HIGHWOODS PROPERTIES, INC., 10-Q filed on 7/25/2017
Quarterly Report
v3.7.0.1
Document and Entity Information Document - shares
6 Months Ended
Jun. 30, 2017
Jul. 18, 2017
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS PROPERTIES INC.  
Entity Central Index Key 0000921082  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2017  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   103,236,237
Highwoods Realty Limited Partnership [Member]    
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS REALTY LIMITED PARTNERSHIP  
Entity Central Index Key 0000941713  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2017  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q2  
Amendment Flag false  
v3.7.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2017
Dec. 31, 2016
Real estate assets, at cost:    
Land $ 470,185 $ 474,375
Buildings and tenant improvements 4,374,143 4,313,373
Development in-process 245,593 279,602
Land held for development 82,326 77,355
Total real estate assets 5,172,247 5,144,705
Less-accumulated depreciation (1,163,778) (1,134,103)
Net real estate assets 4,008,469 4,010,602
Real estate and other assets, net, held for sale 54,543 0
Cash and cash equivalents 13,346 49,490
Restricted cash 20,612 29,141
Accounts receivable, net of allowance of $376 and $624, respectively 15,701 17,372
Mortgages and notes receivable, net of allowance of $88 and $105, respectively 6,750 8,833
Accrued straight-line rents receivable, net of allowance of $205 and $692, respectively 185,632 172,829
Investments in and advances to unconsolidated affiliates 15,243 18,846
Deferred leasing costs, net of accumulated amortization of $147,744 and $140,081, respectively 205,256 213,500
Prepaid expenses and other assets, net of accumulated amortization of $21,517 and $19,904, respectively 34,947 40,437
Total Assets 4,560,499 4,561,050
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,005,038 1,948,047
Accounts payable, accrued expenses and other liabilities 200,981 313,885
Liabilities held for sale 1,122 0
Total Liabilities 2,207,141 2,261,932
Commitments and contingencies
Noncontrolling interests in the Operating Partnership 143,646 144,802
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), 28,905 and 28,920 shares issued and outstanding, respectively 28,905 28,920
Common Stock, $.01 par value, 200,000,000 authorized shares; 103,236,237 and 101,665,554 shares issued and outstanding, respectively 1,032 1,017
Additional paid-in capital 2,926,128 2,850,881
Distributions in excess of net income available for common stockholders (770,101) (749,412)
Accumulated other comprehensive income 6,046 4,949
Total Stockholders’ Equity 2,192,010 2,136,355
Noncontrolling interests in consolidated affiliates 17,702 17,961
Total Equity/Capital 2,209,712 2,154,316
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital 4,560,499 4,561,050
Highwoods Realty Limited Partnership [Member]    
Real estate assets, at cost:    
Land 470,185 474,375
Buildings and tenant improvements 4,374,143 4,313,373
Development in-process 245,593 279,602
Land held for development 82,326 77,355
Total real estate assets 5,172,247 5,144,705
Less-accumulated depreciation (1,163,778) (1,134,103)
Net real estate assets 4,008,469 4,010,602
Real estate and other assets, net, held for sale 54,543 0
Cash and cash equivalents 13,346 49,490
Restricted cash 20,612 29,141
Accounts receivable, net of allowance of $376 and $624, respectively 15,701 17,372
Mortgages and notes receivable, net of allowance of $88 and $105, respectively 6,750 8,833
Accrued straight-line rents receivable, net of allowance of $205 and $692, respectively 185,632 172,829
Investments in and advances to unconsolidated affiliates 15,243 18,846
Deferred leasing costs, net of accumulated amortization of $147,744 and $140,081, respectively 205,256 213,500
Prepaid expenses and other assets, net of accumulated amortization of $21,517 and $19,904, respectively 34,947 40,437
Total Assets 4,560,499 4,561,050
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,005,038 1,948,047
Accounts payable, accrued expenses and other liabilities 200,981 313,885
Liabilities held for sale 1,122 0
Total Liabilities 2,207,141 2,261,932
Commitments and contingencies
Redeemable Operating Partnership Units:    
Common Units, 2,832,704 and 2,838,704 outstanding, respectively 143,646 144,802
Series A Preferred Units (liquidation preference $1,000 per unit), 28,905 and 28,920 units issued and outstanding, respectively 28,905 28,920
Total Redeemable Operating Partnership Units 172,551 173,722
Equity/Capital:    
General partner Common Units, 1,056,601 and 1,040,954 outstanding, respectively 21,568 21,023
Limited partner Common Units, 101,770,827 and 100,215,791 outstanding, respectively 2,135,491 2,081,463
Accumulated other comprehensive income 6,046 4,949
Noncontrolling interests in consolidated affiliates 17,702 17,961
Total Equity/Capital 2,180,807 2,125,396
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital $ 4,560,499 $ 4,561,050
v3.7.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Assets:    
Accounts receivable allowance $ 376 $ 624
Mortgages and notes receivable allowance 88 105
Accrued straight-line rents receivable allowance 205 692
Deferred leasing costs, accumulated amortization 147,744 140,081
Prepaid expenses and other assets, accumulated amortization $ 21,517 $ 19,904
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) 28,905 28,920
Series A Preferred Stock, shares outstanding (in shares) 28,905 28,920
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) 103,236,237 101,665,554
Common Stock, shares outstanding (in shares) 103,236,237 101,665,554
Highwoods Realty Limited Partnership [Member]    
Assets:    
Accounts receivable allowance $ 376 $ 624
Mortgages and notes receivable allowance 88 105
Accrued straight-line rents receivable allowance 205 692
Deferred leasing costs, accumulated amortization 147,744 140,081
Prepaid expenses and other assets, accumulated amortization $ 21,517 $ 19,904
Redeemable Operating Partnership Units: [Abstract]    
Redeemable Common Units outstanding (in shares) 2,832,704 2,838,704
Series A Preferred Units, liquidation preference (in dollars per share) $ 1,000 $ 1,000
Series A Preferred Units, issued (in shares) 28,905 28,920
Series A Preferred Units, outstanding (in shares) 28,905 28,920
Common Units: [Abstract]    
