HIGHWOODS PROPERTIES, INC., 10-Q filed on 8/2/2016
Quarterly Report
v3.5.0.2
Document and Entity Information Document - shares
6 Months Ended
Jun. 30, 2016
Jul. 25, 2016
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS PROPERTIES INC.  
Entity Central Index Key 0000921082  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2016  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   98,611,821
Entity Well-known Seasoned Issuer Yes  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
Highwoods Realty Limited Partnership [Member]    
Entity Information [Line Items]    
Entity Registrant Name HIGHWOODS REALTY LIMITED PARTNERSHIP  
Entity Central Index Key 0000941713  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Type 10-Q  
Document Period End Date Jun. 30, 2016  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Entity Well-known Seasoned Issuer Yes  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
v3.5.0.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2016
Dec. 31, 2015
Real estate assets, at cost:    
Land $ 448,212 $ 443,705
Buildings and tenant improvements 4,128,823 4,063,328
Development in-process 229,184 194,050
Land held for development 75,078 68,244
Total real estate assets 4,881,297 4,769,327
Less-accumulated depreciation (1,063,010) (1,007,104)
Net real estate assets 3,818,287 3,762,223
Real estate and other assets, net, held for sale 2,387 240,948
Cash and cash equivalents 2,444 5,036
Restricted cash 265,193 16,769
Accounts receivable, net of allowance of $850 and $928, respectively 26,671 29,077
Mortgages and notes receivable, net of allowance of $75 and $287, respectively 9,971 2,096
Accrued straight-line rents receivable, net of allowance of $483 and $257, respectively 162,573 150,392
Investments in and advances to unconsolidated affiliates 19,786 20,676
Deferred leasing costs, net of accumulated amortization of $129,252 and $115,172, respectively 217,042 231,765
Prepaid expenses and other assets, net of accumulated amortization of $19,260 and $17,830, respectively 40,008 26,649
Total Assets 4,564,362 4,485,631
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,082,207 2,491,813
Accounts payable, accrued expenses and other liabilities 241,979 233,988
Liabilities held for sale 0 14,119
Total Liabilities 2,324,186 2,739,920
Commitments and contingencies
Noncontrolling interests in the Operating Partnership 151,400 126,429
Equity/Capital:    
Preferred Stock, $.01 par value, 50,000,000 authorized shares; 8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 28,935 and 29,050 shares issued and outstanding, respectively 28,935 29,050
Common Stock, $.01 par value, 200,000,000 authorized shares; 98,570,974 and 96,091,932 shares issued and outstanding, respectively 986 961
Additional paid-in capital 2,693,755 2,598,242
Distributions in excess of net income available for common stockholders (640,969) (1,023,135)
Accumulated other comprehensive loss (11,628) (3,811)
Total Stockholders’ Equity 2,071,079 1,601,307
Noncontrolling interests in consolidated affiliates 17,697 17,975
Total Equity/Capital 2,088,776 1,619,282
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital 4,564,362 4,485,631
Highwoods Realty Limited Partnership [Member]    
Real estate assets, at cost:    
Land 448,212 443,705
Buildings and tenant improvements 4,128,823 4,063,328
Development in-process 229,184 194,050
Land held for development 75,078 68,244
Total real estate assets 4,881,297 4,769,327
Less-accumulated depreciation (1,063,010) (1,007,104)
Net real estate assets 3,818,287 3,762,223
Real estate and other assets, net, held for sale 2,387 240,948
Cash and cash equivalents 2,444 5,036
Restricted cash 265,193 16,769
Accounts receivable, net of allowance of $850 and $928, respectively 26,671 29,077
Mortgages and notes receivable, net of allowance of $75 and $287, respectively 9,971 2,096
Accrued straight-line rents receivable, net of allowance of $483 and $257, respectively 162,573 150,392
Investments in and advances to unconsolidated affiliates 19,786 20,676
Deferred leasing costs, net of accumulated amortization of $129,252 and $115,172, respectively 217,042 231,765
Prepaid expenses and other assets, net of accumulated amortization of $19,260 and $17,830, respectively 40,008 26,649
Total Assets 4,564,362 4,485,631
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:    
Mortgages and notes payable, net 2,082,207 2,491,813
Accounts payable, accrued expenses and other liabilities 241,979 233,988
Liabilities held for sale 0 14,119
Total Liabilities 2,324,186 2,739,920
Commitments and contingencies
Redeemable Operating Partnership Units:    
Common Units, 2,867,424 and 2,899,752 outstanding, respectively 151,400 126,429
Series A Preferred Units (liquidation preference $1,000 per unit), 28,935 and 29,050 units issued and outstanding, respectively 28,935 29,050
Total Redeemable Operating Partnership Units 180,335 155,479
Equity/Capital:    
General partner Common Units, 1,010,296 and 985,829 outstanding, respectively 20,537 15,759
Limited partner Common Units, 97,151,869 and 94,697,294 outstanding, respectively 2,033,235 1,560,309
Accumulated other comprehensive loss (11,628) (3,811)
Noncontrolling interests in consolidated affiliates 17,697 17,975
Total Equity/Capital 2,059,841 1,590,232
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital $ 4,564,362 $ 4,485,631
v3.5.0.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Assets:    
Accounts receivable allowance $ 850 $ 928
Mortgages and notes receivable allowance 75 287
