HIGHWOODS PROPERTIES, INC., 10-Q filed on 4/29/2014
Quarterly Report
Document and Entity Information Document
3 Months Ended
Mar. 31, 2014
Apr. 21, 2014
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, 2014 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q1 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
90,121,773 
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, 2014 
 
Document Fiscal Year Focus
2014 
 
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, 2014
Dec. 31, 2013
Real estate assets, at cost:
 
 
Land
$ 394,233 
$ 393,602 
Buildings and tenant improvements
3,782,607 
3,748,869 
Development in process
69,527 
44,621 
Land held for development
111,444 
110,374 
Total real estate assets
4,357,811 
4,297,466 
Less-accumulated depreciation
(1,019,931)
(985,244)
Net real estate assets
3,337,880 
3,312,222 
Cash and cash equivalents
13,344 
10,184 
Restricted cash
9,140 
14,169 
Accounts receivable, net of allowance of $1,412 and $1,648, respectively
24,661 
26,430 
Mortgages and notes receivable, net of allowance of $300 and $302, respectively
10,028 
26,409 
Accrued straight-line rents receivable, net of allowance of $1,118 and $1,063, respectively
132,038 
126,014 
Investments in unconsolidated affiliates
28,836 
29,901 
Deferred financing and leasing costs, net of accumulated amortization of $100,639 and $92,220, respectively
218,831 
222,211 
Prepaid expenses and other assets, net of accumulated amortization of $13,186 and $12,905, respectively
45,235 
39,561 
Total Assets
3,819,993 
3,807,101 
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Equity:
 
 
Mortgages and notes payable
2,012,554 
1,956,299 
Accounts payable, accrued expenses and other liabilities
198,856 
218,962 
Financing obligations
26,443 
26,664 
Total Liabilities
2,237,853 
2,201,925 
Commitments and contingencies
   
   
Noncontrolling interests in the Operating Partnership
112,808 
106,480 
Equity:
 
 
Preferred Stock, $.01 par value, 50,000,000 authorized shares; 8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share; 29,077 shares issued and outstanding)
29,077 
29,077 
Common Stock, $.01 par value, 200,000,000 authorized shares; 90,061,731 and 89,920,915 shares issued and outstanding, respectively
901 
899 
Additional paid-in capital
2,367,509 
2,370,368 
Distributions in excess of net income available for common stockholders
(946,530)
(920,433)
Accumulated other comprehensive loss
(2,922)
(2,611)
Total Stockholders’ Equity
1,448,035 
1,477,300 
Noncontrolling interests in consolidated affiliates
21,297 
21,396 
Total Equity
1,469,332 
1,498,696 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Equity
3,819,993 
3,807,101 
Highwoods Realty Limited Partnership [Member]
 
 
Real estate assets, at cost:
 
 
Land
394,233 
393,602 
Buildings and tenant improvements
3,782,607 
3,748,869 
Development in process
69,527 
44,621 
Land held for development
111,444 
110,374 
Total real estate assets
4,357,811 
4,297,466 
Less-accumulated depreciation
(1,019,931)
(985,244)
Net real estate assets
3,337,880 
3,312,222 
Cash and cash equivalents
13,430 
10,281 
Restricted cash
9,140 
14,169 
Accounts receivable, net of allowance of $1,412 and $1,648, respectively
24,661 
26,430 
Mortgages and notes receivable, net of allowance of $300 and $302, respectively
10,028 
26,409 
Accrued straight-line rents receivable, net of allowance of $1,118 and $1,063, respectively
132,038 
126,014 
Investments in unconsolidated affiliates
28,836 
29,901 
Deferred financing and leasing costs, net of accumulated amortization of $100,639 and $92,220, respectively
218,831 
222,211 
Prepaid expenses and other assets, net of accumulated amortization of $13,186 and $12,905, respectively
45,201 
39,561 
Total Assets
3,820,045 
3,807,198 
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Liabilities, Redeemable Operating Partnership Units and Equity:
 
 
Mortgages and notes payable
2,012,554 
1,956,299 
Accounts payable, accrued expenses and other liabilities
198,804 
218,887 
Financing obligations
26,443 
26,664 
Total Liabilities
2,237,801 
2,201,850 
Commitments and contingencies
   
   
Redeemable Operating Partnership Units:
 
 
Common Units, 2,936,955 and 2,943,872 outstanding, respectively
112,808 
106,480 
Series A Preferred Units (liquidation preference $1,000 per unit), 29,077 units issued and outstanding
29,077 
29,077 
Total Redeemable Operating Partnership Units
141,885 
135,557 
Equity:
 
