
86

 

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
2,151

 
2,151

 

 

Total Liabilities
 
$
2,212,318

 
$
2,151

 
$
2,210,167

 
$

Fair Value at December 31, 2018:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
5,599

 
$

 
$
5,599

 
$

Interest rate swaps (in prepaid expenses and other assets)
 
1,146

 

 
1,146

 

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
1,849

 
1,849

 

 

Impaired real estate assets
 
10,252