Accrued straight-line rents receivable allowance 483 257
Deferred leasing costs, accumulated amortization 129,252 115,172
Prepaid expenses and other assets, accumulated amortization $ 19,260 $ 17,830
Equity/Capital:    
Series A Preferred Stock, dividend rate percentage (in hundredths) 8.625% 8.625%
Series A Preferred Stock, par value (in dollars per share) $ 0.01 $ 0.01
Series A Preferred Stock, authorized shares (in shares) 50,000,000 50,000,000
Series A Preferred Stock, liquidation preference (in dollars per share) $ 1,000 $ 1,000
Series A Preferred Stock, shares issued (in shares) 28,935 29,050
Series A Preferred Stock, shares outstanding (in shares) 28,935 29,050
Common Stock, par value (in dollars per share) $ 0.01 $ 0.01
Common Stock, authorized shares (in shares) 200,000,000 200,000,000
Common Stock, shares issued (in shares) 98,570,974 96,091,932
Common Stock, shares outstanding (in shares) 98,570,974 96,091,932
Highwoods Realty Limited Partnership [Member]    
Assets:    
Accounts receivable allowance $ 850 $ 928
Mortgages and notes receivable allowance 75 287
Accrued straight-line rents receivable allowance 483 257
Deferred leasing costs, accumulated amortization 129,252 115,172
Prepaid expenses and other assets, accumulated amortization $ 19,260 $ 17,830
Redeemable Operating Partnership Units: [Abstract]    
Redeemable Common Units outstanding (in shares) 2,867,424 2,899,752
Series A Preferred Units, liquidation preference (in dollars per share) $ 1,000 $ 1,000
Series A Preferred Units, issued (in shares) 28,935 29,050
Series A Preferred Units, outstanding (in shares) 28,935 29,050
Common Units: [Abstract]    
General partners' capital account, units outstanding (in shares) 1,010,296 985,829
Limited partners' capital account, units outstanding (in shares) 97,151,869 94,697,294
v3.5.0.2
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Rental and other revenues $ 166,860 $ 148,543 $ 331,719 $ 293,779
Operating expenses:        
Rental property and other expenses 57,515 52,370 115,095 104,884
Depreciation and amortization 55,317 47,928 108,811 94,795
General and administrative 8,327 8,665 19,464 19,908
Total operating expenses 121,159 108,963 243,370 219,587
Interest expense:        
Contractual 18,674 20,857 38,389 41,299
Amortization of debt issuance costs 811 828 1,801 1,628
Financing obligation 0 162 0 162
Total interest expense 19,485 21,847 40,190 43,089
Other income:        
Interest and other income 534 520 1,051 1,102
Losses on debt extinguishment 0 (220) 0 (220)
Total other income 534 300 1,051 882
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates 26,750 18,033 49,210 31,985
Gains on disposition of property 5,861 2,412 10,258 3,569
Equity in earnings of unconsolidated affiliates 917 1,776 2,202 3,587
Income from continuing operations 33,528 22,221 61,670 39,141
Discontinued operations:        
Income from discontinued operations 0 4,670 4,097 8,585
Net gains on disposition of discontinued operations 0 0 414,496 0
Total income from discontinued operations 0 4,670 418,593 8,585
Net income 33,528 26,891 480,263 47,726
Net (income) attributable to noncontrolling interests in the Operating Partnership (939) (782) (13,950) (1,378)
Net (income) attributable to noncontrolling interests in consolidated affiliates (314) (328) (622) (624)
Dividends on Preferred Stock (627) (626) (1,253) (1,253)
Net income available for common stockholders $ 31,648 $ 25,155 $ 464,438 $ 44,471
Earnings per Common Share – basic:        
Income from continuing operations available for common stockholders (in dollars per share) $ 0.32 $ 0.22 $ 0.60 $ 0.39
Income from discontinued operations available for common stockholders (in dollars per share) 0.00 0.05 4.19 0.08
Net income available for common stockholders (in dollars per share) $ 0.32 $ 0.27 $ 4.79 $ 0.47
Weighted average Common Shares outstanding - basic (in shares) 97,648 94,055 97,010 93,641
Earnings per Common Share - diluted:        
Income from continuing operations available for common stockholders (in dollars per share) $ 0.32 $ 0.22 $ 0.60 $ 0.39
Income from discontinued operations available for common stockholders (in dollars per share) 0.00 0.05 4.18 0.08
Net income available for common stockholders (in dollars per share) $ 0.32 $ 0.27 $ 4.78 $ 0.47
Weighted average Common Shares outstanding - diluted (in shares) [1] 100,628 97,049 99,992 96,666
Dividends declared per Common Share (in dollars per share) $ 0.425 $ 0.425 $ 0.85 $ 0.85
Net income available for common stockholders:        
Income from continuing operations available for common stockholders $ 31,648 $ 20,626 $ 58,110 $ 36,147
Income from discontinued operations available for common stockholders 0 4,529 406,328 8,324
Net income available for common stockholders 31,648 25,155 464,438 44,471
Highwoods Realty Limited Partnership [Member]        
Rental and other revenues 166,860 148,543 331,719 293,779
Operating expenses:        
Rental property and other expenses 57,515 52,370 115,095 104,884
Depreciation and amortization 55,317 47,928 108,811 94,795
General and administrative 8,327 8,665 19,464 19,908
Total operating expenses 121,159 108,963 243,370 219,587
Interest expense:        
Contractual 18,674 20,857 38,389 41,299
Amortization of debt issuance costs 811 828 1,801 1,628
Financing obligation 0 162 0 162
Total interest expense 19,485 21,847 40,190 43,089
Other income:        
Interest and other income 534 520 1,051 1,102
Losses on debt extinguishment 0 (220) 0 (220)
Total other income 534 300 1,051 882
