HIGHWOODS PROPERTIES, INC., 10-Q filed on 10/22/2019
Quarterly Report
v3.19.3
Cover Page Cover Page - shares
9 Months Ended
Sep. 30, 2019
Oct. 15, 2019
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 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, $.01 par value, of Highwoods Properties, Inc.  
Trading Symbol HIW  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   103,743,546
Entity Central Index Key 0000921082  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Highwoods Realty Limited Partnership [Member]    
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS REALTY LIMITED PARTNERSHIP  
Entity Incorporation, State or Country Code NC  
Entity File Number 000-21731  
Entity Tax Identification Number 56-1869557  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0000941713  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Amendment Flag false  
v3.19.3
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Real estate assets, at cost:    
Land $ 495,501 $ 491,441
Buildings and tenant improvements 4,844,229 4,676,862
Development in-process 133,189 165,537
Land held for development 94,550 128,248
Total real estate assets 5,567,469 5,462,088
Less-accumulated depreciation (1,388,166) (1,296,562)
Net real estate assets 4,179,303 4,165,526
Cash and cash equivalents 116,724 3,769
Restricted cash 6,300 6,374
Accounts receivable 25,507 25,952
Mortgages and notes receivable, net of allowance of $19 and $44, respectively 1,542 5,599
Accrued straight-line rents receivable 233,078 220,088
Investments in and advances to unconsolidated affiliates 24,088 23,585
Deferred leasing costs, net of accumulated amortization of $148,019 and $149,275, respectively 196,048 195,273
Prepaid expenses and other assets, net of accumulated depreciation of $19,944 and $18,074, respectively 108,035 28,843
Total Assets 4,890,625 4,675,009
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,322,226 2,085,831
Accounts payable, accrued expenses and other liabilities 272,989 218,922
Total Liabilities 2,595,215 2,304,753
Commitments and contingencies
Noncontrolling interests in the Operating Partnership 122,493 105,960
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; 103,748,337 and 103,557,065 shares issued and outstanding, respectively 1,037 1,036
Additional paid-in capital 2,963,680 2,976,197
Distributions in excess of net income available for common stockholders (842,387) (769,303)
Accumulated other comprehensive income/(loss) (527) 9,913
Total Stockholders’ Equity 2,150,662 2,246,720
Noncontrolling interests in consolidated affiliates 22,255 17,576
Total Equity/Capital 2,172,917 2,264,296
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital 4,890,625 4,675,009
Highwoods Realty Limited Partnership [Member]    
Real estate assets, at cost:    
Land 495,501 491,441
Buildings and tenant improvements 4,844,229 4,676,862
Development in-process 133,189 165,537
Land held for development 94,550 128,248
Total real estate assets 5,567,469 5,462,088
Less-accumulated depreciation (1,388,166) (1,296,562)
Net real estate assets 4,179,303 4,165,526
Cash and cash equivalents 116,724 3,769
Restricted cash 6,300 6,374
Accounts receivable 25,507 25,952
Mortgages and notes receivable, net of allowance of $19 and $44, respectively 1,542 5,599
Accrued straight-line rents receivable 233,078 220,088
Investments in and advances to unconsolidated affiliates 24,088 23,585
Deferred leasing costs, net of accumulated amortization of $148,019 and $149,275, respectively 196,048 195,273
Prepaid expenses and other assets, net of accumulated depreciation of $19,944 and $18,074, respectively 108,035 28,843
Total Assets 4,890,625 4,675,009
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,322,226 2,085,831
Accounts payable, accrued expenses and other liabilities 272,989 218,922
Total Liabilities 2,595,215 2,304,753
Commitments and contingencies
Redeemable Operating Partnership Units:    
Common Units, 2,725,703 and 2,738,703 outstanding, respectively 122,493 105,960
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 151,352 134,837
Equity/Capital:    
General partner Common Units, 1,060,652 and 1,058,870 outstanding, respectively 21,221 22,078
Limited partner Common Units, 102,278,876 and 102,089,386 outstanding, respectively 2,101,109 2,185,852
Accumulated other comprehensive income/(loss) (527) 9,913
Noncontrolling interests in consolidated affiliates 22,255 17,576
Total Equity/Capital 2,144,058 2,235,419
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital $ 4,890,625 $ 4,675,009
v3.19.3
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2019
Dec. 31, 2018
Assets:    
Mortgages and notes receivable allowance $ 19 $ 44
Deferred leasing costs, accumulated amortization 148,019 149,275
Prepaid expenses and other assets, accumulated depreciation $ 19,944 $ 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) 103,748,337 103,557,065
Common Stock, shares outstanding (in shares) 103,748,337 103,557,065
Highwoods Realty Limited Partnership [Member]    
Assets:    
Mortgages and notes receivable allowance $ 19 $ 44