General partners' capital account, units outstanding (in shares) 1,056,601 1,040,954
Limited partners' capital account, units outstanding (in shares) 101,770,827 100,215,791
v3.7.0.1
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Rental and other revenues $ 177,283 $ 166,860 $ 346,691 $ 331,719
Operating expenses:        
Rental property and other expenses 58,854 57,515 116,250 115,095
Depreciation and amortization 55,816 55,317 111,961 108,811
General and administrative 9,050 8,327 20,540 19,464
Total operating expenses 123,720 121,159 248,751 243,370
Interest expense:        
Contractual 15,345 18,674 32,368 38,389
Amortization of debt issuance costs 809 811 1,649 1,801
Total interest expense 16,154 19,485 34,017 40,190
Other income:        
Interest and other income 564 534 1,248 1,051
Gains on debt extinguishment 826 0 826 0
Total other income 1,390 534 2,074 1,051
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates 38,799 26,750 65,997 49,210
Gains on disposition of property 0 5,861 5,332 10,258
Equity in earnings of unconsolidated affiliates 755 917 1,710 2,202
Income from continuing operations 39,554 33,528 73,039 61,670
Discontinued operations:        
Income from discontinued operations 0 0 0 4,097
Net gains on disposition of discontinued operations 0 0 0 414,496
Total income from discontinued operations 0 0 0 418,593
Net income 39,554 33,528 73,039 480,263
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,043) (939) (1,931) (13,950)
Net (income) attributable to noncontrolling interests in consolidated affiliates (299) (314) (599) (622)
Dividends on Preferred Stock (623) (627) (1,246) (1,253)
Net income available for common stockholders $ 37,589 $ 31,648 $ 69,263 $ 464,438
Earnings per Common Share – basic:        
Income from continuing operations available for common stockholders (in dollars per share) $ 0.37 $ 0.32 $ 0.68 $ 0.60
Income from discontinued operations available for common stockholders (in dollars per share) 0.00 0.00 0.00 4.19
Net income available for common stockholders (in dollars per share) $ 0.37 $ 0.32 $ 0.68 $ 4.79
Weighted average Common Shares outstanding - basic (in shares) 102,475 97,648 102,109 97,010
Earnings per Common Share - diluted:        
Income from continuing operations available for common stockholders (in dollars per share) $ 0.37 $ 0.32 $ 0.68 $ 0.60
Income from discontinued operations available for common stockholders (in dollars per share) 0.00 0.00 0.00 4.18
Net income available for common stockholders (in dollars per share) $ 0.37 $ 0.32 $ 0.68 $ 4.78
Weighted average Common Shares outstanding - diluted (in shares) 105,386 100,628 105,026 99,992
Dividends declared per Common Share (in dollars per share) $ 0.440 $ 0.425 $ 0.88 $ 0.850
Net income available for common stockholders:        
Income from continuing operations available for common stockholders $ 37,589 $ 31,648 $ 69,263 $ 58,110
Income from discontinued operations available for common stockholders 0 0 0 406,328
Net income available for common stockholders 37,589 31,648 69,263 464,438
Highwoods Realty Limited Partnership [Member]        
Rental and other revenues 177,283 166,860 346,691 331,719
Operating expenses:        
Rental property and other expenses 58,854 57,515 116,250 115,095
Depreciation and amortization 55,816 55,317 111,961 108,811
General and administrative 9,050 8,327 20,540 19,464
Total operating expenses 123,720 121,159 248,751 243,370
Interest expense:        
Contractual 15,345 18,674 32,368 38,389
Amortization of debt issuance costs 809 811 1,649 1,801
Total interest expense 16,154 19,485 34,017 40,190
Other income:        
Interest and other income 564 534 1,248 1,051
Gains on debt extinguishment 826 0 826 0
Total other income 1,390 534 2,074 1,051
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates 38,799 26,750 65,997 49,210
Gains on disposition of property 0 5,861 5,332 10,258
Equity in earnings of unconsolidated affiliates 755 917 1,710 2,202
Income from continuing operations 39,554 33,528 73,039 61,670
Discontinued operations:        
Income from discontinued operations 0 0 0 4,097
Net gains on disposition of discontinued operations 0 0 0 414,496
Total income from discontinued operations 0 0 0 418,593
Net income 39,554 33,528 73,039 480,263
Net (income) attributable to noncontrolling interests in consolidated affiliates (299) (314) (599) (622)
Distributions on Preferred Units (623) (627) (1,246) (1,253)
Net income available for common unitholders $ 38,632 $ 32,587 $ 71,194 $ 478,388
Earnings per Common Unit - basic:        
Income from continuing operations available for common unitholders (in dollars per share) $ 0.37 $ 0.33 $ 0.68 $ 0.60
Income from discontinued operations available for common unitholders (in dollars per share) 0.00 0.00 0.00 4.21
Net income available for common unitholders (in dollars per share) $ 0.37 $ 0.33 $ 0.68 $ 4.81
Weighted average Common Units outstanding - basic (in shares) 104,900 100,129 104,536 99,496
Earnings per Common Unit - diluted:        
Income from continuing operations available for common unitholders (in dollars per share) $ 0.37 $ 0.33 $ 0.68 $ 0.60
Income from discontinued operations available for common unitholders (in dollars per share) 0.00 0.00 0.00 4.20
Net income available for common unitholders (in dollars per share) $ 0.37 $ 0.33 $ 0.68 $ 4.80
Weighted average Common Units outstanding - diluted (in shares) 104,977 100,219 104,617 99,583
Distributions declared per Common Unit (in dollars per unit) $ 0.44 $ 0.425 $ 0.88 $ 0.850
Net income available for common unitholders:        
Income from continuing operations available for common unitholders $ 38,632 $ 32,587 $ 71,194 $ 59,795
Income from discontinued operations available for common unitholders 0 0 0 418,593
Net income available for common unitholders $ 38,632 $ 32,587 $ 71,194 $ 478,388
v3.7.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Comprehensive income:        
Net income $ 39,554 $ 33,528 $ 73,039 $ 480,263
Other comprehensive income/(loss):        
Unrealized gains/(losses) on cash flow hedges (136) (5,760) 316 (9,395)
Amortization of cash flow hedges 297 783 781 1,578
Total other comprehensive income/(loss) 161 (4,977) 1,097 (7,817)
Total comprehensive income 39,715 28,551 74,136 472,446
Less-comprehensive (income) attributable to noncontrolling interests (1,342) (1,253) (2,530) (14,572)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders 38,373 27,298 71,606 457,874