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates 26,750 18,033 49,210 31,985
Gains on disposition of property 5,861 2,412 10,258 3,569
Equity in earnings of unconsolidated affiliates 917 1,776 2,202 3,587
Income from continuing operations 33,528 22,221 61,670 39,141
Discontinued operations:        
Income from discontinued operations 0 4,670 4,097 8,585
Net gains on disposition of discontinued operations 0 0 414,496 0
Total income from discontinued operations 0 4,670 418,593 8,585
Net income 33,528 26,891 480,263 47,726
Net (income) attributable to noncontrolling interests in consolidated affiliates (314) (328) (622) (624)
Distributions on Preferred Units (627) (626) (1,253) (1,253)
Net income available for common unitholders $ 32,587 $ 25,937 $ 478,388 $ 45,849
Earnings per Common Unit - basic:        
Income from continuing operations available for common unitholders (in dollars per share) $ 0.33 $ 0.22 $ 0.60 $ 0.39
Income from discontinued operations available for common unitholders (in dollars per share) 0.00 0.05 4.21 0.09
Net income available for common unitholders (in dollars per share) $ 0.33 $ 0.27 $ 4.81 $ 0.48
Weighted average Common Units outstanding - basic (in shares) 100,129 96,556 99,496 96,153
Earnings per Common Unit - diluted:        
Income from continuing operations available for common unitholders (in dollars per share) $ 0.33 $ 0.22 $ 0.60 $ 0.39
Income from discontinued operations available for common unitholders (in dollars per share) 0.00 0.05 4.20 0.09
Net income available for common unitholders (in dollars per share) $ 0.33 $ 0.27 $ 4.80 $ 0.48
Weighted average Common Units outstanding - diluted (in shares) [2] 100,219 96,640 99,583 96,257
Distributions declared per Common Unit (in dollars per unit) $ 0.425 $ 0.425 $ 0.85 $ 0.85
Net income available for common unitholders:        
Income from continuing operations available for common unitholders $ 32,587 $ 21,267 $ 59,795 $ 37,264
Income from discontinued operations available for common unitholders 0 4,670 418,593 8,585
Net income available for common unitholders $ 32,587 $ 25,937 $ 478,388 $ 45,849
[1] Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.
[2] Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.
v3.5.0.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Comprehensive income:        
Net income $ 33,528 $ 26,891 $ 480,263 $ 47,726
Other comprehensive income/(loss):        
Unrealized gains on tax increment financing bond 0 1 0 194
Unrealized gains/(losses) on cash flow hedges (5,760) 269 (9,395) (2,645)
Amortization of cash flow hedges 783 925 1,578 1,849
Total other comprehensive income/(loss) (4,977) 1,195 (7,817) (602)
Total comprehensive income 28,551 28,086 472,446 47,124
Less-comprehensive (income) attributable to noncontrolling interests (1,253) (1,110) (14,572) (2,002)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders 27,298 26,976 457,874 45,122
Highwoods Realty Limited Partnership [Member]        
Comprehensive income:        
Net income 33,528 26,891 480,263 47,726
Other comprehensive income/(loss):        
Unrealized gains on tax increment financing bond 0 1 0 194
Unrealized gains/(losses) on cash flow hedges (5,760) 269 (9,395) (2,645)
Amortization of cash flow hedges 783 925 1,578 1,849
Total other comprehensive income/(loss) (4,977) 1,195 (7,817) (602)
Total comprehensive income 28,551 28,086 472,446 47,124
Less-comprehensive (income) attributable to noncontrolling interests (314) (328) (622) (624)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders $ 28,237 $ 27,758 $ 471,824 $ 46,500
v3.5.0.2
Consolidated Statements of Equity/Capital - USD ($)
$ in Thousands
Total
Highwoods Realty Limited Partnership [Member]
Common Stock [Member]
Series A Cumulative Redeemable Preferred Shares [Member]
General Partners' Common Units [Member]
Highwoods Realty Limited Partnership [Member]
Limited Partners' Common Units [Member]
Highwoods Realty Limited Partnership [Member]
Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Highwoods Realty Limited Partnership [Member]
Noncontrolling Interests in Consolidated Affiliates [Member]
Noncontrolling Interests in Consolidated Affiliates [Member]
Highwoods Realty Limited Partnership [Member]
Distributions in Excess of Net Income Available for Common Stockholders [Member]
Balance (in shares) at Dec. 31, 2014     92,907,310                  
Balance at Dec. 31, 2014 $ 1,551,091 $ 1,522,223 $ 929 $ 29,060 $ 15,078 $ 1,492,948 $ 2,464,275 $ (3,912) $ (3,912) $ 18,109 $ 18,109 $ (957,370)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   43,216     432 42,784     0   0  
Distributions paid on Common Units   (81,663)     (817) (80,846)     0   0  
Distributions paid on Preferred Units   (1,253)     (13) (1,240)     0   0  
Issuances of Common Stock, net of issuance costs and tax withholdings - Shares     1,055,491                  
Issuances of Common Stock, net of issuance costs and tax withholdings 43,216   $ 11 0     43,205 0   0   0
Conversions of Common Units to Common Stock - Shares     26,820                  
Conversions of Common Units to Common Stock 1,206   $ 0 0     1,206 0   0   0
Dividends on Common Stock (79,526)   0 0     0 0   0   (79,526)
Dividends on Preferred Stock (1,253)   0 0     0 0   0   (1,253)
Adjustment of noncontrolling interests in the Operating Partnership to fair value 11,475   0 0     11,475 0   0   0
Distributions to noncontrolling interests in consolidated affiliates (751) (751) $ 0 0 0 0 0 0 0 (751) (751) 0