Deferred leasing costs, accumulated amortization 148,019 149,275
Prepaid expenses and other assets, accumulated depreciation $ 19,944 $ 18,074
Redeemable Operating Partnership Units: [Abstract]    
Redeemable Common Units outstanding (in shares) 2,725,703 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) 1,060,652 1,058,870
Limited partners' capital account, units outstanding (in shares) 102,278,876 102,089,386
v3.19.3
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Rental and other revenues $ 187,475 $ 179,417 $ 543,908 $ 538,647
Operating expenses:        
Rental property and other expenses 64,135 61,153 185,244 180,248
Depreciation and amortization 60,850 57,661 189,514 171,923
Impairments of real estate assets 5,318 0 5,849 0
General and administrative 11,717 9,551 33,658 30,869
Total operating expenses 142,020 128,365 414,265 383,040
Interest expense 20,527 17,437 59,622 53,705
Other income/(loss) 174 818 (3,271) 1,735
Gains on disposition of property 3,515 3 10,218 16,975
Equity in earnings of unconsolidated affiliates 940 573 2,369 1,641
Net income 29,557 35,009 79,337 122,253
Net (income) attributable to noncontrolling interests in the Operating Partnership (737) (902) (1,974) (3,171)
Net (income) attributable to noncontrolling interests in consolidated affiliates (297) (324) (919) (918)
Dividends on Preferred Stock (622) (623) (1,866) (1,869)
Net income available for common stockholders $ 27,901 $ 33,160 $ 74,578 $ 116,295
Earnings per Common Share – basic:        
Net income available for common stockholders (in dollars per share) $ 0.27 $ 0.32 $ 0.72 $ 1.12
Weighted average Common Shares outstanding - basic (in shares) 103,727 103,471 103,674 103,408
Earnings per Common Share - diluted:        
Net income available for common stockholders (in dollars per share) $ 0.27 $ 0.32 $ 0.72 $ 1.12
Weighted average Common Shares outstanding - diluted (in shares) 106,471 106,333 106,425 106,256
Highwoods Realty Limited Partnership [Member]        
Rental and other revenues $ 187,475 $ 179,417 $ 543,908 $ 538,647
Operating expenses:        
Rental property and other expenses 64,135 61,153 185,244 180,248
Depreciation and amortization 60,850 57,661 189,514 171,923
Impairments of real estate assets 5,318 0 5,849 0
General and administrative 11,717 9,551 33,658 30,869
Total operating expenses 142,020 128,365 414,265 383,040
Interest expense 20,527 17,437 59,622 53,705
Other income/(loss) 174 818 (3,271) 1,735
Gains on disposition of property 3,515 3 10,218 16,975
Equity in earnings of unconsolidated affiliates 940 573 2,369 1,641
Net income 29,557 35,009 79,337 122,253
Net (income) attributable to noncontrolling interests in consolidated affiliates (297) (324) (919) (918)
Distributions on Preferred Units (622) (623) (1,866) (1,869)
Net income available for common unitholders $ 28,638 $ 34,062 $ 76,552 $ 119,466
Earnings per Common Unit - basic:        
Net income available for common unitholders (in dollars per share) $ 0.27 $ 0.32 $ 0.72 $ 1.13
Weighted average Common Units outstanding - basic (in shares) 106,046 105,866 105,998 105,808
Earnings per Common Unit - diluted:        
Net income available for common unitholders (in dollars per share) $ 0.27 $ 0.32 $ 0.72 $ 1.13
Weighted average Common Units outstanding - diluted (in shares) 106,062 105,924 106,016 105,847
v3.19.3
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Comprehensive income:        
Net income $ 29,557 $ 35,009 $ 79,337 $ 122,253
Other comprehensive income/(loss):        
Unrealized gains/(losses) on cash flow hedges (6,732) 2,187 (9,282) 10,926
Amortization of cash flow hedges (283) (654) (1,158) (1,275)
Total other comprehensive income/(loss) (7,015) 1,533 (10,440) 9,651
Total comprehensive income 22,542 36,542 68,897 131,904
Less-comprehensive (income) attributable to noncontrolling interests (1,034) (1,226) (2,893) (4,089)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders 21,508 35,316 66,004 127,815
Highwoods Realty Limited Partnership [Member]        
Comprehensive income:        
Net income 29,557 35,009 79,337 122,253
Other comprehensive income/(loss):        
Unrealized gains/(losses) on cash flow hedges (6,732) 2,187 (9,282) 10,926
Amortization of cash flow hedges (283) (654) (1,158) (1,275)
Total other comprehensive income/(loss) (7,015) 1,533 (10,440) 9,651
Total comprehensive income 22,542 36,542 68,897 131,904
Less-comprehensive (income) attributable to noncontrolling interests (297) (324) (919) (918)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders $ 22,245 $ 36,218 $ 67,978 $ 130,986
v3.19.3
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   1,476     15 1,461            
Distributions on Common Units   (146,763)     (1,467) (145,296)            
Distributions on Preferred Units   (1,869)     (19) (1,850)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     22,815                  
Issuances of Common Stock, net of issuance costs and tax withholdings 1,476   $ 0       1,476          
Conversions of Common Units to Common Stock - Shares     26,196                  
