HIGHWOODS PROPERTIES, INC., 10-Q filed on 4/28/2015
Quarterly Report
Document and Entity Information Document
3 Months Ended
Mar. 31, 2015
Apr. 20, 2015
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
Mar. 31, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
94,052,036 
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
Mar. 31, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
Amendment Flag
false 
 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Real estate assets, at cost:
 
 
Land
$ 400,850 
$ 388,807 
Buildings and tenant improvements
3,941,463 
3,840,379 
Development in process
133,688 
205,971 
Land held for development
75,888 
79,355 
Total real estate assets
4,551,889 
4,514,512 
Less-accumulated depreciation
(1,056,028)
(1,033,106)
Net real estate assets
3,495,861 
3,481,406 
Real estate and other assets, net, held for sale
2,980 
1,038 
Cash and cash equivalents
11,381 
8,832 
Restricted cash
11,852 
14,595 
Accounts receivable, net of allowance of $1,647 and $1,314, respectively
28,385 
48,557 
Mortgages and notes receivable, net of allowance of $468 and $275, respectively
14,137 
13,116 
Accrued straight-line rents receivable, net of allowance of $530 and $600, respectively
147,597 
142,037 
Investments in and advances to unconsolidated affiliates
27,056 
27,071 
Deferred financing and leasing costs, net of accumulated amortization of $115,342 and $112,804, respectively
224,270 
228,768 
Prepaid expenses and other assets, net of accumulated amortization of $14,770 and $14,259, respectively
46,297 
39,489 
Total Assets
4,009,816 
4,004,909 
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:
 
 
Mortgages and notes payable
2,089,226 
2,071,389 
Accounts payable, accrued expenses and other liabilities
203,001 
237,633 
Financing obligations
23,519 
23,519 
Total Liabilities
2,315,746 
2,332,541 
Commitments and contingencies
   
   
Noncontrolling interests in the Operating Partnership
133,226 
130,048 
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; 29,050 and 29,060 shares issued and outstanding, respectively)
29,050 
29,060 
Common Stock, $.01 par value, 200,000,000 authorized shares; 94,047,118 and 92,907,310 shares issued and outstanding, respectively
940 
929 
Additional paid-in capital
2,504,867 
2,464,275 
Distributions in excess of net income available for common stockholders
(986,388)
(966,141)
Accumulated other comprehensive loss
(5,709)
(3,912)
Total Stockholders’ Equity
1,542,760 
1,524,211 
Noncontrolling interests in consolidated affiliates
18,084 
18,109 
Total Equity/Captal
1,560,844 
1,542,320 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital
4,009,816 
4,004,909 
Highwoods Realty Limited Partnership [Member]
 
 
Real estate assets, at cost:
 
 
Land
400,850 
388,807 
Buildings and tenant improvements
3,941,463 
3,840,379 
Development in process
133,688 
205,971 
Land held for development
75,888 
79,355 
Total real estate assets
4,551,889 
4,514,512 
Less-accumulated depreciation
(1,056,028)
(1,033,106)
Net real estate assets
3,495,861 
3,481,406 
Real estate and other assets, net, held for sale
2,980 
1,038 
Cash and cash equivalents
11,381 
8,938 
Restricted cash
11,852 
14,595 
Accounts receivable, net of allowance of $1,647 and $1,314, respectively
28,385 
48,557 
Mortgages and notes receivable, net of allowance of $468 and $275, respectively
14,137 
13,116 
Accrued straight-line rents receivable, net of allowance of $530 and $600, respectively
147,597 
142,037 
Investments in and advances to unconsolidated affiliates
27,056 
27,071 
Deferred financing and leasing costs, net of accumulated amortization of $115,342 and $112,804, respectively
224,270 
228,768 
Prepaid expenses and other assets, net of accumulated amortization of $14,770 and $14,259, respectively
46,297 
39,489 
Total Assets
4,009,816 
4,005,015 
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Capital:
 
 
Mortgages and notes payable
2,089,226 
2,071,389 
Accounts payable, accrued expenses and other liabilities
203,001 
237,547 
Financing obligations
23,519 
23,519 
Total Liabilities
2,315,746 
2,332,455 
Commitments and contingencies
   
   
Redeemable Operating Partnership Units:
 
 
Common Units, 2,910,135 and 2,936,955 outstanding, respectively
133,226 
130,048 
Series A Preferred Units (liquidation preference $1,000 per unit), 29,050 and 29,060 units issued and outstanding, respectively
29,050 
29,060 
Total Redeemable Operating Partnership Units
162,276 
159,108 
Equity/Capital:
 
 
General partner Common Units, 965,484 and 954,355 outstanding, respectively
15,192 
14,990 
Limited partner Common Units, 92,672,825 and 91,544,146 outstanding, respectively
1,504,227 
1,484,265 
Accumulated other comprehensive loss
(5,709)
(3,912)
Noncontrolling interests in consolidated affiliates
18,084 
18,109 
Total Equity/Captal
1,531,794 
1,513,452 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Capital
$ 4,009,816 
$ 4,005,015 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2015
Dec. 31, 2014
Assets:
 
 
Accounts receivable allowance
$ 1,647 
$ 1,314 
Mortgages and notes receivable allowance
468 
275 
Accrued straight-line rents receivable allowance
530 
600 
Deferred financing and leasing costs, accumulated amortization
115,342 
112,804 
Prepaid expenses and other assets, accumulated amortization
14,770 
14,259 
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)
29,050 
29,060 
Series A Preferred Stock, shares outstanding (in shares)
29,050 
29,060 
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)
94,047,118 
92,907,310 
Common Stock, shares outstanding (in shares)
94,047,118 
92,907,310 
Highwoods Realty Limited Partnership [Member]
 