 
General partner Common Units, 925,899 and 924,560 outstanding, respectively
14,219 
14,508 
Limited partner Common Units, 88,727,023 and 88,587,546 outstanding, respectively
1,407,765 
1,436,498 
Accumulated other comprehensive loss
(2,922)
(2,611)
Noncontrolling interests in consolidated affiliates
21,297 
21,396 
Total Equity
1,440,359 
1,469,791 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity/Total Liabilities, Redeemable Operating Partnership Units and Equity
$ 3,820,045 
$ 3,807,198 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2014
Dec. 31, 2013
Assets:
 
 
Accounts receivable allowance
$ 1,412 
$ 1,648 
Mortgages and notes receivable allowance
300 
302 
Accrued straight-line rents receivable allowance
1,118 
1,063 
Deferred financing and leasing costs, accumulated amortization
100,639 
92,220 
Prepaid expenses and other assets, accumulated amortization
13,186 
12,905 
Equity:
 
 
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)
29,077 
29,077 
Series A Preferred Stock, shares outstanding (in shares)
29,077 
29,077 
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)
90,061,731 
89,920,915 
Common Stock, shares outstanding (in shares)
90,061,731 
89,920,915 
Highwoods Realty Limited Partnership [Member]
 
 
Assets:
 
 
Accounts receivable allowance
1,412 
1,648 
Mortgages and notes receivable allowance
300 
302 
Accrued straight-line rents receivable allowance
1,118 
1,063 
Deferred financing and leasing costs, accumulated amortization
100,639 
92,220 
Prepaid expenses and other assets, accumulated amortization
$ 13,186 
$ 12,905 
Redeemable Operating Partnership Units: [Abstract]
 
 
Redeemable Common Units outstanding (in shares)
2,936,955 
2,943,872 
Series A Preferred Units, liquidation preference (in dollars per share)
$ 1,000 
$ 1,000 
Series A Preferred Units, issued (in shares)
29,077 
29,077 
Series A Preferred Units, outstanding (in shares)
29,077 
29,077 
Common Units: [Abstract]
 
 
General partners' capital account, units outstanding (in shares)
925,899 
924,560 
Limited partners' capital account, units outstanding (in shares)
88,727,023 
88,587,546 
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Rental and other revenues
$ 148,453 
$ 130,377 
Operating expenses:
 
 
Rental property and other expenses
56,390 
46,594 
Depreciation and amortization
48,165 
40,088 
General and administrative
10,714 
10,582 
Total operating expenses
115,269 
97,264 
Interest expense:
 
 
Contractual
20,750 
22,798 
Amortization of deferred financing costs
652 
949 
Financing obligations
(40)
121 
Total interest expense
21,362 
23,868 
Other income:
 
 
Interest and other income
1,399 
1,783 
Losses on debt extinguishment
(164)
Total other income
1,399 
1,619 
Income from continuing operations before activity in unconsolidated affiliates
13,221 
10,864 
Equity in earnings/(losses) of unconsolidated affiliates
(29)
436 
Income from continuing operations
13,192 
11,300 
Discontinued operations:
 
 
Income from discontinued operations
2,344 
Impairments of real estate assets
(1,128)
Net gains on disposition of discontinued operations
384 
1,244 
Total discontinued operations
384 
2,460 
Net income
13,576 
13,760 
Net (income) attributable to noncontrolling interests in the Operating Partnership
(398)
(581)
Net (income) attributable to noncontrolling interests in consolidated affiliates
(423)
(203)
Dividends on Preferred Stock
(627)
(627)
Net income available for common stockholders
12,128 
12,349 
Earnings per Common Share – basic:
 
 
Income from continuing operations available for common stockholders (in dollars per share)
$ 0.13 
$ 0.12 
Income from discontinued operations available for common stockholders (in dollars per share)
$ 0.00 
$ 0.03 
Net income available for common stockholders (in dollars per share)
$ 0.13 
$ 0.15 
Weighted average Common Shares outstanding - basic (in shares)
89,966 1 2
81,029 1 2
Earnings per Common Share - diluted:
 
 
Income from continuing operations available for common stockholders (in dollars per share)
$ 0.13 
$ 0.12 
Income from discontinued operations available for common stockholders (in dollars per share)
$ 0.00 
$ 0.03 
Net income available for common stockholders (in dollars per share)
$ 0.13 
$ 0.15 
Weighted average Common Shares outstanding - diluted (in shares)
93,030 1 2
84,862 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
11,756 
9,998 
Income from discontinued operations available for common stockholders
372 
2,351 
Net income available for common stockholders
12,128 
12,349 
Highwoods Realty Limited Partnership [Member]
 
 
Rental and other revenues
148,453 
130,377 
Operating expenses:
 
 
Rental property and other expenses
56,374 
46,620 
Depreciation and amortization
48,165 
40,088 
General and administrative
10,730 
10,556 
Total operating expenses
115,269 
97,264 
Interest expense:
 
 
Contractual
20,750 
22,798 
Amortization of deferred financing costs
652 
949 
Financing obligations
(40)
121 
Total interest expense
21,362 
23,868 
Other income:
 