Highwoods Realty Limited Partnership [Member]        
Comprehensive income:        
Net income 39,554 33,528 73,039 480,263
Other comprehensive income/(loss):        
Unrealized gains/(losses) on cash flow hedges (136) (5,760) 316 (9,395)
Amortization of cash flow hedges 297 783 781 1,578
Total other comprehensive income/(loss) 161 (4,977) 1,097 (7,817)
Total comprehensive income 39,715 28,551 74,136 472,446
Less-comprehensive (income) attributable to noncontrolling interests (299) (314) (599) (622)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders $ 39,416 $ 28,237 $ 73,537 $ 471,824
v3.7.0.1
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, 2015     96,091,932                  
Balance at Dec. 31, 2015 $ 1,619,282 $ 1,590,232 $ 961 $ 29,050 $ 15,759 $ 1,560,309 $ 2,598,242 $ (3,811) $ (3,811) $ 17,975 $ 17,975 $ (1,023,135)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   104,472     1,045 103,427            
Distributions on Common Units   (84,387)     (844) (83,543)            
Distributions on Preferred Units   (1,253)     (13) (1,240)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     2,324,850                  
Issuances of Common Stock, net of issuance costs and tax withholdings 104,472   $ 23       104,449          
Conversions of Common Units to Common Stock - Shares     32,328                  
Conversions of Common Units to Common Stock 1,558           1,558          
Dividends on Common Stock (82,272)                     (82,272)
Dividends on Preferred Stock (1,253)                     (1,253)
Adjustment of noncontrolling interests in the Operating Partnership to fair value (15,042)           (15,042)          
Distributions to noncontrolling interests in consolidated affiliates (900) (900)               (900) (900)  
Issuances of restricted stock - shares     130,752                  
Issuances of restricted stock 0                      
Redemptions/repurchases of Preferred Stock (115)     (115)                
Share-based compensation expense, net of forfeitures - shares     (8,888)                  
Share-based compensation expense, net of forfeitures 4,550 4,550 $ 2   46 4,504 4,548          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   (25,319)     (253) (25,066)            
Net (income) attributable to noncontrolling interests in the Operating Partnership (13,950)                     (13,950)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (6) (616)       622 622 (622)
Comprehensive income:                        
Net income 480,263 480,263     4,803 475,460           480,263
Other comprehensive income/(loss) (7,817) (7,817)           (7,817) (7,817)      
Total comprehensive income 472,446 472,446                    
Balance (in shares) at Jun. 30, 2016     98,570,974                  
Balance at Jun. 30, 2016 $ 2,088,776 2,059,841 $ 986 28,935 20,537 2,033,235 2,693,755 (11,628) (11,628) 17,697 17,697 (640,969)
Balance (in shares) at Dec. 31, 2016 101,665,554   101,665,554                  
Balance at Dec. 31, 2016 $ 2,154,316 2,125,396 $ 1,017 28,920 21,023 2,081,463 2,850,881 4,949 4,949 17,961 17,961 (749,412)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   69,833     698 69,135            
Distributions on Common Units   (92,087)     (920) (91,167)            
Distributions on Preferred Units   (1,246)     (12) (1,234)            
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     1,453,935                  
Issuances of Common Stock, net of issuance costs and tax withholdings 69,833   $ 15       69,818          
Conversions of Common Units to Common Stock - Shares     6,000                  
Conversions of Common Units to Common Stock 305           305          
Dividends on Common Stock (89,952)                     (89,952)
Dividends on Preferred Stock (1,246)                     (1,246)
Adjustment of noncontrolling interests in the Operating Partnership to fair value 287           287          
Distributions to noncontrolling interests in consolidated affiliates (858) (858)               (858) (858)  
Issuances of restricted stock - shares     110,748                  
Issuances of restricted stock 0                      
Redemptions/repurchases of Preferred Stock (15)     (15)                
Share-based compensation expense, net of forfeitures - shares     0                  
Share-based compensation expense, net of forfeitures 4,837 4,837     48 4,789 4,837          
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   796     7 789            
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,931)                     (1,931)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0     (6) (593)       599 599 (599)
Comprehensive income:                        
Net income 73,039 73,039     730 72,309           73,039
Other comprehensive income/(loss) 1,097 1,097           1,097 1,097      
Total comprehensive income $ 74,136 74,136                    
Balance (in shares) at Jun. 30, 2017 103,236,237   103,236,237                  
Balance at Jun. 30, 2017 $ 2,209,712 $ 2,180,807 $ 1,032 $ 28,905 $ 21,568 $ 2,135,491 $ 2,926,128 $ 6,046 $ 6,046 $ 17,702 $ 17,702 $ (770,101)
v3.7.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Operating activities:    
Net income $ 73,039 $ 480,263
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 111,961 108,811
Amortization of lease incentives and acquisition-related intangible assets and liabilities (345) (1,179)
Share-based compensation expense 4,837 4,550
Allowance for losses on accounts and accrued straight-line rents receivable 110 1,218
Accrued interest on mortgages and notes receivable (274) (212)
Amortization of debt issuance costs 1,649 1,801
Amortization of cash flow hedges 781 1,578
Amortization of mortgages and notes payable fair value adjustments 139 (116)
Gains on debt extinguishment (826) 0
Net gains on disposition of property (5,332) (424,754)
Equity in earnings of unconsolidated affiliates (1,710) (2,202)
Distributions of earnings from unconsolidated affiliates 2,907 1,095
Settlement of cash flow hedges 7,322 0
Changes in operating assets and liabilities:    
Accounts receivable 4,358 (181)
Prepaid expenses and other assets (1,455) (5,297)
Accrued straight-line rents receivable (15,228) (13,600)
Accounts payable, accrued expenses and other liabilities (9,818) (13,970)
Net cash provided by operating activities 172,115 137,805