Conversions of Common Units to Common Stock 1,231           1,231          
Dividends on Common Stock (143,435)                     (143,435)
Dividends on Preferred Stock (1,869)                     (1,869)
Adjustment of noncontrolling interests in the Operating Partnership to fair value 9,607           9,607          
Distributions to noncontrolling interests in consolidated affiliates (950) (950)               (950) (950)  
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 6,609 6,609 $ 2   66 6,543 6,607          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   10,995     110 10,885            
Net (income) attributable to noncontrolling interests in the Operating Partnership (3,171)                     (3,171)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (9) (909)       918 918 (918)
Comprehensive income:                        
Net income 122,253 122,253     1,223 121,030           122,253
Other comprehensive income/(loss) 9,651 9,651           9,651 9,651      
Total comprehensive income 131,904 131,904                    
Balance (in shares) at Sep. 30, 2018     103,488,326                  
Balance at Sep. 30, 2018 2,238,631 2,209,744 $ 1,035 28,887 21,749 2,153,122 2,948,320 17,489 17,489 17,384 17,384 (774,484)
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)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   1,061     11 1,050            
Distributions on Common Units   (48,963)     (489) (48,474)            
Distributions on Preferred Units   (623)     (7) (616)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     26,211                  
Issuances of Common Stock, net of issuance costs and tax withholdings 1,061   $ 0       1,061          
Conversions of Common Units to Common Stock - Shares     3,000                  
Conversions of Common Units to Common Stock 147           147          
Dividends on Common Stock (47,856)                     (47,856)
Dividends on Preferred Stock (623)                     (623)
Adjustment of noncontrolling interests in the Operating Partnership to fair value 9,335           9,335          
Distributions to noncontrolling interests in consolidated affiliates (407) (407)               (407) (407)  
Share-based compensation expense, net of forfeitures 1,141 1,141 $ 0   11 1,130 1,141          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   9,687     97 9,590            
Net (income) attributable to noncontrolling interests in the Operating Partnership (902)                     (902)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (3) (321)       324 324 (324)
Comprehensive income:                        
Net income 35,009 35,009     351 34,658           35,009
Other comprehensive income/(loss) 1,533 1,533           1,533 1,533      
Total comprehensive income 36,542 36,542                    
Balance (in shares) at Sep. 30, 2018     103,488,326                  
Balance at Sep. 30, 2018 $ 2,238,631 2,209,744 $ 1,035 28,887 21,749 2,153,122 2,948,320 17,489 17,489 17,384 17,384 (774,484)
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   (243)     (2) (241)            
Distributions on Common Units   (150,973)     (1,510) (149,463)            
Distributions on Preferred Units   (1,866)     (19) (1,847)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     (11,715)                  
Issuances of Common Stock, net of issuance costs and tax withholdings (243)   $ 0       (243)          
Conversions of Common Units to Common Stock - Shares     13,000                  
Conversions of Common Units to Common Stock 572           572          
Dividends on Common Stock (147,662)                     (147,662)
Dividends on Preferred Stock (1,866)                     (1,866)
Adjustment of noncontrolling interests in the Operating Partnership to fair value (19,025)           (19,025)          
Distributions to noncontrolling interests in consolidated affiliates (1,227) (1,227)               (1,227) (1,227)  
Contributions from noncontrolling interests in consolidated affiliates 4,987 4,987               4,987 4,987  
Issuances of restricted stock - shares     190,934                  
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 6,180 6,180 $ 1   62 6,118 6,179          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   (17,116)     (172) (16,944)            
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,974)                     (1,974)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (9) (910)       919 919 (919)
Comprehensive income:                        
Net income 79,337 79,337     793 78,544           79,337
Other comprehensive income/(loss) (10,440) (10,440)           (10,440) (10,440)      
Total comprehensive income $ 68,897 68,897                    
Balance (in shares) at Sep. 30, 2019 103,748,337   103,748,337                  
Balance at Sep. 30, 2019 $ 2,172,917 2,144,058 $ 1,037 28,859 21,221 2,101,109 2,963,680 (527) (527) 22,255 22,255 (842,387)
Balance (in shares) at Jun. 30, 2019     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)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   488     5 483            