Issuances of restricted stock - shares     128,951                  
Issuances of restricted stock 0   $ 0 0     0 0   0   0
Redemptions/repurchases of Preferred Stock (10)   $ 0 (10)     0 0   0   0
Share-based compensation expense, net of forfeitures - shares     (566)                  
Share-based compensation expense, net of forfeitures 5,067 5,067 $ 1 0 51 5,016 5,066 0 0 0 0 0
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   13,248     133 13,115     0   0  
Net (income) attributable to noncontrolling interests in the Operating Partnership (1,378)   0 0     0 0   0   (1,378)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0 0 0 (6) (618) 0 0 0 624 624 (624)
Comprehensive income:                        
Net income 47,726 47,726 0 0 477 47,249 0 0 0 0 0 47,726
Other comprehensive loss (602) (602) $ 0 0 0 0 0 (602) (602) 0 0 0
Total comprehensive income 47,124 47,124                    
Balance (in shares) at Jun. 30, 2015     94,118,006                  
Balance at Jun. 30, 2015 $ 1,576,261 1,547,211 $ 941 29,050 15,335 1,518,408 2,525,227 (4,514) (4,514) 17,982 17,982 (992,425)
Balance (in shares) at Dec. 31, 2015 96,091,932   96,091,932                  
Balance at Dec. 31, 2015 $ 1,619,282 1,590,232 $ 961 29,050 15,759 1,560,309 2,598,242 (3,811) (3,811) 17,975 17,975 (1,023,135)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Issuances of Common Units, net of issuance costs and tax withholdings   104,472     1,045 103,427     0   0  
Distributions paid on Common Units   (84,387)     (844) (83,543)     0   0  
Distributions paid on Preferred Units   (1,253)     (13) (1,240)     0   0  
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 0     104,449 0   0   0
Conversions of Common Units to Common Stock - Shares     32,328                  
Conversions of Common Units to Common Stock 1,558   $ 0 0     1,558 0   0   0
Dividends on Common Stock (82,272)   0 0     0 0   0   (82,272)
Dividends on Preferred Stock (1,253)   0 0     0 0   0   (1,253)
Adjustment of noncontrolling interests in the Operating Partnership to fair value (15,042)   0 0     (15,042) 0   0   0
Distributions to noncontrolling interests in consolidated affiliates (900) (900) $ 0 0 0 0 0 0 0 (900) (900) 0
Issuances of restricted stock - shares     130,752                  
Issuances of restricted stock 0   $ 0 0     0 0   0   0
Redemptions/repurchases of Preferred Stock (115)   $ 0 (115)     0 0   0   0
Share-based compensation expense, net of forfeitures - shares     (8,888)                  
Share-based compensation expense, net of forfeitures 4,550 4,550 $ 2 0 46 4,504 4,548 0 0 0 0 0
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner   (25,319)     (253) (25,066)     0   0  
Net (income) attributable to noncontrolling interests in the Operating Partnership (13,950)   0 0     0 0   0   (13,950)
Net (income) attributable to noncontrolling interests in consolidated affiliates 0 0 0 0 (6) (616) 0 0 0 622 622 (622)
Comprehensive income:                        
Net income 480,263 480,263 0 0 4,803 475,460 0 0 0 0 0 480,263
Other comprehensive loss (7,817) (7,817) $ 0 0 0 0 0 (7,817) (7,817) 0 0 0
Total comprehensive income $ 472,446 472,446                    
Balance (in shares) at Jun. 30, 2016 98,570,974   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)
v3.5.0.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Operating activities:    
Net income $ 480,263 $ 47,726
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 108,811 101,548
Amortization of lease incentives and acquisition-related intangible assets and liabilities (1,179) 9
Share-based compensation expense 4,550 5,067
Allowance for losses on accounts and accrued straight-line rents receivable 1,218 1,174
Accrued interest on mortgages and notes receivable (212) (268)
Amortization of debt issuance costs 1,801 1,628
Amortization of cash flow hedges 1,578 1,849
Amortization of mortgages and notes payable fair value adjustments (116) 84
Losses on debt extinguishment 0 220
Net gains on disposition of property (424,754) (3,569)
Equity in earnings of unconsolidated affiliates (2,202) (3,587)
Changes in financing obligation 0 162
Distributions of earnings from unconsolidated affiliates 1,095 3,438
Changes in operating assets and liabilities:    
Accounts receivable (181) 1,723
Prepaid expenses and other assets (5,297) (4,365)
Accrued straight-line rents receivable (13,600) (11,417)
Accounts payable, accrued expenses and other liabilities (13,970) (19,127)
Net cash provided by operating activities 137,805 122,295
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (9,058) (4,277)
Investments in development in-process (74,668) (44,601)
Investments in tenant improvements and deferred leasing costs (42,954) (61,282)
Investments in building improvements (31,677) (23,513)
Net proceeds from disposition of real estate assets 675,003 6,070
Distributions of capital from unconsolidated affiliates 2,118 10,077
Investments in mortgages and notes receivable (7,818) (1,772)
Repayments of mortgages and notes receivable 155 9,221
Investments in and advances to unconsolidated affiliates (105) 0
Changes in restricted cash and other investing activities (257,181) (6,741)
Net cash provided by/(used in) investing activities 253,815 (116,818)
Financing activities:    
Dividends on Common Stock (82,272) (79,526)
Redemptions/repurchases of Preferred Stock (115) (10)
Dividends on Preferred Stock (1,253) (1,253)
Distributions to noncontrolling interests in the Operating Partnership (2,463) (2,485)
Distributions to noncontrolling interests in consolidated affiliates (900) (751)