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired 0 (9,058)
Investments in development in-process (97,096) (74,668)
Investments in tenant improvements and deferred leasing costs (54,119) (42,954)
Investments in building improvements (31,070) (31,677)
Net proceeds from disposition of real estate assets 11,532 675,003
Distributions of capital from unconsolidated affiliates 7,445 2,118
Investments in mortgages and notes receivable 0 (7,818)
Repayments of mortgages and notes receivable 2,357 155
Investments in and advances to unconsolidated affiliates (172) (105)
Changes in restricted cash and other investing activities 4,496 (257,181)
Net cash provided by/(used in) investing activities (156,627) 253,815
Financing activities:    
Dividends on Common Stock (89,952) (82,272)
Special dividend on Common Stock (81,205) 0
Redemptions/repurchases of Preferred Stock (15) (115)
Dividends on Preferred Stock (1,246) (1,253)
Distributions to noncontrolling interests in the Operating Partnership (2,495) (2,463)
Special distribution to noncontrolling interests in the Operating Partnership (2,271) 0
Distributions to noncontrolling interests in consolidated affiliates (858) (900)
Proceeds from the issuance of Common Stock 74,987 110,158
Costs paid for the issuance of Common Stock (1,199) (1,629)
Repurchase of shares related to tax withholdings (3,955) (4,057)
Borrowings on revolving credit facility 425,300 153,800
Repayments of revolving credit facility (314,300) (169,800)
Borrowings on mortgages and notes payable 456,001 0
Repayments of mortgages and notes payable (506,679) (394,738)
Payments of debt extinguishment costs (57) 0
Changes in debt issuance costs and other financing activities (3,688) (943)
Net cash used in financing activities (51,632) (394,212)
Net decrease in cash and cash equivalents (36,144) (2,592)
Cash and cash equivalents at beginning of the period 49,490 5,036
Cash and cash equivalents at end of the period 13,346 2,444
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 34,930 38,222
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized gains/(losses) on cash flow hedges 316 (9,395)
Conversions of Common Units to Common Stock 305 1,558
Changes in accrued capital expenditures (21,961) 9,227
Write-off of fully depreciated real estate assets 28,449 21,948
Write-off of fully amortized leasing costs 15,023 11,690
Write-off of fully amortized debt issuance costs 4,324 0
Adjustment of noncontrolling interests in the Operating Partnership to fair value (287) 15,042
Highwoods Realty Limited Partnership [Member]    
Operating activities:    
Net income 73,039 480,263
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 111,961 108,811
Amortization of lease incentives and acquisition-related intangible assets and liabilities (345) (1,179)
Share-based compensation expense 4,837 4,550
Allowance for losses on accounts and accrued straight-line rents receivable 110 1,218
Accrued interest on mortgages and notes receivable (274) (212)
Amortization of debt issuance costs 1,649 1,801
Amortization of cash flow hedges 781 1,578
Amortization of mortgages and notes payable fair value adjustments 139 (116)
Gains on debt extinguishment (826) 0
Net gains on disposition of property (5,332) (424,754)
Equity in earnings of unconsolidated affiliates (1,710) (2,202)
Distributions of earnings from unconsolidated affiliates 2,907 1,095
Settlement of cash flow hedges 7,322 0
Changes in operating assets and liabilities:    
Accounts receivable 4,358 (181)
Prepaid expenses and other assets (1,455) (5,297)
Accrued straight-line rents receivable (15,228) (13,600)
Accounts payable, accrued expenses and other liabilities (9,818) (13,970)
Net cash provided by operating activities 172,115 137,805
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired 0 (9,058)
Investments in development in-process (97,096) (74,668)
Investments in tenant improvements and deferred leasing costs (54,119) (42,954)
Investments in building improvements (31,070) (31,677)
Net proceeds from disposition of real estate assets 11,532 675,003
Distributions of capital from unconsolidated affiliates 7,445 2,118
Investments in mortgages and notes receivable 0 (7,818)
Repayments of mortgages and notes receivable 2,357 155
Investments in and advances to unconsolidated affiliates (172) (105)
Changes in restricted cash and other investing activities 4,496 (257,181)
Net cash provided by/(used in) investing activities (156,627) 253,815
Financing activities:    
Distributions on Common Units (92,087) (84,387)
Special distribution on Common Units (83,149) 0
Redemptions/repurchases of Preferred Units (15) (115)
Distributions on Preferred Units (1,246) (1,253)
Distributions to noncontrolling interests in consolidated affiliates (858) (900)
Proceeds from the issuance of Common Units 74,987 110,158
Costs paid for the issuance of Common Units (1,199) (1,629)
Repurchase of units related to tax withholdings (3,955) (4,057)
Borrowings on revolving credit facility 425,300 153,800
Repayments of revolving credit facility (314,300) (169,800)
Borrowings on mortgages and notes payable 456,001 0
Repayments of mortgages and notes payable (506,679) (394,738)
Payments of debt extinguishment costs (57) 0
Changes in debt issuance costs and other financing activities (4,375) (1,291)
Net cash used in financing activities (51,632) (394,212)
Net decrease in cash and cash equivalents (36,144) (2,592)
Cash and cash equivalents at beginning of the period 49,490 5,036
Cash and cash equivalents at end of the period 13,346 2,444
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 34,930 38,222
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized gains/(losses) on cash flow hedges 316 (9,395)
Changes in accrued capital expenditures (21,961) 9,227
Write-off of fully depreciated real estate assets 28,449 21,948
Write-off of fully amortized leasing costs 15,023 11,690
Write-off of fully amortized debt issuance costs 4,324 0
Adjustment of Redeemable Common Units to fair value $ (1,156) $ 24,971
v3.7.0.1
Description of Business and Significant Accounting Policies
6 Months Ended
Jun. 30, 2017
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, 2017, we owned or had an interest in 32.0 million rentable square feet of in-service properties, 1.2 million rentable square feet of properties under development and approximately 400 acres of development land.
 