 
Interest and other income
1,399 
1,783 
Losses on debt extinguishment
(164)
Total other income
1,399 
1,619 
Income from continuing operations before activity in unconsolidated affiliates
13,221 
10,864 
Equity in earnings/(losses) of unconsolidated affiliates
(29)
383 
Income from continuing operations
13,192 
11,247 
Discontinued operations:
 
 
Income from discontinued operations
2,344 
Impairments of real estate assets
(1,128)
Net gains on disposition of discontinued operations
384 
1,244 
Total discontinued operations
384 
2,460 
Net income
13,576 
13,707 
Net (income) attributable to noncontrolling interests in consolidated affiliates
(423)
(203)
Distributions on Preferred Units
(627)
(627)
Net income available for common unitholders
12,526 
12,877 
Earnings per Common Unit - basic:
 
 
Income from continuing operations available for common unitholders (in dollars per share)
$ 0.13 
$ 0.12 
Income from discontinued operations available for common unitholders (in dollars per share)
$ 0.01 
$ 0.03 
Net income available for common unitholders (in dollars per share)
$ 0.14 
$ 0.15 
Weighted average Common Units outstanding - basic (in shares)
92,497 2 3
84,345 2 3
Earnings per Common Unit - diluted:
 
 
Income from continuing operations available for common unitholders (in dollars per share)
$ 0.13 
$ 0.12 
Income from discontinued operations available for common unitholders (in dollars per share)
$ 0.01 
$ 0.03 
Net income available for common unitholders (in dollars per share)
$ 0.14 
$ 0.15 
Weighted average Common Units outstanding - diluted (in shares)
92,621 2 3
84,453 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
12,142 
10,417 
Income from discontinued operations available for common unitholders
384 
2,460 
Net income available for common unitholders
$ 12,526 
$ 12,877 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Comprehensive income:
 
 
Net income
$ 13,576 
$ 13,760 
Other comprehensive income/(loss):
 
 
Unrealized gains/(losses) on tax increment financing bond
165 
390 
Unrealized gains/(losses) on cash flow hedges
(1,404)
280 
Amortization of cash flow hedges
928 
788 
Total other comprehensive income/(loss)
(311)
1,458 
Total comprehensive income
13,265 
15,218 
Less-comprehensive (income) attributable to noncontrolling interests
(821)
(784)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders
12,444 
14,434 
Highwoods Realty Limited Partnership [Member]
 
 
Comprehensive income:
 
 
Net income
13,576 
13,707 
Other comprehensive income/(loss):
 
 
Unrealized gains/(losses) on tax increment financing bond
165 
390 
Unrealized gains/(losses) on cash flow hedges
(1,404)
280 
Amortization of cash flow hedges
928 
788 
Total other comprehensive income/(loss)
(311)
1,458 
Total comprehensive income
13,265 
15,165 
Less-comprehensive (income) attributable to noncontrolling interests
(423)
(203)
Comprehensive income attributable to common stockholders/Comprehensive income attributable to common unitholders
$ 12,842 
$ 14,962 
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, 2012
$ 1,164,893 
$ 1,135,033 
$ 803 
$ 29,077 
$ 11,427 
$ 1,131,481 
$ 2,040,306 
$ (12,628)
$ (12,628)
$ 4,753 
$ 4,753 
$ (897,418)
Balance (in shares) at Dec. 31, 2012
 
 
80,311,437 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
Issuances of Common Units, net of units redeemed for tax withholdings
 
55,804 
 
 
558 
55,246 
 
 
 
 
Distributions paid on Common Units
 
(35,669)
 
 
(356)
(35,313)
 
 
 
 
Distributions paid on Preferred Units
 
(627)
 
 
(6)
(621)
 
 
 
 
Issuances of Common Stock - Shares
 
 
1,664,519 
 
 
 
 
 
 
 
 
 
Issuances of Common Stock, net of shares redeemed for tax withholdings
55,804 
 
17 
 
 
55,787 
 
 
Conversions of Common Units to Common Stock - Shares
 
 
10,071 
 
 
 
 
 
 
 
 
 
Conversions of Common Units to Common Stock
351 
 
 
 
351 
 
 
Dividends on Common Stock
(34,259)
 
 
 
 
 
(34,259)
Dividends on Preferred Stock
(627)
 
 
 
 
 
(627)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
(23,802)
 
 
 
(23,802)
 
 
Distributions to noncontrolling interests in consolidated affiliates
(265)
(265)
(265)
(265)
Issuances of restricted stock -shares
 
 
144,566 
 
 
 
 
 
 
 
 
 
Issuances of restricted stock
 
 
 
 
 
Share-based compensation expense, net of forfeitures
3,440 
3,440 
34 
3,406 
3,439 
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner
 
(22,854)
 
 
(229)
(22,625)
 