Proceeds from the issuance of Common Stock 110,158 47,678
Costs paid for the issuance of Common Stock (1,629) (735)
Repurchase of shares related to tax withholdings (4,057) (3,727)
Borrowings on revolving credit facility 153,800 183,900
Repayments of revolving credit facility (169,800) (233,900)
Borrowings on mortgages and notes payable 0 125,000
Repayments of mortgages and notes payable (394,738) (41,887)
Payments on financing obligation 0 (162)
Changes in debt issuance costs and other financing activities (943) (1,512)
Net cash used in financing activities (394,212) (9,370)
Net decrease in cash and cash equivalents (2,592) (3,893)
Cash and cash equivalents at beginning of the period 5,036 8,832
Cash and cash equivalents at end of the period 2,444 4,939
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 38,222 40,540
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized losses on cash flow hedges (9,395) (2,645)
Conversions of Common Units to Common Stock 1,558 1,206
Changes in accrued capital expenditures 9,227 (3,250)
Write-off of fully depreciated real estate assets 21,948 31,011
Write-off of fully amortized debt issuance and leasing costs 11,690 17,812
Adjustment of noncontrolling interests in the Operating Partnership to fair value 15,042 (11,475)
Unrealized gains on tax increment financing bond 0 194
Assumption of mortgages and notes payable related to acquisition activities 0 19,277
Contingent consideration in connection with the acquisition of land 0 900
Highwoods Realty Limited Partnership [Member]    
Operating activities:    
Net income 480,263 47,726
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 108,811 101,548
Amortization of lease incentives and acquisition-related intangible assets and liabilities (1,179) 9
Share-based compensation expense 4,550 5,067
Allowance for losses on accounts and accrued straight-line rents receivable 1,218 1,174
Accrued interest on mortgages and notes receivable (212) (268)
Amortization of debt issuance costs 1,801 1,628
Amortization of cash flow hedges 1,578 1,849
Amortization of mortgages and notes payable fair value adjustments (116) 84
Losses on debt extinguishment 0 220
Net gains on disposition of property (424,754) (3,569)
Equity in earnings of unconsolidated affiliates (2,202) (3,587)
Changes in financing obligation 0 162
Distributions of earnings from unconsolidated affiliates 1,095 3,438
Changes in operating assets and liabilities:    
Accounts receivable (181) 1,723
Prepaid expenses and other assets (5,297) (4,365)
Accrued straight-line rents receivable (13,600) (11,417)
Accounts payable, accrued expenses and other liabilities (13,970) (19,041)
Net cash provided by operating activities 137,805 122,381
Investing activities:    
Investments in acquired real estate and related intangible assets, net of cash acquired (9,058) (4,277)
Investments in development in-process (74,668) (44,601)
Investments in tenant improvements and deferred leasing costs (42,954) (61,282)
Investments in building improvements (31,677) (23,513)
Net proceeds from disposition of real estate assets 675,003 6,070
Distributions of capital from unconsolidated affiliates 2,118 10,077
Investments in mortgages and notes receivable (7,818) (1,772)
Repayments of mortgages and notes receivable 155 9,221
Investments in and advances to unconsolidated affiliates (105) 0
Changes in restricted cash and other investing activities (257,181) (6,741)
Net cash provided by/(used in) investing activities 253,815 (116,818)
Financing activities:    
Distributions on Common Units (84,387) (81,663)
Redemptions/repurchases of Preferred Units (115) (10)
Distributions on Preferred Units (1,253) (1,253)
Distributions to noncontrolling interests in consolidated affiliates (900) (751)
Proceeds from the issuance of Common Units 110,158 47,678
Costs paid for the issuance of Common Units (1,629) (735)
Repurchase of units related to tax withholdings (4,057) (3,727)
Borrowings on revolving credit facility 153,800 183,900
Repayments of revolving credit facility (169,800) (233,900)
Borrowings on mortgages and notes payable 0 125,000
Repayments of mortgages and notes payable (394,738) (41,887)
Payments on financing obligation 0 (162)
Changes in debt issuance costs and other financing activities (1,291) (2,052)
Net cash used in financing activities (394,212) (9,562)
Net decrease in cash and cash equivalents (2,592) (3,999)
Cash and cash equivalents at beginning of the period 5,036 8,938
Cash and cash equivalents at end of the period 2,444 4,939
Supplemental disclosure of cash flow information:    
Cash paid for interest, net of amounts capitalized 38,222 40,540
Supplemental disclosure of non-cash investing and financing activities:    
Unrealized losses on cash flow hedges (9,395) (2,645)
Changes in accrued capital expenditures 9,227 (3,250)
Write-off of fully depreciated real estate assets 21,948 31,011
Write-off of fully amortized debt issuance and leasing costs 11,690 17,812
Adjustment of Redeemable Common Units to fair value 24,971 (13,788)
Unrealized gains on tax increment financing bond 0 194
Assumption of mortgages and notes payable related to acquisition activities 0 19,277
Contingent consideration in connection with the acquisition of land $ 0 $ 900
v3.5.0.2
Description of Business and Significant Accounting Policies
6 Months Ended
Jun. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business and Significant Accounting Policies
Description of Business and Significant Accounting Policies