Distributions on Common Units   (50,339)     (504) (49,835)            
Distributions on Preferred Units   (622)     (7) (615)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     11,990                  
Issuances of Common Stock, net of issuance costs and tax withholdings 488   $ 0       488          
Conversions of Common Units to Common Stock - Shares     5,000                  
Conversions of Common Units to Common Stock 219           219          
Dividends on Common Stock (49,237)                     (49,237)
Dividends on Preferred Stock (622)                     (622)
Adjustment of noncontrolling interests in the Operating Partnership to fair value (10,493)           (10,493)          
Distributions to noncontrolling interests in consolidated affiliates (443) (443)               (443) (443)  
Issuances of restricted stock - shares     26,744                  
Issuances of restricted stock 0                      
Share-based compensation expense, net of forfeitures - shares     0                  
Share-based compensation expense, net of forfeitures 668 668 $ 0   7 661 668          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   (9,909)     (100) (9,809)            
Net (income) attributable to noncontrolling interests in the Operating Partnership (737)                     (737)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (3) (294)       297 297 (297)
Comprehensive income:                        
Net income 29,557 29,557     295 29,262           29,557
Other comprehensive income/(loss) (7,015) (7,015)           (7,015) (7,015)      
Total comprehensive income $ 22,542 22,542                    
Balance (in shares) at Sep. 30, 2019 103,748,337   103,748,337                  
Balance at Sep. 30, 2019 $ 2,172,917 $ 2,144,058 $ 1,037 $ 28,859 $ 21,221 $ 2,101,109 $ 2,963,680 $ (527) $ (527) $ 22,255 $ 22,255 $ (842,387)
v3.19.3
Consolidated Statements of Equity/Capital (Parentheticals) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Highwoods Properties, Inc. [Member]        
Dividends on Common Stock (per share) $ 0.475 $ 0.4625 $ 1.425 $ 1.3875
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 64.6875 64.6875
Highwoods Realty Limited Partnership [Member]        
Distributions on Common Units (per unit) 0.475 0.4625 1.425 1.3875
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 $ 64.6875 $ 64.6875
v3.19.3
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Operating activities:    
Net income $ 79,337 $ 122,253
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 189,514 171,923
Amortization of lease incentives and acquisition-related intangible assets and liabilities 197 (1,488)
Share-based compensation expense 6,180 6,609
Credit losses on operating lease receivables 8,711 791
Write-off of mortgages and notes receivable 4,087 0
Accrued interest on mortgages and notes receivable (151) (336)
Amortization of debt issuance costs 2,194 2,126
Amortization of cash flow hedges (1,158) (1,275)
Amortization of mortgages and notes payable fair value adjustments 1,193 1,071
Impairments of real estate assets 5,849 0
Losses on debt extinguishment 640 0
Net gains on disposition of property (10,218) (16,975)
Equity in earnings of unconsolidated affiliates (2,369) (1,641)
Distributions of earnings from unconsolidated affiliates 730 1,943
Settlement of cash flow hedges (11,749) 7,216
Changes in operating assets and liabilities:    
Accounts receivable (3,611) 4,778
Prepaid expenses and other assets 458 (1,487)
Accrued straight-line rents receivable (20,955) (17,945)
Accounts payable, accrued expenses and other liabilities 37,382 15,395
Net cash provided by operating activities 286,261 292,958
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (19,365) (50,649)
Investments in development in-process (77,854) (130,241)
Investments in tenant improvements and deferred leasing costs (105,879) (89,875)
Investments in building improvements (36,383) (52,151)
Net proceeds from disposition of real estate assets 45,250 35,441
Distributions of capital from unconsolidated affiliates 29 105
Repayments of mortgages and notes receivable 221 1,137
Payments of earnest money deposits (50,000) 0
Changes in other investing activities (6,279) (4,671)
Net cash used in investing activities (250,260) (290,904)
Financing activities:    
Dividends on Common Stock (147,662) (143,435)
Redemptions/repurchases of Preferred Stock (18) (5)
Dividends on Preferred Stock (1,866) (1,869)
Distributions to noncontrolling interests in the Operating Partnership (3,894) (3,895)
Distributions to noncontrolling interests in consolidated affiliates (1,227) (950)
Proceeds from the issuance of Common Stock 1,541 3,242
Costs paid for the issuance of Common Stock 0 (95)
Repurchase of shares related to tax withholdings (1,784) (1,671)
Borrowings on revolving credit facility 278,600 336,400
Repayments of revolving credit facility (460,600) (397,400)
Borrowings on mortgages and notes payable 747,990 345,863
Repayments of mortgages and notes payable (326,400) (211,345)