 
 
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
(581)
 
 
 
 
 
(581)
Net (income) attributable to noncontrolling interests in consolidated affiliates
(2)
(201)
203 
203 
(203)
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
Net income
13,760 
13,707 
137 
13,570 
13,760 
Other comprehensive income/(loss)
1,458 
1,458 
1,458 
1,458 
Total comprehensive income
15,218 
15,165 
 
 
 
 
 
 
 
 
 
 
Balance at Mar. 31, 2013
1,180,172 
1,150,027 
821 
29,077 
11,563 
1,144,943 
2,076,081 
(11,170)
(11,170)
4,691 
4,691 
(919,328)
Balance (in shares) at Mar. 31, 2013
 
 
82,130,593 
 
 
 
 
 
 
 
 
 
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 
 
89,920,915 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
Issuances of Common Units, net of units redeemed for 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 shares redeemed for 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 - Shares
 
 
 
 
 
 
 
 
 
 
 
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 
 
90,061,731 
 
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Operating activities:
 
 
Net income
$ 13,576 
$ 13,760 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
48,165 
42,292 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
82 
(136)
Share-based compensation expense
4,262 
3,440 
Allowance for losses on accounts and accrued straight-line rents receivable
1,125 
426 
Accrued interest on mortgages and notes receivable
(115)
Amortization of deferred financing costs
652 
949 
Amortization of cash flow hedges
928 
788 
Amortization of mortgages and notes payable fair value adjustments
(809)
Impairments of real estate assets
1,128 
Losses on debt extinguishment
164 
Net gains on disposition of property
(384)
(1,244)
Equity in (earnings)/losses of unconsolidated affiliates
29 
(436)
Changes in financing obligations
(221)
(105)
Distributions of earnings from unconsolidated affiliates
788 
1,145 
Changes in operating assets and liabilities:
 
 
Accounts receivable
713 
(1,479)
Prepaid expenses and other assets
(5,260)
(2,533)
Accrued straight-line rents receivable
(6,457)
(5,788)
Accounts payable, accrued expenses and other liabilities
(25,690)
(10,252)
Net cash provided by operating activities
31,384 
42,119 
Investing activities:
 
 
Investments in acquired real estate and related intangible assets, net of cash acquired
(88,332)
Investments in development in process
(27,232)
(4,978)
Investments in tenant improvements and deferred leasing costs
(24,782)
(18,004)
Investments in building improvements
(13,007)
(13,107)
Net proceeds from disposition of real estate assets
14,971 
Distributions of capital from unconsolidated affiliates
230 
363 
Investments in mortgages and notes receivable
(108)
Repayments of mortgages and notes receivable
16,604 
Investments in unconsolidated affiliates
(429)
Changes in restricted cash and other investing activities
4,043 
10,262 
Net cash (used in) investing activities
(44,252)
(99,254)
Financing activities:
 
 
Dividends on Common Stock
(38,225)
(34,259)
Redemptions of Common Units
(93)
Dividends on Preferred Stock
(627)
(627)
Distributions to noncontrolling interests in the Operating Partnership
(1,249)
(1,584)
Distributions to noncontrolling interests in consolidated affiliates
(522)
(265)
Proceeds from the issuance of Common Stock
1,313 
59,019 
Costs paid for the issuance of Common Stock
(14)
(701)
Repurchase of shares related to tax withholdings
(1,523)
(2,514)
Borrowings on revolving credit facility
96,100 
135,900 
Repayments of revolving credit facility
(36,800)
(61,400)
Repayments of mortgages and notes payable
(2,236)
(37,214)
Additions to deferred financing costs and other financing activities
(96)
(833)
Net cash provided by financing activities
16,028 
55,522 
Net increase/(decrease) in cash and cash equivalents
3,160 
(1,613)
Cash and cash equivalents at beginning of the period
10,184 
13,783 
Cash and cash equivalents at end of the period
13,344 
12,170 
Supplemental disclosure of cash flow information:
 
 
Cash paid for interest, net of amounts capitalized
25,054 
21,887 
Supplemental disclosure of non-cash investing and financing activities:
 
 
Unrealized gains/(losses) on cash flow hedges
(1,404)
280 
Conversions of Common Units to Common Stock
162 
351 
Changes in accrued capital expenditures
5,399 
5,158 
Write-off of fully depreciated real estate assets
3,121 
6,467 
Write-off of fully amortized deferred financing and leasing costs
3,697 
4,872 
Unrealized gains on marketable securities of non-qualified deferred compensation plan
59 
283 
Adjustment of noncontrolling interests in the Operating Partnership to fair value
7,434 
23,802 
Unrealized gains on tax increment financing bond
165 
390 
Highwoods Realty Limited Partnership [Member]
 
 
Operating activities:
 