The Company is the sole general partner of the Operating Partnership. At June 30, 2017, the Company owned all of the Preferred Units and 102.8 million, or 97.3%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.8 million Common Units. During the six months ended June 30, 2017, the Company redeemed 6,000 Common Units for a like number of shares of Common Stock.

Common Stock Offerings
 
During the first quarter of 2017, we entered into separate equity distribution agreements in which the Company may offer and sell up to $300.0 million in aggregate gross sales price of shares of Common Stock. During the three and six months ended June 30, 2017, the Company issued 1,177,734 and 1,363,919 shares, respectively, of Common Stock under its equity distribution agreements at an average gross sales price of $51.03 and $50.85 per share, respectively, and received net proceeds, after sales commissions, of $59.2 million and $68.3 million, respectively.

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. 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 2016 Annual Report on Form 10-K.

Use of Estimates

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

1.    Description of Business and Significant Accounting Policies – Continued

Recently Issued Accounting Standards

The Financial Accounting Standards Board ("FASB") issued an accounting standards update ("ASU") that requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that we identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when we satisfy the performance obligations. We will also be required to disclose information regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Upon adoption of the ASU in 2018, we expect to utilize the modified retrospective approach. Our initial analysis of our non-lease related revenue contracts indicates that the adoption of this ASU will impact the financial statement disclosure of these contracts with no material impact on the timing of revenue recognition; however, we are still in the process of evaluating this ASU. We expect additional impact of this ASU upon adoption of the ASU related to accounting for leases discussed below for certain lease revenue streams that will be required to be evaluated as non-lease components using the five-step revenue recognition model.
 
The FASB issued an ASU that adds to and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The ASU is required to be adopted in 2018 with retrospective application required. We do not expect such adoption to have a material effect on our Consolidated Statements of Cash Flows.

The FASB issued an ASU that clarifies and narrows the definition of a business used in determining whether to account for a transaction as an asset acquisition or business combination. The guidance requires evaluation of the fair value of the assets acquired to determine if it is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the transferred assets would not be a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs. The ASU is required to be adopted in 2018 and applied prospectively. Upon adoption of this ASU, we expect that the majority of our future acquisitions would not meet the definition of a business; therefore, the related acquisition costs would be capitalized as part of the purchase price.

The FASB issued an ASU that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The guidance requires modification accounting if the value, vesting conditions or classification of the award changes. The ASU is required to be adopted in 2018 and applied prospectively. We do not expect such adoption to have a material effect on our Consolidated Financial Statements.

The FASB issued an ASU which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The ASU requires lessors to account for leases using an approach that is substantially equivalent to the existing guidance and is effective for reporting periods beginning in 2019 with early adoption permitted. Our initial analysis of our leases indicates that upon adoption of the ASU, certain lease revenue streams that are currently accounted for using the lease accounting standard will be accounted for as non-lease components using the five-step revenue recognition model discussed above. We are in the process of evaluating this ASU.

The FASB issued an ASU that requires, among other things, the use of a new current expected credit loss ("CECL") model in determining our allowances for doubtful accounts with respect to accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable. The CECL model requires that we estimate our lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. We will also be required to disclose information about how we developed the allowances, including changes in the factors (e.g., portfolio mix, credit trends, unemployment, gross domestic product, etc.) that influenced our estimate of expected credit losses and the reasons for those changes. We will apply the ASU’s provisions as a cumulative-effect adjustment to retained earnings upon adoption in 2020. We are in the process of evaluating this ASU.
v3.7.0.1
Real Estate Assets
6 Months Ended
Jun. 30, 2017
Real Estate [Abstract]  
Real Estate Assets
Real Estate Assets
During the first quarter of 2017, we sold a building for a sale price of $13.0 million (before closing credits to buyer of $1.2 million) and recorded a gain on disposition of property of $5.3 million.
v3.7.0.1
Mortgages and Notes Receivable
6 Months Ended
Jun. 30, 2017
Receivables [Abstract]  
Mortgages and Notes Receivable
Mortgages and Notes Receivable
Mortgages and notes receivable were $6.8 million and $8.8 million at June 30, 2017 and December 31, 2016, respectively. We evaluate the ability to collect our mortgages and notes receivable by monitoring the leasing statistics and/or market fundamentals of these assets. As of June 30, 2017, our mortgages and notes receivable were not in default and there were no other indicators of impairment.
v3.7.0.1
Intangible Assets and Below Market Lease Liabilities
6 Months Ended
Jun. 30, 2017
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,
2017
 
December 31,
2016
Assets:
 
 
 
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
$
353,000

 
$
353,581

Less accumulated amortization
(147,744
)
 
(140,081
)
 
$
205,256

 
$
213,500

 
 
 
 
Liabilities (in accounts payable, accrued expenses and other liabilities):
 
 
 
Acquisition-related below market lease liabilities
$
60,809

 
$
61,221

Less accumulated amortization
(25,834
)
 
(23,074
)
 
$
34,975

 
$
38,147

 
The following table sets forth amortization of intangible assets and below market lease liabilities:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
10,133

 
$
11,731

 
$
20,752

 
$
23,066

Amortization of lease incentives (in rental and other revenues)
$
443

 
$
390

 
$
840

 
$
1,101

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
675

 
$
972

 
$
1,711

 
$
2,003

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

 
$
139

 
$
276

 
$
277

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(1,592
)
 
$
(2,788
)
 
$
(3,172
)
 
$
(4,560
)
 
4.    Intangible Assets and Below Market Lease Liabilities - Continued

The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities:
 
 
 
Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization)
 
Amortization of Lease Incentives (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets (in Rental Property and Other Expenses)
 
Amortization of Acquisition-Related Below Market Lease Liabilities (in Rental and Other Revenues)
July 1 through December 31, 2017
 
$
21,126

 
$
810

 
$
1,140

 
$
274

 
$
(3,073
)
2018
 
36,533

 
1,510

 
1,680

 
553

 
(5,962
)
2019
 
30,942

 
1,286

 
1,286

 
553

 
(5,492
)
2020
 
26,160

 
1,011

 
967

 
525

 
(5,180
)
2021
 
21,887

 
797

 
647

 

 
(4,409
)
Thereafter
 
50,280

 
3,404

 
1,885

 

 
(10,859
)
 
 
$
186,928

 
$
8,818

 
$
7,605

 
$
1,905

 
$
(34,975
)
Weighted average remaining amortization periods as of June 30, 2017 (in years)
 
6.7

 
8.7

 
6.4

 
3.5

 
7.0

v3.7.0.1
Mortgages and Notes Payable
6 Months Ended
Jun. 30, 2017
Debt Disclosure [Abstract]  
Mortgages and Notes Payable
Mortgages and Notes Payable
 
The following table sets forth our mortgages and notes payable:
 
 
June 30,
2017
 
December 31,
2016
Secured indebtedness
$
99,856

 
$
128,204

Unsecured indebtedness
1,913,966

 
1,826,145

Less-unamortized debt issuance costs
(8,784
)
 
(6,302
)
Total mortgages and notes payable, net
$
2,005,038

 
$
1,948,047


 
At June 30, 2017, our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $147.8 million.

Our $475.0 million unsecured revolving credit facility is scheduled to mature in January 2018 and includes an accordion feature that allows for an additional $75.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. The interest rate at our current credit ratings is LIBOR plus 110 basis points and the annual facility fee is 20 basis points. There was $111.0 million and $97.0 million outstanding under our revolving credit facility at June 30, 2017 and July 18, 2017, respectively. At both June 30, 2017 and July 18, 2017, we had $0.6 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, 2017 and July 18, 2017 was $363.4 million and $377.4 million, respectively.
 
During the second quarter of 2017, we prepaid without penalty a secured mortgage loan with a fair market value of $108.2 million with an effective interest rate of 4.22% that was originally scheduled to mature in November 2017. We recorded $0.4 million of gain on debt extinguishment related to this prepayment.
 
5.    Mortgages and Notes Payable - Continued
 
During 2015, we acquired our joint venture partner’s 77.2% interest in a building in Orlando. Simultaneously with this acquisition, the joint venture's previously existing mortgage note was restructured into a new $18.0 million first mortgage note and a $10.2 million subordinated note, both of which were scheduled to mature in July 2017. The first mortgage and subordinated notes had effective interest rates of 5.36% and 8.6%, respectively. The subordinated note and accrued interest thereon can be satisfied, in certain circumstances, upon payment of a "waterfall payment" equal to a cash payment of 50.0% of the amount by which the net sale proceeds or appraised value at the time of refinancing exceeded (1) the outstanding principal of the first mortgage note, (2) funds deposited by us into escrow to fund tenant improvements, leasing commissions and building improvements and (3) a 10.0% return on such funds deposited by us into escrow. As of the date of such restructuring, the subordinated note was recorded at a projected waterfall payment of $1.0 million. During the second quarter of 2017, both notes were retired upon payment of the $18.0 million principal balance on the first mortgage note and a $0.5 million waterfall payment relating to the subordinated note, which resulted in $0.4 million of gain on debt extinguishment.
 