Changes in debt issuance costs and other financing activities (7,800) (2,948)
Net cash provided by/(used in) financing activities 76,880 (78,108)
Net increase/(decrease) in cash and cash equivalents and restricted cash 112,881 (76,054)
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 123,024 12,279
Reconciliation of cash and cash equivalents and restricted cash:    
Cash and cash equivalents at end of the period 116,724 5,324
Restricted cash at end of the period 6,300 6,955
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 55,608 56,771
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized gains/(losses) on cash flow hedges (9,282) 10,926
Conversions of Common Units to Common Stock 572 1,231
Changes in accrued capital expenditures (7,407) (10,396)
Write-off of fully depreciated real estate assets 59,428 63,820
Write-off of fully amortized leasing costs 34,203 26,660
Write-off of fully amortized debt issuance costs 1,791 2,733
Adjustment of noncontrolling interests in the Operating Partnership to fair value 19,025 (9,607)
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 79,337 122,253
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 189,514 171,923
Amortization of lease incentives and acquisition-related intangible assets and liabilities 197 (1,488)
Share-based compensation expense 6,180 6,609
Credit losses on operating lease receivables 8,711 791
Write-off of mortgages and notes receivable 4,087 0
Accrued interest on mortgages and notes receivable (151) (336)
Amortization of debt issuance costs 2,194 2,126
Amortization of cash flow hedges (1,158) (1,275)
Amortization of mortgages and notes payable fair value adjustments 1,193 1,071
Impairments of real estate assets 5,849 0
Losses on debt extinguishment 640 0
Net gains on disposition of property (10,218) (16,975)
Equity in earnings of unconsolidated affiliates (2,369) (1,641)
Distributions of earnings from unconsolidated affiliates 730 1,943
Settlement of cash flow hedges (11,749) 7,216
Changes in operating assets and liabilities:    
Accounts receivable (3,611) 4,778
Prepaid expenses and other assets 458 (1,487)
Accrued straight-line rents receivable (20,955) (17,945)
Accounts payable, accrued expenses and other liabilities 37,382 15,395
Net cash provided by operating activities 286,261 292,958
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (19,365) (50,649)
Investments in development in-process (77,854) (130,241)
Investments in tenant improvements and deferred leasing costs (105,879) (89,875)
Investments in building improvements (36,383) (52,151)
Net proceeds from disposition of real estate assets 45,250 35,441
Distributions of capital from unconsolidated affiliates 29 105
Repayments of mortgages and notes receivable 221 1,137
Payments of earnest money deposits (50,000) 0
Changes in other investing activities (6,279) (4,671)
Net cash used in investing activities (250,260) (290,904)
Financing activities:    
Distributions on Common Units (150,973) (146,763)
Redemptions/repurchases of Preferred Units (18) (5)
Distributions on Preferred Units (1,866) (1,869)
Distributions to noncontrolling interests in consolidated affiliates (1,227) (950)
Proceeds from the issuance of Common Units 1,541 3,242
Costs paid for the issuance of Common Units 0 (95)
Repurchase of units related to tax withholdings (1,784) (1,671)
Borrowings on revolving credit facility 278,600 336,400
Repayments of revolving credit facility (460,600) (397,400)
Borrowings on mortgages and notes payable 747,990 345,863
Repayments of mortgages and notes payable (326,400) (211,345)
Changes in debt issuance costs and other financing activities (8,383) (3,515)
Net cash provided by/(used in) financing activities 76,880 (78,108)
Net increase/(decrease) in cash and cash equivalents and restricted cash 112,881 (76,054)
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 123,024 12,279
Reconciliation of cash and cash equivalents and restricted cash:    
Cash and cash equivalents at end of the period 116,724 5,324
Restricted cash at end of the period 6,300 6,955
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 55,608 56,771
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized gains/(losses) on cash flow hedges (9,282) 10,926
Changes in accrued capital expenditures (7,407) (10,396)
Write-off of fully depreciated real estate assets 59,428 63,820
Write-off of fully amortized leasing costs 34,203 26,660
Write-off of fully amortized debt issuance costs 1,791 2,733
Adjustment of Redeemable Common Units to fair value 16,533 (11,562)
Contributions from noncontrolling interests in consolidated affiliates 4,987 0
Initial recognition of lease liabilities related to right of use assets $ 35,349 $ 0
v3.19.3
Description of Business and Significant Accounting Policies
9 Months Ended
Sep. 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 September 30, 2019, we owned or had an interest in 31.2 million rentable square feet of in-service properties, 1.2 million rentable square feet of office properties under development and approximately 275 acres of development land.
 