 
Net income
13,576 
13,707 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
48,165 
42,292 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
82 
(136)
Share-based compensation expense
4,262 
3,440 
Allowance for losses on accounts and accrued straight-line rents receivable
1,125 
426 
Accrued interest on mortgages and notes receivable
(115)
Amortization of deferred financing costs
652 
949 
Amortization of cash flow hedges
928 
788 
Amortization of mortgages and notes payable fair value adjustments
(809)
Impairments of real estate assets
1,128 
Losses on debt extinguishment
164 
Net gains on disposition of property
(384)
(1,244)
Equity in (earnings)/losses of unconsolidated affiliates
29 
(383)
Changes in financing obligations
(221)
(105)
Distributions of earnings from unconsolidated affiliates
788 
1,139 
Changes in operating assets and liabilities:
 
 
Accounts receivable
713 
(1,479)
Prepaid expenses and other assets
(5,226)
(2,391)
Accrued straight-line rents receivable
(6,457)
(5,788)
Accounts payable, accrued expenses and other liabilities
(25,667)
(10,155)
Net cash provided by operating activities
31,441 
42,352 
Investing activities:
 
 
Investments in acquired real estate and related intangible assets, net of cash acquired
(88,332)
Investments in development in process
(27,232)
(4,978)
Investments in tenant improvements and deferred leasing costs
(24,782)
(18,004)
Investments in building improvements
(13,007)
(13,107)
Net proceeds from disposition of real estate assets
14,971 
Distributions of capital from unconsolidated affiliates
230 
363 
Investments in mortgages and notes receivable
(108)
Repayments of mortgages and notes receivable
16,604 
Investments in unconsolidated affiliates
(429)
Changes in restricted cash and other investing activities
4,043 
10,262 
Net cash (used in) investing activities
(44,252)
(99,254)
Financing activities:
 
 
Distributions on Common Units
(39,300)
(35,669)
Redemptions of Common Units
(93)
Distributions on Preferred Units
(627)
(627)
Distributions to noncontrolling interests in consolidated affiliates
(522)
(265)
Proceeds from the issuance of Common Units
1,313 
59,019 
Costs paid for the issuance of Common Units
(14)
(701)
Repurchase of units related to tax withholdings
(1,523)
(2,514)
Borrowings on revolving credit facility
96,100 
135,900 
Repayments of revolving credit facility
(36,800)
(61,400)
Repayments of mortgages and notes payable
(2,236)
(37,214)
Additions to deferred financing costs and other financing activities
(338)
(1,240)
Net cash provided by financing activities
15,960 
55,289 
Net increase/(decrease) in cash and cash equivalents
3,149 
(1,613)
Cash and cash equivalents at beginning of the period
10,281 
13,867 
Cash and cash equivalents at end of the period
13,430 
12,254 
Supplemental disclosure of cash flow information:
 
 
Cash paid for interest, net of amounts capitalized
25,054 
21,887 
Supplemental disclosure of non-cash investing and financing activities:
 
 
Unrealized gains/(losses) on cash flow hedges
(1,404)
280 
Changes in accrued capital expenditures
5,399 
5,158 
Write-off of fully depreciated real estate assets
3,121 
6,467 
Write-off of fully amortized deferred financing and leasing costs
3,697 
4,872 
Unrealized gains on marketable securities of non-qualified deferred compensation plan
59 
283 
Adjustment of Redeemable Common Units to fair value
6,328 
22,448 
Unrealized gains on tax increment financing bond
$ 165 
$ 390 
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, 2014, we owned or had an interest in 32.1 million rentable square feet of in-service office, industrial and retail properties, 0.8 million rentable square feet of office properties under development and approximately 600 acres of development land.

The Company is the sole general partner of the Operating Partnership. At March 31, 2014, the Company owned all of the Preferred Units and 89.7 million, or 96.8%, 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, 2014, the Company redeemed 2,500 Common Units for less than $0.1 million in cash and redeemed 4,417 Common Units for a like number of shares of Common Stock.

Common Stock Offerings
 
During the three months ended March 31, 2014, the Company issued 23,584 shares of Common Stock under its equity sales agreements at an average gross sales price of $38.29 per share and received net proceeds, after sales commissions, of $0.9 million.