During the second quarter of 2017, we obtained a $100.0 million secured mortgage loan from a third party lender with an effective interest rate of 4.0%. This loan is scheduled to mature in May 2029. We incurred $0.8 million of debt issuance costs in connection with this loan, which will be amortized over the term of the loan.
 
During the first quarter of 2017, the Operating Partnership issued $300.0 million aggregate principal amount of 3.875% notes due 2027, less original issue discount of $4.0 million. These notes were priced to yield 4.038%. Underwriting fees and other expenses were incurred that aggregated $2.5 million; these costs were deferred and will be amortized over the term of the notes.
 
During the first quarter of 2017, we paid off at maturity $379.7 million principal amount of 5.85% unsecured notes.
 
During the first quarter of 2017, we amended our $150.0 million unsecured bank term loan that is scheduled to mature in January 2022 by increasing the borrowed amount to $200.0 million. The interest rate on this term loan at our current credit ratings is LIBOR plus 110 basis points. The underlying LIBOR rate with respect to $50.0 million of the unsecured bank term loan has been effectively fixed for the term through floating-to-fixed interest rate swaps as discussed in Note 6. We incurred $0.3 million of debt issuance costs in connection with this amendment, which will be amortized along with existing unamortized debt issuance costs over the remaining term.
 
We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
 
We have considered our short-term liquidity needs within one year from July 25, 2017 (the date of issuance of the quarterly financial statements) and the adequacy of our estimated cash flows from operating activities and other expected financing sources to meet these needs. In particular, we have considered our scheduled debt maturities during such one-year period, including the $200.0 million principal amount of unsecured notes due April 15, 2018. We have concluded it is probable we will meet these short-term liquidity requirements through a combination of the following:
 
available cash and cash equivalents;
 
cash flows from operating activities;
 
issuance of debt securities by the Operating Partnership (some of which debt securities may be hedged to a fixed interest rate pursuant to the forward-starting swaps referred to in Note 6);
 
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.
v3.7.0.1
Derivative Financial Instruments
6 Months Ended
Jun. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments

During the second quarter of 2017, we entered into $150.0 million notional amount of forward-starting swaps that effectively lock the underlying 10-year treasury rate at 2.44% with respect to a planned issuance of debt securities by the Operating Partnership expected to occur prior to May 15, 2018.

During the second quarter of 2017, we entered into floating-to-fixed interest rate swaps through January 2022 with respect to an aggregate of $50.0 million LIBOR-based borrowings. These swaps effectively fix the underlying one-month LIBOR rate at a weighted average rate of 1.693%.

During 2016, we entered into $150.0 million notional amount of forward-starting swaps that effectively locked the underlying 10-year treasury rate at 1.90% with respect to a planned issuance of debt securities by the Operating Partnership. Upon issuance of the $300.0 million aggregate principal amount of 3.875% notes due 2027 during the first quarter of 2017, we terminated the forward-starting swaps resulting in an unrealized gain of $7.3 million in accumulated other comprehensive income.

The counterparties under these 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. No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on our cash flow hedges during the six months ended June 30, 2017 and 2016. 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 variable-rate debt. During the period from July 1, 2017 through June 30, 2018, we estimate that $0.4 million will be reclassified as a net increase to interest expense.
 
The following table sets forth the gross fair value of our derivatives:
 
 
June 30,
2017
 
December 31,
2016
Derivatives:
 
 
 
Derivatives designated as cash flow hedges in prepaid expenses and other assets:
 
 
 
Interest rate swaps
$
275

 
$
7,619

Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
 
 
 
Interest rate swaps
$
1,003

 
$
1,870


 
The following table sets forth the effect of our cash flow hedges on accumulated other comprehensive income/(loss) and interest expense:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Derivatives Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Amount of unrealized gains/(losses) recognized in accumulated other comprehensive income/(loss) on derivatives (effective portion):
 
 
 
 
 
 
 
Interest rate swaps
$
(136
)
 
$
(5,760
)
 
$
316

 
$
(9,395
)
Amount of net losses reclassified out of accumulated other comprehensive income/(loss) into contractual interest expense (effective portion):
 
 
 
 
 
 
 
Interest rate swaps
$
297

 
$
783

 
$
781

 
$
1,578

v3.7.0.1
Noncontrolling Interests
6 Months Ended
Jun. 30, 2017
Noncontrolling Interest [Abstract]  
Noncontrolling Interests
Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates
 
At June 30, 2017, our noncontrolling interests in consolidated affiliates relate to our joint venture partner's 50.0% interest in office properties in Richmond. Our joint venture partner is an unrelated third party.