Description of Business

Highwoods Properties, Inc. (the “Company”) is a fully integrated real estate investment trust (“REIT”) that provides leasing, management, development, construction and other customer-related services for its properties and for third parties. The Company conducts its activities through Highwoods Realty Limited Partnership (the “Operating Partnership”). At June 30, 2016, we owned or had an interest in 31.1 million rentable square feet of in-service properties, 1.1 million rentable square feet of properties under development and approximately 500 acres of development land.
 
The Company is the sole general partner of the Operating Partnership. At June 30, 2016, the Company owned all of the Preferred Units and 98.2 million, or 97.2%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.9 million Common Units. During the six months ended June 30, 2016, the Company redeemed 32,328 Common Units for a like number of shares of Common Stock.

Common Stock Offerings
 
During the three and six months ended June 30, 2016, the Company issued 1,022,575 and 2,077,071 shares, respectively, of Common Stock under its equity distribution agreements at an average gross sales price of $48.90 and $47.36 per share, respectively, and received net proceeds, after sales commissions, of $49.3 million and $96.9 million, respectively. As a result of this activity and the redemptions discussed above, the percentage of Common Units owned by the Company increased from 97.1% at December 31, 2015 to 97.2% at June 30, 2016.

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

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


1.    Description of Business and Significant Accounting Policies – Continued

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.

Recently Issued Accounting Standards

The Financial Accounting Standards Board ("FASB") recently issued an accounting standards update ("ASU") that requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that we identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when we satisfy the performance obligations. We will also be required to disclose information regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is required to be adopted in 2018. Retrospective application is required either to all periods presented or with the cumulative effect of initial adoption recognized in the period of adoption. We are in the process of evaluating this ASU.
 
The FASB recently issued an ASU that amended consolidation requirements. The amendments significantly change the consolidation analysis required under GAAP and require companies to reevaluate all previous consolidation conclusions. We adopted the ASU as of January 1, 2016 and there was no impact to consolidated entities included in our Consolidated Financial Statements. However, in reevaluating our previous consolidation conclusions upon adoption of the ASU, we determined our 12.5% equity interest in an unconsolidated affiliate to be an interest in a variable interest entity because certain of its limited partners do not have substantive kick-out or participating rights. We do not qualify as the primary beneficiary since our obligation to absorb losses and receive benefits of the variable interest entity is less than that of the other general partner. Accordingly, the entity is not consolidated. At June 30, 2016, our maximum exposure to loss with respect to this arrangement is limited to the $1.6 million carrying value of our 12.5% investment in the unconsolidated affiliate.
 
The FASB recently issued an ASU that requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability to which they relate, consistent with debt discounts, as opposed to being presented as assets. For debt issuance costs related to revolving credit facilities, the FASB allows the presentation of debt issuance costs as an asset. We adopted the ASU as of January 1, 2016 with retrospective application to our December 31, 2015 Consolidated Balance Sheets. The effect of the adoption was to reclassify debt issuance costs from deferred financing and leasing costs, net of accumulated amortization, as follows: $7.8 million to a contra account as a deduction from the related mortgages and notes payable and $2.1 million to prepaid expenses and other assets. There was no effect on our Consolidated Statements of Income.

The FASB recently issued an ASU which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.  The ASU requires lessors to account for leases using an approach that is substantially equivalent to the existing guidance and is effective for reporting periods beginning after December 15, 2018 with early adoption permitted.  We are in the process of evaluating this ASU.

The FASB recently issued an ASU that requires, among other things, the use of a new current expected credit loss ("CECL") model in determining our allowances for doubtful accounts with respect to accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable. The CECL model requires that we estimate our lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. We will also be required to disclose information about how we developed the allowances, including changes in the factors (e.g., portfolio mix, credit trends, unemployment, gross domestic product, etc.) that influenced our estimate of expected credit losses and the reasons for those changes. We will apply the ASU’s provisions as a cumulative-effect adjustment to retained earnings upon adoption in 2020. We are in the process of evaluating this ASU.
v3.5.0.2
Real Estate Assets
6 Months Ended
Jun. 30, 2016
Real Estate [Abstract]  
Real Estate Assets
Real Estate Assets
 
Acquisitions
 
During the second quarter of 2016, we acquired 14 acres of development land in Nashville, TN for a purchase price, including acquisition costs, of $9.1 million.
Dispositions
 
During the second quarter of 2016, we sold a building for a sale price of $14.2 million and recorded a gain on disposition of property of $5.9 million.
 
During the first quarter of 2016, we sold:
 
substantially all of our wholly-owned Country Club Plaza assets in Kansas City (which we refer to as the “Plaza assets”) for a sale price of $660.0 million (before closing credits to buyer of $4.8 million). We recorded gains on disposition of discontinued operations of $414.5 million and a gain on disposition of property of $1.3 million related to the land;
 
a 32,000 square foot building for a sale price of $4.7 million (before closing credits to buyer of $0.1 million) and recorded a gain on disposition of property of $1.1 million. The buyer, which leased 79% of the building, is a family business controlled by a director of the Company. The sale price exceeded the value set forth in an appraisal performed by a reputable independent commercial real estate services firm that has no relationship with the director or any of his affiliates; and
 
a building for a sale price of $6.4 million (before closing credits to buyer of $0.5 million) and recorded a gain on disposition of property of $2.0 million.
v3.5.0.2
Mortgages and Notes Receivable
6 Months Ended
Jun. 30, 2016
Receivables [Abstract]  
Mortgages and Notes Receivable
Mortgages and Notes Receivable
Mortgages and notes receivable were $10.0 million and $2.1 million at June 30, 2016 and December 31, 2015, respectively. We evaluate the ability to collect our mortgages and notes receivable by monitoring the leasing statistics and/or market fundamentals of these assets. As of June 30, 2016, our mortgages and notes receivable were not in default and there were no other indicators of impairment.
v3.5.0.2
Investments In and Advances To Unconsolidated Affiliates
6 Months Ended
Jun. 30, 2016
Equity Method Investments and Joint Ventures [Abstract]  
Investments In and Advances To Unconsolidated Affiliates
Investments in and Advances to Unconsolidated Affiliates

We have equity interests of up to 50.0% in various joint ventures with unrelated third parties that are accounted for using the equity method of accounting because we have the ability to exercise significant influence over their operating and financial policies.
 