 
Assets:
 
 
Accounts receivable allowance
1,647 
1,314 
Mortgages and notes receivable allowance
468 
275 
Accrued straight-line rents receivable allowance
530 
600 
Deferred financing and leasing costs, accumulated amortization
115,342 
112,804 
Prepaid expenses and other assets, accumulated amortization
$ 14,770 
$ 14,259 
Redeemable Operating Partnership Units: [Abstract]
 
 
Redeemable Common Units outstanding (in shares)
2,910,135 
2,936,955 
Series A Preferred Units, liquidation preference (in dollars per share)
$ 1,000 
$ 1,000 
Series A Preferred Units, issued (in shares)
29,050 
29,060 
Series A Preferred Units, outstanding (in shares)
29,050 
29,060 
Common Units: [Abstract]
 
 
General partners' capital account, units outstanding (in shares)
965,484 
954,355 
Limited partners' capital account, units outstanding (in shares)
92,672,825 
91,544,146 
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Rental and other revenues
$ 157,310 
$ 148,453 
Operating expenses:
 
 
Rental property and other expenses
57,513 
56,390 
Depreciation and amortization
50,308 
48,165 
General and administrative
11,437 
10,714 
Total operating expenses
119,258 
115,269 
Interest expense:
 
 
Contractual
20,442 
20,750 
Amortization of deferred financing costs
800 
652 
Financing obligations
181 
(40)
Total interest expense
21,423 
21,362 
Other income:
 
 
Interest and other income
1,238 
1,399 
Total other income
1,238 
1,399 
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates
17,867 
13,221 
Gains on disposition of property
1,157 
Equity in earnings/(losses) of unconsolidated affiliates
1,811 
(29)
Income from continuing operations
20,835 
13,192 
Discontinued operations:
 
 
Net gains on disposition of discontinued operations
384 
Total discontinued operations
384 
Net income
20,835 
13,576 
Net (income) attributable to noncontrolling interests in the Operating Partnership
(596)
(398)
Net (income) attributable to noncontrolling interests in consolidated affiliates
(296)
(423)
Dividends on Preferred Stock
(627)
(627)
Net income available for common stockholders
19,316 
12,128 
Earnings per Common Share – basic:
 
 
Income from continuing operations available for common stockholders (in dollars per share)
$ 0.21 
$ 0.13 
Income from discontinued operations available for common stockholders (in dollars per share)
$ 0.00 
$ 0.00 
Net income available for common stockholders (in dollars per share)
$ 0.21 
$ 0.13 
Weighted average Common Shares outstanding - basic (in shares)
93,222 
89,966 
Earnings per Common Share - diluted:
 
 
Income from continuing operations available for common stockholders (in dollars per share)
$ 0.21 
$ 0.13 
Income from discontinued operations available for common stockholders (in dollars per share)
$ 0.00 
$ 0.00 
Net income available for common stockholders (in dollars per share)
$ 0.21 
$ 0.13 
Weighted average Common Shares outstanding - diluted (in shares)
96,279 1 2
93,030 1 2
Dividends declared per Common Share (in dollars per share)
$ 0.425 
$ 0.425 
Net income available for common stockholders:
 
 
Income from continuing operations available for common stockholders
19,316 
11,756 
Income from discontinued operations available for common stockholders
372 
Net income available for common stockholders
19,316 
12,128 
Highwoods Realty Limited Partnership [Member]
 
 
Rental and other revenues
157,310 
148,453 
Operating expenses:
 
 
Rental property and other expenses
57,513 
56,374 
Depreciation and amortization
50,308 
48,165 
General and administrative
11,437 
10,730 
Total operating expenses
119,258 
115,269 
Interest expense:
 
 
Contractual
20,442 
20,750 
Amortization of deferred financing costs
800 
652 
Financing obligations
181 
(40)
Total interest expense
21,423 
21,362 
Other income:
 
 
Interest and other income
1,238 
1,399 
Total other income
1,238 
1,399 
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates
17,867 
13,221 
Gains on disposition of property
1,157 
Equity in earnings/(losses) of unconsolidated affiliates
1,811 
(29)
Income from continuing operations
20,835 
13,192 
Discontinued operations:
 
 
Net gains on disposition of discontinued operations
384 
Total discontinued operations
384 
Net income
20,835 
13,576 
Net (income) attributable to noncontrolling interests in consolidated affiliates
(296)
(423)
Distributions on Preferred Units
(627)
(627)
Net income available for common unitholders
19,912 
12,526 
Earnings per Common Unit - basic:
 
 
Income from continuing operations available for common unitholders (in dollars per share)
$ 0.21 
$ 0.13 
Income from discontinued operations available for common unitholders (in dollars per share)
$ 0.00 
$ 0.01 
Net income available for common unitholders (in dollars per share)
$ 0.21 
$ 0.14 
Weighted average Common Units outstanding - basic (in shares)
95,746 
92,497 
Earnings per Common Unit - diluted:
 
 
Income from continuing operations available for common unitholders (in dollars per share)
$ 0.21 
$ 0.13 
Income from discontinued operations available for common unitholders (in dollars per share)
$ 0.00 
$ 0.01 
Net income available for common unitholders (in dollars per share)
$ 0.21 
$ 0.14 
Weighted average Common Units outstanding - diluted (in shares)
95,870 2 3
92,621 2 3
Distributions declared per Common Unit (in dollars per unit)
$ 0.425 
$ 0.425 
Net income available for common unitholders:
 
 
Income from continuing operations available for common unitholders
19,912 
12,142 
Income from discontinued operations available for common unitholders
384 
Net income available for common unitholders
$ 19,912 
$ 12,526 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Comprehensive income:
 
 
Net income
$ 20,835 
$ 13,576 
Other comprehensive loss:
 
 
Unrealized gains on tax increment financing bond
193 
165 
Unrealized losses on cash flow hedges
(2,914)
(1,404)
Amortization of cash flow hedges
924 
928 
Total other comprehensive loss
(1,797)
(311)
Total comprehensive income
19,038 
13,265 
Less-comprehensive (income) attributable to noncontrolling interests
(892)
(821)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders
18,146 
12,444 
Highwoods Realty Limited Partnership [Member]
 
 
Comprehensive income:
 
 
Net income
20,835 
13,576 
Other comprehensive loss:
 
 
Unrealized gains on tax increment financing bond
193 
165 
Unrealized losses on cash flow hedges
(2,914)
(1,404)
Amortization of cash flow hedges
924 
928 
Total other comprehensive loss
(1,797)
(311)
Total comprehensive income
19,038 
13,265 
Less-comprehensive (income) attributable to noncontrolling interests
(296)
(423)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders
$ 18,742 
$ 12,842 
Consolidated Statements of Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Highwoods Realty Limited Partnership [Member]
Common Stock [Member]
Series A Cumulative Redeemable Preferred Shares [Member]
General Partner Common Units [Member]
Highwoods Realty Limited Partnership [Member]
Limited Partner 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 at Dec. 31, 2013
$ 1,498,696 
$ 1,469,791 
$ 899 
$ 29,077 
$ 14,508 
$ 1,436,498 
$ 2,370,368 
$ (2,611)
$ (2,611)
$ 21,396 
$ 21,396 
$ (920,433)
Balance (in shares) at Dec. 31, 2013
 
 
89,920,915 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
Issuances of Common Units, net of issuance costs and tax withholdings
 
153 
 
 
151 
 
 
 
 
Redemptions of Common Units
 
(93)
 
 
(1)
(92)
 
 
 
 
Distributions paid on Common Units
 
(39,300)
 
 
(393)
(38,907)
 
 
 
 
Distributions paid on Preferred Units
 
(627)
 
 
(6)
(621)
 
 
 
 
Issuances of Common Stock - Shares
 
 
(8,427)
 
 
 
 
 
 
 
 
 
Issuances of Common Stock, net of issuance costs and tax withholdings
153 
 
 
 
153 
 
 
Conversions of Common Units to Common Stock - Shares
 
 
4,417 
 
 
 
 
 
 
 
 
 
Conversions of Common Units to Common Stock
162 
 
 
 
162 
 
 
Dividends on Common Stock
(38,225)
 
 
 
 
 
(38,225)
Dividends on Preferred Stock
(627)
 
 
 
 
 
(627)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
(7,434)
 
 
 
(7,434)
 
 
Distributions to noncontrolling interests in consolidated affiliates
(522)
(522)
(522)
(522)
Issuances of restricted stock - shares
 
 
144,826 
 
 
 
 
 
 
 
 
 
Issuances of restricted stock
 
 
 
 
 
Share-based compensation expense, net of forfeitures
4,262 
4,262 
43 
4,219 
4,260 
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner
 
(6,570)
 
 
(66)
(6,504)
 
 
 
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
(398)
 
 
 
 
 
(398)
Net (income) attributable to noncontrolling interests in consolidated affiliates
(4)
(419)
423 
423 
(423)
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
13,576 
13,576 
136 
13,440 
13,576 
Other comprehensive income/(loss)
(311)
(311)
(311)
(311)
Total comprehensive income
13,265 
13,265 
 
 
 
 
 
 
 
 
 
 
Balance at Mar. 31, 2014
1,469,332 
1,440,359 
901 
29,077 
14,219 
1,407,765 
2,367,509 
(2,922)
(2,922)
21,297 
21,297 
(946,530)
Balance (in shares) at Mar. 31, 2014
 
 
90,061,731 
 
 
 
 
 
 
 
 
 
Balance at Dec. 31, 2014
1,542,320 
1,513,452 
929 
29,060 
14,990 
1,484,265 
2,464,275 
(3,912)
(3,912)
18,109 
18,109 
(966,141)
Balance (in shares) at Dec. 31, 2014
92,907,310 
 
92,907,310 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
Issuances of Common Units, net of issuance costs and tax withholdings
 
40,567 
 
 
406 
40,161 
 
 
 
 
Distributions paid on Common Units
 
(40,637)
 
 
(406)
(40,231)
 
 
 
 
Distributions paid on Preferred Units
 
(627)
 
 
(6)
(621)
 
 
 
 
Issuances of Common Stock - Shares
 
 
989,417 
 
 
 
 
 
 
 
 
 
Issuances of Common Stock, net of issuance costs and tax withholdings
40,567 
 
10 
 
 
40,557 
 
 
Conversions of Common Units to Common Stock - Shares
 
 
26,820 
 
 
 
 
 
 
 
 
 
Conversions of Common Units to Common Stock
1,206 
 
 
 
1,206 
 
 
Dividends on Common Stock
(39,563)
 
 
 
 
 
(39,563)
Dividends on Preferred Stock
(627)
 
 
 
 
 
(627)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
(5,036)
 
 
 
(5,036)
 
 
Distributions to noncontrolling interests in consolidated affiliates
(321)
(321)
(321)
(321)
Issuances of restricted stock - shares
 
 
123,571 
 
 
 
 
 
 
 
 
 
Issuances of restricted stock
 
 
 
 
 
Redemptions/repurchases of Preferred Stock
(10)
 
(10)
 
 
 
 
Share-based compensation expense, net of forfeitures
3,866 
3,866 
39 
3,827 
3,865 
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner
 
(3,544)
 
 
(36)
(3,508)
 
 
 
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
(596)
 
 
 
 
 
(596)
Net (income) attributable to noncontrolling interests in consolidated affiliates
(3)
(293)
296 
296 
(296)
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
20,835 
20,835 
208 
20,627 
20,835 
Other comprehensive income/(loss)
(1,797)
(1,797)
(1,797)
(1,797)
Total comprehensive income
19,038 
19,038 
 
 
 
 
 
 
 
 
 
 
Balance at Mar. 31, 2015
$ 1,560,844 
$ 1,531,794 
$ 940 
$ 29,050 
$ 15,192 
$ 1,504,227 
$ 2,504,867 
$ (5,709)
$ (5,709)
$ 18,084 
$ 18,084 
$ (986,388)
Balance (in shares) at Mar. 31, 2015
94,047,118 
 
94,047,118 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Operating activities:
 
 
Net income
$ 20,835 
$ 13,576 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
50,308 
48,165 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
(67)
82 
Share-based compensation expense
3,866 
4,262 
Allowance for losses on accounts and accrued straight-line rents receivable
417 
1,125 
Accrued interest on mortgages and notes receivable
(170)
(115)
Amortization of deferred financing costs
800 
652 
Amortization of cash flow hedges
924 
928 
Amortization of mortgages and notes payable fair value adjustments
57 
(809)
Net gains on disposition of property
(1,157)
(384)
Equity in (earnings)/losses of unconsolidated affiliates
(1,811)
29 
Changes in financing obligations
(221)
Distributions of earnings from unconsolidated affiliates
1,386 
788 
Changes in operating assets and liabilities:
 
 
Accounts receivable
3,166 
713 
Prepaid expenses and other assets
(6,769)
(5,260)
Accrued straight-line rents receivable
(5,591)
(6,457)
Accounts payable, accrued expenses and other liabilities
(33,088)
(25,690)
Net cash provided by operating activities
33,106 
31,384 
Investing activities:
 
 
Investments in development in process
(11,232)
(27,232)
Investments in tenant improvements and deferred leasing costs
(30,008)
(24,782)
Investments in building improvements
(12,081)
(13,007)
Net proceeds from disposition of real estate assets
5,650 
Distributions of capital from unconsolidated affiliates
394 
230 
Investments in mortgages and notes receivable
(938)
(108)
Repayments of mortgages and notes receivable
87 
16,604 
Changes in restricted cash and other investing activities
993 
4,043 
Net cash used in investing activities
(47,135)
(44,252)
Financing activities:
 
 
Dividends on Common Stock
(39,563)
(38,225)
Redemptions/repurchases of Preferred Stock
(10)
Redemptions of Common Units
(93)
Dividends on Preferred Stock
(627)
(627)
Distributions to noncontrolling interests in the Operating Partnership
(1,248)
(1,249)
Distributions to noncontrolling interests in consolidated affiliates
(321)
(522)
Proceeds from the issuance of Common Stock
44,937 
1,313 
Costs paid for the issuance of Common Stock
(643)
(14)
Repurchase of shares related to tax withholdings
(3,727)
(1,523)
Borrowings on revolving credit facility
110,900 
96,100 
Repayments of revolving credit facility
(91,900)
(36,800)
Repayments of mortgages and notes payable
(1,220)
(2,236)
Additions to deferred financing costs and other financing activities
(96)
Net cash provided by financing activities
16,578 
16,028 
Net increase in cash and cash equivalents
2,549 
3,160 
Cash and cash equivalents at beginning of the period
8,832 
10,184 
Cash and cash equivalents at end of the period
11,381 
13,344 
Supplemental disclosure of cash flow information:
 
 
Cash paid for interest, net of amounts capitalized
21,480 
25,054 
Supplemental disclosure of non-cash investing and financing activities:
 
 
Unrealized losses on cash flow hedges
(2,914)
(1,404)
Conversions of Common Units to Common Stock
1,206 
162 
Changes in accrued capital expenditures
(2,697)
5,399 
Write-off of fully depreciated real estate assets
15,020 
3,121 
Write-off of fully amortized deferred financing and leasing costs
10,147 
3,697 
Adjustment of noncontrolling interests in the Operating Partnership to fair value
5,036 
7,434 
Unrealized gains on tax increment financing bond
193 
165 
Highwoods Realty Limited Partnership [Member]
 
 
Operating activities:
 
 
Net income
20,835 
13,576 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
50,308 
48,165 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
(67)
82 
Share-based compensation expense
3,866 
4,262 
Allowance for losses on accounts and accrued straight-line rents receivable
417 
1,125 
Accrued interest on mortgages and notes receivable
(170)
(115)
Amortization of deferred financing costs
800 
652 
Amortization of cash flow hedges
924 
928 
Amortization of mortgages and notes payable fair value adjustments
57 
(809)
Net gains on disposition of property
(1,157)
(384)
Equity in (earnings)/losses of unconsolidated affiliates
(1,811)
29 
Changes in financing obligations
(221)
Distributions of earnings from unconsolidated affiliates
1,386 
788 
Changes in operating assets and liabilities:
 
 
Accounts receivable
3,166 
713 
Prepaid expenses and other assets
(6,769)
(5,226)
Accrued straight-line rents receivable
(5,591)
(6,457)
Accounts payable, accrued expenses and other liabilities
(33,002)
(25,667)
Net cash provided by operating activities
33,192 
31,441 
Investing activities:
 
 
Investments in development in process
(11,232)
(27,232)
Investments in tenant improvements and deferred leasing costs
(30,008)
(24,782)
Investments in building improvements
(12,081)
(13,007)
Net proceeds from disposition of real estate assets
5,650 
Distributions of capital from unconsolidated affiliates
394 
230 
Investments in mortgages and notes receivable
(938)
(108)
Repayments of mortgages and notes receivable
87 
16,604 
Changes in restricted cash and other investing activities
993 
4,043 
Net cash used in investing activities
(47,135)
(44,252)
Financing activities:
 
 
Distributions on Common Units
(40,637)
(39,300)
Redemptions/repurchases of Preferred Units
(10)
Redemptions of Common Units
(93)
Distributions on Preferred Units
(627)
(627)
Distributions to noncontrolling interests in consolidated affiliates
(321)
(522)
Proceeds from the issuance of Common Units
44,937 
1,313 
Costs paid for the issuance of Common Units
(643)
(14)
Repurchase of units related to tax withholdings
(3,727)
(1,523)
Borrowings on revolving credit facility
110,900 
96,100 
Repayments of revolving credit facility
(91,900)
(36,800)
Repayments of mortgages and notes payable
(1,220)
(2,236)
Additions to deferred financing costs and other financing activities
(366)
(338)
Net cash provided by financing activities
16,386 
15,960 
Net increase in cash and cash equivalents
2,443 
3,149 
Cash and cash equivalents at beginning of the period
8,938 
10,281 
Cash and cash equivalents at end of the period
11,381 
13,430 
Supplemental disclosure of cash flow information:
 
 
Cash paid for interest, net of amounts capitalized
21,480 
25,054 
Supplemental disclosure of non-cash investing and financing activities:
 
 
Unrealized losses on cash flow hedges
(2,914)
(1,404)
Changes in accrued capital expenditures
(2,697)
5,399 
Write-off of fully depreciated real estate assets
15,020 
3,121 
Write-off of fully amortized deferred financing and leasing costs
10,147 
3,697 
Adjustment of Redeemable Common Units to fair value
3,178 
6,328 
Unrealized gains on tax increment financing bond
$ 193 
$ 165 
Description of Business and Significant Accounting Policies
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 March 31, 2015, we owned or had an interest in 31.3 million rentable square feet of in-service properties, 1.2 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 March 31, 2015, the Company owned all of the Preferred Units and 93.6 million, or 97.0%, of the Common Units in the Operating Partnership. Limited partners own the remaining 2.9 million Common Units. During the three months ended March 31, 2015, the Company redeemed 26,820 Common Units for a like number of shares of Common Stock.

Common Stock Offerings
 
During the three months ended March 31, 2015, the Company issued 914,126 shares of Common Stock under its equity sales agreements at an average gross sales price of $45.34 per share and received net proceeds, after sales commissions, of $40.8 million. As a result of this activity and the redemptions discussed above, the percentage of Common Units owned by the Company increased from 96.9% at December 31, 2014 to 97.0% at March 31, 2015.

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. At March 31, 2015 and December 31, 2014, we had involvement with, but are not the primary beneficiary in, an entity that we concluded to be a variable interest entity (see Note 3).

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 2014 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 the Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates.


1.    Description of Business and Significant Accounting Policies – Continued
Recently Issued Accounting Standards

The Financial Accounting Standards Board ("FASB") recently issued an accounting standards update 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 accounting standards update is required to be adopted in 2017. 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 accounting standards update.

The FASB recently issued an accounting standards update that amends consolidation requirements. The amendments significantly change the consolidation analysis required under GAAP and will require companies to reevaluate all previous consolidation conclusions. The accounting standards update is required to be adopted in 2016. We are in the process of evaluating this accounting standards update.

The FASB recently issued an accounting standards update that requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The accounting standards update is required to be adopted in 2016. Retrospective application is required. We are in the process of evaluating this accounting standards update.
Real Estate Assets
Real Estate Assets
Real Estate Assets

Dispositions
 
During the first quarter of 2015, we sold:

two buildings for an aggregate sale price of $3.5 million and recorded aggregate gains on disposition of property of $0.4 million; and

land for a sale price of $2.5 million and recorded a gain on disposition of property of $0.8 million.
Mortgages and Notes Receivable
Mortgages and Notes Receivable
Mortgages and Notes Receivable

The following table sets forth our mortgages and notes receivable:

 
March 31,
2015
 
December 31,
2014
Mortgages receivable (including accrued interest)
$
11,931

 
$
10,869

Less allowance

 

 
11,931

 
10,869

Promissory notes
2,674

 
2,522

Less allowance
(468
)
 
(275
)
 
2,206

 
2,247

Mortgages and notes receivable, net
$
14,137

 
$
13,116



Mortgages receivable consist of secured financing provided to a third party. We concluded this arrangement to be an interest in a variable interest entity. However, since we do not have the power to direct matters that most significantly impact the activities of the entity, we do not qualify as the primary beneficiary. Accordingly, the entity is not consolidated. Our risk of loss with respect to this arrangement is limited to the carrying value of the mortgage receivable and the future infrastructure development funding commitment.

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 March 31, 2015, our mortgages and notes receivable were not in default and there were no other indicators of impairment.

The following table sets forth our notes receivable allowance, which relates only to promissory notes:

 
Three Months Ended
March 31,
 
2015
 
2014
Beginning notes receivable allowance
$
275

 
$
302

Recoveries/write-offs/other
193

 
(2
)
Total notes receivable allowance
$
468

 
$
300

Investments In Affiliates
Investments In Affiliates
Investments in and Advances to Affiliates

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
March 31,
 
2015
 
2014
Income Statements:
 
 
 
Rental and other revenues
$
12,231

 
$
12,434

Expenses:
 
 
 
Rental property and other expenses
5,667

 
6,217

Depreciation and amortization
3,115

 
3,489

Interest expense
2,149

 
2,211

Total expenses
10,931

 
11,917

Income before disposition of property
1,300

 
517

Gains on disposition of property
2,127

 
1,949

Net income
$
3,427

 
$
2,466


 
During the first quarter of 2015, Highwoods DLF 97/26 DLF 99/32, LP sold a building to an unrelated third party for a sale price of $7.0 million and recorded a gain on disposition of property of $2.1 million. We recorded $1.1 million as our share of this gain through equity in earnings of unconsolidated affiliates.
Intangible Assets and Below Market Lease Liabilities
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:
 
 
March 31,
2015
 
December 31,
2014
Assets:
 
 
 
Deferred financing costs
$
19,444

 
$
19,478

Less accumulated amortization
(8,697
)
 
(7,953
)
 
10,747

 
11,525

Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
320,168

 
322,094

Less accumulated amortization
(106,645
)
 
(104,851
)
 
213,523

 
217,243

Deferred financing and leasing costs, net
$
224,270

 
$
228,768

 
 
 
 
Liabilities (in accounts payable, accrued expenses and other liabilities):
 
 
 
Acquisition-related below market lease liabilities
$
55,360

 
$
55,783

Less accumulated amortization
(14,857
)
 
(13,548
)
 
$
40,503

 
$
42,235


5.    Intangible Assets and Below Market Lease Liabilities - Continued

The following table sets forth amortization of intangible assets and below market lease liabilities:
 
 
Three Months Ended
March 31,
 
2015
 
2014
Amortization of deferred financing costs
$
800

 
$
652

Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
10,293

 
$
9,928

Amortization of lease incentives (in rental and other revenues)
$
362

 
$
351

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
1,166

 
$
1,116

Amortization of acquisition-related intangible assets (in rental property and other expenses)
$
137

 
$
137

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(1,732
)
 
$
(1,522
)
The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities:
 
 
 
Amortization of Deferred Financing Costs
 
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)
April 1 through December 31, 2015
 
$
2,299

 
$
30,616

 
$
887

 
$
3,216

 
$
415

 
$
(4,700
)
2016
 
2,784

 
34,322

 
1,072

 
3,054

 
553

 
(5,570
)
2017
 
2,508

 
29,907

 
1,000

 
2,253

 
553

 
(5,298
)
2018
 
1,379

 
25,334

 
893

 
1,462

 
553

 
(5,135
)
2019
 
653

 
21,021

 
705

 
1,046

 
553

 
(4,804
)
Thereafter
 
1,124

 
48,503

 
2,214

 
2,858

 
533

 
(14,996
)
 
 
$
10,747

 
$
189,703

 
$
6,771

 
$
13,889

 
$
3,160

 
$
(40,503
)
Weighted average remaining amortization periods as of March 31, 2015 (in years)
 
4.2

 
6.9

 
8.0

 
6.2

 
5.7

 
8.0



Mortgages and Notes Payable
Mortgages and Notes Payable
Mortgages and Notes Payable
 
The following table sets forth our mortgages and notes payable:
 
 
March 31,
2015
 
December 31,
2014
Secured indebtedness
$
311,502

 
$
312,868

Unsecured indebtedness
1,777,724

 
1,758,521

Total mortgages and notes payable
$
2,089,226

 
$
2,071,389


 
At March 31, 2015, our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $583.2 million.
 

6.    Mortgages and Notes Payable - Continued
 
Our $475.0 million unsecured revolving credit facility is scheduled to mature in January 2018 and includes an accordion feature that allows for an additional $75.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods. The interest rate at our current credit ratings is LIBOR plus 110 basis points and the annual facility fee is 20 basis points. There was $228.0 million and $239.0 million outstanding under our revolving credit facility at March 31, 2015 and April 20, 2015, respectively. At both March 31, 2015 and April 20, 2015, 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 March 31, 2015 and April 20, 2015 was $246.8 million and $235.8 million, respectively.

We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
Derivative Financial Instruments
Derivative Financial Instruments
Derivative Financial Instruments
 
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 three months ended March 31, 2015 and 2014. 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 April 1, 2015 through March 31, 2016, we estimate that $3.0 million will be reclassified to interest expense.
 
The following table sets forth the fair value of our derivatives:
 
 
March 31,
2015
 
December 31,
2014
Derivatives:
 
 
 
Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
 
 
 
Interest rate swaps
$
4,480

 
$
2,412



The following table sets forth the effect of our cash flow hedges on AOCL and interest expense:
 
 
Three Months Ended
March 31,
 
2015
 
2014
Derivatives Designated as Cash Flow Hedges:
 
 
 
Amount of unrealized losses recognized in AOCL on derivatives (effective portion):
 
 
 
Interest rate swaps
$
(2,914
)
 
$
(1,404
)
Amount of losses reclassified out of AOCL into contractual interest expense (effective portion):
 
 
 
Interest rate swaps
$
924

 
$
928

Noncontrolling Interests
Noncontrolling Interests
Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates
 
At March 31, 2015, our noncontrolling interests in consolidated affiliates relates 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:
 
 
Three Months Ended
March 31,
 
2015
 
2014
Beginning noncontrolling interests in the Operating Partnership
$
130,048

 
$
106,480

Adjustment of noncontrolling interests in the Operating Partnership to fair value
5,036

 
7,434

Conversions of Common Units to Common Stock
(1,206
)
 
(162
)
Redemptions of Common Units

 
(93
)
Net income attributable to noncontrolling interests in the Operating Partnership
596

 
398

Distributions to noncontrolling interests in the Operating Partnership
(1,248
)
 
(1,249
)
Total noncontrolling interests in the Operating Partnership
$
133,226

 
$
112,808


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
March 31,
 
2015
 
2014
Net income available for common stockholders
$
19,316

 
$
12,128

Increase in additional paid in capital from conversions of Common Units
to Common Stock
1,206

 
162

Change from net income available for common stockholders and transfers from noncontrolling interests
$
20,522

 
$
12,290

Disclosure About Fair Value of Financial Instruments
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 certain 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 LIBOR interest rates (forward curves) derived from observed market LIBOR interest rate curves. In addition, credit valuation adjustments are incorporated in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented.
 
Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Our Level 3 assets include (1) certain of our mortgages and notes receivable, which were estimated by the income approach utilizing internal cash flow projections and market interest rates to estimate the price that would be paid in an orderly transaction between market participants, and (2) our tax increment financing bond, which is not routinely traded but whose fair value is 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 is the fair value of our financing obligations, 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 March 31, 2015:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
14,163

 
$

 
$
2,206

 
$
11,957

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
3,504

 
3,504

 

 

Tax increment financing bond (in prepaid expenses and other assets)
 
12,640

 

 

 
12,640

Total Assets
 
$
30,307

 
$
3,504

 
$
2,206

 
$
24,597

Noncontrolling Interests in the Operating Partnership
 
$
133,226

 
$
133,226

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, at fair value (1)
 
$
2,173,153

 
$

 
$
2,173,153

 
$

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
4,480

 

 
4,480

 

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
3,504

 
3,504

 

 

Financing obligations, at fair value (1)
 
20,264

 

 

 
20,264

Total Liabilities
 
$
2,201,401

 
$
3,504

 
$
2,177,633

 
$
20,264

Fair Value at December 31, 2014:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
13,142

 
$

 
$
2,247

 
$
10,895

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
3,635

 
3,635

 

 

Tax increment financing bond (in prepaid expenses and other assets)
 
12,447

 

 

 
12,447

Total Assets
 
$
29,224

 
$
3,635

 
$
2,247

 
$
23,342

Noncontrolling Interests in the Operating Partnership
 
$
130,048

 
$
130,048

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, at fair value (1)
 
$
2,141,334

 
$

 
$
2,141,334

 
$

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
2,412

 

 
2,412

 

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
3,635

 
3,635

 

 

Financing obligations, at fair value (1)
 
20,117

 

 

 
20,117

Total Liabilities
 
$
2,167,498

 
$
3,635

 
$
2,143,746

 
$
20,117


__________
(1)    Amounts recorded at historical cost on our Consolidated Balance Sheets at March 31, 2015 and December 31, 2014.
9.
Disclosure About Fair Value of Financial Instruments - Continued

The following table sets forth the changes in our Level 3 asset, which is recorded at fair value on our Consolidated Balance Sheets:

 
Three Months Ended
March 31,
 
2015
 
2014
Asset:
 
 
 
Tax Increment Financing Bond:
 
 
 
Beginning balance
$
12,447

 
$
13,403

Unrealized gains (in AOCL)
193

 
165

Ending balance
$
12,640

 
$
13,568



During 2007, we acquired a tax increment financing bond associated with a parking garage developed by us. This bond amortizes to maturity in 2020. The estimated fair value at March 31, 2015 was $0.2 million below the outstanding principal due on the bond. If the discount rate used to fair value this bond was 100 basis points higher or lower, the fair value of the bond would have been $0.4 million lower or $0.4 million higher, respectively, as of March 31, 2015. We intend to hold this bond and have concluded that we will not be required to sell this bond before recovery of the bond principal. Payment of the principal and interest for the bond is guaranteed by us. We have recorded no credit losses related to the bond during the three months ended March 31, 2015 and 2014. There is no legal right of offset with the liability, which we report as a financing obligation, related to this tax increment financing bond.
 
The following table sets forth quantitative information about the unobservable input of our Level 3 asset, which is recorded at fair value on our Consolidated Balance Sheets:
 
 
Valuation
Technique
 
Unobservable
Input
 
Rate as of
 
 
 
March 31,
2015
 
December 31,
2014
Asset:
 
 
 
 
 
 
 
Tax increment financing bond
Income approach
 
Discount rate
 
8.6%
 
8.4%
Share-Based Payments
Share-Based Payments
Share-Based Payments
 
During the three months ended March 31, 2015, the Company granted 197,408 stock options with an exercise price equal to the closing market price of a share of Common Stock on 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 $6.19. During the three months ended March 31, 2015, the Company also granted 66,845 shares of time-based restricted stock and 56,726 shares of total return-based restricted stock with weighted average grant date fair values per share of $45.89 and $43.79, respectively. We recorded share-based compensation expense of $3.9 million and $4.3 million during the three months ended March 31, 2015 and 2014, respectively. At March 31, 2015, there was $7.7 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 2.8 years.
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
 
The following table sets forth the components of AOCL:
 
 
Three Months Ended
March 31,
 
2015
 
2014
Tax increment financing bond:
 
 
 
Beginning balance
$
(445
)
 
$
(1,029
)
Unrealized gains on tax increment financing bond
193

 
165

Ending balance
(252
)
 
(864
)
Cash flow hedges:
 
 
 
Beginning balance
(3,467
)
 
(1,582
)
Unrealized losses on cash flow hedges
(2,914
)
 
(1,404
)
Amortization of cash flow hedges (1)
924

 
928

Ending balance
(5,457
)
 
(2,058
)
Total accumulated other comprehensive loss
$
(5,709
)
 
$
(2,922
)
__________
(1)    Amounts reclassified out of AOCL into contractual interest expense.
Real Estate and Other Assets Held For Sale
Real Estate and Other Assets Held For Sale
Real Estate and Other Assets Held For Sale

The following table sets forth the major classes of assets of our real estate and other assets, net, held for sale:

 
March 31,
2015
 
December 31,
2014
Assets:
 
 
 
Land held for development
$
2,961

 
$
995

Net real estate assets
2,961

 
995

Prepaid expenses and other assets
19

 
43

Real estate and other assets, net, held for sale
$
2,980

 
$
1,038

Earnings Per Share and Per Unit
Earnings Per Share and Per Unit
Earnings Per Share and Per Unit

The following table sets forth the computation of basic and diluted earnings per share of the Company:

 
Three Months Ended
March 31,
 
2015
 
2014
Earnings per Common Share - basic:
 
 
 
Numerator:
 
 
 
Income from continuing operations
$
20,835

 
$
13,192

Net (income) attributable to noncontrolling interests in the Operating Partnership from continuing operations
(596
)
 
(386
)
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
(296
)
 
(423
)
Dividends on Preferred Stock
(627
)
 
(627
)
Income from continuing operations available for common stockholders
19,316

 
11,756

Income from discontinued operations

 
384

Net (income) attributable to noncontrolling interests in the Operating Partnership from discontinued operations

 
(12
)
Income from discontinued operations available for common stockholders

 
372

Net income available for common stockholders
$
19,316

 
$
12,128

Denominator:
 
 
 
Denominator for basic earnings per Common Share – weighted average shares
93,222

 
89,966

Earnings per Common Share - basic:
 
 
 
Income from continuing operations available for common stockholders
$
0.21

 
$
0.13

Income from discontinued operations available for common stockholders

 

Net income available for common stockholders
$
0.21

 
$
0.13

Earnings per Common Share - diluted:
 
 
 
Numerator:
 
 
 
Income from continuing operations
$
20,835

 
$
13,192

Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
(296
)
 
(423
)
Dividends on Preferred Stock
(627
)
 
(627
)
Income from continuing operations available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership
19,912

 
12,142

Income from discontinued operations available for common stockholders

 
384

Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership
$
19,912

 
$
12,526

Denominator:
 
 
 
Denominator for basic earnings per Common Share – weighted average shares
93,222

 
89,966

Add:
 
 
 
Stock options using the treasury method
124

 
124

Noncontrolling interests Common Units
2,933

 
2,940

Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions (1) (2)
96,279

 
93,030

Earnings per Common Share - diluted:
 
 
 
Income from continuing operations available for common stockholders
$
0.21

 
$
0.13

Income from discontinued operations available for common stockholders

 

Net income available for common stockholders
$
0.21

 
$
0.13

__________
(1)
There were 0.2 million and 0.3 million options outstanding during the three months ended March 31, 2015 and 2014, respectively, that were not included in the computation of diluted earnings per share because the impact of including such options would be anti-dilutive.
(2)
Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.
 
13.
Earnings Per Share and Per Unit - Continued

The following table sets forth the computation of basic and diluted earnings per unit of the Operating Partnership:
 
 
Three Months Ended
March 31,
 
2015
 
2014
Earnings per Common Unit - basic:
 
 
 
Numerator:
 
 
 
Income from continuing operations
$
20,835

 
$
13,192

Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
(296
)
 
(423
)
Distributions on Preferred Units
(627
)
 
(627
)
Income from continuing operations available for common unitholders
19,912

 
12,142

Income from discontinued operations available for common unitholders

 
384

Net income available for common unitholders
$
19,912

 
$
12,526

Denominator:
 
 
 
Denominator for basic earnings per Common Unit – weighted average units
95,746

 
92,497

Earnings per Common Unit - basic:
 
 
 
Income from continuing operations available for common unitholders
$
0.21

 
$
0.13

Income from discontinued operations available for common unitholders

 
0.01

Net income available for common unitholders
$
0.21

 
$