Noncontrolling Interests in the Operating Partnership

The following table sets forth the Company's noncontrolling interests in the Operating Partnership:
 
 
Six Months Ended
June 30,
 
2017
 
2016
Beginning noncontrolling interests in the Operating Partnership
$
144,802

 
$
126,429

Adjustment of noncontrolling interests in the Operating Partnership to fair value
(287
)
 
15,042

Conversions of Common Units to Common Stock
(305
)
 
(1,558
)
Net income attributable to noncontrolling interests in the Operating Partnership
1,931

 
13,950

Distributions to noncontrolling interests in the Operating Partnership
(2,495
)
 
(2,463
)
Total noncontrolling interests in the Operating Partnership
$
143,646

 
$
151,400


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,
 
2017
 
2016
 
2017
 
2016
Net income available for common stockholders
$
37,589

 
$
31,648

 
$
69,263

 
$
464,438

Increase in additional paid in capital from conversions of Common Units
to Common Stock
203

 
1,558

 
305

 
1,558

Change from net income available for common stockholders and transfers from noncontrolling interests
$
37,792

 
$
33,206

 
$
69,568

 
$
465,996

v3.7.0.1
Disclosure About Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2017
Fair Value Disclosures [Abstract]  
Disclosure About Fair Value of Financial Instruments
Disclosure About Fair Value of Financial Instruments

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

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

Our Level 1 asset is our investment in marketable securities that we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 liability is our non-qualified deferred compensation obligation. The Company's Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Our Level 2 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 asset consisted of our tax increment financing bond, which was not routinely traded but whose fair value was determined by the income approach utilizing contractual cash flows and market-based interest rates to estimate the projected redemption value based on quoted bid/ask prices for similar unrated municipal bonds. Our tax increment financing bond was assigned in conjunction with a sale during the first quarter of 2016. The estimated fair value at the date of sale of $11.2 million was equal to the outstanding principal amount due on the bond.
 

8.
Disclosure About Fair Value of Financial Instruments - Continued

The following table sets forth our assets and liabilities and the Company's noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy.
 
 
 
 
Level 1
 
Level 2
 
 
Total
 
Quoted Prices
in Active
Markets for Identical Assets or Liabilities
 
Significant Observable Inputs
Fair Value at June 30, 2017:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
6,750

 
$

 
$
6,750

Interest rate swaps (in prepaid expenses and other assets)
 
275

 

 
275

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
2,478

 
2,478

 

Total Assets
 
$
9,503

 
$
2,478

 
$
7,025

Noncontrolling Interests in the Operating Partnership
 
$
143,646

 
$
143,646

 
$

Liabilities:
 
 
 
 
 
 
Mortgages and notes payable, net, at fair value (1)
 
$
2,016,420

 
$

 
$
2,016,420

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
1,003

 

 
1,003

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
2,478

 
2,478

 

Total Liabilities
 
$
2,019,901

 
$
2,478

 
$
2,017,423

Fair Value at December 31, 2016:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
8,833

 
$

 
$
8,833

Interest rate swaps (in prepaid expenses and other assets)
 
7,619

 

 
7,619

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
2,451

 
2,451

 

Total Assets
 
$
18,903

 
$
2,451

 
$
16,452

Noncontrolling Interests in the Operating Partnership
 
$
144,802

 
$
144,802

 
$

Liabilities:
 
 
 
 
 
 
Mortgages and notes payable, net, at fair value (1)
 
$
1,965,611

 
$

 
$
1,965,611

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
1,870

 

 
1,870

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
2,451

 
2,451

 

Total Liabilities
 
$
1,969,932

 
$
2,451

 
$
1,967,481


__________
(1)    Amounts recorded at historical cost on our Consolidated Balance Sheets at June 30, 2017 and December 31, 2016.
v3.7.0.1
Share-Based Payments
6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Payments
Share-Based Payments
 
During the six months ended June 30, 2017, the Company granted 168,748 stock options with an exercise price equal to the last reported stock price of our Common Stock on the New York Stock Exchange on the last trading day prior to the date of grant. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $6.72. During the six months ended June 30, 2017, the Company also granted 61,404 shares of time-based restricted stock and 49,344 shares of total return-based restricted stock with weighted average grant date fair values per share of $52.49 and $49.59, respectively. We recorded share-based compensation expense of $1.1 million and $1.0 million during the three months ended June 30, 2017 and 2016, respectively, and $4.8 million and $4.6 million during the six months ended June 30, 2017 and 2016, respectively. At June 30, 2017, there was $7.0 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 2.5 years.
v3.7.0.1
Accumulated Other Comprehensive Income (Loss)
6 Months Ended
Jun. 30, 2017
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Accumulated Other Comprehensive Income/(Loss)
Accumulated Other Comprehensive Income/(Loss)
 
The following table sets forth the components of accumulated other comprehensive income/(loss):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Cash flow hedges:
 
 
 
 
 
 
 
Beginning balance
$
5,885

 
$
(6,651
)
 
$
4,949

 
$
(3,811
)
Unrealized gains/(losses) on cash flow hedges
(136
)
 
(5,760
)
 
316

 
(9,395
)
Amortization of cash flow hedges (1)
297

 
783

 
781

 
1,578

Total accumulated other comprehensive income/(loss)
$
6,046


$
(11,628
)
 
$
6,046

 
$
(11,628
)
__________
(1)    Amounts reclassified out of accumulated other comprehensive income/(loss) into contractual interest expense.
v3.7.0.1
Real Estate, Other Assets and Liabilities Held for Sale and Discontinued Operations
6 Months Ended
Jun. 30, 2017
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Real Estate, Other Assets and Liabilities Held For Sale and Discontinued Operations

The following table sets forth the assets and liabilities held for sale at June 30, 2017 and December 31, 2016, which are considered non-core:
 
June 30,
2017
 
December 31,
2016
Assets:
 
 
 
Land
$
11,610

 
$

Buildings and tenant improvements
69,259

 

Less-accumulated depreciation
(30,399
)
 

Net real estate assets
50,470

 

Accrued straight-line rents receivable, net
2,284

 

Deferred leasing costs, net
1,740

 

Prepaid expenses and other assets
49

 

Real estate and other assets, net, held for sale
$
54,543

 
$

Liabilities:
 
 
 
Accounts payable, accrued expenses and other liabilities
$
(1,122
)
 
$

Liabilities held for sale
$