The following table sets forth the summarized income statements of our unconsolidated affiliates:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Income Statements:
 
 
 
 
 
 
 
Rental and other revenues
$
11,210

 
$
12,423

 
$
21,982

 
$
24,654

Expenses:
 
 
 
 
 
 
 
Rental property and other expenses
4,573

 
6,031

 
9,288

 
11,698

Depreciation and amortization
2,656

 
3,110

 
5,403

 
6,225

Interest expense
1,342

 
2,032

 
2,719

 
4,181

Total expenses
8,571

 
11,173

 
17,410

 
22,104

Income before disposition of property
2,639

 
1,250

 
4,572

 
2,550

Gains on disposition of property

 
16,054

 
902

 
18,181

Net income
$
2,639

 
$
17,304

 
$
5,474

 
$
20,731



4.    Investments in and Advances to Unconsolidated Affiliates - Continued

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

During the first quarter of 2016, 4600 Madison Associates, LP (a joint venture in which we own a 12.5% interest) sold land to an unrelated third party for a sale price of $3.4 million and recorded a gain on disposition of property of $1.0 million. We recorded $0.1 million as our share of this gain through equity in earnings of unconsolidated affiliates. Simultaneously with the sale, the joint venture used all of the proceeds to pay down $3.4 million on its secured mortgage loan with an effective interest rate of 6.85%.
v3.5.0.2
Intangible Assets and Below Market Lease Liabilities
6 Months Ended
Jun. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets and Below Market Lease Liabilities
Intangible Assets and Below Market Lease Liabilities
 
The following table sets forth total intangible assets and acquisition-related below market lease liabilities, net of accumulated amortization:
 
 
June 30,
2016
 
December 31,
2015
Assets:
 
 
 
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
$
346,294

 
$
346,937

Less accumulated amortization
(129,252
)
 
(115,172
)
 
$
217,042

 
$
231,765

 
 
 
 
Liabilities (in accounts payable, accrued expenses and other liabilities):
 
 
 
Acquisition-related below market lease liabilities
$
63,400

 
$
63,830

Less accumulated amortization
(22,057
)
 
(17,927
)
 
$
41,343

 
$
45,903


The following table sets forth amortization of intangible assets and below market lease liabilities:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
11,731

 
$
9,888

 
$
23,066

 
$
19,889

Amortization of lease incentives (in rental and other revenues)
$
390

 
$
412

 
$
1,101

 
$
763

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
972

 
$
1,189

 
$
2,003

 
$
2,355

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

 
$
139

 
$
277

 
$
276

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(2,788
)
 
$
(1,674
)
 
$
(4,560
)
 
$
(3,406
)

5.    Intangible Assets and Below Market Lease Liabilities - Continued

The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities:
 
 
 
Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization)
 
Amortization of Lease Incentives (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets (in Rental Property and Other Expenses)
 
Amortization of Acquisition-Related Below Market Lease Liabilities (in Rental and Other Revenues)
July 1 through December 31, 2016
 
$
22,822

 
$
680

 
$
1,848

 
$
276

 
$
(3,520
)
2017
 
39,636

 
1,306

 
2,639

 
553

 
(6,207
)
2018
 
32,768

 
1,203

 
1,704

 
553

 
(6,014
)
2019
 
27,057

 
993

 
1,304

 
553

 
(5,524
)
2020
 
22,465

 
756

 
988

 
525

 
(5,196
)
Thereafter
 
51,660

 
2,193

 
2,560

 

 
(14,882
)
 
 
$
196,408

 
$
7,131

 
$
11,043

 
$
2,460

 
$
(41,343
)
Weighted average remaining amortization periods as of June 30, 2016 (in years)
 
6.6

 
7.2

 
6.2

 
4.5

 
7.6

v3.5.0.2
Mortgages and Notes Payable
6 Months Ended
Jun. 30, 2016
Debt Disclosure [Abstract]  
Mortgages and Notes Payable
Mortgages and Notes Payable
 
The following table sets forth our mortgages and notes payable:
 
 
June 30,
2016
 
December 31,
2015
Secured indebtedness
$
130,001

 
$
175,281

Unsecured indebtedness
1,958,739

 
2,324,333

Less-unamortized debt issuance costs
(6,533
)
 
(7,801
)
Total mortgages and notes payable, net
$
2,082,207

 
$
2,491,813


 
At June 30, 2016, our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $244.6 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 $283.0 million and $272.0 million outstanding under our revolving credit facility at June 30, 2016 and July 25, 2016, respectively. At both June 30, 2016 and July 25, 2016, we had $0.2 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at June 30, 2016 and July 25, 2016 was $191.8 million and $202.8 million, respectively.
 
During the second quarter of 2016, we prepaid without penalty the remaining $43.6 million balance on a secured mortgage loan with an effective interest rate of 7.5% that was originally scheduled to mature in August 2016.
 
During the second quarter of 2016, we executed a $150.0 million, 67-month unsecured term loan facility. The term loan facility is originally scheduled to mature in January 2022. The interest rate on the term loan facility at our current credit ratings is LIBOR plus 110 basis points. The purpose of the term loan facility is to repay amounts outstanding under our revolving credit facility and other general corporate purposes. There were no borrowings outstanding under our term loan facility at June 30, 2016 and July 25, 2016.
 
6.    Mortgages and Notes Payable - Continued
 
During the first quarter of 2016, we prepaid without penalty the $350.0 million balance on our unsecured bridge facility that was originally scheduled to mature in March 2016.
 
We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
v3.5.0.2
Derivative Financial Instruments
6 Months Ended
Jun. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
 
During the first quarter of 2016, we obtained $150.0 million notional amount of forward-starting swaps that effectively lock the underlying 10-year treasury rate at 1.90% with respect to a forecasted debt issuance expected to occur prior to March 15, 2017. The counterparties under the swaps are major financial institutions.
 
Our interest rate swaps have been designated as and are being accounted for as cash flow hedges with changes in fair value recorded in other comprehensive income/(loss) each reporting period. No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on our cash flow hedges during the six months ended June 30, 2016 and 2015. We have no collateral requirements related to our interest rate swaps.
 
Amounts reported in accumulated other comprehensive loss ("AOCL") related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the period from July 1, 2016 through June 30, 2017, we estimate that $4.0 million will be reclassified to interest expense.
 
The following table sets forth the fair value of our derivatives:
 
 
June 30,
2016
 
December 31,
2015
Derivatives:
 
 
 
Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
 
 
 
Interest rate swaps
$
11,049

 
$
3,073


 
The following table sets forth the effect of our cash flow hedges on AOCL and interest expense:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Derivatives Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Amount of unrealized gains/(losses) recognized in AOCL on derivatives (effective portion):
 
 
 
 
 
 
 
Interest rate swaps
$
(5,760
)
 
$
269

 
$
(9,395
)
 
$
(2,645
)
Amount of losses reclassified out of AOCL into contractual interest expense (effective portion):
 
 
 
 
 
 
 
Interest rate swaps
$
783

 
$
925

 
$
1,578

 
$
1,849

v3.5.0.2
Noncontrolling Interests
6 Months Ended
Jun. 30, 2016
Noncontrolling Interest [Abstract]  
Noncontrolling Interests
Noncontrolling Interests

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

Noncontrolling Interests in the Operating Partnership

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

 
$
130,048

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

 
(11,475
)
Conversions of Common Units to Common Stock
(1,558
)
 
(1,206
)
Net income attributable to noncontrolling interests in the Operating Partnership
13,950

 
1,378

Distributions to noncontrolling interests in the Operating Partnership
(2,463
)
 
(2,485
)
Total noncontrolling interests in the Operating Partnership
$
151,400

 
$
116,260


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,
 
2016
 
2015
 
2016
 
2015
Net income available for common stockholders
$
31,648

 
$
25,155

 
$
464,438

 
$
44,471

Increase in additional paid in capital from conversions of Common Units
to Common Stock
1,558

 

 
1,558

 
1,206

Change from net income available for common stockholders and transfers from noncontrolling interests
$
33,206

 
$
25,155

 
$
465,996

 
$
45,677

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

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

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

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

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

Our Level 2 asset is the fair value of our mortgages and notes receivable. Our Level 2 liabilities include the fair value of our mortgages and notes payable and interest rate swaps.

The fair value of mortgages and notes receivable and mortgages and notes payable is estimated by the income approach utilizing contractual cash flows and market-based interest rates to approximate the price that would be paid in an orderly transaction between market participants. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments of interest rate swaps are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments are considered in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented.
 
Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Our Level 3 asset included our tax increment financing bond, which was not routinely traded but whose fair value was determined by the income approach utilizing contractual cash flows and market-based interest rates to estimate the projected redemption value based on quoted bid/ask prices for similar unrated municipal bonds.
 
Our Level 3 liability was the fair value of our financing obligation, which was estimated by the income approach to approximate the price that would be paid in an orderly transaction between market participants, utilizing: (1) contractual cash flows; (2) market-based interest rates; and (3) a number of other assumptions including demand for space, competition for customers, changes in market rental rates, costs of operation and expected ownership periods.


9.
Disclosure About Fair Value of Financial Instruments - Continued

The following table sets forth our assets and liabilities and the Company's noncontrolling interests in the Operating Partnership that are measured at fair value within the fair value hierarchy.
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
Total
 
Quoted Prices
in Active
Markets for Identical Assets or Liabilities
 
Significant Observable Inputs
 
Significant Unobservable Inputs
Fair Value at June 30, 2016:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
9,971

 
$

 
$
9,971

 
$

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
2,572

 
2,572

 

 

Total Assets
 
$
12,543

 
$
2,572

 
$
9,971

 
$

Noncontrolling Interests in the Operating Partnership
 
$
151,400

 
$
151,400

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, net, at fair value (1)
 
$
2,120,627

 
$

 
$
2,120,627

 
$

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
11,049

 

 
11,049

 

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
2,572

 
2,572

 

 

Total Liabilities
 
$
2,134,248

 
$
2,572

 
$
2,131,676

 
$

Fair Value at December 31, 2015:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
2,096

 
$

 
$
2,096

 
$

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
2,736

 
2,736

 

 

Tax increment financing bond (in real estate and other assets, net, held for sale) (2)
 
11,197

 

 

 
11,197

Total Assets
 
$
16,029

 
$
2,736

 
$
2,096

 
$
11,197

Noncontrolling Interests in the Operating Partnership
 
$
126,429

 
$
126,429

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, net, at fair value (1)
 
$
2,517,589