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 months ended March 31, 2013 were retrospectively revised from previously reported amounts to reflect in discontinued operations 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. All intercompany transactions and accounts have been eliminated. At March 31, 2014 and December 31, 2013, we had involvement with, but are not the primary beneficiary in, an entity that we concluded to be a variable interest entity (see Note 2).
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 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 2013 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

Beginning with our Quarterly Report on Form 10-Q for the three months ended March 31, 2015, we will be required to reflect in discontinued operations for only those real estate asset sales representing a strategic shift in operations (e.g. a disposal of a major geographic area or a major line of business).  Currently, we are required to reflect all real estate asset sales as discontinued operations, which requires reclassification of the earnings of the sold assets from continuing operations for all periods presented.  Early adoption is permitted, but only for real estate asset sales that have not been previously reflected as discontinued operations.
Mortgages and Notes Receivable
Mortgages and Notes Receivable
Mortgages and Notes Receivable

The following table sets forth our mortgages and notes receivable:

 
March 31,
2014
 
December 31,
2013
Seller financing (first mortgages)
$

 
$
16,454

Less allowance

 

 

 
16,454

Mortgage receivable
9,658

 
9,435

Less allowance

 

 
9,658

 
9,435

Promissory notes
670

 
822

Less allowance
(300
)
 
(302
)
 
370

 
520

Mortgages and notes receivable, net
$
10,028

 
$
26,409



During 2010, we provided seller financing in conjunction with two disposition transactions. We accounted for these dispositions using the installment method, whereby a gain on disposition of property was deferred until the seller financing was repaid. During the first quarter of 2014, the $16.5 million of seller financing was fully repaid and we recorded the $0.4 million gain on disposition of property.

During 2012, we provided secured acquisition financing to a third party. We also agreed to loan such third party $8.4 million on a secured basis to fund future infrastructure development. As of March 31, 2014, $0.4 million has been funded to the third party for infrastructure development. 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, 2014, 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,
 
2014
 
2013
Beginning notes receivable allowance
$
302

 
$
182

Recoveries/write-offs/other
(2
)
 
255

Total notes receivable allowance
$
300

 
$
437

Investments In and Advances To Affiliates
Investments In and Advances To Affiliates
Investments in 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,
 
2014
 
2013
Income Statements:
 
 
 
Rental and other revenues
$
12,434

 
$
23,516

Expenses:
 
 
 
Rental property and other expenses
6,217

 
11,209

Depreciation and amortization
3,489

 
6,146

Impairments of real estate assets

 
4,790

Interest expense
2,211

 
4,739

Total expenses
11,917

 
26,884

Income/(loss) before disposition of properties
517

 
(3,368
)
Gains on disposition of properties
1,949

 
24

Net income/(loss)
$
2,466

 
$
(3,344
)
Our share of:
 
 
 
Depreciation and amortization
$
1,031

 
$
2,015

Impairments of real estate assets
$

 
$
1,020

Interest expense
$
776

 
$
1,752

Gains on disposition of properties
$
955

 
$
421

Net income
$
1,155

 
$
4

 
 
 
 
Our share of net income
$
1,155

 
$
4

Adjustments for management and other fees
169

 
432

Impairment of investment in unconsolidated affiliate
(1,353
)
 

Equity in earnings/(losses) of unconsolidated affiliates
$
(29
)
 
$
436



Board of Trade Investment Company ("Board of Trade")

During the first quarter of 2014, Board of Trade sold an office property to an unrelated third party for gross proceeds of $8.3 million and recorded a gain of $1.9 million. We expect to receive aggregate net distributions of $4.7 million in connection with our investment in this entity. As our cost basis is different from the basis reflected at the entity level, we recorded a net impairment charge on our investment of $0.4 million. This charge represented the other-than-temporary decline in the fair value below the carrying value of our investment.
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,
2014
 
December 31,
2013
Assets:
 
 
 
Deferred financing costs
$
17,329

 
$
17,363

Less accumulated amortization
(5,789
)
 
(5,204
)
 
11,540

 
12,159

Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
302,141

 
297,068

Less accumulated amortization
(94,850
)
 
(87,016
)
 
207,291

 
210,052

Deferred financing and leasing costs, net
$
218,831

 
$
222,211

 
 
 
 
Liabilities (in accounts payable, accrued expenses and other liabilities):
 
 
 
Acquisition-related below market lease liabilities
$
54,996

 
$
55,323

Less accumulated amortization
(9,673
)
 
(8,478
)
 
$
45,323

 
$
46,845


The following table sets forth amortization of intangible assets and below market lease liabilities:
 
 
Three Months Ended March 31,
 
2014
 
2013
Amortization of deferred financing costs
$
652

 
$
949

Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
9,928

 
$
8,075

Amortization of lease incentives (in rental and other revenues)
$
351

 
$
376

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
1,116

 
$
466

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)
$
(1,522
)
 
$
(1,122
)


4.    Intangible Assets and Below Market Lease Liabilities - Continued

The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities:

 
 
Amortization of Deferred 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, 2014
 
$
2,104

 
$
29,555

 
$
983

 
$
3,221

 
$
416

 
$
(4,479
)
2015
 
2,765

 
33,532

 
1,083

 
3,619

 
553

 
(5,718
)
2016
 
2,500

 
27,957

 
910

 
2,810

 
553

 
(5,427
)
2017
 
2,205

 
23,985

 
840

 
2,269

 
553

 
(5,164
)
2018
 
1,080

 
19,729

 
737

 
1,426

 
553

 
(5,016
)
Thereafter
 
886

 
44,666

 
2,487

 
3,768

 
1,086

 
(19,519
)
 