The Company is the sole general partner of the Operating Partnership. At September 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 nine months ended September 30, 2019, the Company redeemed 13,000 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 September 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 nine months ended September 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 $51.3 million and $48.1 million for the three months ended September 30, 2019 and 2018, respectively, and $159.7 million and $142.4 million for the nine months ended September 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 September 30, 2019, a reserve of $0.5 million was recorded to cover estimated reported and unreported claims.

Other Events
 
During the third quarter of 2019, we announced a series of planned investment activities. First, we have agreed to acquire Bank of America Tower at Legacy Union in Charlotte’s uptown CBD submarket for a total investment of $436 million. Bank of America Tower at Legacy Union is a trophy, LEED gold-registered office building encompassing 841,000 square feet with structured parking that delivers this year. The acquisition is scheduled to close in November 2019. We have posted earnest money deposits totaling $50 million that are non-refundable except in limited circumstances. Second, we have a two-phased plan to exit the Greensboro and Memphis markets. The first phase consists of selling a select portfolio of assets in Greensboro and Memphis by mid-2020 with a total sales price that approximates the $436 million total investment for Bank of America Tower at Legacy Union and closing the division offices. We can provide no assurances, however, that we will dispose of any of these assets on favorable terms, or at all, because the dispositions are subject to the negotiation and execution of definitive and binding purchase and sale agreements and would then be subject to the buyers’ completion of satisfactory due diligence and other customary closing conditions. The second phase is the planned sale of the remaining assets in both markets. There is no pre-determined timetable for the second phase. As a result of the announced plan to exit the Greensboro and Memphis markets and close our division offices, we recorded $0.7 million of severance costs in the third quarter of 2019 and expect to record an additional $1.5 million in the fourth quarter of 2019.

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.
v3.19.3
Leases
9 Months Ended
Sep. 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 September 30, 2019 and for the three and nine months ended September 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 on a straight-line basis from the date of the executed termination agreement through lease expiration when the amount of the fee is determinable and collectability of the fee is reasonably assured. Our extension options generally require a re-negotiation with the customer at market rates.
 
Initial direct costs, primarily commissions, related to the leasing of our office properties are included in deferred leasing costs and are stated at amortized cost. Such expenditures are part of the investment necessary to execute leases and, 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 $184.2 million and $534.2 million, respectively, during the three and nine months ended September 30, 2019, of which variable lease payments were $17.3 million and $49.2 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 September 30, 2019 for the properties that we wholly own:
 
October 1 through December 31, 2019
 
$
156,920

2020
 
619,066

2021
 
577,843

2022
 
544,683

2023
 
483,709

2024
 
422,362

Thereafter
 
1,820,576

 
 
$
4,625,159


 
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 $1.8 million of ground lease expense during the three and nine months ended September 30, 2019, respectively. Cash payments related to these leases were $0.5 million and $1.7 million during the three and nine months ended September 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 September 30, 2019 and a reconciliation of those cash flows to the operating lease liability at September 30, 2019:
 
October 1 through December 31, 2019
 
$
517

2020
 
2,086

2021
 
2,127

2022
 
2,169

2023
 
2,167

2024
 
2,123

Thereafter
 
83,697

 
 
94,886

Discount
 
(59,869
)
Lease liability
 
$
35,017


 
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


v3.19.3
Consolidated Variable Interest Entity
9 Months Ended
Sep. 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 began in the third 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 ($13.6 million of which was funded and/or placed in escrow as of September 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 September 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 September 30, 2019 and for the period May 29, 2019 through September 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:

 
September 30,
2019
Development in-process
$
19,602

Accounts payable, accrued expenses and other liabilities
$
798



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.
v3.19.3
Real Estate Assets
9 Months Ended
Sep. 30, 2019
Real Estate [Abstract]  
Real Estate Assets Real Estate Assets
 
Acquisitions

During the third quarter of 2019, we acquired development land in Raleigh for a purchase price, including capitalized acquisition costs, of $6.6 million.

Dispositions
 
During the third quarter of 2019, we sold a building and land parcels for an aggregate sale price of $14.3 million and recorded aggregate gains on disposition of property of $3.5 million.

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 third quarter of 2019, we recorded aggregate impairments of real estate assets of $5.3 million as a result of shortened hold periods from classifying all of our assets in Greensboro and Memphis as non-core.

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.
v3.19.3
Intangible Assets and Below Market Lease Liabilities
9 Months Ended
Sep. 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:
 
 
September 30,
2019
 
December 31,
2018
Assets:
 
 
 
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
$
344,067

 
$
344,548

Less accumulated amortization
(148,019
)
 
(149,275
)
 
$
196,048

 
$
195,273

Liabilities (in accounts payable, accrued expenses and other liabilities):
 
 
 
Acquisition-related below market lease liabilities
$
53,861

 
$
57,955

Less accumulated amortization
(33,285
)
 
(32,307
)
 
$
20,576

 
$
25,648

 
The following table sets forth amortization of intangible assets and below market lease liabilities:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
9,003

 
$
8,969

 
$
28,077

 
$
27,671

Amortization of lease incentives (in rental and other revenues)
$
540

 
$
452

 
$
3,848

 
$
1,357

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
305

 
$
415

 
$
1,005

 
$
1,292

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

 
$
140

 
$
416

 
$
416

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(1,656
)
 
$
(1,535
)
 
$
(5,072
)
 
$
(4,553
)

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, 2019
 
$
9,538

 
$
428

 
$
258

 
$
137

 
$
(1,349
)
2020
 
34,968

 
1,584

 
954

 
514

 
(5,107
)
2021
 
30,100

 
1,338

 
631

 

 
(4,152
)
2022
 
25,689

 
1,104

 
462

 

 
(3,086
)
2023
 
22,180

 
1,025

 
308

 

 
(2,707
)
Thereafter
 
58,995

 
4,735

 
1,100

 

 
(4,175
)
 
 
$
181,470

 
$
10,214

 
$
3,713

 
$
651

 
$
(20,576
)
Weighted average remaining amortization periods as of September 30, 2019 (in years)
 
7.3

 
9.3

 
6.5

 
1.2

 
5.2


v3.19.3
Mortgages and Notes Payable
9 Months Ended
Sep. 30, 2019
Debt Disclosure [Abstract]  
Mortgages and Notes Payable Mortgages and Notes Payable
 
The following table sets forth our mortgages and notes payable:
 
 
September 30,
2019
 
December 31,
2018
Secured indebtedness
$
95,779

 
$
97,179

Unsecured indebtedness
2,239,999

 
1,997,816

Less-unamortized debt issuance costs
(13,552
)
 
(9,164
)
Total mortgages and notes payable, net
$
2,322,226

 
$
2,085,831


 
At September 30, 2019, our secured mortgage loan was collateralized by real estate assets with an undepreciated book value of $146.3 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 were no amounts outstanding under our revolving credit facility at both September 30, 2019 and October 15, 2019. At both September 30, 2019 and October 15, 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 both September 30, 2019 and October 15, 2019 was $599.9 million.
 
During the third quarter of 2019, the Operating Partnership issued $400.0 million aggregate principal amount of 3.050% notes due February 2030, less original issuance discount of $1.0 million. These notes were priced to yield 3.079%. Underwriting fees and other expenses were incurred that aggregated $3.4 million; these costs were deferred and will be amortized over the term of the notes.

During the third quarter of 2019, we prepaid without penalty $100.0 million of our $200.0 million unsecured bank term loan that is scheduled to mature in January 2022. The interest rate on the term loan at our current credit ratings is LIBOR plus 110 basis points. We recorded $0.3 million of loss on debt extinguishment related to this prepayment.

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.
v3.19.3
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
 
During the third quarter of 2019, we entered into $150.0 million notional amount of forward-starting swaps that effectively locked the underlying 10-year treasury rate at 1.87% with respect to a planned issuance of debt securities by the Operating Partnership. Upon the subsequent issuance of the $400.0 million aggregate principal amount of 3.050% notes due February 2030 during the third quarter of 2019, we terminated the forward-starting swaps and paid cash upon settlement. The unrealized loss of $6.6 million in accumulated other comprehensive income/(loss) will be reclassified to interest expense as interest payments are made on the debt.

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/(loss) 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/(loss) related to derivatives will be reclassified to interest expense as interest payments are made on our debt. During the period from October 1, 2019 through September 30, 2020, we estimate that $0.3 million will be reclassified as a net decrease to interest expense.

The following table sets forth the gross fair value of our derivatives:
 
 
September 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
$
284

 
$
3,581


 
The following table sets forth the effect of our cash flow hedges on accumulated other comprehensive income/(loss) and interest expense:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Derivatives Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Amount of unrealized gains/(losses) recognized in accumulated other comprehensive income/(loss) on derivatives:
 
 
 
 
 
 
 
Interest rate swaps
$
(6,732
)
 
$
2,187

 
$
(9,282
)
 
$
10,926

Amount of gains reclassified out of accumulated other comprehensive income/(loss) into interest expense:
 
 
 
 
 
 
 
Interest rate swaps
$
(283
)
 
$
(654
)
 
$
(1,158
)
 
$
(1,275
)

v3.19.3
Noncontrolling Interests
9 Months Ended
Sep. 30, 2019
Noncontrolling Interest [Abstract]  
Noncontrolling Interests
Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates
 
At September 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
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Beginning noncontrolling interests in the Operating Partnership
$
112,778

 
$
142,323

 
$
105,960

 
$
144,009

Adjustment of noncontrolling interests in the Operating Partnership to fair value
10,493

 
(9,335
)
 
19,025

 
(9,607
)
Conversions of Common Units to Common Stock
(219
)
 
(147
)
 
(572
)
 
(1,231
)
Net income attributable to noncontrolling interests in the Operating Partnership
737

 
902

 
1,974

 
3,171

Distributions to noncontrolling interests in the Operating Partnership
(1,296
)
 
(1,296
)
 
(3,894
)
 
(3,895
)
Total noncontrolling interests in the Operating Partnership
$
122,493

 
$
132,447

 
$
122,493

 
$
132,447


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,
 
2019
 
2018
 
2019
 
2018
Net income available for common stockholders
$
27,901

 
$
33,160

 
$
74,578

 
$
116,295

Increase in additional paid in capital from conversions of Common Units to Common Stock
219

 
147

 
572

 
1,231

Change from net income available for common stockholders and transfers from noncontrolling interests
$
28,120

 
$
33,307

 
$
75,150

 
$
117,526


v3.19.3
Disclosure About Fair Value of Financial Instruments
9 Months Ended
Sep. 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 unobservable local and national industry market data such as comparable sales, appraisals, brokers' opinions of value and/or the terms of definitive sales contracts. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement.

The following table sets forth our assets and liabilities and the Company's noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy.
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
Total
 
Quoted Prices
in Active
Markets for Identical Assets or Liabilities
 
Significant Observable Inputs
 
Significant Unobservable Inputs
Fair Value at September 30, 2019:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
1,542

 
$

 
$
1,542

 
$

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
2,170

 
2,170

 

 

Impaired real estate assets
 
7,580

 

 

 
7,580

Total Assets
 
$
11,292

 
$
2,170

 
$
1,542

 
$
7,580

Noncontrolling Interests in the Operating Partnership
 
$
122,493

 
$
122,493

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, net, at fair value (1)
 
$
2,391,434

 
$

 
$
2,391,434

 
$

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
284

 

 
284

 

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
2,170

 
2,170

 

 

Total Liabilities
 
$
2,393,888

 
$
2,170

 
$
2,391,718

 
$

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

 
$

 
$
5,599

 
$