 
$
11,540

 
$
179,424

 
$
7,040

 
$
17,113

 
$
3,714

 
$
(45,323
)
Weighted average remaining amortization periods as of March 31, 2014 (in years)
 
4.5

 
6.7

 
8.3

 
6.6

 
6.7

 
8.9


 
 
 
 
 
 
 


Mortgages and Notes Payable
Mortgages and Notes Payable
Mortgages and Notes Payable

The following table sets forth our mortgages and notes payable:

 
March 31,
2014
 
December 31,
2013
Secured indebtedness
$
485,525

 
$
488,664

Unsecured indebtedness
1,527,029

 
1,467,635

Total mortgages and notes payable
$
2,012,554

 
$
1,956,299



At March 31, 2014, our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $817.9 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 $275.0 million and $409.0 million outstanding under our revolving credit facility at March 31, 2014 and April 21, 2014, respectively. At both March 31, 2014 and April 21, 2014, we had $0.1 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at March 31, 2014 and April 21, 2014 was $199.9 million and $65.9 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 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, 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, 2014 through March 31, 2015, we estimate that $3.4 million will be reclassified to interest expense.
 
The following table sets forth the gross fair value of our derivatives:
 
March 31,
2014
 
December 31,
2013
Derivatives:
 
 
 
Derivatives designated as cash flow hedges in prepaid expenses and other assets:
 
 
 
Interest rate swaps
$

 
$
301

Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
 
 
 
Interest rate swaps
$
763

 
$
510



The following table sets forth the effect of our cash flow hedges on AOCL and interest expense:
 
 
Three Months Ended March 31,
 
2014
 
2013
Derivatives Designated as Cash Flow Hedges:
 
 
 
Amount of unrealized gains/(losses) recognized in AOCL on derivatives (effective portion):
 
 
 
Interest rate swaps
$
(1,404
)
 
$
280

Amount of losses reclassified out of AOCL into contractual interest expense (effective portion):
 
 
 
Interest rate swaps
$
928

 
$
788

Noncontrolling Interests
Noncontrolling Interests
Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates
 
At March 31, 2014, 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,
 
2014
 
2013
Beginning noncontrolling interests in the Operating Partnership
$
106,480

 
$
124,869

Adjustment of noncontrolling interests in the Operating Partnership to fair value
7,434

 
23,802

Conversions of Common Units to Common Stock
(162
)
 
(351
)
Redemptions of Common Units
(93
)
 

Net income attributable to noncontrolling interests in the Operating Partnership
398

 
581

Distributions to noncontrolling interests in the Operating Partnership
(1,249
)
 
(1,584
)
Total noncontrolling interests in the Operating Partnership
$
112,808

 
$
147,317


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,
 
2014
 
2013
Net income available for common stockholders
$
12,128

 
$
12,349

Increase in additional paid in capital from conversions of Common Units to Common Stock
162

 
351

Change from net income available for common stockholders and transfers from noncontrolling interests
$
12,290

 
$
12,700

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 assets include investments in marketable securities that we use to pay benefits under our non-qualified deferred compensation plan and an investment in an unconsolidated affiliate recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis. The investment is primarily comprised of undistributed cash remaining after the sale of its sole real estate asset. Our Level 1 liability is our non-qualified deferred compensation obligation. The Company's Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company.

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

Our Level 2 assets include the fair value of certain of our mortgages and notes receivable and certain of our interest rate swaps. Our Level 2 liabilities include the fair value of our mortgages and notes payable and the remainder of our 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, (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, and (3) any real estate assets recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis, which were valued using the terms of definitive sales contracts or the sales comparison approach and substantiated with internal cash flow projections.
 
Our Level 3 liabilities include the fair value of our contingent consideration to acquire real estate assets and financing obligations, which were 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.


8.
Disclosure About Fair Value of Financial Instruments - Continued

The following table sets forth our assets and liabilities and the Company's noncontrolling interests in the Operating Partnership that are measured 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, 2014:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
10,037

 
$

 
$
370

 
$
9,667

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
3,721

 
3,721

 

 

Impaired investment in unconsolidated affiliate
 
4,668

 
4,668

 

 

Tax increment financing bond (in prepaid expenses and other assets)
 
13,568

 

 

 
13,568

Total Assets
 
$
31,994

 
$
8,389

 
$
370

 
$
23,235

Noncontrolling Interests in the Operating Partnership
 
$
112,808

 
$
112,808

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, at fair value (1)
 
$
2,101,898

 
$

 
$
2,101,898

 
$

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
763

 

 
763

 

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
3,721

 
3,721

 

 

Financing obligations, at fair value (1)
 
22,203

 

 

 
22,203

Total Liabilities
 
$
2,128,585

 
$
3,721

 
$
2,102,661

 
$
22,203

Fair Value at December 31, 2013:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Mortgages and notes receivable, at fair value (1)
 
$
26,485

 
$

 
$
17,029

 
$
9,456

Interest rate swaps (in prepaid expenses and other assets)
 
301

 

 
301

 

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
3,996

 
3,996

 

 

Tax increment financing bond (in prepaid expenses and other assets)
 
13,403

 

 

 
13,403

Total Assets
 
$
44,185

 
$
3,996

 
$
17,330

 
$
22,859

Noncontrolling Interests in the Operating Partnership
 
$
106,480

 
$
106,480

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
 
Mortgages and notes payable, at fair value (1)
 
$
2,037,385

 
$

 
$
2,037,385

 
$

Interest rate swaps (in accounts payable, accrued expenses and other liabilities)
 
510

 

 
510

 

Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
3,996

 
3,996

 

 

Financing obligations, at fair value (1)
 
22,478

 

 

 
22,478

Total Liabilities
 
$
2,064,369

 
$
3,996

 
$
2,037,895

 
$
22,478


__________
(1)    Amounts recorded at historical cost on our Consolidated Balance Sheets at March 31, 2014 and December 31, 2013.
8.
Disclosure About Fair Value of Financial Instruments - Continued

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

 
Three Months Ended March 31,
 
2014
 
2013
Asset:
 
 
 
Tax Increment Financing Bond:
 
 
 
Beginning balance
$
13,403

 
$
14,496

Principal repayment

 
(562
)
Unrealized gains (in AOCL)
165

 
390

Ending balance
$
13,568

 
$
14,324

Liability:
 
 
 
Contingent Consideration to Acquire Real Estate Assets:
 
 
 
Beginning balance
$

 
$
563

Recognized gains (in general and administrative expenses)

 
(188
)
Ending balance
$

 
$
375



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, 2014 was $0.9 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, 2014. 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, 2014 and 2013. 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/ Percentage
Asset:
 
 
 
 
 
Tax increment financing bond
Income approach
 
Discount rate
 
9.7%
Share-Based Payments
Share-Based Payments
Share-Based Payments
 
During the three months ended March 31, 2014, the Company granted 166,081 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 $6.89. During the three months ended March 31, 2014, the Company also granted 79,056 shares of time-based restricted stock and 65,770 shares of total return-based restricted stock with weighted average grant date fair values per share of $37.55 and $35.24, respectively. We recorded share-based compensation expense of $4.3 million and $3.4 million during the three months ended March 31, 2014 and 2013, respectively. At March 31, 2014, there was $6.2 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 2.7 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,
 
2014
 
2013
Tax increment financing bond:
 
 
 
Beginning balance
$
(1,029
)
 
$
(1,898
)
Unrealized gains on tax increment financing bond
165

 
390

Ending balance
(864
)
 
(1,508
)
Cash flow hedges:
 
 
 
Beginning balance
(1,582
)
 
(10,730
)
Unrealized gains/(losses) on cash flow hedges
(1,404
)
 
280

Amortization of cash flow hedges (1)
928

 
788

Ending balance
(2,058
)
 
(9,662
)
Total accumulated other comprehensive loss
$
(2,922
)
 
$
(11,170
)
__________
(1)    Amounts reclassified out of AOCL into contractual interest expense.
Discontinued Operations
Discontinued Operations
Discontinued Operations

The following table sets forth our operations classified as discontinued operations:

 
Three Months Ended March 31,
 
2014
 
2013
Rental and other revenues
$

 
$
6,998

Operating expenses:
 
 
 
Rental property and other expenses

 
2,450

Depreciation and amortization

 
2,204

Total operating expenses

 
4,654

Income from discontinued operations

 
2,344

Impairments of real estate assets

 
(1,128
)
Net gains on disposition of discontinued operations
384

 
1,244

Total discontinued operations
$
384

 
$
2,460

 
 
 
 
Earnings Per Share/Unit
Earnings Per Share/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,
 
2014
 
2013
Earnings per Common Share - basic:
 
 
 
Numerator:
 
 
 
Income from continuing operations
$
13,192

 
$
11,300

Net (income) attributable to noncontrolling interests in the Operating Partnership from continuing operations
(386
)
 
(472
)
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
(423
)
 
(203
)
Dividends on Preferred Stock
(627
)
 
(627
)
Income from continuing operations available for common stockholders
11,756

 
9,998

Income from discontinued operations
384

 
2,460

Net (income) attributable to noncontrolling interests in the Operating Partnership from discontinued operations
(12
)
 
(109
)
Income from discontinued operations available for common stockholders
372

 
2,351

Net income available for common stockholders
$
12,128

 
$
12,349

Denominator:
 
 
 
Denominator for basic earnings per Common Share – weighted average shares
89,966

 
81,029

Earnings per Common Share - basic: