UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K

[X]	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the fiscal year ended December 31, 2015
 
OR

[  ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the transition period from________ to___________

HIGHWOODS PROPERTIES, INC.
(Exact name of registrant as specified in its charter)

					
 	Maryland	001-13100	56-1871668	 	
 	(State or other jurisdiction
of incorporation or organization)	(Commission
File Number)	(I.R.S. Employer
Identification Number)	 	
 
HIGHWOODS REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

					
 	North Carolina	000-21731	56-1869557	 	
 	(State or other jurisdiction
of incorporation or organization)	(Commission
File Number)	(I.R.S. Employer
Identification Number)	 	
 
3100 Smoketree Court, Suite 600
Raleigh, NC 27604
(Address of principal executive offices) (Zip Code)
919-872-4924
(Registrants’ telephone number, including area code)
______________
Securities registered pursuant to Section 12(b) of the Act:

		
Title of Each Class	Name of Each Exchange on Which Registered	
Common Stock, $.01 par value, of Highwoods Properties, Inc.	New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act:
NONE
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Highwoods Properties, Inc.   Yes   x     No ¨      Highwoods Realty Limited Partnership   Yes   x     No ¨
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act.
Highwoods Properties, Inc.   Yes   ¨     No x      Highwoods Realty Limited Partnership   Yes   ¨     No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Highwoods Properties, Inc.   Yes   x     No ¨      Highwoods Realty Limited Partnership   Yes   x     No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Highwoods Properties, Inc.   Yes   x     No ¨      Highwoods Realty Limited Partnership   Yes   x     No ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of such registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of ‘large accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Securities Exchange Act.
 
Highwoods Properties, Inc.
Large accelerated filer x     Accelerated filer ¨       Non-accelerated filer ¨       Smaller reporting company ¨
 
Highwoods Realty Limited Partnership
Large accelerated filer ¨     Accelerated filer ¨       Non-accelerated filer x       Smaller reporting company ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).
Highwoods Properties, Inc.   Yes   ¨     No x      Highwoods Realty Limited Partnership   Yes   ¨     No x
 
The aggregate market value of shares of Common Stock of Highwoods Properties, Inc. held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on June 30, 2015 was approximately $3.7 billion . At January 29, 2016 , there were 96,103,555 shares of Common Stock outstanding.
 
There is no public trading market for the Common Units of Highwoods Realty Limited Partnership. As a result, an aggregate market value of the Common Units of Highwoods Realty Limited Partnership cannot be determined.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the Proxy Statement of Highwoods Properties, Inc. to be filed in connection with its Annual Meeting of Stockholders to be held May 11, 2016 are incorporated by reference in Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14.

	

EXPLANATORY NOTE

We refer to Highwoods Properties, Inc. as the “Company,” Highwoods Realty Limited Partnership as the “Operating Partnership,” the Company’s common stock as “Common Stock” or “Common Shares,” the Company’s preferred stock as “Preferred Stock” or “Preferred Shares,” the Operating Partnership’s common partnership interests as “Common Units” and the Operating Partnership’s preferred partnership interests as “Preferred Units." References to “we” and “our” mean the Company and the Operating Partnership, collectively, unless the context indicates otherwise.

The Company conducts its activities through the Operating Partnership and is its sole general partner. The partnership agreement provides that the Operating Partnership will assume and pay when due, or reimburse the Company for payment of, all costs and expenses relating to the ownership and operations of, or for the benefit of, the Operating Partnership. The partnership agreement further provides that all expenses of the Company are deemed to be incurred for the benefit of the Operating Partnership.

Certain information contained herein is presented as of January 29, 2016 , the latest practicable date for financial information prior to the filing of this Annual Report.

This report combines the Annual Reports on Form 10-K for the period ended December 31, 2015 of the Company and the Operating Partnership. We believe combining the annual reports into this single report results in the following benefits:

•	combined reports better reflect how management and investors view the business as a single operating unit;	

•	combined reports enhance investors' understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;	

•	combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and	

•	combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.	

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

•	Item 6 - Selected Financial Data;	

•	Item 9A - Controls and Procedures;	

•	Item 15 - Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act;	

•	Consolidated Financial Statements; and	

•	the following Notes to Consolidated Financial Statements:	

•	Note 10 - Noncontrolling Interests;	

•	Note 12 - Equity;	

•	Note 17 - Earnings Per Share and Per Unit; and	

•	Note 20 - Quarterly Financial Data.	

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP

TABLE OF CONTENTS

	
			
Item No.	 	Page	
 	PART I	 	
1.	BUSINESS	4	
1A.	RISK FACTORS	5	
1B.	UNRESOLVED STAFF COMMENTS	14	
2.	PROPERTIES	15	
3.	LEGAL PROCEEDINGS	20	
X.	EXECUTIVE OFFICERS OF THE REGISTRANT	20	
 	 	 	
 	PART II	 	
5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	22	
6.	SELECTED FINANCIAL DATA	24	
7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26	
7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	46	
8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	46	
9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	46	
9A.	CONTROLS AND PROCEDURES	47	
9B.	OTHER INFORMATION	50	
 	 	 	
 	PART III	 	
10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	51	
11.	EXECUTIVE COMPENSATION	51	
12.	SECURITY OWNERSIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	51	
13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	51	
14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	51	
 	 	 	
 	PART IV	 	
15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	52	

3

Table of Contents

PART I

ITEM 1. BUSINESS
 
General
 
Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded real estate investment trust ("REIT"). The Company is a fully integrated office REIT that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Greensboro, Kansas City, Memphis, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. Our Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "HIW."

At December 31, 2015 , the Company owned all of the Preferred Units and 95.7 million , or 97.1% , of the Common Units. Limited partners owned the remaining 2.9 million Common Units. Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock. The Common Units owned by the Company are not redeemable.
 
The Company was incorporated in Maryland in 1994. The Operating Partnership was formed in North Carolina in 1994. Our executive offices are located at 3100 Smoketree Court, Suite 600, Raleigh, NC 27604, and our telephone number is (919) 872-4924.
 
Our business is the operation, acquisition and development of real estate properties. There are no material inter-segment transactions. See Note 19 to our Consolidated Financial Statements for a summary of the rental and other revenues, net operating income and assets for each reportable segment.

Our website is www.highwoods.com. In addition to this Annual Report, all quarterly and current reports, proxy statements, interactive data and other information are made available, without charge, on our website as soon as reasonably practicable after they are filed or furnished with the Securities and Exchange Commission ("SEC"). The information on our website does not constitute part of this Annual Report. Reports filed or furnished with the SEC may also be viewed at www.sec.gov or obtained at the SEC's public reference facilities. Please call the SEC at (800) 732-0330 for further information about the public reference facilities.
 
During 2015 , the Company filed unqualified Section 303A certifications with the NYSE. The Company and the Operating Partnership have also filed the CEO and CFO certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as exhibits to this Annual Report.
 
Business and Operating Strategy
 
Our Strategic Plan focuses on:

•	owning high-quality, differentiated office buildings in the BBDs of our core markets;	

•	improving the operating results of our existing properties through concentrated leasing, asset management, cost control and customer service efforts;	

•	developing and acquiring office buildings in BBDs that improve the overall quality of our portfolio and generate attractive returns over the long term for our stockholders;	

•	disposing of properties no longer considered to be core assets primarily due to location, age, quality and overall strategic fit; and	

•	maintaining a conservative and flexible balance sheet with ample liquidity to meet our funding needs and growth prospects. 	

Local Market Leadership . We focus our real estate activities in markets where we have extensive local knowledge and own a significant amount of assets. In each of our core markets, we maintain offices that are led by division officers with significant real estate experience. Our real estate professionals are seasoned and cycle-tested. Our senior leadership team has significant experience and maintains important relationships with market participants in each of our core markets.

4

Table of Contents

Customer Service-Oriented Organization . We provide a complete line of real estate services to our customers. We believe that our in-house leasing and asset management, development, acquisition and construction management services generally allow us to respond to the many demands of our existing and potential customer base. We provide our customers with cost-effective services such as build-to-suit construction and space modification, including tenant improvements and expansions. In addition, the breadth of our capabilities and resources provides us with market information not generally available. We believe that operating efficiencies achieved through our fully integrated organization and the strength of our balance sheet also provide a competitive advantage in retaining existing customers and attracting new customers as well as setting our lease rates and pricing other services. In addition, our relationships with our customers may lead to development projects when these customers seek new space.
 
Geographic Diversification . Our core portfolio consists primarily of office properties in Raleigh, Atlanta, Tampa, Nashville, Memphis, Pittsburgh, Richmond and Orlando, office and industrial properties in Greensboro and retail and office properties in Kansas City. We do not believe that our operations are significantly dependent upon any particular geographic market.
 
Conservative and Flexible Balance Sheet . We are committed to maintaining a conservative and flexible balance sheet that allows us to capitalize on favorable development and acquisition opportunities as they arise. Our balance sheet also allows us to proactively assure our existing and prospective customers that we are able to fund tenant improvements and maintain our properties in good condition.
 
Competition
 
Our properties compete for customers with similar properties located in our markets primarily on the basis of location, rent, services provided and the design, quality and condition of the facilities. We also compete with other domestic and foreign REITs, financial institutions, pension funds, partnerships, individual investors and others when attempting to acquire, develop and operate properties.
 
Employees
 
At December 31, 2015 , we had 447 full-time employees.

ITEM 1A. RISK FACTORS
 
An investment in our securities involves various risks. Investors should carefully consider the following risk factors in conjunction with the other information contained in this Annual Report before trading in our securities. If any of these risks actually occur, our business, results of operations, prospects and financial condition could be adversely affected.

Adverse economic conditions in our markets that negatively impact the demand for office space, such as high unemployment, may result in lower occupancy and rental rates for our portfolio, which would adversely affect our results of operations . Our operating results depend heavily on successfully leasing and operating the office space in our portfolio. Economic growth and employment levels in our core markets are and will continue to be important factors in predicting our future operating results.

Key components affecting our rental and other revenues include average occupancy, rental rates, cost recovery income, new developments placed in service, acquisitions and dispositions. Average occupancy generally increases during times of improving economic growth, as our ability to lease space outpaces vacancies that occur upon the expirations of existing leases. Average occupancy generally declines during times of slower economic growth and decreasing office employment because new vacancies tend to outpace our ability to lease space. In addition, the timing of changes in occupancy levels tends to lag the timing of changes in overall economic activity and employment levels. For additional information regarding our average occupancy and rental rate trends over the past five years, see “Item 2. Properties.” Lower rental revenues that result from lower average occupancy or lower rental rates with respect to our same property portfolio will adversely affect our results of operations unless offset by the impact of any newly acquired or developed properties or lower variable operating expenses, general and administrative expenses and/or interest expense.

We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to the existing leases, or we may spend significant capital in our efforts to renew and re-let space, which may adversely affect our results of operations. In addition to seeking to increase our average occupancy by leasing current vacant space, we also concentrate our leasing efforts on renewing existing leases. Because we compete with a number of other developers, owners and operators of office and office-oriented, mixed-use properties, we may be unable to renew leases with our existing customers and, if our current customers do not renew their leases, we may be unable to re-let the space to new customers. To the

5

Table of Contents

extent that we are able to renew existing leases or re-let such space to new customers, heightened competition resulting from adverse market conditions may require us to utilize rent concessions and tenant improvements to a greater extent than we anticipate or have historically. Further, changes in space utilization by our customers due to technology, economic conditions and business culture also affect the occupancy of our properties. As a result, customers may seek to downsize by leasing less space from us upon any renewal.

If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our customers, we may lose existing and potential customers, and we may be pressured to reduce our rental rates below those we currently charge in order to retain customers upon expiration of their existing leases. Even if our customers renew their leases or we are able to re-let the space, the terms and other costs of renewal or re-letting, including the cost of required renovations, increased tenant improvement allowances, leasing commissions, reduced rental rates and other potential concessions, may be less favorable than the terms of our current leases and could require significant capital expenditures. From time to time, we may also agree to modify the terms of existing leases to incentivize customers to renew their leases. If we are unable to renew leases or re-let space in a reasonable time, or if our rental rates decline or our tenant improvement costs, leasing commissions or other costs increase, our financial condition and results of operations could be materially adversely affected.

Difficulties or delays in renewing leases with large customers or re-leasing space vacated by large customers would materially impact our results of operations. Our 20 largest customers account for a significant portion of our revenues. See “Item 2. Properties - Customers” and “Item 2. Properties - Lease Expirations.” There are no assurances that these customers, or any of our other large customers, will renew all or any of their space upon expiration of their current leases.

Some of our leases provide customers with the right to terminate their leases early, which could have an adverse effect on our financial condition and results of operations . Certain of our leases permit our customers to terminate their leases as to all or a portion of the leased premises prior to their stated lease expiration dates under certain circumstances, such as providing notice by a certain date and, in many cases, paying a termination fee. To the extent that our customers exercise early termination rights, our results of operations will be adversely affected, and we can provide no assurances that we will be able to generate an equivalent amount of net effective rent by leasing the vacated space to new third party customers.

An oversupply of space in our markets would typically cause rental rates and occupancies to decline, making it more difficult for us to lease space at attractive rental rates, if at all . Undeveloped land in many of the markets in which we operate is generally more readily available and less expensive than in higher barrier-to-entry markets such as New York, Boston and San Francisco. As a result, even during times of positive economic growth, we and/or our competitors could construct new buildings that would compete with our existing properties. Any such oversupply could result in lower occupancy and rental rates in our portfolio, which would have a negative impact on our results of operations.

In order to maintain and/or increase the quality of our properties and successfully compete against other properties, we regularly must spend money to maintain, repair, renovate and improve our properties, which could negatively impact our financial condition and results of operations . If our properties are not as attractive to customers due to physical condition as properties owned by our competitors, we could lose customers or suffer lower rental rates. As a result, we may from time to time be required to make significant capital expenditures to maintain or enhance the competitiveness of our properties. There can be no assurances that any such expenditures would result in higher occupancy or higher rental rates or deter existing customers from relocating to properties owned by our competitors.

Our results of operations and financial condition could be adversely affected by financial difficulties experienced by a major customer, or by a number of smaller customers, including bankruptcies, insolvencies or general downturns in business . The success of our investments and stability of our operations depend on the financial stability of our customers. A default or termination by a significant customer on its lease payments to us would cause us to lose the revenue associated with such lease. In the event of a customer default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing the property. We cannot evict a customer solely because of its bankruptcy. On the other hand, a court might authorize the customer to reject and terminate its lease. In such case, our claim against the bankrupt customer for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease. As a result, our claim for unpaid rent would likely not be paid in full. If a customer defaults on or terminates a significant lease, we may not be able to recover the full amount of unpaid rent or be able to lease the property for the rent previously received, if at all. In any of these instances, we may also be required to write off deferred leasing costs and accrued straight-line rents receivable. These events would adversely impact our financial condition and results of operations.

Costs of complying with governmental laws and regulations may adversely affect our results of operations . All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to

6

Table of Contents

environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings.

Compliance with new laws or regulations or stricter interpretation of existing laws may require us to incur significant expenditures. Future laws or regulations may impose significant environmental liability. Additionally, our customers' operations, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and that may subject us to liability in the form of fines or damages for noncompliance. Any expenditures, fines or damages we must pay would adversely affect our results of operations. Proposed legislation to address climate change could increase utility and other costs of operating our properties.

Discovery of previously undetected environmentally hazardous conditions may adversely affect our financial condition and results of operations . Under various federal, state and local environmental laws and regulations, a current or previous property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on such property. These costs could be significant. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require significant expenditures or prevent us from entering into leases with prospective customers that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could adversely affect our financial condition and results of operations.

Our same property results of operations would suffer if costs of operating our properties, such as real estate taxes, utilities, insurance, maintenance and other costs, rise faster than our ability to increase rental revenues and/or cost recovery income . While we receive additional rent from our customers that is based on recovering a portion of operating expenses, increased operating expenses will negatively impact our results of operations. Our revenues, including cost recovery income, are subject to longer-term leases and may not be quickly increased sufficient to recover an increase in operating costs and expenses. Furthermore, the costs associated with owning and operating a property are not necessarily reduced when circumstances such as market factors and competition cause a reduction in rental revenues from the property. Increases in same property operating expenses would adversely affect our results of operations unless offset by higher rental rates, higher cost recovery income, the impact of any newly acquired or developed properties, or lower general and administrative expenses and/or interest expense.

Recent and future acquisitions and development properties may fail to perform in accordance with our expectations and may require renovation and development costs exceeding our estimates. In the normal course of business, we typically evaluate potential acquisitions, enter into non-binding letters of intent, and may, at any time, enter into contracts to acquire additional properties. Acquired properties may fail to perform in accordance with our expectations due to lease-up risk, renovation cost risks and other factors. In addition, the renovation and improvement costs we incur in bringing an acquired property up to our standards may exceed our original estimates. We may not have the financial resources to make suitable acquisitions or renovations on favorable terms or at all.

Further, we face significant competition for attractive investment opportunities from an indeterminate number of other real estate investors, including investors with significantly greater capital resources and access to capital than we have, such as domestic and foreign corporations and financial institutions, publicly-traded and privately-held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds. Moreover, owners of office properties may be reluctant to sell, resulting in fewer acquisition opportunities. As a result of such increased competition and limited opportunities, we may be unable to acquire additional properties or the purchase price of such properties may be significantly elevated and reduce our expected return from making any such acquisitions.

In addition to acquisitions, we periodically consider developing or re-developing properties. Risks associated with development and re-development activities include:

•	the unavailability of favorable construction and/or permanent financing;	

•	construction costs exceeding original estimates;	

7

Table of Contents

		
•	construction and lease-up delays resulting in increased debt service expense and construction costs; and	

•	lower than anticipated occupancy rates and rents causing a property to be unprofitable or less profitable than originally estimated.	

Development and re-development activities are also subject to risks relating to our ability to obtain, or delays in obtaining, all necessary zoning, land-use, building, occupancy and other required governmental and utility company authorizations.

Illiquidity of real estate investments and the tax effect of dispositions could significantly impede our ability to sell assets or respond to favorable or adverse changes in the performance of our properties. Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to changing economic, financial and investment conditions is limited. In addition, we have mortgage debt under which we would incur significant prepayment penalties if such loans were paid off in connection with the sale of the underlying real estate assets.

We intend to continue to sell some of our properties in the future as part of our investment strategy and activities. However, we cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether the price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and close the sale of a property.

Certain of our properties have low tax bases relative to their estimated current fair values, and accordingly, the sale of such assets would generate significant taxable gains unless we sold such properties in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction. For an exchange to qualify for tax-deferred treatment under Section 1031, the net proceeds from the sale of a property must be held by an escrow agent until applied toward the purchase of real estate qualifying for gain deferral. Given the competition for properties meeting our investment criteria, there could be a delay in reinvesting such proceeds or we may be unable to reinvest such proceeds at all. Any delay or limitation in using the reinvestment proceeds to acquire additional income producing assets would adversely affect our results of operations. Additionally, in connection with tax-deferred 1031 transactions, our restricted cash balances may be commingled with other funds being held by any such escrow agent, which subjects our balance to the credit risk of the institution. If we sell properties outright in taxable transactions, we may be required to distribute a significant amount of the taxable gain to our stockholders under the requirements of the Internal Revenue Code for REITs, which in turn could negatively affect our future results of operations and may increase our leverage.

Because holders of Common Units, including one of our directors, may suffer adverse tax consequences upon the sale of some of our properties, they may seek to influence us not to sell certain properties even if such a sale would otherwise be in our best interest . Holders of Common Units may suffer adverse tax consequences upon the sale of certain properties. Therefore, holders of Common Units, including one of our directors, may have different objectives than our stockholders regarding the appropriate pricing and timing of a property's sale. Although the Company is the sole general partner of the Operating Partnership and has the exclusive authority to sell any of our properties, those who hold Common Units may seek to influence us not to sell certain properties even if such sale might be financially advantageous to us or influence us to enter into tax deferred exchanges with the proceeds of such sales when such a reinvestment might not otherwise be in our best interest.

Our use of joint ventures may limit our flexibility with jointly owned investments . In appropriate circumstances, we own, develop and acquire properties in joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to the risks that:

•	we could become engaged in a dispute with any of our joint venture partners that might affect our ability to develop or operate a property;	

•	our joint ventures are subject to debt and the refinancing of such debt may require equity capital calls;	

•	our joint venture partners may default on their obligations necessitating that we fulfill their obligation ourselves;	

•	our joint venture partners may have different objectives than we have regarding the appropriate timing and terms of any renovation, sale or refinancing of properties;	

•	our joint venture partners may be structured differently than us for tax purposes and this could create conflicts of interest; and	

8

Table of Contents

•	our joint venture partners may have competing interests in our markets that could create conflicts of interest.	

Our insurance coverage on our properties may be inadequate. We carry insurance on all of our properties, including insurance for liability, fire, windstorms, floods, earthquakes and business interruption. Insurance companies, however, limit or exclude coverage against certain types of losses, such as losses due to terrorist acts, named windstorms, earthquakes and toxic mold. Thus, we may not have insurance coverage, or sufficient insurance coverage, against certain types of losses and/or there may be decreases in the insurance coverage available. Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future operating income from the property or properties. If any of our properties were to experience a catastrophic loss, it could disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Further, if any of our insurance carriers were to become insolvent, we would be forced to replace the existing insurance coverage with another suitable carrier, and any outstanding claims would be at risk for collection. In such an event, we cannot be certain that we would be able to replace the coverage at similar or otherwise favorable terms. Such events could adversely affect our results of operations and financial condition.

We have obtained title insurance policies for each of our properties, typically in an amount equal to its original purchase price.  However, these policies may be for amounts less than the current or future values of our properties, particularly for land parcels on which we subsequently construct a building. In such event, if there is a title defect relating to any of our properties, we could lose some of the capital invested in and anticipated profits from such property.

Our use of debt to finance a significant portion of our operations could have a material adverse effect on our financial condition and results of operations. We are subject to risks associated with debt financing, such as the sufficiency of cash flow to meet required payment obligations, ability to comply with financial ratios and other covenants and the availability of capital to refinance existing indebtedness or fund important business initiatives. If we breach covenants in our debt agreements, the lenders can declare a default and, if the debt is secured, can take possession of the property securing the defaulted loan. In addition, our unsecured debt agreements contain cross-default provisions with respect to certain other indebtedness, giving the unsecured lenders the right to declare a default if we are in default under other loans in some circumstances. Unwaived defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.

Further, we obtain credit ratings from Moody's Investors Service and Standard and Poor's Rating Services based on their evaluation of our creditworthiness. These agencies' ratings are based on a number of factors, some of which are not within our control. In addition to factors specific to our financial strength and performance, the rating agencies also consider conditions affecting REITs generally. We cannot assure you that our credit ratings will not be downgraded. If our credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and fees on outstanding borrowings under our revolving credit facility, bridge facility and term loans.

We generally do not intend to reserve funds to retire existing secured or unsecured debt upon maturity. We may not be able to repay, refinance or extend any or all of our debt at maturity or upon any acceleration. If any refinancing is done at higher interest rates, the increased interest expense could adversely affect our financial condition and results of operations. Any such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions. If we do not meet our mortgage financing obligations, any properties securing such indebtedness could be foreclosed on.

We depend on our revolving credit facility for working capital purposes and for the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt upon maturity. Our ability to borrow under the revolving credit facility also allows us to quickly capitalize on opportunities at short-term interest rates. If our lenders default under their obligations under the revolving credit facility or we become unable to borrow additional funds under the facility for any reason, we would be required to seek alternative equity or debt capital, which could be more costly and adversely impact our financial condition. If such alternative capital were unavailable, we may not be able to make new investments and could have difficulty repaying other debt.

Increases in interest rates would increase our interest expense. At December 31, 2015 , we had $974.0 million of variable rate debt outstanding not protected by interest rate hedge contracts. We may incur additional variable rate debt in the future. If interest rates increase, then so would the interest expense on our unhedged variable rate debt, which would adversely affect our financial condition and results of operations. From time to time, we manage our exposure to interest rate risk with interest rate hedge contracts that effectively fix or cap a portion of our variable rate debt. In addition, we utilize fixed rate debt at market rates. If interest rates decrease, the fair market value of any existing interest rate hedge contracts or outstanding fixed-rate debt would decline.

9

Table of Contents

Our efforts to manage these exposures may not be successful. Our use of interest rate hedge contracts to manage risk associated with interest rate volatility may expose us to additional risks, including a risk that a counterparty to a hedge contract may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Termination of interest rate hedge contracts typically involves costs, such as transaction fees or breakage costs.

Failure to comply with Federal government contractor requirements could result in substantial costs and loss of substantial revenue. We are subject to compliance with a wide variety of complex legal requirements because we are a Federal government contractor. These laws regulate how we conduct business, require us to administer various compliance programs and require us to impose compliance responsibilities on some of our contractors. Our failure to comply with these laws could subject us to fines and penalties, cause us to be in default of our leases and other contracts with the Federal government and bar us from entering into future leases and other contracts with the Federal government.

We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems. We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our customers. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.

A security breach or other significant disruption involving our IT networks and related systems could:

•	disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our customers;	

•	result in misstated financial reports, violations of loan covenants, missed reporting deadlines and/or missed permitting deadlines;	

•	result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;	

•	result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;	

•	result in our inability to maintain the building systems relied upon by our customers for the efficient use of their leased space;	

•	require significant management attention and resources to remedy any damages that result;	

•	subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or	

•	damage our reputation among our customers and investors generally.	
 
Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

The Company may be subject to taxation as a regular corporation if it fails to maintain its REIT status, which would also have a material adverse effect on the Company's stockholders and on the Operating Partnership. We may be subject

10

Table of Contents

to adverse consequences if the Company fails to continue to qualify as a REIT for federal income tax purposes. While we intend to operate in a manner that will allow the Company to continue to qualify as a REIT, we cannot provide any assurances that the Company will remain qualified as such in the future, which would have particularly adverse consequences to the Company's stockholders. Many of the requirements for taxation as a REIT are highly technical and complex and depend upon various factual matters and circumstances that may not be entirely within our control. The fact that the Company holds its assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the Internal Revenue Service might change the tax laws and regulations and the courts might issue new rulings that make it more difficult, or impossible, for the Company to remain qualified as a REIT. If the Company fails to qualify as a REIT, it would (a) not be allowed a deduction for dividends paid to stockholders in computing its taxable income, (b) be subject to federal income tax at regular corporate rates (and potentially the alternative minimum tax and increased state and local taxes) and (c) unless entitled to relief under the tax laws, not be able to re-elect REIT status until the fifth calendar year after it failed to qualify as a REIT. Additionally, the Company would no longer be required to make distributions. As a result of these factors, the Company's failure to qualify as a REIT would likely impair our ability to expand our business and would adversely affect the price of our Common Stock.

Even if we remain qualified as a REIT, we may face other tax liabilities that adversely affect our financial condition and results of operations. Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition, our taxable REIT subsidiary is subject to regular corporate federal, state and local taxes. Any of these taxes would adversely affect our financial condition and results of operations.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments. To remain qualified as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of taxable REIT subsidiaries and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of taxable REIT subsidiaries and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by the securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments, which could adversely affect our financial condition and results of operations.

The prohibited transactions tax may limit our ability to sell properties. A REIT's net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, we cannot assure you that we can in all cases comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our properties or may conduct such sales through our taxable REIT subsidiary, which would be subject to federal and state income taxation.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed at individual rates is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.

We face possible state and local tax audits. Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes, but we are subject to certain state and local taxes. In the normal course of business, certain entities through which we own real estate have undergone tax audits. Collectively, tax deficiency notices received to date from the jurisdictions

11

Table of Contents

conducting previous audits have not been material. However, there can be no assurance that future audits will not occur with increased frequency or that the ultimate result of such audits will not have a material adverse effect on our results of operations.

The price of our Common Stock is volatile and may decline. As with any public company, a number of factors may adversely influence the public market price of our Common Stock. These factors include:

•	the level of institutional interest in us;	

•	the perceived attractiveness of investment in us, in comparison to other REITs;	

•	the attractiveness of securities of REITs in comparison to other asset classes;	

•	our financial condition and performance;	

•	the market's perception of our growth potential and potential future cash dividends;	

•	government action or regulation, including changes in tax laws;	

•	increases in market interest rates, which may lead investors to expect a higher annual yield from our distributions in relation to the price of our Common Stock;	

•	changes in our credit ratings; and	

•	any negative change in the level or stability of our dividend.	

We cannot assure you that we will continue to pay dividends at historical rates . We generally expect to use cash flows from operating activities to fund dividends. The following factors will affect such cash flows and, accordingly, influence the decisions of the Company's board of directors regarding dividends:

•	debt service requirements after taking into account debt covenants and the repayment and restructuring of certain indebtedness and the availability of alternative sources of debt and equity capital and their impact on our ability to refinance existing debt and grow our business;	

•	scheduled increases in base rents of existing leases;	

•	changes in rents attributable to the renewal of existing leases or replacement leases;	

•	changes in occupancy rates at existing properties and execution of leases for newly acquired or developed properties;	

•	changes in operating expenses;	

•	anticipated leasing capital expenditures attributable to the renewal of existing leases or replacement leases;	

•	anticipated building improvements; and	

•	expected cash flows from financing and investing activities, including from the sale of assets generating significant taxable gains to the extent such assets are not sold in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction.	

The decision to declare and pay dividends on our Common Stock in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of the Company's board of directors. Any change in our dividend policy could have a material effect on the market price of our Common Stock.

Cash distributions reduce the amount of cash that would otherwise be available for other business purposes, including funding debt maturities or future growth initiatives. For the Company to maintain its qualification as a REIT, it must annually distribute to its stockholders at least 90% of REIT taxable income, excluding net capital gains. In addition, although capital gains are not required to be distributed to maintain REIT status, taxable capital gains, if any, that are generated as part of our capital recycling program are subject to federal and state income tax unless such gains are distributed to our stockholders. Cash distributions

12

Table of Contents

made to stockholders to maintain REIT status or to distribute otherwise taxable capital gains limit our ability to accumulate capital for other business purposes, including funding debt maturities or growth initiatives.

Further issuances of equity securities may adversely affect the market price of our Common Stock and may be dilutive to current stockholders . The sales of a substantial number of Common Shares, or the perception that such sales could occur, could adversely affect the market price of our Common Stock. The Company’s board of directors may authorize the issuance of additional authorized but unissued Common Shares or other authorized but unissued securities at any time. We have filed a registration statement with the SEC allowing us to offer, from time to time, an indefinite amount of equity securities (including Common Stock and Preferred Stock) on an as-needed basis and subject to our ability to affect offerings on satisfactory terms based on prevailing conditions. In addition, the Company’s board of directors has authorized the Company to issue shares of Common Stock pursuant to the Company’s equity sales agreements. The interests of our existing stockholders could be diluted if additional equity securities are issued to finance future developments and acquisitions or repay indebtedness.  Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common equity.

We may change our policies without obtaining the approval of our stockholders . Our operating and financial policies, including our policies with respect to acquisitions of real estate, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by the Company’s Board of Directors. Accordingly, our stockholders do not control these policies.

Limits on changes in control may discourage takeover attempts beneficial to stockholders. Provisions in the Company's charter and bylaws as well as Maryland general corporation law may have anti-takeover effects that delay, defer or prevent a takeover attempt. For example, these provisions may defer or prevent tender offers for our Common Stock or purchases of large blocks of our Common Stock, thus limiting the opportunities for the Company's stockholders to receive a premium for their shares of Common Stock over then-prevailing market prices. These provisions include the following:

•	Ownership limit . The Company's charter prohibits direct, indirect or constructive ownership by any person or entity of more than 9.8% of the Company's outstanding capital stock. Any attempt to own or transfer shares of capital stock in excess of the ownership limit without the consent of the Company's board of directors will be void.	

•	Preferred Stock . The Company's charter authorizes the board of directors to issue preferred stock in one or more classes and to establish the preferences and rights of any class of preferred stock issued. These actions can be taken without stockholder approval. The issuance of preferred stock could have the effect of delaying or preventing someone from taking control of the Company, even if a change in control were in our best interest.	

•	Business combinations. Pursuant to the Company's charter and Maryland law, the Company cannot merge into or consolidate with another corporation or enter into a statutory share exchange transaction in which the Company is not the surviving entity or sell all or substantially all of its assets unless the board of directors adopts a resolution declaring the proposed transaction advisable and a majority of the stockholders voting together as a single class approve the transaction. Maryland law prohibits stockholders from taking action by written consent unless all stockholders consent in writing. The practical effect of this limitation is that any action required or permitted to be taken by the Company's stockholders may only be taken if it is properly brought before an annual or special meeting of stockholders. The Company's bylaws further provide that in order for a stockholder to properly bring any matter before a meeting, the stockholder must comply with requirements regarding advance notice. The foregoing provisions could have the effect of delaying until the next annual meeting stockholder actions that the holders of a majority of the Company's outstanding voting securities favor. These provisions may also discourage another person from making a tender offer for the Company's common stock, because such person or entity, even if it acquired a majority of the Company's outstanding voting securities, would likely be able to take action as a stockholder, such as electing new directors or approving a merger, only at a duly called stockholders meeting. Maryland law also establishes special requirements with respect to business combinations between Maryland corporations and interested stockholders unless exemptions apply. Among other things, the law prohibits for five years a merger and other similar transactions between a company and an interested stockholder and requires a supermajority vote for such transactions after the end of the five-year period. The Company's charter contains a provision exempting the Company from the Maryland business combination statute. However, we cannot assure you that this charter provision will not be amended or repealed at any point in the future.	

•	Control share acquisitions.  Maryland general corporation law also provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquirer or by officers or employee directors. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or to acquisitions approved or exempted by the corporation's charter or bylaws.	

13

Table of Contents

The Company's bylaws contain a provision exempting from the control share acquisition statute any stock acquired by any person. However, we cannot assure you that this bylaw provision will not be amended or repealed at any point in the future.

•	Maryland unsolicited takeover statute. Under Maryland law, the Company's board of directors could adopt various anti-takeover provisions without the consent of stockholders. The adoption of such measures could discourage offers for the Company or make an acquisition of the Company more difficult, even when an acquisition would be in the best interest of the Company's stockholders.	

•	Anti‑takeover protections of operating partnership agreement . Upon a change in control of the Company, the partnership agreement of the Operating Partnership requires certain acquirers to maintain an umbrella partnership real estate investment trust structure with terms at least as favorable to the limited partners as are currently in place. For instance, the acquirer would be required to preserve the limited partner's right to continue to hold tax-deferred partnership interests that are redeemable for capital stock of the acquirer. Exceptions would require the approval of two-thirds of the limited partners of our Operating Partnership (other than the Company). These provisions may make a change of control transaction involving the Company more complicated and therefore might decrease the likelihood of such a transaction occurring, even if such a transaction would be in the best interest of the Company's stockholders.	

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

14

Table of Contents

ITEM 2. PROPERTIES

Our core portfolio consists primarily of office properties in Raleigh, Atlanta, Tampa, Nashville, Memphis, Pittsburgh, Richmond and Orlando, office and industrial properties in Greensboro and retail and office properties in Kansas City.

On January 4, 2016, we announced our agreement to sell substantially all of our wholly-owned Country Club Plaza assets in Kansas City (which we refer to as the "Plaza assets") for $660.0 million. The Plaza assets, which are currently 95% leased in the aggregate, consist of 18 properties encompassing 776,000 square feet of in-service retail space, 468,000 square feet of in-service office space and a 28,000 square foot retail redevelopment project. The parties have entered into a series of definitive agreements, dated as of December 21, 2015, relating to the sale of the Plaza assets. The sales, which are subject to customary closing conditions, are scheduled to close on March 1, 2016. The buyer’s contractual due diligence investigation period ended on December 31, 2015. The buyer has posted earnest money deposits, held by a third party, totaling $25.0 million that are non-refundable and the buyer would be obligated to pay us an additional $25.0 million in the event of a default, except in limited circumstances.

Properties

The following table sets forth information about in-service properties that we wholly own:

	
																		
 	December 31,	
 	2015	 	2014	
 	Occupied	 	Vacant	 	Total	 	Occupied	 	Vacant	 	Total	
 	(rentable square feet)	 	(rentable square feet)	
Office	25,261,000		 	2,021,000		 	27,282,000		 	23,156,000		 	2,248,000		 	25,404,000		
Industrial	2,347,000		 	66,000		 	2,413,000		 	2,362,000		 	51,000		 	2,413,000		
Retail	802,000		 	33,000		 	835,000		 	748,000		 	31,000		 	779,000		
Total	28,410,000		 	2,120,000		 	30,530,000		 	26,266,000		 	2,330,000		 	28,596,000		

The following table sets forth the net changes in rentable square footage of in-service properties that we wholly own:

	
									
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
 	(rentable square feet in thousands)	
Acquisitions	1,592		 	686		 	3,425		
Developments Placed In-Service	503		 	282		 	221		
Redevelopment/Other	14		 	(19	)	 	(30	)	
Dispositions	(175	)	 	(1,645	)	 	(4,012	)	
Net Change in Rentable Square Footage	1,934		 	(696	)	 	(396	)	

15

Table of Contents

The following table sets forth information about in-service properties that we wholly own by geographic location at December 31, 2015 :

	
																			
 	 	Rentable
Square Feet	 	Occupancy	 	Percentage of Annualized Cash Rental Revenue (1)	
Market	 					Office	 	Industrial	 	Retail	 	Total	
Atlanta	 	5,361,000		 	92.4	%	 	17.9	%	 	—	%	 	—	%	 	17.9	%	
Raleigh	 	4,882,000		 	92.8		 	15.8		 	—		 	—		 	15.8		
Nashville	 	3,379,000		 	99.2		 	13.2		 	—		 	0.2		 	13.4		
Tampa	 	3,649,000		 	87.4		 	12.1		 	—		 	—		 	12.1		
Pittsburgh	 	2,157,000		 	95.7		 	8.6		 	—		 	—		 	8.6		
Kansas City	 	1,393,000		 	97.2		 	2.3		 	—		 	5.2		 	7.5		
Memphis	 	2,226,000		 	91.0		 	7.3		 	—		 	0.1		 	7.4		
Orlando	 	1,978,000		 	86.0		 	6.7		 	—		 	—		 	6.7		
Richmond	 	1,941,000		 	93.9		 	5.5		 	—		 	—		 	5.5		
Greensboro	 	3,564,000		 	95.8		 	3.3		 	1.8		 	—		 	5.1		
Total	 	30,530,000		 	93.1	%	 	92.7	%	 	1.8	%	 	5.5	%	 	100.0	%	
__________
		
(1)	Annualized Cash Rental Revenue is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December 2015 multiplied by 12.	

The following table sets forth operating information about in-service properties that we wholly own:

	
											
 	Average
Occupancy	 	Annualized GAAP Rent
Per Square
Foot (1)	 	Annualized Cash Rent
Per Square
Foot (2)	
2011	89.6	%	 	$	18.58		 	$	17.84		
2012	90.3	%	 	$	17.90		 	$	18.42		
2013	90.0	%	 	$	21.42		 	$	20.48		
2014	90.4	%	 	$	22.13		 	$	21.29		
2015	92.3	%	 	$	23.30		 	$	22.55		
__________
		
(1)	Annualized GAAP Rent Per Square Foot is rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December of the respective year multiplied by 12, divided by total occupied rentable square footage.	
		
(2)	Annualized Cash Rent Per Square Foot is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December of the respective year multiplied by 12, divided by total occupied rentable square footage.	

16

Table of Contents

Customers

The following table sets forth information concerning the 20 largest customers of properties that we wholly own at December 31, 2015 :

	
														
Customer	 	Rentable Square
Feet	 	Annualized
Cash Rental
Revenue (1)	 	Percent of
Total
Annualized
Cash Rental
Revenue (1)	 	Weighted
Average
Remaining
Lease Term in
Years	
 	 	 	 	(in thousands)	 	 	 	 	
Federal Government	 	1,457,229		 	$	34,896		 	5.45	%	 	3.8		
Metropolitan Life Insurance	 	634,775		 	14,755		 	2.30		 	11.5		
PPG Industries	 	356,215		 	9,050		 	1.41		 	15.3		
HCA Corporation	 	297,909		 	7,790		 	1.22		 	1.3		
EQT Corporation	 	317,052		 	7,423		 	1.16		 	8.8		
International Paper	 	299,538		 	6,969		 	1.09		 	11.8		
Healthways	 	263,598		 	6,653		 	1.04		 	7.2		
Bass, Berry & Sims	 	195,846		 	6,290		 	0.98		 	9.1		
State of Georgia	 	318,796		 	6,018		 	0.94		 	5.0		
Lockton Companies	 	229,192		 	5,546		 	0.87		 	14.2		
Aon	 	190,683		 	5,255		 	0.82		 	3.9		
PNC Bank	 	187,076		 	5,170		 	0.81		 	10.9		
Marsh USA	 	175,390		 	5,117		 	0.80		 	6.3		
Syniverse Technologies	 	218,678		 	5,065		 	0.79		 	10.9		
AT&T	 	217,400		 	4,862		 	0.76		 	3.4		
Novelis	 	168,949		 	4,849		 	0.76		 	8.7		
Vanderbilt University	 	208,921		 	4,771		 	0.74		 	4.8		
Lifepoint Corporate Services	 	202,991		 	4,563		 	0.71		 	13.3		
BB&T	 	245,543		 	4,500		 	0.70		 	4.1		
SunTrust	 	146,646		 	4,495		 	0.70		 	1.7		
Total	 	6,332,427		 	$	154,037		 	24.05	%	 	7.4		
__________
		
(1)	Annualized Cash Rental Revenue is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December 2015 multiplied by 12.	

17

Table of Contents

Lease Expirations
 
The following tables set forth scheduled lease expirations for existing leases at office properties (other than in-process development) that we wholly owned at December 31, 2015 :

	
																					
Lease Expiring	 	Number of Leases Expiring	 	Rentable
Square Feet
Subject to
Expiring
Leases	 	Percentage of
Leased Square
Footage
Represented
by Expiring
Leases	 	Annualized
Cash Rental
Revenue
Under Expiring
Leases (1)	 	Average
Annual Cash
Rental Rate
Per Square
Foot for
Expirations	 	Percent of
Annualized
Cash Rental
Revenue
Represented
by Expiring
Leases (1)	
 	 	 	 	 	 	 	($ in thousands)	 	 	 	
2016 (2)	 	435		 	1,957,791		 	7.8	%	 	$	45,592		 	$	23.29		 	7.7	%	
2017	 	379		 	2,957,467		 	11.7		 	71,321		 	24.12		 	12.0		
2018	 	388		 	2,641,931		 	10.5		 	62,144		 	23.52		 	10.5		
2019	 	315		 	3,417,711		 	13.5		 	80,663		 	23.60		 	13.6		
2020	 	266		 	2,727,093		 	10.8		 	73,257		 	26.86		 	12.3		
2021	 	142		 	2,437,730		 	9.7		 	54,503		 	22.36		 	9.2		
2022	 	94		 	1,304,809		 	5.2		 	29,432		 	22.56		 	5.0		
2023	 	63		 	1,485,624		 	5.9		 	31,455		 	21.17		 	5.3		
2024	 	49		 	1,522,574		 	6.0		 	38,719		 	25.43		 	6.5		
2025	 	38		 	893,132		 	3.5		 	25,383		 	28.42		 	4.3		
Thereafter	 	170		 	3,913,894		 	15.4		 	80,991		 	20.69		 	13.6		
 	 	2,339		 	25,259,756		 	100.0	%	 	$	593,460		 	$	23.49		 	100.0	%	
__________
		
(1)	Annualized Cash Rental Revenue is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December 2015 multiplied by 12.	
		
(2)	Includes 81,000 rentable square feet of leases that are on a month-to-month basis, which represent 0.3% of total annualized cash rental revenue.	

Note: 2016 and beyond expirations that have been renewed are reflected above based on the renewal expiration date. Expirations include leases related to completed not stabilized development properties and exclude leases related to developments in-process.

In-Process Development
 
As of December 31, 2015 , we were developing 1,454,200 rentable square feet of properties. The following table summarizes these developments:

	
																					
Property	 	Market	 	Rentable Square Feet	 	Anticipated Total Investment (1)	 	Investment As Of December 31, 2015 (1)	 	Pre - Leased %	 	Estimated Completion	 	Estimated Stabilization	
 	 	 	 	 	 	($ in thousands)	 	 	 	 	 	 	
Laser Spine Institute (Office)	 	Tampa	 	176,000		 	$	56,000		 	$	49,853		 	100.0	%	 	1Q 16	 	1Q 16	
Seven Springs West (Office)	 	Nashville	 	203,000		 	59,000		 	38,748		 	85.6		 	3Q 16	 	1Q 17	
Bridgestone Americas (Office)	 	Nashville	 	514,000		 	200,000		 	57,918		 	98.5		 	3Q 17	 	3Q 17	
Riverwood 200 (Office)	 	Atlanta	 	299,000		 	107,000		 	21,416		 	66.2		 	2Q 17	 	2Q 19	
Enterprise V (Industrial)	 	Greensboro	 	131,200		 	7,600		 	4,642		 	—		 	2Q 16	 	2Q 17	
Seven Springs II (Office)	 	Nashville	 	131,000		 	38,100		 	3,849		 	42.9		 	2Q 17	 	3Q 18	
 	 	 	 	1,454,200		 	$	467,700		 	$	176,426		 	76.3	%	 	 	 	 	
__________
		
(1)	Includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheets.	

18

Table of Contents

Land Held for Development
 
We wholly owned 465 acres of development land at December 31, 2015 . We estimate that we can develop approximately 4.4 million and 2.3 million rentable square feet of office and industrial space, respectively, on the 391 acres that we consider core assets for our future development needs. Our core development land is zoned and available for development, and nearly all of the land has utility infrastructure in place. We believe that our commercially zoned and unencumbered land gives us a development advantage over other commercial real estate development companies in many of our markets.
 
Other Properties
 
The following table sets forth information about other in-service office properties in which we own an interest (50.0% or less) by geographic location at December 31, 2015 :

	
													
 	 	Rentable
Square Feet	 	Weighted
Average
Ownership
Interest (1)	 	Occupancy	 	Percentage of
Annualized
Cash Rental
Revenue (2)	
Market	 								
Kansas City	 	553,000		 	32.3	%	 	91.8	%	 	41.2	%	
Raleigh	 	635,000		 	25.0		 	95.4		 	28.3		
Richmond (3)	 	345,000		 	50.0		 	99.8		 	19.4		
Orlando	 	306,000		 	28.0		 	74.3		 	8.7		
Greensboro	 	118,000		 	50.0		 	36.8		 	2.4		
Total	 	1,957,000		 	33.4	%	 	88.3	%	 	100.0	%	
__________
		
(1)	Weighted Average Ownership Interest is calculated using Rentable Square Feet.	
		
(2)	Annualized Cash Rental Revenue is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December 2015 multiplied by 12.	
		
(3)	This joint venture is consolidated.	

19

Table of Contents

ITEM 3. LEGAL PROCEEDINGS

We are from time to time a party to a variety of legal proceedings, claims and assessments arising in the ordinary course of our business. We regularly assess the liabilities and contingencies in connection with these matters based on the latest information available. For those matters where it is probable that we have incurred or will incur a loss and the loss or range of loss can be reasonably estimated, the estimated loss is accrued and charged to income in our Consolidated Financial Statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, a reasonable estimate of liability, if any, cannot be made. Based on the current expected outcome of such matters, none of these proceedings, claims or assessments is expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.

ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT

The Company is the sole general partner of the Operating Partnership. The following table sets forth information with respect to the Company’s executive officers:

	
					
Name	 	Age	 	Position and Background	
Edward J. Fritsch	 	57	 	Director, President and Chief Executive Officer.
Mr. Fritsch has been a director since January 2001. Mr. Fritsch became our chief executive officer and chair of the investment committee of our board of directors on July 1, 2004 and our president in December 2003. Prior to that, Mr. Fritsch was our chief operating officer from January 1998 to July 2004 and was a vice president and secretary from June 1994 to January 1998. Mr. Fritsch joined our predecessor in 1982 and was a partner of that entity at the time of our initial public offering in June 1994. Mr. Fritsch currently serves as a director and member of the audit and compensation committees of National Retail Properties, Inc., a publicly-traded REIT (NYSE:NNN). Mr. Fritsch is also chair of the National Association of Real Estate Investment Trusts ("NAREIT"). Mr. Fritsch is also a member of Wells Fargo's central regional advisory board, a member of the University of North Carolina at Chapel Hill Foundation board, a director of the University of North Carolina at Chapel Hill Real Estate Holdings, a member of the University of North Carolina Kenan-Flagler Business School board of visitors and a member of the Dix Park Conservancy board.
	
Theodore J. Klinck	 	50	 	Executive Vice President and Chief Operating and Investment Officer.
Mr. Klinck became executive vice president and chief operating and investment officer in September 2015. Prior to that, Mr. Klinck was our senior vice president and chief investment officer since March 2012. Before joining us, Mr. Klinck served as principal and chief investment officer with Goddard Investment Group, a privately owned real estate investment firm. Previously, Mr. Klinck had been a managing director at Morgan Stanley Real Estate.

20

Table of Contents

	
					
Mark F. Mulhern	 	56	 	Senior Vice President and Chief Financial Officer.
Mr. Mulhern became senior vice president and chief financial officer in September 2014. Prior to that, Mr. Mulhern was a director of the Company since January 2012. Mr. Mulhern served as executive vice president and chief financial officer of Exco Resources, Inc. (NYSE:XCO), an oil and gas exploration and production company, from April 2013 until September 2014. Mr. Mulhern served as senior vice president and chief financial officer of Progress Energy, Inc. (NYSE:PGN) from September 2008 until its merger with Duke Energy Corporation (NYSE:DUK) in July 2012. Mr. Mulhern first joined Progress Energy in 1996. Mr. Mulhern previously served as chief financial officer at Hydra Co Enterprises, the independent power subsidiary of Niagara Mohawk. He also spent eight years at Price Waterhouse. Mr. Mulhern currently serves as a director and member of the audit committee of Azure Midstream Partners, a publicly-traded energy company (NYSE:AZUR), and McKim and Creed, a private engineering services firm. Mr. Mulhern is a certified public accountant, a certified management accountant and a certified internal auditor.
 	
Jeffrey D. Miller	 	45	 	Senior Vice President, General Counsel and Secretary.
Prior to joining us in March 2007, Mr. Miller was a partner with DLA Piper US, LLP, where he practiced since 2005. Previously, Mr. Miller had been a partner with Alston & Bird LLP. Mr. Miller is admitted to practice in North Carolina. Mr. Miller currently serves as lead independent director of Hatteras Financial Corp., a publicly-traded mortgage REIT (NYSE:HTS).

Kevin E. Penn	 	44	 	Senior Vice President of Strategy and Administration.
Mr. Penn became senior vice president of strategy and administration in January 2012. Mr. Penn joined us in 1997 and was our vice president of strategy from August 2005 to January 2012 and chief information officer from April 2002 to August 2005. Mr. Penn is chair of the Urban Land Institute Triangle District Council, chair of the executive committee of the Office, Technology and Operations Consortium and chair of the North Carolina Leukemia Lymphoma Society.

21

Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth high and low stock prices per share reported on the NYSE and dividends paid per share:

	
																									
 	 	2015	 	2014	
Quarter Ended	 	High	 	Low	 	Dividend	 	High	 	Low	 	Dividend	
March 31	 	$	48.34		 	$	43.09		 	$	0.425		 	$	38.60		 	$	35.44		 	$	0.425		
June 30	 	$	47.10		 	$	39.72		 	$	0.425		 	$	42.54		 	$	37.32		 	$	0.425		
September 30	 	$	42.78		 	$	36.57		 	$	0.425		 	$	43.06		 	$	38.42		 	$	0.425		
December 31	 	$	44.61		 	$	38.18		 	$	0.425		 	$	45.67		 	$	38.63		 	$	0.425		

On December 31, 2015 , the last reported stock price of our Common Stock on the NYSE was $43.60 per share and the Company had 902 common stockholders of record. There is no public trading market for the Common Units. On December 31, 2015 , the Operating Partnership had 104 holders of record of Common Units (other than the Company). At December 31, 2015 , there were 96.1 million shares of Common Stock outstanding and 2.9 million Common Units outstanding not owned by the Company.

Because the Company is a REIT, the partnership agreement requires the Operating Partnership to distribute at least enough cash for the Company to be able to distribute to its stockholders at least 90.0% of its REIT taxable income, excluding net capital gains. See “Item 1A. Risk Factors – Cash distributions reduce the amount of cash that would otherwise be available for other business purposes, including funding debt maturities or future growth initiatives.”

We generally expect to use cash flows from operating activities to fund distributions. The following factors will affect such cash flows and, accordingly, influence the decisions of the Company’s Board of Directors regarding dividends and distributions:

•	debt service requirements after taking into account debt covenants and the repayment and restructuring of certain indebtedness and the availability of alternative sources of debt and equity capital and their impact on our ability to refinance existing debt and grow our business;	

•	scheduled increases in base rents of existing leases;	

•	changes in rents attributable to the renewal of existing leases or replacement leases;	

•	changes in occupancy rates at existing properties and execution of leases for newly acquired or developed properties;	

•	changes in operating expenses;	

•	anticipated leasing capital expenditures attributable to the renewal of existing leases or replacement leases;	

•	anticipated building improvements; and	

•	expected cash flows from financing and investing activities, including from the sale of assets generating significant taxable gains to the extent such assets are not sold in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction.	

The following stock price performance graph compares the performance of our Common Stock to the S&P 500 and the FTSE NAREIT All Equity REITs Index. The stock price performance graph assumes an investment of $100 in our Common Stock and the three indices on December 31, 2010 and further assumes the reinvestment of all dividends. The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50% of total assets in qualifying real estate assets other than mortgages secured by real property. Stock price performance is not necessarily indicative of future results.

22

Table of Contents

	
																
 	 	For the Period from December 31, 2010 to December 31,	
Index	 	2011	 	2012	 	2013	 	2014	 	2015	
Highwoods Properties, Inc.	 	98.23		 	116.63		 	132.10		 	168.66		 	172.72		
S&P 500	 	102.11		 	118.45		 	156.82		 	178.28		 	180.75		
FTSE NAREIT All Equity REITs Index	 	108.29		 	127.85		 	131.01		 	170.49		 	175.94		
 
The performance graph above is being furnished as part of this Annual Report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish the Company’s stockholders with such information and, therefore, is not deemed to be filed, or incorporated by reference in any filing, by the Company or the Operating Partnership under the Securities Act of 1933 or the Securities Exchange Act of 1934.
 
During 2015 , cash dividends on Common Stock totaled $1.70 per share, approximately $0.07 of which represented return of capital and approximately $0.13 of which represented capital gains for income tax purposes. The minimum dividend per share of Common Stock required for the Company to maintain its REIT status was $1.31 per share in 2015 .
 
During the fourth quarter of 2015, the Company issued an aggregate of 10,383 shares of Common Stock to holders of Common Units in the Operating Partnership upon the redemption of a like number of Common Units in private offerings exempt from the registration requirements pursuant to Section 4(2) of the Securities Act. Each of the holders of Common Units was an accredited investor under Rule 501 of the Securities Act. The resale of such shares was registered by the Company under the Securities Act.
 
The Company has a Dividend Reinvestment and Stock Purchase Plan (“DRIP”) under which holders of Common Stock may elect to automatically reinvest their dividends in additional shares of Common Stock and make optional cash payments for additional shares of Common Stock.
 
The Company has an Employee Stock Purchase Plan pursuant to which employees may contribute up to 25.0% of their cash compensation for the purchase of Common Stock. At the end of each three-month offering period, each participant’s account balance, which includes accumulated dividends, is applied to acquire shares of Common Stock at a cost that is calculated at 85.0% of the average closing price on the NYSE on the five consecutive days preceding the last day of the quarter.
 
Information about the Company’s equity compensation plans and other related stockholder matters is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 11, 2016 .

23

Table of Contents

ITEM 6. SELECTED FINANCIAL DATA

The operating results and certain liabilities of the Company as of and for the years ended December 31, 2014 , 2013 , 2012 and 2011 were retrospectively revised from previously reported amounts to reclassify those properties classified as held for sale, and in discontinued operations the operations for those properties classified as discontinued operations. The information in the following tables should be read in conjunction with the Company’s Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein ($ in thousands, except per share data):

	
																				
 	Year Ended December 31,	
 	2015	 	2014	 	2013	 	2012	 	2011	
Rental and other revenues	$	604,671		 	$	555,871		 	$	505,008		 	$	434,890		 	$	386,198		
Income from continuing operations	$	85,521		 	$	96,987		 	$	42,641		 	$	21,578		 	$	25,623		
Income from discontinued operations	$	15,739		 	$	18,985		 	$	88,456		 	$	62,657		 	$	22,348		
Income from continuing operations available for common stockholders	$	79,308		 	$	90,069		 	$	37,890		 	$	17,394		 	$	17,444		
Net income	$	101,260		 	$	115,972		 	$	131,097		 	$	84,235		 	$	47,971		
Net income available for common stockholders	$	94,572		 	$	108,457		 	$	122,949		 	$	77,087		 	$	38,677		
Earnings per Common Share – basic:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.84		 	$	1.00		 	$	0.44		 	$	0.23		 	$	0.24		
Net income available for common stockholders	$	1.00		 	$	1.20		 	$	1.44		 	$	1.02		 	$	0.54		
Earnings per Common Share – diluted:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.84		 	$	0.99		 	$	0.44		 	$	0.23		 	$	0.24		
Net income available for common stockholders	$	1.00		 	$	1.19		 	$	1.44		 	$	1.02		 	$	0.54		
Dividends declared and paid per Common Share	$	1.70		 	$	1.70		 	$	1.70		 	$	1.70		 	$	1.70		

	
																				
 	December 31,	
 	2015	 	2014	 	2013	 	2012	 	2011	
Total assets (as revised)	$	4,493,432		 	$	3,999,123		 	$	3,801,315		 	$	3,344,642		 	$	3,154,157		
Mortgages and notes payable	$	2,499,614		 	$	2,071,389		 	$	1,956,299		 	$	1,859,162		 	$	1,847,857		

24

Table of Contents

The operating results and certain liabilities of the Operating Partnership as of and for the years ended December 31, 2014 , 2013 , 2012 and 2011 were retrospectively revised from previously reported amounts to reclassify those properties classified as held for sale, and in discontinued operations the operations for those properties classified as discontinued operations. The information in the following tables should be read in conjunction with the Operating Partnership’s Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein ($ in thousands, except per unit data):

	
																				
 	Year Ended December 31,	
 	2015	 	2014	 	2013	 	2012	 	2011	
Rental and other revenues	$	604,671		 	$	555,871		 	$	505,008		 	$	434,890		 	$	386,198		
Income from continuing operations	$	85,521		 	$	96,987		 	$	42,590		 	$	21,638		 	$	25,684		
Income from discontinued operations	$	15,739		 	$	18,985		 	$	88,456		 	$	62,657		 	$	22,348		
Income from continuing operations available for common unitholders	$	81,751		 	$	93,014		 	$	39,133		 	$	18,344		 	$	18,481		
Net income	$	101,260		 	$	115,972		 	$	131,046		 	$	84,295		 	$	48,032		
Net income available for common unitholders	$	97,490		 	$	111,999		 	$	127,589		 	$	81,001		 	$	40,829		
Earnings per Common Unit – basic:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.84		 	$	1.00		 	$	0.44		 	$	0.23		 	$	0.24		
Net income available for common unitholders	$	1.01		 	$	1.20		 	$	1.44		 	$	1.02		 	$	0.54		
Earnings per Common Unit – diluted:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.84		 	$	1.00		 	$	0.44		 	$	0.23		 	$	0.24		
Net income available for common unitholders	$	1.01		 	$	1.20		 	$	1.44		 	$	1.02		 	$	0.54		
Distributions declared and paid per Common Unit	$	1.70		 	$	1.70		 	$	1.70		 	$	1.70		 	$	1.70		

	
																				
 	December 31,	
 	2015	 	2014	 	2013	 	2012	 	2011	
Total assets (as revised)	$	4,493,432		 	$	3,999,229		 	$	3,801,412		 	$	3,343,739		 	$	3,153,049		
Mortgages and notes payable	$	2,499,614		 	$	2,071,389		 	$	1,956,299		 	$	1,859,162		 	$	1,847,857		

25

Table of Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with the accompanying Consolidated Financial Statements and related notes contained elsewhere herein. Unless otherwise noted, same property information contained herein includes all in-service properties included in continuing operations that were wholly-owned during the entirety of the periods presented (from January 1, 2014 to December 31, 2015). As a result, the Plaza assets, which were classified as held for sale at December 31, 2015, are excluded from our same property portfolio.

Disclosure Regarding Forward-Looking Statements

Some of the information in this Annual Report may contain forward-looking statements. Such statements include, in particular, statements about our plans, strategies and prospects under this section and under the heading “Item 1. Business.” You can identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved. When considering such forward-looking statements, you should keep in mind the following important factors that could cause our actual results to differ materially from those contained in any forward-looking statement:

•	the planned disposition of the Plaza assets in Kansas City may not occur on the terms described herein, if at all (see "Investment Activity");	

•	the financial condition of our customers could deteriorate;	

•	we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases;	

•	we may not be able to lease our newly constructed buildings as quickly or on as favorable terms as originally anticipated;	

•	we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects as quickly or on as favorable terms as anticipated;	

•	development activity by our competitors in our existing markets could result in an excessive supply relative to customer demand;	

•	our markets may suffer declines in economic growth;	

•	unanticipated increases in interest rates could increase our debt service costs;	

•	unanticipated increases in operating expenses could negatively impact our operating results;	

•	we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and	

•	the Company could lose key executive officers.	

This list of risks and uncertainties, however, is not intended to be exhaustive. You should also review the other cautionary statements we make in “Item 1A. Business – Risk Factors” set forth in this Annual Report. Given these uncertainties, you should not place undue reliance on forward-looking statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the occurrence of unanticipated events.

26

Table of Contents

Executive Summary
 
Our Strategic Plan focuses on:

•	owning high-quality, differentiated office buildings in the BBDs of our core markets;	

•	improving the operating results of our existing properties through concentrated leasing, asset management, cost control and customer service efforts;	

•	developing and acquiring office buildings in BBDs that improve the overall quality of our portfolio and generate attractive returns over the long term for our stockholders;	

•	disposing of properties no longer considered to be core assets primarily due to location, age, quality and overall strategic fit; and	

•	maintaining a conservative and flexible balance sheet with ample liquidity to meet our funding needs and growth prospects.	
 
Revenues

Our operating results depend heavily on successfully leasing and operating the office space in our portfolio. Economic growth and employment levels in our core markets are and will continue to be important factors in predicting our future operating results.
 
The key components affecting our rental and other revenues are average occupancy, rental rates, cost recovery income, new developments placed in service, acquisitions and dispositions. Average occupancy generally increases during times of improving economic growth, as our ability to lease space outpaces vacancies that occur upon the expirations of existing leases. Average occupancy generally declines during times of slower economic growth, when new vacancies tend to outpace our ability to lease space. Asset acquisitions, dispositions and new developments placed in service directly impact our rental revenues and could impact our average occupancy, depending upon the occupancy rate of the properties that are acquired, sold or placed in service. A further indicator of the predictability of future revenues is the expected lease expirations of our portfolio. As a result, in addition to seeking to increase our average occupancy by leasing current vacant space, we also must concentrate our leasing efforts on renewing our existing leases prior to expiration. For more information regarding our lease expirations, see “Item 2. Properties - Lease Expirations.” Occupancy in our office portfolio increased from 91.2% at December 31, 2014 to 92.6% at December 31, 2015 .
 
Whether or not our rental revenue tracks average occupancy proportionally depends upon whether GAAP rents under signed new and renewal leases are higher or lower than the GAAP rents under expiring leases. Annualized rental revenues from second generation leases expiring during any particular year are generally less than 15% of our total annual rental revenues. The following table sets forth information regarding second generation office leases signed during the fourth quarter of 2015 (we define second generation office leases as leases with new customers and renewals of existing customers in office space that has been previously occupied under our ownership and leases with respect to vacant space in acquired buildings):

	
												
 	New	 	Renewal	 	All Office	
Leased space (in rentable square feet)	237,493		 	809,940		 	1,047,433		
Average term (in years - rentable square foot weighted)	6.7		 	7.0		 	6.9		
Base rents (per rentable square foot) (1)	$	26.49		 	$	24.43		 	$	24.90		
Rent concessions (per rentable square foot) (1)	(0.96	)	 	(0.52	)	 	(0.62	)	
GAAP rents (per rentable square foot) (1)	$	25.53		 	$	23.91		 	$	24.28		
Tenant improvements (per rentable square foot) (1)	$	4.05		 	$	1.85		 	$	2.35		
Leasing commissions (per rentable square foot) (1)	$	1.03		 	$	0.76		 	$	0.82		
__________
		
(1)	Weighted average per rentable square foot on an annual basis over the lease term.	

Compared to previous leases in the same office spaces, annual combined GAAP rents for new and renewal leases signed in the fourth quarter were $24.28 per rentable square foot, or 10.6% higher .

27

Table of Contents

We strive to maintain a diverse, stable and creditworthy customer base. We have an internal guideline whereby customers that account for more than 3% of our revenues are periodically reviewed with the Company's Board of Directors. As of December 31, 2015 , no customer accounted for more than 3% of our cash revenues other than the Federal Government, which accounted for less than 6% of our cash revenues on an annualized basis. See “Item 2. Properties - Customers.” Upon completion of the Bridgestone Americas development project in Nashville, which is scheduled for delivery in mid-to-late 2017, it is expected that Bridgestone Americas, Inc., the U.S. subsidiary of Bridgestone Corporation, will account for approximately 3% of our revenues based on annualized cash revenues for December 2015 . See “Item 2. Properties - In-Process Development.”
 
Operating Expenses
 
Our expenses primarily consist of rental property expenses, depreciation and amortization, general and administrative expenses and interest expense. From time to time, expenses also include impairments of real estate assets. Rental property expenses are expenses associated with our ownership and operation of rental properties and include expenses that vary somewhat proportionately to occupancy levels, such as janitorial services and utilities, and expenses that do not vary based on occupancy, such as property taxes and insurance. Depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year, unless we buy, place in service or sell assets, since we depreciate our properties and related building and tenant improvement assets on a straight-line basis over fixed lives. General and administrative expenses consist primarily of management and employee salaries and other personnel costs, corporate overhead and short and long-term incentive compensation.

Net Operating Income

Whether or not we record growing same property net operating income (“NOI”) depends upon our ability to garner higher rental revenues, whether from higher average occupancy, higher GAAP rents per rentable square foot or higher cost recovery income, that exceed any corresponding growth in operating expenses. Same property NOI from continuing operations was $19.5 million , or 5.9% , higher in 2015 as compared to 2014 due to an increase in same property revenues of $24.5 million offset by an increase of $5.0 million in same property expenses. We expect same property NOI to be higher in 2016 than 2015 as higher rental revenues, mostly from higher average occupancy and higher average GAAP rents per rentable square foot, are expected to more than offset a corresponding increase in same property operating expenses.

In addition to the effect of same property NOI, whether or not NOI from continuing operations increases depends upon whether the NOI from our acquired properties and development properties placed in service exceeds the NOI from sold properties. NOI from continuing operations was $38.7 million , or 11.1% , higher in 2015 as compared to 2014 due to the full year impact of acquisitions and development properties placed in service in 2014 and the partial year impact of acquisitions and development properties placed in service in 2015 , offset by NOI lost from sold properties not classified as discontinued operations. We expect NOI from continuing operations to be higher in 2016 than 2015 due to our net investment activity in 2015 and higher same property revenues resulting mostly from an increase in average occupancy and higher average GAAP rents per rentable square foot.

Cash Flows

In calculating net cash related to operating activities, depreciation and amortization, which are non-cash expenses, are added back to net income. As a result, we have historically generated a positive amount of cash from operating activities. From period to period, cash flow from operations depends primarily upon changes in our net income, as discussed more fully below under “Results of Operations,” changes in receivables and payables, and net additions or decreases in our overall portfolio.

Net cash related to investing activities generally relates to capitalized costs incurred for leasing and major building improvements and our acquisition, development, disposition and joint venture capital activity. During periods of significant net acquisition and/or development activity, our cash used in such investing activities will generally exceed cash provided by investing activities, which typically consists of cash received upon the sale of properties and distributions of capital from our joint ventures.

Net cash related to financing activities generally relates to distributions, incurrence and repayment of debt, and issuances, repurchases or redemptions of Common Stock, Common Units and Preferred Stock. As discussed previously, we use a significant amount of our cash to fund distributions. Whether or not we have increases in the outstanding balances of debt during a period depends generally upon the net effect of our acquisition, disposition, development and joint venture activity. We generally use our revolving credit facility for daily working capital purposes, which means that during any given period, in order to minimize interest expense, we may record significant repayments and borrowings under our revolving credit facility.

28

Table of Contents

Liquidity and Capital Resources
 
We intend to maintain a conservative and flexible balance sheet with access to multiple sources of debt and equity capital and sufficient availability under our revolving credit facility that allows us to capitalize on favorable development and acquisition opportunities as they arise.

Rental and other revenues are our principal source of funds to meet our short-term liquidity requirements. Other sources of funds for short-term liquidity needs include available working capital and borrowings under our existing revolving credit facility, which had $ 161.1 million of availability at January 29, 2016 . Our short-term liquidity requirements primarily consist of operating expenses, interest and principal amortization on our debt, distributions and capital expenditures, including building improvement costs, tenant improvement costs and lease commissions. Building improvements are capital costs to maintain or enhance existing buildings not typically related to a specific customer. Tenant improvements are the costs required to customize space for the specific needs of customers. We anticipate that our available cash and cash equivalents and cash provided by operating activities, together with cash available from borrowings under our revolving credit facility, will be adequate to meet our short-term liquidity requirements. We use our revolving credit facility for working capital purposes and for the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt. The continued ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.
 
Our long-term liquidity uses generally consist of the retirement or refinancing of debt upon maturity (including mortgage debt, our revolving credit facility, bridge facility, term loans and other unsecured debt), funding of existing and new building development and land infrastructure projects and funding acquisitions of buildings and development land. Additionally, we may, from time to time, retire some or all of our remaining outstanding Preferred Stock and/or unsecured debt securities through redemptions, open market repurchases, privately negotiated acquisitions or otherwise.
 
We expect to meet our long-term liquidity needs through a combination of:

•	cash flow from operating activities;	

•	bank term loans and borrowings under our revolving credit facility;	

•	the issuance of unsecured debt;	

•	the issuance of secured debt;	

•	the issuance of equity securities by the Company or the Operating Partnership; and	

•	the disposition of non-core assets.	

We generally expect to grow our company on a leverage-neutral basis. Before the decision to sell the Plaza assets, we have generally operated within a targeted leverage range of 40% to 45% as measured by the ratio of the undepreciated book value of our assets to our mortgages and notes payable and outstanding preferred stock. The Plaza assets, which are under contract to sell for $660.0 million, have an undepreciated book value of approximately $372 million. As of December 31, 2015 , our leverage ratio was 44.9% using the undepreciated book value of the Plaza assets and 42.7% using the contracted sales price of the Plaza assets.

Assuming the sale of the Plaza assets had occurred as of December 31, 2015 and the net proceeds had been used as described under “Investment Activity,” our leverage would have been 38.3%. The sale of the Plaza assets is expected to close on March 1, 2016. Once the sale of the Plaza assets is completed, we believe it prudent and appropriate to adjust our targeted leverage range to reflect the impact of the significant difference between the undepreciated book value and contracted sales price of the Plaza assets. As a result, going forward, our plan will be to operate within a targeted leverage range of 38% to 43%.

This forward-looking statement is subject to risks and uncertainties. See "Disclosure Regarding Forward-Looking Statements."

Investment Activity

As noted above, a key tenet of our strategic plan is to continuously upgrade the quality of our office portfolio through acquisitions, dispositions and development. We generally seek to acquire and develop office buildings that improve the average quality of our overall portfolio and deliver consistent and sustainable value for our stockholders over the long-term. Whether or not an asset acquisition or new development results in higher per share net income or funds from operations ("FFO") in any given period depends upon a number of factors, including whether the NOI for any such period exceeds the actual cost of capital used

29

Table of Contents

to finance the acquisition or development. Additionally, given the length of construction cycles, development projects are not placed in service until, in some cases, several years after commencement. Sales of non-core assets could result in lower per share net income or FFO in any given period in the event the resulting use of proceeds does not exceed the capitalization rate on the sold properties.

Results of Operations

As noted previously, we entered into a series of definitive agreements, dated as of December 21, 2015, pursuant to which we intend to sell the Plaza assets for $660.0 million. The sales, which are subject to customary closing conditions, are scheduled to close on March 1, 2016. The buyer’s contractual due diligence investigation period ended on December 31, 2015. The buyer has posted earnest money deposits, held by a third party, totaling $25.0 million that are non-refundable and the buyer would be obligated to pay us an additional $25.0 million in the event of a default, except in limited circumstances. As a result of the foregoing, the Plaza assets and related liabilities were classified as held for sale at December 31, 2015 and 2014 and, accordingly, the revenues and expenses of the Plaza assets have been reclassified to income from discontinued operations in the presentation of our results of operations.

Comparison of 2015 to 2014

Rental and Other Revenues
 
Rental and other revenues were $48.8 million, or 8.8%, higher in 2015 as compared to 2014 primarily due to recent acquisitions, higher same property revenues and development properties placed in service, which increased rental and other revenues by $25.5 million, $24.5 million and $17.2 million, respectively. Same property rental and other revenues were higher primarily due to an increase in average occupancy to 92.3% in 2015 from 90.5% in 2014, higher average GAAP rents per rentable square foot and higher cost recovery income. These increases were partly offset by lost revenue of $18.0 million from property dispositions. We expect rental and other revenues to again be higher in 2016 as compared to 2015 due to the full year contribution of acquisitions closed and development properties placed in service in 2015 and higher same property revenues, partly offset by lost revenue from 2015 property dispositions.

Operating Expenses
 
Rental property and other expenses were $10.1 million, or 4.9%, higher in 2015 as compared to 2014 primarily due to recent acquisitions, higher same property operating expenses and development properties placed in service, which increased operating expenses by $9.6 million, $5.0 million and $3.4 million, respectively. Same property operating expenses were higher primarily due to higher property taxes, janitorial and other building-related services and repairs and maintenance, partly offset by lower property insurance and utilities. These increases were partly offset by a $6.7 million decrease in operating expenses from property dispositions. We expect rental property and other expenses to again be higher in 2016 as compared to 2015 due to the full year contribution of acquisitions closed and development properties placed in service in 2015 and higher same property operating expenses, partly offset by lower operating expenses due to 2015 property dispositions.

Depreciation and amortization was $21.3 million, or 11.8%, higher in 2015 as compared to 2014 primarily due to recent acquisitions and development properties placed in service, partly offset by property dispositions. We expect 2016 depreciation and amortization to increase over 2015 primarily due to the full year contribution of acquisitions closed and development properties placed in service in 2015, partly offset by lower depreciation and amortization due to 2015 property dispositions.

We recorded an impairment of real estate assets of $0.6 million in 2014 on a building in Greensboro, NC, which resulted from a change in the assumed timing of future disposition and leasing assumptions. We recorded no such impairment in 2015.

General and administrative expenses were $2.4 million, or 6.8%, higher in 2015 as compared to 2014 primarily due to higher company-wide base salaries and benefits, incentive compensation and acquisition costs. We expect 2016 general and administrative expenses to decrease over 2015 primarily due to lower incentive compensation and acquisition costs, partly offset by higher company-wide base salaries.

Interest Expense
 
Interest expense was $0.9 million, or 1.1%, higher in 2015 as compared to 2014 primarily due to higher average debt balances and financing obligation interest expense, partly offset by higher capitalized interest. We expect 2016 interest expense to decrease over 2015 primarily due to lower average interest rates and higher capitalized interest.

30

Table of Contents

Other Income
 
Other income was $0.7 million, or 29.0%, lower in 2015 as compared to 2014 primarily due to the repayments of mortgages receivable in 2014 and 2015. We expect 2016 other income to continue to decrease over 2015 primarily due to the repayments of mortgages receivable in 2015.

Gains on Disposition of Property and Net Gains on Disposition of Discontinued Operations
 
With the adoption of the discontinued operations accounting standards update in the second quarter of 2014, gains on disposition of property are now generally included in continuing operations. Prior to adoption, such gains were generally classified as discontinued operations. Total gains were $33.3 million lower in 2015 as compared to 2014 due to the net effect of the disposition activity in such years. We expect to record a significant net gain on disposition of discontinued operations during the first quarter of 2016 in connection with the sale of the Plaza assets.

Gain on Disposition of Investment in Unconsolidated Affiliate
 
We recorded a gain on disposition of investment in unconsolidated affiliate of $4.2 million in 2015 due to the sale of our 20.0% interest in SF-HIW Harborview Plaza, LP ("Harborview") to our partner. We had no comparable transaction in 2014.

Equity in Earnings of Unconsolidated Affiliates
 
Equity in earnings of unconsolidated affiliates was $3.3 million higher in 2015 as compared to 2014 primarily due to our share of gains recognized by certain of our unconsolidated affiliates in 2015, lower interest expense in 2015 and a net impairment of one of our previous investments in 2014. These increases were partly offset by less net operating income in our unconsolidated affiliates as a result of disposition activity. We expect 2016 equity in earnings of unconsolidated affiliates to decrease over 2015 primarily due to our share of gains recognized in 2015 and as a result of disposition activity by certain of our joint ventures.

Income From Discontinued Operations
 
Income from discontinued operations was $2.9 million, or 15.4%, lower in 2015 as compared to 2014 primarily due to lower termination fees in 2015 and anticipated severance costs required to be accrued in 2015 due to our intent to close our Kansas City division office upon the sale of the Plaza assets.

Earnings Per Common Share - Diluted
 
Diluted earnings per common share was $0.19, or 16.0%, lower in 2015 as compared to 2014 due to a decrease in net income for the reasons discussed above and an increase in the weighted average Common Shares outstanding.

Comparison of 2014 to 2013
 
Rental and Other Revenues
 
Rental and other revenues were $50.9 million, or 10.1%, higher in 2014 as compared to 2013 primarily due to 2013 and 2014 acquisitions and development properties placed in service and higher same property revenues, which increased rental and other revenues by $55.2 million and $4.8 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot and higher cost recovery income, partly offset by lower termination fees and a decrease in average occupancy to 90.7% in 2014 from 91.1% in 2013. These increases were partly offset by $6.6 million in lost revenue from property dispositions and the recognition of $1.1 million of deferred leasing commission income in 2013.

Operating Expenses
 
Rental property and other expenses were $21.7 million, or 11.8%, higher in 2014 as compared to 2013 primarily due to 2013 and 2014 acquisitions and development properties placed in service and higher same property operating expenses, which increased operating expenses by $19.5 million and $5.4 million, respectively. Same property operating expenses were higher primarily due to higher utilities and snow removal costs as a result of harsher than normal winter conditions and higher property taxes, partly offset by lower repairs and maintenance. These increases were partly offset by a $2.4 million decrease in operating expenses from property dispositions in 2014.

31

Table of Contents

Depreciation and amortization was $17.7 million, or 10.9%, higher in 2014 as compared to 2013 primarily due to 2013 and 2014 acquisitions and development properties placed in service.

We recorded an impairment of real estate assets of $0.6 million in 2014 on a building in Greensboro, NC. Prior to the adoption of the discontinued operations accounting standards update in the second quarter of 2014, such comparable impairments were classified as discontinued operations in 2013. We recorded impairments of real estate assets of $1.1 million on seven buildings in Atlanta, GA and $1.1 million on four buildings in a single office park in Winston-Salem, NC in 2013. These impairments were due to a change in the assumed timing of future dispositions and leasing assumptions.

General and administrative expenses were $1.1 million, or 3.1%, lower in 2014 as compared to 2013 primarily due to lower acquisition costs, partly offset by higher company-wide base salaries, benefits and incentive compensation.

Interest Expense
 
Interest expense was $6.8 million, or 7.4%, lower in 2014 as compared to 2013 primarily due to lower average interest rates and higher capitalized interest, partly offset by higher average debt balances.

Other Income
 
Other income was $0.9 million, or 26.6%, lower in 2014 as compared to 2013 primarily due to the repayments in the first quarter of 2014 of $16.5 million of mortgages receivable, which consisted of seller financing provided in connection with 2010 disposition transactions

Gains on Disposition of Property and Net Gains on Disposition of Discontinued Operations
 
With the adoption of the discontinued operations accounting standards update in the second quarter of 2014, gains on disposition of property are now generally included in continuing operations. Prior to adoption, such gains were generally classified as discontinued operations. Total gains were $19.1 million lower in 2014 as compared to 2013 due to the net effect of the disposition activity in such years.

Gain on Acquisition of Controlling Interest in Unconsolidated Affiliate
 
We recorded a gain on acquisition of controlling interest in unconsolidated affiliate of $7.5 million in 2013 due to acquiring our joint venture partner’s 60.0% interest in our HIW-KC Orlando, LLC joint venture. We had no comparable transaction in 2014.

Income From Discontinued Operations
 
The revenues and expenses of the Plaza assets, which we plan to dispose of in March 2016, have been reclassified to income from discontinued operations in 2014 and 2013. Additionally, 2013 amounts include properties which qualified for discontinued operations treatment prior to adoption of the discontinued operations accounting standards update in the second quarter of 2014. Income from discontinued operations was $8.3 million, or 30.7%, lower in 2014 as compared to 2013 due to the net effect of the disposition activity in such years.

Equity in Earnings of Unconsolidated Affiliates
 
Equity in earnings of unconsolidated affiliates was $0.4 million, or 19.3%, lower in 2014 as compared to 2013 primarily due to our share of a gain recognized by the Lofts at Weston, LLC joint venture in 2013, the acquisitions of certain joint venture interests and assets in the third quarter of 2013 and a net impairment of our previous investment in Board of Trade Investment Company in 2014. Partly offsetting this decrease is our share of impairments of real estate assets on certain buildings in our Highwoods DLF 98/29, LLC joint venture in 2013.

Earnings Per Common Share - Diluted
 
Diluted earnings per common share was $0.25, or 17.4%, lower in 2014 as compared to 2013 due to a decrease in net income for the reasons discussed above and an increase in the weighted average Common Shares outstanding.

32

Table of Contents

Liquidity and Capital Resources

Statements of Cash Flows

We report and analyze our cash flows based on operating activities, investing activities and financing activities. The following table sets forth the changes in the Company’s cash flows ($ in thousands):

	
																				
 	Year Ended December 31,	 	 	 	 	
 	2015	 	2014	 	2013	 	2015-2014 Change	 	2014-2013 Change	
Net Cash Provided By Operating Activities	$	288,879		 	$	266,911		 	$	256,437		 	$	21,968		 	$	10,474		
Net Cash Used In Investing Activities	(654,157	)	 	(328,178	)	 	(356,603	)	 	(325,979	)	 	28,425		
Net Cash Provided By Financing Activities	361,482		 	59,915		 	96,567		 	301,567		 	(36,652	)	
Total Cash Flows	$	(3,796	)	 	$	(1,352	)	 	$	(3,599	)	 	$	(2,444	)	 	$	2,247		

Comparison of 2015 to 2014

The increase in net cash provided by operating activities in 2015 as compared to 2014 was primarily due to higher net cash from the operations of recent acquisitions and development properties placed in service in 2014 and 2015, partly offset by higher cash paid for operating expenses in 2015. We expect net cash related to operating activities to be higher in 2016 as compared to 2015 due to the full year impact of properties acquired in 2015 and higher cash flows from leases signed in 2015 and prior years as free rent periods expire, partly offset by the sale of the Plaza assets in 2016.

The increase in net cash used in investing activities in 2015 as compared to 2014 was primarily due to higher acquisition activity and lower net proceeds from disposition of real estate assets in 2015, partly offset by lower development activity and the repayment of an advance from an unconsolidated affiliate in 2015. We expect uses of cash for investing activities in 2016 to be primarily driven by our plans to acquire and commence development of office buildings in the BBDs of our markets. Additionally, as of December 31, 2015 , we have $294 million left to fund of our previously-announced development activity. We expect these uses of cash for investing activities will be partly offset by the sale of the Plaza assets in 2016.

The increase in net cash provided by financing activities in 2015 as compared to 2014 was primarily due to higher net debt borrowings and higher proceeds from the issuance of Common Stock in 2015.

Comparison of 2014 to 2013

The increase in net cash provided by operating activities in 2014 as compared to 2013 was primarily due to higher net cash from the operations of properties acquired in 2014 and 2013 partly offset by higher cash paid for operating expenses in 2014.

The decrease in net cash used in investing activities in 2014 as compared to 2013 was primarily due to lower acquisition activity and higher repayments of mortgages and notes receivable in 2014, partly offset by higher development activity, lower net proceeds from dispositions of real estate assets and lower distributions of capital from unconsolidated affiliates in 2014.

The decrease in net cash provided by financing activities in 2014 as compared to 2013 was primarily due to lower proceeds from the issuance of Common Stock, higher aggregate dividends on Common Stock due to a higher number of shares outstanding and lower contributions from noncontrolling interests in consolidated affiliates in 2014, partly offset by higher net debt borrowings in 2014.

33

Table of Contents

Capitalization
 
The following table sets forth the Company’s capitalization (in thousands, except per share amounts):

	
								
 	December 31,	
 	2015	 	2014	
 	 	 	(as revised)	
Mortgages and notes payable, at recorded book value	$	2,499,614		 	$	2,071,389		
Financing obligation (in liabilities held for sale)	$	7,402		 	$	8,962		
Preferred Stock, at liquidation value	$	29,050		 	$	29,060		
Common Stock outstanding	96,092		 	92,907		
Common Units outstanding (not owned by the Company)	2,900		 	2,937		
Per share stock price at year end	$	43.60		 	$	44.28		
Market value of Common Stock and Common Units	$	4,316,051		 	$	4,243,972		
Total capitalization	$	6,852,117		 	$	6,353,383		
 
At December 31, 2015 , our mortgages and notes payable and outstanding preferred stock represented 36.9% of our total capitalization and 44.9% of the undepreciated book value of our assets. See also "Executive Summary - Liquidity and Capital Resources."

Our mortgages and notes payable as of December 31, 2015 consisted of $175.3 million of secured indebtedness with a weighted average interest rate of 5.13% and $2,324.3 million of unsecured indebtedness with a weighted average interest rate of 3.32% . The secured indebtedness was collateralized by real estate assets with an aggregate undepreciated book value of $314.2 million . As of December 31, 2015 , $974.0 million of our debt does not bear interest at fixed rates or is not protected by interest rate hedge contracts. Approximately $430 million of variable rate debt will be paid off in connection with the sale of the Plaza assets.
 
Dividends and Distributions
 
To maintain its qualification as a REIT, the Company must pay dividends to stockholders that are at least 90.0% of its annual REIT taxable income, excluding net capital gains. The partnership agreement requires the Operating Partnership to distribute at least enough cash for the Company to be able to pay such dividends. The Company's REIT taxable income, as determined by the federal tax laws, does not equal its net income under generally accepted accounting principles in the United States of America (“GAAP”). In addition, although capital gains are not required to be distributed to maintain REIT status, capital gains, if any, are subject to federal and state income tax unless such gains are distributed to stockholders.
 
Cash dividends and distributions reduce the amount of cash that would otherwise be available for other business purposes, including funding debt maturities or future growth initiatives. The amount of future distributions that will be made is at the discretion of the Company's Board of Directors. For a discussion of the factors that will influence decisions of the Board of Directors regarding distributions, see “Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”
 
Investment Activity
 
During the third quarter of 2015, we acquired:

•	a building in the central business district of Tampa, FL encompassing 528,000 rentable square feet for a net purchase price of $113.5 million and an adjacent land parcel for a purchase price of $2.2 million; and	

•	two buildings in the Buckhead submarket of Atlanta, GA encompassing 896,000 rentable square feet for a net purchase price of $290.3 million.	

During the second quarter of 2015, we acquired:

•	land in Atlanta, GA for a purchase price and related transaction costs of $5.2 million (including contingent consideration of $0.9 million); and	

34

Table of Contents

•	our Highwoods DLF 98/29, LLC joint venture partner’s 77.2% interest in a building in the central business district of Orlando, FL encompassing 168,000 rentable square feet in exchange for the assumption of secured debt recorded at fair value of $19.3 million (see "Financing Activity").	

During 2015, we expensed $1.0 million of acquisition costs (included in general and administrative expenses) related to these acquisitions. The assets acquired and liabilities assumed were recorded at fair value as determined by management based on information available at the acquisition date and on current assumptions as to future operations. We have invested or intend to invest an additional $17.5 million in the aggregate of planned building improvements in the buildings acquired in 2015. As of the respective closing dates, based on the total anticipated investment of $440.6 million , the weighted average capitalization rate for the acquisitions of these buildings, which were 86.9% occupied on average as of the closing dates, is 6.0% using projected annual GAAP net operating income for the first 12 months of ownership. These forward-looking statements are subject to risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements.”

In the normal course of business, we regularly evaluate potential acquisitions. As a result, from time to time, we may have one or more potential acquisitions under consideration that are in varying stages of evaluation, negotiation or due diligence, including potential acquisitions that are subject to non-binding letters of intent or enforceable contracts. Consummation of any transaction is subject to a number of contingencies, including the satisfaction of customary closing conditions. No assurances can be provided that we will acquire any properties in the future. See "Item 1A. Risk Factors - Recent and future acquisitions and development properties may fail to perform in accordance with our expectations and may require renovation and development costs exceeding our estimates."

We entered into an agreement, dated as of January 29, 2016, to sell a 32,000 square foot building for $4.7 million. The buyer, which currently leases 79% of the building, is a family business controlled by a director of the Company. The sale price exceeds the value set forth in an appraisal performed by a reputable commercial real estate services firm that has no relationship with the director or any of his affiliates. We expect to record a gain of approximately $1.0 million upon completion of the sale, which is expected to close in the second quarter of 2016.

On January 4, 2016, we announced our agreement to sell the Plaza assets for $660.0 million. The Plaza assets, which are currently 95% leased in the aggregate, consist of 18 properties encompassing 776,000 square feet of in-service retail space, 468,000 square feet of in-service office space and a 28,000 square foot redevelopment project. The parties have entered into a series of definitive agreements, dated as of December 21, 2015, relating to the sale of the Plaza assets. The sales, which are subject to customary closing conditions, are scheduled to close on March 1, 2016. The buyer’s contractual due diligence investigation period ended on December 31, 2015. The buyer has posted earnest money deposits, held by a third party, totaling $25.0 million that are non-refundable and the buyer would be obligated to pay us an additional $25.0 million in the event of a default, except in limited circumstances.

We intend to: (1) use $430.0 million of the expected net sale proceeds from the sale of the Plaza assets to repay debt incurred to acquire three buildings in the third quarter of 2015; and (2) hold $220.0 million of the expected net sale proceeds in escrow pending reinvestment in 1031 exchanges qualifying for tax-deferred treatment, repayment of additional debt and/or other general corporate purposes. We intend to close our Kansas City division office upon such sale. In the fourth quarter of 2015, we accrued $1.6 million of the total $2.6 million severance costs expected to be incurred in connection with the sale.

During the fourth quarter of 2015, we sold land for a sale price of $4.2 million and recorded a gain on disposition of property of $0.9 million, net of $0.5 million in taxes payable by our taxable REIT subsidiary.

During the third quarter of 2015, we sold:

•	a building for a sale price of $15.3 million and recorded a gain on disposition of property of $6.5 million; and	

•	land for a sale price of $1.8 million and recorded a gain on disposition of property of $0.5 million.	

During the second quarter of 2015, we sold land for a sale price of $0.5 million and recorded a gain on disposition of property of $0.2 million.

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	

35

Table of Contents

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

During the second quarter of 2015, $9.9 million of secured acquisition financing provided to a third party in 2012 was repaid, including accrued interest.

Financing Activity
 
In 2014, we entered into separate sales agreements with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Robert W. Baird & Co. Incorporated, BB&T Capital Markets, a division of BB&T Securities, LLC, Capital One Securities, Inc., Comerica Securities, Inc., Jefferies LLC, Mitsubishi UFJ Securities (USA), Inc., Morgan Stanley & Co. LLC, Piper Jaffray & Co., RBC Capital Markets, LLC and Wells Fargo Securities, LLC. Under the terms of the sales agreements, the Company could offer and sell up to $250.0 million in aggregate gross sales price of shares of Common Stock from time to time through such firms, acting as agents of the Company or as principals. Sales of the shares, if any, may be made by means of ordinary brokers' transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices or as otherwise agreed with any of such firms. During 2015 , the Company issued 2,922,905 shares of Common Stock at an average gross sales price of $43.39 per share and received net proceeds, after sales commissions, of $124.9 million . We paid an aggregate of $1.9 million in sales commissions to Wells Fargo Securities, LLC, Jefferies LLC, Capital One Securities, Inc., Robert W. Baird & Co. Incorporated, Mitsubishi UFJ Securities (USA), Inc. and Morgan Stanley & Co. LLC during 2015 .

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. The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody's Investors Service or Standard & Poor's Ratings Services. There was $ 299.0 million and $ 313.7 million outstanding under our revolving credit facility at December 31, 2015 and January 29, 2016 , respectively. At both December 31, 2015 and January 29, 2016 , we had $ 0.2 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at December 31, 2015 and January 29, 2016 was $ 175.8 million and $ 161.1 million , respectively.

During the fourth quarter of 2015, we prepaid without penalty a secured mortgage loan with a fair market value of $5.9 million with an effective interest rate of 7.65% that was originally scheduled to mature in February 2016 and prepaid without penalty the remaining $106.0 million balance on a secured mortgage loan with an effective interest rate of 6.88% that was originally scheduled to mature in January 2016.

During the third quarter of 2015, we obtained a $350.0 million, six-month unsecured bridge facility. The bridge facility is originally scheduled to mature on March 28, 2016. Assuming no defaults have occurred, we have an option to extend the maturity for an additional six-month period. The interest rate on the bridge facility at our current credit ratings is LIBOR plus 110 basis points. The interest rate is based on the higher of the publicly announced ratings from Moody's Investors Service or Standard & Poor's Ratings Services. The financial and other covenants under the bridge facility are similar to our revolving credit facility. The purpose of the bridge facility is for the short-term funding of our third quarter acquisition activity and other general corporate purposes. There was $350.0 million outstanding under our bridge facility at December 31, 2015. We expect to repay all amounts outstanding under the bridge facility on or about March 1, 2016 in connection with the sale of the Plaza assets.

During the second quarter of 2015, we amended our $225.0 million, seven-year unsecured bank term loan, which was scheduled to mature in January 2019. We increased the borrowed amount to $350.0 million and used the $125.0 million of incremental new proceeds to repay amounts outstanding under our $475.0 million unsecured revolving credit facility. The amended term loan is now scheduled to mature in June 2020 and the interest rate, based on our current credit ratings, was reduced from LIBOR plus 175 basis points to LIBOR plus 110 basis points. The interest rate is based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services. The financial and other covenants under the amended term loan are unchanged.

During the second quarter of 2015, we prepaid without penalty the remaining $39.4 million balance on a secured mortgage loan with an effective interest rate of 6.43% that was originally scheduled to mature in November 2015.

During the second quarter of 2015, we acquired our joint venture partner’s 77.2% interest in a building in Orlando, FL. Simultaneously with this acquisition, the joint venture's previously existing mortgage note was restructured into a new $18.0 million first mortgage note and a $10.2 million subordinated note, both of which are scheduled to mature in July 2017. The first mortgage note is interest only with an effective interest rate of 5.36%, payable monthly. The subordinated note has an effective

36

Table of Contents

interest rate of 8.6%. Additionally, we deposited $3.0 million into escrow to fund tenant improvements, leasing commissions and building improvements. The first mortgage note and subordinated note can be prepaid at any time commencing October 2016 upon a sale or refinancing of the property. In such event, the subordinated note and any and all accrued interest thereon would be deemed fully satisfied upon payment of a "waterfall payment," if any. Such "waterfall payment" would be a cash payment equal to 50.0% of the amount, if any, by which the net sale proceeds or appraised value in the event of a refinancing exceeds (1) the outstanding principal of the first mortgage note, (2) the funds deposited by us into escrow to fund tenant improvements, leasing commissions and building improvements and (3) a 10.0% return on such funds deposited by us into escrow. The fair value of the first mortgage note was $18.3 million and the fair value of the subordinated note equaled the projected waterfall payment of $1.0 million.

We regularly evaluate the financial condition of the financial institutions that participate in our credit facilities and as counterparties under interest rate swap agreements using publicly available information. Based on this review, we currently expect these financial institutions to perform their obligations under our existing facilities and swap agreements.
 
For information regarding our interest hedging activities and other market risks associated with our debt financing activities, see "Item 7A. Quantitative and Qualitative Disclosures About Market Risk."

Covenant Compliance
 
We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt. Although we expect to remain in compliance with these covenants and ratios for at least the next year, depending upon our future operating performance, property and financing transactions and general economic conditions, we cannot assure you that we will continue to be in compliance.

Our revolving credit facility, bridge facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on the revolving credit facility, the lenders having at least 51.0% of the total commitments under the revolving credit facility can accelerate all borrowings then outstanding, and we could be prohibited from borrowing any further amounts under our revolving credit facility, which would adversely affect our ability to fund our operations.

As of December 31, 2015 , the Operating Partnership had the following unsecured notes outstanding ($ in thousands):

	
														
 	Face Amount	 	Carrying Amount	 	Stated Interest Rate	 	Effective Interest Rate	
Notes due March 2017	$	379,685		 	$	379,544		 	5.850	%	 	5.880	%	
Notes due April 2018	$	200,000		 	$	200,000		 	7.500	%	 	7.500	%	
Notes due June 2021	$	300,000		 	$	297,639		 	3.200	%	 	3.363	%	
Notes due January 2023	$	250,000		 	$	248,150		 	3.625	%	 	3.752	%	

The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0% in principal amount of either series of bonds can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.
 
We may not be able to repay, refinance or extend any or all of our debt at maturity or upon any acceleration. If any refinancing is done at higher interest rates, the increased interest expense could adversely affect our cash flow and ability to pay distributions. Any such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions.

37

Table of Contents

Contractual Obligations
 
The following table sets forth a summary regarding our known contractual obligations, including required interest payments for those items that are interest bearing, at December 31, 2015 ($ in thousands):

	
																												
 	 	 	Amounts due during the years ending December 31,	 	 	
 	Total	 	2016	 	2017	 	2018	 	2019	 	2020	 	Thereafter	
Mortgages and Notes Payable:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Principal payments   (1)	$	2,502,023		 	$	395,817		 	$	507,206		 	$	499,000		 	$	200,000		 	$	350,000		 	$	550,000		
Interest payments	246,055		 	80,874		 	59,219		 	34,039		 	26,768		 	22,226		 	22,929		
Financing Obligation:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax increment financing bond (2)	7,402		 	1,669		 	1,785		 	1,908		 	2,040		 	—		 	—		
Interest on financing obligation	1,326		 	513		 	397		 	274		 	142		 	—		 	—		
Capitalized Lease Obligations	117		 	63		 	43		 	11		 	—		 	—		 	—		
Purchase Obligations:		 	 	 	 	 	 	 	 	 	 	 	 	
Lease and contractual commitments and contingent consideration (3)	340,022		 	237,436		 	96,489		 	34		 	1,301		 	3,406		 	1,356		
Operating Lease Obligations:		 	 	 	 	 	 	 	 	 	 	 	 	
Operating ground leases	124,679		 	3,033		 	3,067		 	3,103		 	3,140		 	3,179		 	109,157		
Total	$	3,221,624		 	$	719,405		 	$	668,206		 	$	538,369		 	$	233,391		 	$	378,811		 	$	683,442		
__________
		
(1)	Excludes amortization of premiums, discounts and/or purchase accounting adjustments.	
		
(2)	Recorded on our Consolidated Balance Sheets in liabilities held for sale. See Note 16.	
		
(3)	Amount represents commitments under signed leases and contracts for operating properties, excluding tenant-funded tenant improvements, and contracts for development/redevelopment projects. This includes $188.9 million of contractual commitments related to our in-process development activity. For a description of our development activity, see "Item 2. Properties - In-Process Development." The timing of these lease and contractual commitments may fluctuate.	

The interest payments due on mortgages and notes payable are based on the stated rates for the fixed rate debt and on the rates in effect at December 31, 2015 for the variable rate debt. The weighted average interest rate on our fixed (including debt with a variable rate that is effectively fixed by related interest rate swaps) and variable rate debt was 4.71% and 1.46% , respectively, at December 31, 2015 . For additional information about our mortgages and notes payable, see Note 6 to our Consolidated Financial Statements. For additional information about our financing obligation, see Note 8 to our Consolidated Financial Statements. For additional information about purchase obligations and operating lease obligations, see Note 9 to our Consolidated Financial Statements.

Off Balance Sheet Arrangements

We generally account for our investments in less than majority owned joint ventures, partnerships and limited liability companies using the equity method. As a result, these joint ventures are not included in our Consolidated Financial Statements, other than as investments in unconsolidated affiliates and equity in earnings of unconsolidated affiliates.

At December 31, 2015 , our unconsolidated joint ventures had $217.4 million of total assets and $148.1 million of total liabilities. Our weighted average equity interest based on the total assets of these unconsolidated joint ventures was 33.0% . During 2015 , our unconsolidated joint ventures had $24.1 million of aggregate net income. For additional information about our unconsolidated joint venture activity, see Note 4 to our Consolidated Financial Statements.

38

Table of Contents

At December 31, 2015 , our unconsolidated joint ventures had $141.6 million of outstanding mortgage debt. The following table sets forth the scheduled maturities of the Company’s $49.2 million proportionate share of the outstanding debt of its unconsolidated joint ventures at December 31, 2015 ($ in thousands):

	
				
2016	$	4,407		
2017	20,817		
2018	19,580		
2019	563		
2020	562		
Thereafter	3,313		
 	$	49,242		

All of this joint venture debt is non-recourse to us except in the case of customary exceptions pertaining to such matters as misuse of funds, environmental conditions, material misrepresentations and voluntary or uncontested involuntary bankruptcy events.

During the third quarter of 2015, we sold our 20.0% interest in Harborview to our partner for net proceeds of $6.9 million and recorded a $4.2 million gain on disposition of investment in unconsolidated affiliate. The $20.8 million interest-only secured loan previously provided by us to the joint venture was paid in full upon consummation of the sale.

See "Investment Activity" for a description of our acquisition of a building in Orlando, FL from Highwoods DLF 98/29, LLC during the second quarter of 2015. The joint venture recorded a gain on disposition of property of $13.7 million. Our share of $3.1 million was recorded as a reduction to real estate assets.

During the second quarter of 2015, Highwoods KC Glenridge Office, LLC and Highwoods KC Glenridge Land, LLC collectively sold two buildings and land to an unrelated third party for an aggregate sale price of $24.5 million (before closing credits to buyer of $0.3 million for unfunded tenant improvements) and recorded gains on disposition of property of $2.4 million. We recorded $0.9 million as our share of these gains through equity in earnings of unconsolidated affiliates.

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.

Financing Arrangements
 
- Harborview
 
We had a 20.0% interest in Harborview, which had been accounted for as a financing obligation since our partner had the right to put its 80.0% equity interest back to us any time prior to September 11, 2015 . During 2012, we also provided a three-year $20.8 million interest-only secured loan to Harborview that was scheduled to mature in September 2015.

During the second quarter of 2015, as a result of our partner’s irrevocable exercise of a buy-sell provision in our Harborview joint venture agreement, our partner’s right to put its 80.0% equity interest back to us became no longer exercisable, which resulted in recording the original contribution transaction as a partial sale. As a result, we were required to begin accounting for Harborview using the equity method of accounting. See Note 1 to our Consolidated Financial Statements.

During the third quarter of 2015, we sold our 20.0% interest in Harborview. See "Off Balance Sheet Arrangements."

- Tax Increment Financing Bond

In connection with tax increment financing for a parking garage we constructed in 1999, we are obligated to pay fixed special assessments over a 20-year period ending in 2019 . The net present value of these assessments, discounted at the 6.93% interest rate on the underlying tax increment financing, is recorded as a financing obligation and is classified in liabilities held for sale on our Consolidated Balance Sheets. We receive special tax revenues and property tax rebates recorded in interest and other income, which are intended, but not guaranteed, to provide funds to pay the special assessments. We acquired the related tax increment financing bond in a privately negotiated transaction in 2007 . Under the definitive agreements, dated as of December 21, 2015,

39

Table of Contents

relating to the sale of the Plaza assets, this tax increment financing bond will be assigned to the buyer of the Plaza assets as of the closing date at the agreed upon value of the principal amount and accrued interest, if any, then outstanding. Such value is included as part of the $660.0 million purchase price for the Plaza assets. For additional information about this tax increment financing bond, see Notes 8 and 11 to our Consolidated Financial Statements.

Critical Accounting Estimates
 
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from our estimates.
 
The policies used in the preparation of our Consolidated Financial Statements are described in Note 1 to our Consolidated Financial Statements. However, certain of our significant accounting policies contain an increased level of assumptions used or estimates made in determining their impact in our Consolidated Financial Statements. Management has reviewed and determined the appropriateness of our critical accounting policies and estimates with the audit committee of the Company's Board of Directors.
 
We consider our critical accounting estimates to be those used in the determination of the reported amounts and disclosure related to the following:

•	Real estate and related assets;	

•	Impairments of real estate assets and investments in unconsolidated affiliates;	

•	Sales of real estate;	

•	Rental and other revenues; and	

•	Allowance for doubtful accounts.	
 
Real Estate and Related Assets
 
Real estate and related assets are recorded at cost and stated at cost less accumulated depreciation. Renovations, replacements and other expenditures that improve or extend the life of assets are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful life of 40 years for buildings and depreciable land infrastructure costs, 15 years for building improvements and five to seven years for furniture, fixtures and equipment. Tenant improvements are amortized using the straight-line method over initial fixed terms of the respective leases, which generally are from three to 10 years.
 
Expenditures directly related to the development and construction of real estate assets are included in net real estate assets and are stated at depreciated cost. Development expenditures include pre-construction costs essential to the development of properties, development and construction costs, interest costs on qualifying assets, real estate taxes, development personnel salaries and related costs and other costs incurred during the period of development. Interest and other carrying costs are capitalized until the building is ready for its intended use, but not later than a year from cessation of major construction activity. We consider a construction project as substantially completed and ready for its intended use upon the completion of tenant improvements. We cease capitalization on the portion that is substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with the portion under construction.
 
Expenditures directly related to the leasing of properties are included in deferred financing and leasing costs and are stated at amortized cost. Such expenditures are part of the investment necessary to execute leases and, therefore, are classified as investment activities in the statement of cash flows. All leasing commissions paid to third parties for new leases or lease renewals are capitalized. Internal leasing costs, which consist primarily of compensation, benefits and other costs, such as legal fees related to leasing activities, that are incurred in connection with successfully obtaining leases of properties are also capitalized. Capitalized leasing costs are amortized on a straight-line basis over the initial fixed terms of the respective leases, which generally are from three to 10 years. Estimated costs related to unsuccessful activities are expensed as incurred.
 
We record liabilities for the performance of asset retirement activities when the obligation to perform such activities is probable even when uncertainty exists about the timing and/or method of settlement.

40

Table of Contents

Upon the acquisition of real estate assets, we assess the fair value of acquired tangible assets such as land, buildings and tenant improvements, intangible assets and liabilities such as above and below market leases, acquired in-place leases, customer relationships and other identifiable intangible assets and assumed liabilities. We assess fair value based on estimated cash flow projections that utilize discount and/or capitalization rates as well as available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
 
The above and below market rate portions of leases acquired in connection with property acquisitions are recorded in deferred financing and leasing costs and in accounts payable, accrued expenses and other liabilities, respectively, at fair value and amortized into rental revenue over the remaining term of the respective leases as described below. Fair value is calculated as the present value of the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) our estimate of fair market lease rates for each corresponding in-place lease, using a discount rate that reflects the risks associated with the leases acquired and measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any renewal option that the customer would be economically compelled to exercise for below-market leases.
 
In-place leases acquired are recorded at fair value in deferred financing and leasing costs and are amortized to depreciation and amortization expense over the remaining term of the respective lease. The value of in-place leases is based on our evaluation of the specific characteristics of each customer's lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, current market conditions, the customer's credit quality and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider tenant improvements, leasing commissions and legal and other related expenses.
 
Real estate and other assets are classified as long-lived assets held for use or as long-lived assets held for sale. Real estate is classified as held for sale when the sale of the asset is probable, has been duly approved by the Company, a legally enforceable contract has been executed and the buyer's due diligence period, if any, has expired.
 
Impairments of Real Estate Assets and Investments in Unconsolidated Affiliates
 
With respect to assets classified as held for use, we perform an impairment analysis if events or changes in circumstances indicate that the carrying value may be impaired, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, change in our designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost. This analysis is generally performed at the property level, except when an asset is part of an interdependent group such as an office park, and consists of determining whether the asset's carrying amount will be recovered from its undiscounted estimated future operating and residual cash flows. These cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers, changes in market rental rates, costs to operate each property and expected ownership periods. For properties under development, the cash flows are based on expected service potential of the asset or asset group when development is substantially complete.
 
If the carrying amount of a held for use asset exceeds the sum of its undiscounted future operating and residual cash flows, an impairment loss is recorded for the difference between estimated fair value of the asset and the carrying amount. We generally estimate the fair value of assets held for use by using discounted cash flow analyses. In some instances, appraisal information may be available and is used in addition to a discounted cash flow analysis. As the factors used in generating these cash flows are difficult to predict and are subject to future events that may alter our assumptions, the discounted and/or undiscounted future operating and residual cash flows estimated by us in our impairment analyses or those established by appraisal may not be achieved and we may be required to recognize future impairment losses on properties held for use.
 
We record assets held for sale at the lower of the carrying amount or estimated fair value. Fair value of assets held for sale is equal to the estimated or contracted sales price with a potential buyer, less costs to sell. The impairment loss is the amount by which the carrying amount exceeds the estimated fair value.
 
We also analyze our investments in unconsolidated affiliates for impairment. This analysis consists of determining whether an expected loss in market value of an investment is other than temporary by evaluating the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the unconsolidated affiliate, and our intent and ability to retain our investment for a period of time sufficient to allow for any anticipated recovery in market value. As the factors used in this analysis are difficult to predict and are subject to future events that may alter our assumptions, we may be required to recognize future impairment losses on our investments in unconsolidated affiliates.

41

Table of Contents

Sales of Real Estate
 
For sales transactions meeting the requirements for full profit recognition, the related assets and liabilities are removed from the balance sheet and the resultant gain or loss is recorded in the period the transaction closes. For sales transactions with continuing involvement after the sale, if the continuing involvement with the property is limited by the terms of the sales contract, profit is recognized at the time of sale and is reduced by the maximum exposure to loss related to the nature of the continuing involvement. Sales to entities in which we have or receive an interest are accounted for using partial sale accounting.
 
For transactions that do not meet the criteria for a sale, we evaluate the nature of the continuing involvement, including put and call provisions, if present, and account for the transaction as a financing arrangement, profit-sharing arrangement, leasing arrangement or other alternate method of accounting, rather than as a sale, based on the nature and extent of the continuing involvement. Some transactions may have numerous forms of continuing involvement. In those cases, we determine which method is most appropriate based on the substance of the transaction.
 
Rental and Other Revenues
 
Minimum contractual rents from leases are recognized on a straight-line basis over the terms of the respective leases. This means that, with respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental revenue recognized for the period. Straight-line rental revenue is commenced when the customer assumes control of the leased premises. Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements. Contingent rental revenue, such as percentage rent, is accrued when the contingency is removed. Termination fee income is recognized at the later of when the customer has vacated the space or the lease has expired and a fully executed lease termination agreement has been delivered, the amount of the fee is determinable and collectability of the fee is reasonably assured. Rental revenue reductions related to co-tenancy lease provisions, if any, are accrued when events have occurred that trigger such provisions.
 
Cost recovery income is determined on a calendar year and a lease-by-lease basis. The most common types of cost recovery income in our leases are common area maintenance (“CAM”) and real estate taxes, for which a customer typically pays its pro-rata share of operating and administrative expenses and real estate taxes in excess of the costs incurred during a contractually specified base year. The computation of cost recovery income is complex and involves numerous judgments, including the interpretation of lease provisions. Leases are not uniform in dealing with such cost recovery income and there are many variations in the computation. Many customers make monthly fixed payments of CAM, real estate taxes and other cost reimbursement items. We accrue income related to these payments each month. We make quarterly accrual adjustments, positive or negative, to cost recovery income to adjust the recorded amounts to our best estimate of the final annual amounts to be billed and collected. After the end of the calendar year, we compute each customer's final cost recovery income and, after considering amounts paid by the customer during the year, issue a bill or credit for the appropriate amount to the customer. The differences between the amounts billed less previously received payments and the accrual adjustment are recorded as increases or decreases to cost recovery income when the final bills are prepared, which occurs during the first half of the subsequent year.
 
Allowance for Doubtful Accounts
 
Accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable are reduced by an allowance for amounts that may become uncollectible in the future. We regularly evaluate the adequacy of our allowance for doubtful accounts. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of our customer, historical trends of the customer and changes in customer payment terms. Additionally, with respect to customers in bankruptcy, we estimate the probable recovery through bankruptcy claims and adjust the allowance for amounts deemed uncollectible. If our assumptions regarding the collectability of receivables prove incorrect, we could experience losses in excess of our allowance for doubtful accounts. The allowance and its related receivable are written-off when we have concluded there is a low probability of collection and we have discontinued collection efforts.

Non-GAAP Information

The Company believes that FFO, FFO available for common stockholders and FFO available for common stockholders per share are beneficial to management and investors and are important indicators of the performance of any equity REIT. Because these FFO calculations exclude such factors as depreciation, amortization and impairments of real estate assets and gains or losses from sales of operating real estate assets, which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful life estimates, they facilitate comparisons of operating performance between periods and between other REITs. Management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with

42

Table of Contents

market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient on a stand-alone basis. As a result, management believes that the use of FFO, FFO available for common stockholders and FFO available for common stockholders per share, together with the required GAAP presentations, provides a more complete understanding of the Company's performance relative to its competitors and a more informed and appropriate basis on which to make decisions involving operating, financing and investing activities.
 
FFO, FFO available for common stockholders and FFO available for common stockholders per share are non-GAAP financial measures and therefore do not represent net income or net income per share as defined by GAAP. Net income and net income per share as defined by GAAP are the most relevant measures in determining the Company's operating performance because these FFO measures include adjustments that investors may deem subjective, such as adding back expenses such as depreciation, amortization and impairments. Furthermore, FFO available for common stockholders per share does not depict the amount that accrues directly to the stockholders' benefit. Accordingly, FFO, FFO available for common stockholders and FFO available for common stockholders per share should never be considered as alternatives to net income, net income available for common stockholders, or net income available for common stockholders per share as indicators of the Company's operating performance.
 
The Company's presentation of FFO is consistent with FFO as defined by NAREIT, which is calculated as follows:

•	Net income/(loss) computed in accordance with GAAP;	

•	Less net income attributable to noncontrolling interests in consolidated affiliates;	

•	Plus depreciation and amortization of depreciable operating properties;	

•	Less gains, or plus losses, from sales of depreciable operating properties and acquisition of controlling interest in unconsolidated affiliate, plus impairments on depreciable operating properties and excluding items that are classified as extraordinary items under GAAP;	

•	Plus or minus our share of adjustments, including depreciation and amortization of depreciable operating properties, for unconsolidated partnerships and joint ventures (to reflect funds from operations on the same basis); and	

•	Plus or minus adjustments for depreciation and amortization and gains/(losses) on sales of depreciable operating properties, plus impairments on depreciable operating properties, and noncontrolling interests in consolidated affiliates related to discontinued operations.	
 
In calculating FFO, the Company includes net income attributable to noncontrolling interests in the Operating Partnership, which the Company believes is consistent with standard industry practice for REITs that operate through an UPREIT structure. The Company believes that it is important to present FFO on an as-converted basis since all of the Common Units not owned by the Company are redeemable on a one-for-one basis for shares of its Common Stock.

43

Table of Contents

The following table sets forth the Company's FFO, FFO available for common stockholders and FFO available for common stockholders per share ($ in thousands, except per share amounts):

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Funds from operations:	 	 	 	 	 	
Net income	$	101,260		 	$	115,972		 	$	131,097		
Net (income) attributable to noncontrolling interests in consolidated affiliates	(1,264	)	 	(1,466	)	 	(949	)	
Depreciation and amortization of real estate assets	199,449		 	178,041		 	160,716		
Impairments of depreciable properties	—		 	588		 	—		
(Gains) on disposition of depreciable properties	(9,147	)	 	(37,802	)	 	—		
(Gain) on disposition of investment in unconsolidated affiliate	(4,155	)	 	—		 	—		
(Gain) on acquisition of controlling interest in unconsolidated affiliate	—		 	—		 	(7,451	)	
Unconsolidated affiliates:	 	 	 	 	 	
Depreciation and amortization of real estate assets	3,203		 	3,914		 	6,796		
Impairments of depreciable properties	—		 	—		 	4,507		
Impairment of investment in unconsolidated affiliate	—		 	1,353		 	—		
(Gains) on disposition of depreciable properties	(946	)	 	(1,194	)	 	(431	)	
Discontinued operations:	 	 	 	 	 	
Depreciation and amortization of real estate assets	13,820		 	15,224		 	19,720		
Impairments of depreciable properties	—		 	—		 	2,194		
(Gains) on disposition of depreciable properties	—		 	(384	)	 	(63,792	)	
Funds from operations	302,220		 	274,246		 	252,407		
Dividends on Preferred Stock	(2,506	)	 	(2,507	)	 	(2,508	)	
Funds from operations available for common stockholders	$	299,714		 	$	271,739		 	$	249,899		
Funds from operations available for common stockholders per share	$	3.08		 	$	2.90		 	$	2.81		
Weighted average shares outstanding (1)	97,406		 	93,800		 	88,836		
__________
		
(1)	Includes assumed conversion of all potentially dilutive Common Stock equivalents.	

In addition, the Company believes NOI from continuing operations and same property NOI are useful supplemental measures of the Company’s property operating performance because such metrics provide a performance measure of the revenues and expenses directly involved in owning real estate assets and a perspective not immediately apparent from net income or FFO. The Company defines NOI as rental and other revenues from continuing operations, less rental property and other expenses from continuing operations. The Company defines cash NOI as NOI less straight-line rent and lease termination fees. Other REITs may use different methodologies to calculate NOI and same property NOI.

As of December 31, 2015 , our same property portfolio consisted of 221 in-service properties encompassing 26.2 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2014 to December 31, 2015 ). As of December 31, 2014 , our same property portfolio consisted of 223 in-service properties encompassing 24.2 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2013 to December 31, 2014 ). The change in our same property portfolio was due to the addition of 11 properties encompassing 3.2 million rentable square feet acquired during 2013 and three newly developed properties encompassing 0.2 million rentable square feet placed in service during 2013 . These additions were offset by the removal of 16 properties encompassing 1.4 million rentable square feet that were sold or classified as discontinued operations during 2015 , including the Plaza assets.

Rental and other revenues related to properties not in our same property portfolio were $57.0 million and $32.7 million for the years ended December 31, 2015 and 2014 , respectively. Rental property and other expenses related to properties not in our same property portfolio were $18.4 million and $13.4 million for the years ended December 31, 2015 and 2014 , respectively.

44

Table of Contents

The following table sets forth the Company’s NOI and same property NOI:

	
									
 	 	Year Ended December 31,	
 	 	2015	 	2014	
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates	 	$	64,844		 	$	50,808		
Other income	 	(1,726	)	 	(2,431	)	
Interest expense	 	86,052		 	85,127		
General and administrative expenses	 	37,642		 	35,258		
Impairments of real estate assets	 	—		 	588		
Depreciation and amortization	 	201,918		 	180,637		
Net operating income from continuing operations	 	388,730		 	349,987		
Less – non same property and other net operating income	 	(38,560	)	 	(19,282	)	
Same property net operating income from continuing operations	 	350,170		 	330,705		
Net operating income from the Plaza assets	 	30,046		 	31,260		
Same property net operating income	 	$	380,216		 	$	361,965		
 	 	 	 	 	
Same property net operating income from continuing operations	 	$	350,170		 	$	330,705		
Less – straight-line rent and lease termination fees	 	(15,513	)	 	(19,806	)	
Same property cash net operating income from continuing operations	 	334,657		 	310,899		
Net operating income from the Plaza assets	 	30,046		 	31,260		
Less – straight line rent and lease termination fees from the Plaza assets	 	(616	)	 	(868	)	
Same property cash net operating income	 	$	364,087		 	$	341,291		

45

Table of Contents

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The effects of potential changes in interest rates are discussed below. Our market risk discussion includes “forward-looking statements” and represents an estimate of possible changes in fair value or future earnings that would occur assuming hypothetical future movements in interest rates. Actual future results may differ materially from those presented. See “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” and the Notes to Consolidated Financial Statements for a description of our accounting policies and other information related to these financial instruments.
 
We borrow funds at a combination of fixed and variable rates. Borrowings under our revolving credit facility, bridge facility and bank term loans bear interest at variable rates. Our long-term debt, which consists of secured and unsecured long-term financings, typically bears interest at fixed rates. Our interest rate risk management objectives are to limit generally the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time we enter into interest rate hedge contracts such as collars, swaps, caps and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We generally do not hold or issue these derivative contracts for trading or speculative purposes.
 
At December 31, 2015 , we had $1,300.6 million principal amount of fixed rate debt outstanding (not including debt with a variable rate that is effectively fixed by related interest rate swaps). The estimated aggregate fair market value of this debt was $1,328.9 million . If interest rates had been 100 basis points higher, the aggregate fair market value of our fixed rate debt would have been $42.4 million lower. If interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt would have been $44.7 million higher.
 
At December 31, 2015 , we had $974.0 million of variable rate debt outstanding not protected by interest rate hedge contracts. If the weighted average interest rate on this variable rate debt had been 100 basis points higher, the annual interest expense would increase $9.7 million . If the weighted average interest rate on this variable rate debt had been 100 basis points lower, the annual interest expense would decrease $9.7 million . We expect to repay $350.0 million of variable rate debt outstanding under our bridge facility and $80.0 million of variable rate debt outstanding under our revolving credit facility on or about March 1, 2016 in connection with the sale of the Plaza assets.
 
At December 31, 2015 , we had $225.0 million of variable rate LIBOR-based debt outstanding with $225.0 million of related floating-to-fixed interest rate swaps. These swaps effectively fix the underlying LIBOR rate of the debt at 1.678% . If LIBOR interest rates increase or decrease by 100 basis points, the aggregate fair market value of the swaps at December 31, 2015 would increase by $3.5 million or decrease by $9.6 million , respectively. We are exposed to certain losses in the event of nonperformance by the counterparties, which are major financial institutions, under the swaps. We regularly evaluate the financial condition of our counterparties using publicly available information. Based on this review, we currently expect the counterparties to perform fully under the swaps. However, if a counterparty defaults on its obligations under a swap, we could be required to pay the full rates on the applicable debt, even if such rates were in excess of the rate in the contract.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	
	
See page 54  for Index to Consolidated Financial Statements of Highwoods Properties, Inc. and Highwoods Realty Limited Partnership.	

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

46

Table of Contents

ITEM 9A. CONTROLS AND PROCEDURES

General

The purpose of this section is to discuss our controls and procedures. The statements in this section represent the conclusions of Edward J. Fritsch, the Company's President and Chief Executive Officer (“CEO”), and Mark F. Mulhern, the Company's Senior Vice President and Chief Financial Officer (“CFO”).
 
The CEO and CFO evaluations of our controls and procedures include a review of the controls' objectives and design, the controls' implementation by us and the effect of the controls on the information generated for use in this Annual Report. We seek to identify data errors, control problems or acts of fraud and confirm that appropriate corrective action, including process improvements, is undertaken. Our controls and procedures are also evaluated on an ongoing basis by or through the following:

•	activities undertaken and reports issued by employees responsible for testing our internal control over financial reporting;	

•	quarterly sub-certifications by representatives from appropriate business and accounting functions to support the CEO's and CFO's evaluations of our controls and procedures;	

•	other personnel in our finance and accounting organization;	

•	members of our internal disclosure committee; and	

•	members of the audit committee of the Company's Board of Directors.	
 
We do not expect that our controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of controls and procedures must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
Management's Annual Report on the Company's Internal Control Over Financial Reporting
 
The Company's management is required to establish and maintain internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:

•	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect transactions and dispositions of assets;	

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and	

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.	
 
Under the supervision of the Company's CEO and CFO, we conducted an evaluation of the effectiveness of the Company's internal control over financial reporting at December 31, 2015 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
We have concluded that, at December 31, 2015 , the Company's internal control over financial reporting was effective. Deloitte & Touche LLP, our independent registered public accounting firm, has issued their attestation report, which is included below, on the effectiveness of the Company's internal control over financial reporting at December 31, 2015 .

47

Table of Contents

Management's Annual Report on the Operating Partnership's Internal Control Over Financial Reporting
 
The Operating Partnership is also required to establish and maintain internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Under the supervision of the Company's CEO and CFO, we conducted an evaluation of the effectiveness of the Operating Partnership's internal control over financial reporting at December 31, 2015 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
We have concluded that, at December 31, 2015 , the Operating Partnership's internal control over financial reporting was effective. SEC rules do not require us to obtain an attestation report of Deloitte & Touche LLP on the effectiveness of the Operating Partnership's internal control over financial reporting.

48

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
To the Board of Directors and Stockholders of
Highwoods Properties, Inc.
Raleigh, North Carolina
 
We have audited the internal control over financial reporting of Highwoods Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on the Company’s Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2015 of the Company and our report dated February 9, 2016 expressed an unqualified opinion on those financial statements and financial statement schedules and included an explanatory paragraph regarding the Company’s adoption of the accounting standard update for reporting discontinued operations.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina
February 9, 2016

49

Table of Contents

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2015 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There were also no changes in the Operating Partnership’s internal control over financial reporting during the fourth quarter of 2015 that materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

Disclosure Controls and Procedures

SEC rules also require us to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our annual and periodic reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As defined in Rule 13a-15(e) under the Exchange Act, disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management, including the Company’s CEO and CFO, to allow timely decisions regarding required disclosure. The Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective at the end of the period covered by this Annual Report. The Company’s CEO and CFO also concluded that the Operating Partnership’s disclosure controls and procedures were effective at the end of the period covered by this Annual Report.

ITEM 9B. OTHER INFORMATION

None.

50

Table of Contents

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information about the Company’s executive officers and directors and the code of ethics that applies to the Company’s chief executive officer and senior financial officers, which is posted on our website, is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 11, 2016 . See Item X in Part I of this Annual Report for biographical information regarding the Company’s executive officers. The Company is the sole general partner of the Operating Partnership.

ITEM 11. EXECUTIVE COMPENSATION

Information about the compensation of the Company’s directors and executive officers is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 11, 2016 .

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information about the beneficial ownership of Common Stock and the Company’s equity compensation plans is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 11, 2016 .

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information about certain relationships and related transactions and the independence of the Company’s directors is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 11, 2016 .

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information about fees paid to and services provided by our independent registered public accounting firm is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 11, 2016 .

51

Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

	
	
Reference is made to the Index to Consolidated Financial Statements on page 54  for a list of the Consolidated Financial Statements of Highwoods Properties, Inc. and Highwoods Realty Limited Partnership included in this report.	

Exhibits

	
			
Exhibit
Number	 	Description	
3.1	 	Amended and Restated Charter of the Company (filed as part of the Company’s Current Report on Form 8-K dated May 15, 2008)	
3.2	 	Amended and Restated Bylaws of the Company (filed as part of the Company’s Current Report on Form 8-K dated May 15, 2008)	
4.1	 	Indenture among the Operating Partnership, the Company and U.S. Bank National Association (as successor in interest to Wachovia Bank, N.A.) dated as of December 1, 1996 (filed as part of the Operating Partnership’s Current Report on Form 8-K dated December 2, 1996)	
4.2	 	Form of 7.5% Notes due April 15, 2018 (filed as part of the Company's Current Report on Form 8-K dated April 24, 1998)	
4.3	 	Form of 5.85% Notes due March 15, 2017 (filed as part of the Company's Current Report on Form 8-K dated March 22, 2007)	
4.4	 	Officers’ Certificate Establishing the Terms of the 5.85% Notes, dated March 22, 2007 (filed as part of the Company's Current Report on Form 8-K dated March 22, 2007)	
4.5	 	Form of 3.625% Notes due January 15, 2023 (filed as part of the Company's Current Report on Form 8-K dated December 18, 2012)	
4.6	 	Officers' Certificate Establishing the Terms of the 3.625% Notes, dated as of December 18, 2012 (filed as part of the Company's Current Report on Form 8-K dated December 18, 2012)	
4.7	 	Form of 3.20% Notes due June 15, 2021 (filed as part of the Company's Current Report on Form 8-K dated May 27, 2014)	
4.8	 	Officers' Certificate Establishing the Terms of the 3.20% Notes, dated as of May 27, 2014 (filed as part of the Company's Current Report on Form 8-K dated May 27, 2014)	
10.1	 	Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the Operating Partnership (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)	
10.2	 	Amendment No. 1, dated as of July 22, 2004, to the Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the Operating Partnership (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)	
10.3	*	2015 Long-Term Equity Incentive Plan (filed as part of the Company’s Current Report on Form 8-K dated May 13, 2015)	
10.4	 	Form of warrants to purchase Common Stock of the Company (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 1997)	
10.5	*	Highwoods Properties, Inc. Retirement Plan, effective as of March 1, 2006 (filed as part of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007)	
10.6	*	Amended and Restated Executive Supplemental Employment Agreement, dated as of February 12, 2013, between the Company and Edward J. Fritsch (filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 2012)	
10.7	*	Executive Supplemental Employment Agreement, dated as of September 1, 2015 between the Company and Theodore J. Klinck (filed as part of the Company’s Current Report on Form 8-K dated September 1, 2015)	
10.8	*	Executive Supplemental Employment Agreement, dated as of September 29, 2014 between the Company and Mark F. Mulhern (filed as part of the Company's Current Report on Form 8-K dated October 1, 2014)	

52

Table of Contents

	
			
Exhibit
Number	 	Description	
10.9	*	Amended and Restated Executive Supplemental Employment Agreement, dated as of February 12, 2013, between the Company and Jeffrey D. Miller (filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 2012)	
10.10	*	Highwoods Properties, Inc. Amended and Restated Employee Stock Purchase Plan (filed as part of the Company’s Current Report on Form 8-K dated May 12, 2010)	
10.11	*	Amendment No. 1 to the Amended and Restated Employee Stock Purchase Plan of the Company (filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 2010)	
10.12	 	Fourth Amended and Restated Credit Agreement, dated as of November 12, 2013, by and among the Company, the Operating Partnership , Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association, as Syndication Agent, and the Other Lenders named therein (filed as part of the Company's Current Report on Form 8-K dated November 12, 2013)	
10.13	 	Amended and Restated Five-Year Term Loan Agreement, dated as of November 12, 2013, by and among the Company, the Operating Partnership, Wells Fargo Bank, National Association, as Administrative Agent, and the Other Lenders named therein (filed as part of the Company's Current Report on Form 8-K dated November 12, 2013)	
10.14	 	Amended and Restated Seven-Year Term Loan Agreement, dated as of November 12, 2013, by and among the Company, the Operating Partnership, Wells Fargo Bank, National Association, as Administrative Agent, and the Other Lenders named therein (filed as part of the Company's Current Report on Form 8-K dated November 12, 2013)	
10.15	 	First Amendment to Amended and Restated Seven-Year Term Loan Agreement (filed as part of the Company’s Current Report on Form 8-K dated June 11, 2015)	
10.16	 	Term Loan Agreement, dated as of September 28, 2015, by and among the Company, the Operating Partnership, Bank of America, N.A., as Administrative Agent, and Wells Fargo Bank, National Association and PNC Bank, National Association (filed as part of the Company’s Current Report on Form 8-K dated September 28, 2015)	
10.17	 	Form of Agreement for Purchase and Sale of Real Estate, dated as of December 21,2015, by and between Highwoods Realty Limited Partnership, Highwoods Services, Inc., Country Club Plaza KC Partners LLC, The Macerich Partnership, L.P. and The Taubman Realty Group Limited Partnership	
10.18	 	Agreement for Purchase and Sale of Real Estate and Related Property, dated as of January 29, 2016, by and between Highwoods Realty Limited Partnership and SJ Company I LLC	
12.1	 	Statement re: Computation of Ratios of the Company	
12.2	 	Statement re: Computation of Ratios of the Operating Partnership	
21	 	Schedule of Subsidiaries	
23.1	 	Consent of Deloitte & Touche LLP for the Company	
23.2	 	Consent of Deloitte & Touche LLP for the Operating Partnership	
31.1	 	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company	
31.2	 	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company	
31.3	 	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership	
31.4	 	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership	
32.1	 	Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company	
32.2	 	Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company	
32.3	 	Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership	
32.4	 	Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership	
101.INS	 	XBRL Instance Document	
101.SCH	 	XBRL Taxonomy Extension Schema Document	
101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase Document	
101.DEF	 	XBRL Taxonomy Extension Definition Linkbase Document	
101.LAB	 	XBRL Extension Labels Linkbase	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase Document	
__________
 
* Represents management contract or compensatory plan.

53

Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	
		
 	Page	
 	 	
Highwoods Properties, Inc.	 	
Report of Independent Registered Public Accounting Firm	55	
Consolidated Financial Statements:	 	
Consolidated Balance Sheets at December 31, 2015 and 2014	56	
Consolidated Statements of Income for the Years Ended December 31, 2015, 2014 and 2013	57	
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013	58	
Consolidated Statements of Equity for the Years Ended December 31, 2015, 2014 and 2013	59	
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013	61	
 	 	
Highwoods Realty Limited Partnership:	 	
Report of Independent Registered Public Accounting Firm	63	
Consolidated Financial Statements:	 	
Consolidated Balance Sheets at December 31, 2015 and 2014	64	
Consolidated Statements of Income for the Years Ended December 31, 2015, 2014 and 2013	65	
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013	66	
Consolidated Statements of Capital for the Years Ended December 31, 2015, 2014 and 2013	67	
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013	68	
 	 	
Notes to Consolidated Financial Statements	70	
 	 	
Schedule II	120	
 	 	
Schedule III	121	
__________

All other schedules are omitted because they are not applicable or because the required information is included in our Consolidated Financial Statements or notes thereto.

54

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Highwoods Properties, Inc.
Raleigh, North Carolina

We have audited the accompanying consolidated balance sheets of Highwoods Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedules listed in the Index at Item15. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Highwoods Properties, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for and disclosure of discontinued operations beginning April 1, 2014 due to the adoption of the Financial Accounting Standards Board accounting standard update on reporting discontinued operations and disclosures of disposals of components of an entity.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 2016 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina
February 9, 2016

55

Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)

								
	December 31,	
 	2015	 	2014	
 	 	 	(as revised)	
Assets:	 	 	 	
Real estate assets, at cost:	 	 	 	
Land	$	443,705		 	$	367,895		
Buildings and tenant improvements	4,063,328		 	3,493,992		
Development in-process	194,050		 	201,409		
Land held for development	68,244		 	78,266		
 	4,769,327		 	4,141,562		
Less-accumulated depreciation	(1,007,104	)	 	(893,517	)	
Net real estate assets	3,762,223		 	3,248,045		
Real estate and other assets, net, held for sale	240,948		 	236,815		
Cash and cash equivalents	5,036		 	8,832		
Restricted cash	16,769		 	14,595		
Accounts receivable, net of allowance of $928 and $1,314, respectively	29,077		 	48,557		
Mortgages and notes receivable, net of allowance of $287 and $275, respectively	2,096		 	13,116		
Accrued straight-line rents receivable, net of allowance of $257 and $316, respectively	150,392		 	130,394		
Investments in and advances to unconsolidated affiliates	20,676		 	50,685		
Deferred financing and leasing costs, net of accumulated amortization of $123,723 and $108,122, respectively	241,663		 	222,448		
Prepaid expenses and other assets, net of accumulated amortization of $15,648 and $13,887,
respectively	24,552		 	25,636		
Total Assets	$	4,493,432		 	$	3,999,123		
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:	 	 	 	
Mortgages and notes payable	$	2,499,614		 	$	2,071,389		
Accounts payable, accrued expenses and other liabilities	233,988		 	231,482		
Liabilities held for sale	14,119		 	15,113		
Total Liabilities	2,747,721		 	2,317,984		
Commitments and contingencies		 		
Noncontrolling interests in the Operating Partnership	126,429		 	130,048		
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), 29,050 and 29,060 shares issued and outstanding, respectively	29,050		 	29,060		
Common Stock, $.01 par value, 200,000,000 authorized shares;	 	 	 	
96,091,932 and 92,907,310 shares issued and outstanding, respectively	961		 	929		
Additional paid-in capital	2,598,242		 	2,464,275		
Distributions in excess of net income available for common stockholders	(1,023,135	)	 	(957,370	)	
Accumulated other comprehensive loss	(3,811	)	 	(3,912	)	
Total Stockholders’ Equity	1,601,307		 	1,532,982		
Noncontrolling interests in consolidated affiliates	17,975		 	18,109		
Total Equity	1,619,282		 	1,551,091		
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	4,493,432		 	$	3,999,123		
See accompanying notes to consolidated financial statements.

56

Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Income
(in thousands, except per share amounts)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Rental and other revenues	$	604,671		 	$	555,871		 	$	505,008		
Operating expenses:	 	 	 	 	 	
Rental property and other expenses	215,941		 	205,884		 	184,187		
Depreciation and amortization	201,918		 	180,637		 	162,937		
Impairments of real estate assets	—		 	588		 	—		
General and administrative	37,642		 	35,258		 	36,381		
Total operating expenses	455,501		 	422,367		 	383,505		
Interest expense:	 	 	 	 	 	
Contractual	82,245		 	82,287		 	88,838		
Amortization of deferred financing costs	3,645		 	3,082		 	3,802		
Financing obligation	162		 	(242	)	 	(754	)	
 	86,052		 	85,127		 	91,886		
Other income:	 	 	 	 	 	
Interest and other income	1,969		 	2,739		 	3,511		
Losses on debt extinguishment	(243	)	 	(308	)	 	(199	)	
 	1,726		 	2,431		 	3,312		
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates	64,844		 	50,808		 	32,929		
Gains/(losses) on disposition of property	11,444		 	44,352		 	(3	)	
Gain on disposition of investment in unconsolidated affiliate	4,155		 	—		 	—		
Gain on acquisition of controlling interest in unconsolidated affiliate	—		 	—		 	7,451		
Equity in earnings of unconsolidated affiliates	5,078		 	1,827		 	2,264		
Income from continuing operations	85,521		 	96,987		 	42,641		
Discontinued operations:	 	 	 	 	 	
Income from discontinued operations	15,739		 	18,601		 	26,858		
Impairments of real estate assets	—		 	—		 	(2,194	)	
Net gains on disposition of discontinued operations	—		 	384		 	63,792		
 	15,739		 	18,985		 	88,456		
Net income	101,260		 	115,972		 	131,097		
Net (income) attributable to noncontrolling interests in the Operating Partnership	(2,918	)	 	(3,542	)	 	(4,691	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates	(1,264	)	 	(1,466	)	 	(949	)	
Dividends on Preferred Stock	(2,506	)	 	(2,507	)	 	(2,508	)	
Net income available for common stockholders	$	94,572		 	$	108,457		 	$	122,949		
Earnings per Common Share – basic:	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.84		 	$	1.00		 	$	0.44		
Income from discontinued operations available for common stockholders	0.16		 	0.20		 	1.00		
Net income available for common stockholders	$	1.00		 	$	1.20		 	$	1.44		
Weighted average Common Shares outstanding – basic	94,404		 	90,743		 	85,335		
Earnings per Common Share – diluted:	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.84		 	$	0.99		 	$	0.44		
Income from discontinued operations available for common stockholders	0.16		 	0.20		 	1.00		
Net income available for common stockholders	$	1.00		 	$	1.19		 	$	1.44		
Weighted average Common Shares outstanding – diluted	97,406		 	93,800		 	88,836		
Net income available for common stockholders:	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	79,308		 	$	90,069		 	$	37,890		
Income from discontinued operations available for common stockholders	15,264		 	18,388		 	85,059		
Net income available for common stockholders	$	94,572		 	$	108,457		 	$	122,949		
See accompanying notes to consolidated financial statements.

57

Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Comprehensive Income
(in thousands)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Comprehensive income:	 	 	 	 	 	
Net income	$	101,260		 	$	115,972		 	$	131,097		
Other comprehensive income/(loss):	 	 	 	 	 	
Unrealized gains on tax increment financing bond	445		 	584		 	869		
Unrealized gains/(losses) on cash flow hedges	(4,040	)	 	(5,662	)	 	5,778		
Amortization of cash flow hedges	3,696		 	3,777		 	3,370		
Total other comprehensive income/(loss)	101		 	(1,301	)	 	10,017		
Total comprehensive income	101,361		 	114,671		 	141,114		
Less-comprehensive (income) attributable to noncontrolling interests	(4,182	)	 	(5,008	)	 	(5,640	)	
Comprehensive income attributable to common stockholders	$	97,179		 	$	109,663		 	$	135,474		
See accompanying notes to consolidated financial statements.

58

Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Equity
(in thousands, except share amounts)

	
																															
 	Number of Common Shares	 	Common Stock	 	Series A Cumulative Redeemable Preferred Shares	 	Additional Paid-In Capital	 	Accumulated Other Compre-hensive Loss	 	Non-controlling Interests in Consolidated Affiliates	 	Distributions in Excess of Net Income Available for Common Stockholders	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	(as revised)	 	(as revised)	
Balance at December 31, 2012	80,311,437		 	$	803		 	$	29,077		 	$	2,040,306		 	$	(12,628	)	 	$	4,753		 	$	(888,647	)	 	$	1,173,664		
Issuances of Common Stock, net of issuance costs and tax withholdings	8,670,517		 	87		 	—		 	305,759		 	—		 	—		 	—		 	305,846		
Conversions of Common Units to Common Stock	789,144		 	—		 	—		 	28,788		 	—		 	—		 	—		 	28,788		
Dividends on Common Stock	—		 	—		 	—		 	—		 	—		 	—		 	(145,964	)	 	(145,964	)	
Dividends on Preferred Stock	—		 	—		 	—		 	—		 	—		 	—		 	(2,508	)	 	(2,508	)	
Adjustment of noncontrolling interests in the Operating Partnership to fair value	—		 	—		 	—		 	(11,375	)	 	—		 	—		 	—		 	(11,375	)	
Distributions to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	—		 	—		 	(546	)	 	—		 	(546	)	
Contributions from noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	—		 	—		 	16,240		 	—		 	16,240		
Issuances of restricted stock	151,630		 	—		 	—		 	—		 	—		 	—		 	—		 	—		
Share-based compensation expense, net of forfeitures	(1,813	)	 	9		 	—		 	6,890		 	—		 	—		 	—		 	6,899		
Net (income) attributable to noncontrolling interests in the Operating Partnership	—		 	—		 	—		 	—		 	—		 	—		 	(4,691	)	 	(4,691	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	—		 	—		 	949		 	(949	)	 	—		
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	—		 	—		 	—		 	—		 	—		 	—		 	131,097		 	131,097		
Other comprehensive income	—		 	—		 	—		 	—		 	10,017		 	—		 	—		 	10,017		
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	141,114		
Balance at December 31, 2013	89,920,915		 	899		 	29,077		 	2,370,368		 	(2,611	)	 	21,396		 	(911,662	)	 	1,507,467		
Issuances of Common Stock, net of issuance costs and tax withholdings	2,812,477		 	28		 	—		 	112,596		 	—		 	—		 	—		 	112,624		
Conversions of Common Units to Common Stock	4,417		 	—		 	—		 	162		 	—		 	—		 	—		 	162		
Dividends on Common Stock	—		 	—		 	—		 	—		 	—		 	—		 	(154,165	)	 	(154,165	)	
Dividends on Preferred Stock	—		 	—		 	—		 	—		 	—		 	—		 	(2,507	)	 	(2,507	)	
Adjustment of noncontrolling interests in the Operating Partnership to fair value	—		 	—		 	—		 	(25,275	)	 	—		 	—		 	—		 	(25,275	)	
Acquisition of noncontrolling interest in consolidated affiliate	—		 	—		 	—		 	(513	)	 	—		 	(3,613	)	 	—		 	(4,126	)	
Distributions to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	—		 	—		 	(1,140	)	 	—		 	(1,140	)	
Issuances of restricted stock	169,501		 	—		 	—		 	—		 	—		 	—		 	—		 	—		
Redemptions/repurchases of Preferred Stock	—		 	—		 	(17	)	 	—		 	—		 	—		 	—		 	(17	)	
Share-based compensation expense, net of forfeitures	—		 	2		 			 	6,937		 	—		 	—		 	—		 	6,939		
Net (income) attributable to noncontrolling interests in the Operating Partnership	—		 	—		 	—		 	—		 	—		 	—		 	(3,542	)	 	(3,542	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	—		 	—		 	1,466		 	(1,466	)	 	—		
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	—		 	—		 	—		 	—		 	—		 	—		 	115,972		 	115,972		
Other comprehensive loss	—		 	—		 	—		 	—		 	(1,301	)	 	—		 	—		 	(1,301	)	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	114,671		
Balance at December 31, 2014	92,907,310		 	$	929		 	$	29,060		 	$	2,464,275		 	$	(3,912	)	 	$	18,109		 	$	(957,370	)	 	$	1,551,091		

59

Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Equity - Continued
(in thousands, except share amounts)

 	Number of Common Shares	 	Common Stock	 	Series A Cumulative Redeemable Preferred Shares	 	Additional Paid-In Capital	 	Accumulated Other Compre-hensive Loss	 	Non-controlling Interests in Consolidated Affiliates	 	Distributions in Excess of Net Income Available for Common Stockholders	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	(as revised)	 	(as revised)	
Balance at December 31, 2014	92,907,310		 	$	929		 	$	29,060		 	$	2,464,275		 	$	(3,912	)	 	$	18,109		 	$	(957,370	)	 	$	1,551,091		
Issuances of Common Stock, net of issuance costs and tax withholdings	3,023,710		 	30		 	—		 	125,507		 	—		 	—		 	—		 	125,537		
Conversions of Common Units to Common Stock	37,203		 	—		 	—		 	1,645		 	—		 	—		 	—		 	1,645		
Dividends on Common Stock	—		 	—		 	—		 	—		 	—		 	—		 	(160,337	)	 	(160,337	)	
Dividends on Preferred Stock	—		 	—		 	—		 	—		 	—		 	—		 	(2,506	)	 	(2,506	)	
Adjustment of noncontrolling interests in the Operating Partnership to fair value	—		 	—		 	—		 	(67	)	 	—		 	—		 	—		 	(67	)	
Distributions to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	—		 	—		 	(1,398	)	 	—		 	(1,398	)	
Issuances of restricted stock	128,951		 	—		 	—		 	—		 	—		 	—		 	—		 	—		
Redemptions/repurchases of Preferred Stock	—		 	—		 	(10	)	 	—		 	—		 	—		 	—		 	(10	)	
Share-based compensation expense, net of forfeitures	(5,242	)	 	2		 			 	6,882		 	—		 	—		 	—		 	6,884		
Net (income) attributable to noncontrolling interests in the Operating Partnership	—		 	—		 	—		 	—		 	—		 	—		 	(2,918	)	 	(2,918	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	—		 	—		 	1,264		 	(1,264	)	 	—		
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	—		 	—		 	—		 	—		 	—		 	—		 	101,260		 	101,260		
Other comprehensive income	—		 	—		 	—		 	—		 	101		 	—		 	—		 	101		
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	101,361		
Balance at December 31, 2015	96,091,932		 	$	961		 	$	29,050		 	$	2,598,242		 	$	(3,811	)	 	$	17,975		 	$	(1,023,135	)	 	$	1,619,282		
See accompanying notes to consolidated financial statements.

60

Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows
(in thousands)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Operating activities:	 	 	 	 	 	
Net income	$	101,260		 	$	115,972		 	$	131,097		
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	
Depreciation and amortization	215,957		 	196,023		 	182,710		
Amortization of lease incentives and acquisition-related intangible assets and liabilities	86		 	442		 	345		
Share-based compensation expense	6,884		 	6,939		 	6,899		
Allowance for losses on accounts and accrued straight-line rents receivable	2,103		 	2,182		 	1,516		
Accrued interest on mortgages and notes receivable	(357	)	 	(477	)	 	(485	)	
Amortization of deferred financing costs	3,645		 	3,082		 	3,802		
Amortization of cash flow hedges	3,696		 	3,777		 	3,370		
Amortization of mortgages and notes payable fair value adjustments	(58	)	 	(788	)	 	(1,825	)	
Impairments of real estate assets	—		 	588		 	2,194		
Losses on debt extinguishment	243		 	308		 	199		
Net gains on disposition of property	(11,444	)	 	(44,736	)	 	(63,789	)	
Gain on disposition of investment in unconsolidated affiliate	(4,155	)	 	—		 	—		
Gain on acquisition of controlling interest in unconsolidated affiliate	—		 	—		 	(7,451	)	
Equity in earnings of unconsolidated affiliates	(5,078	)	 	(1,827	)	 	(2,264	)	
Changes in financing obligation	162		 	(241	)	 	(753	)	
Distributions of earnings from unconsolidated affiliates	4,901		 	2,687		 	3,985		
Changes in operating assets and liabilities:	 	 	 	 	 	
Accounts receivable	1,415		 	(3,114	)	 	(920	)	
Prepaid expenses and other assets	1,266		 	(615	)	 	684		
Accrued straight-line rents receivable	(22,756	)	 	(21,685	)	 	(18,253	)	
Accounts payable, accrued expenses and other liabilities	(8,891	)	 	8,394		 	15,376		
Net cash provided by operating activities	288,879		 	266,911		 	256,437		
Investing activities:	 	 	 	 	 	
Investments in acquired real estate and related intangible assets, net of cash acquired	(408,634	)	 	(163,641	)	 	(418,796	)	
Investments in development in-process	(136,664	)	 	(183,873	)	 	(34,474	)	
Investments in tenant improvements and deferred leasing costs	(115,503	)	 	(113,747	)	 	(103,243	)	
Investments in building improvements	(55,881	)	 	(50,033	)	 	(53,189	)	
Investment in acquired noncontrolling interest in consolidated affiliate	—		 	(4,126	)	 	—		
Investment in acquired controlling interest in unconsolidated affiliate	—		 	—		 	(32,818	)	
Net proceeds from disposition of real estate assets	26,748		 	172,442		 	254,022		
Net proceeds from disposition of investment in unconsolidated affiliate	6,919		 	—		 	—		
Distributions of capital from unconsolidated affiliates	10,401		 	3,806		 	27,486		
Investments in mortgages and notes receivable	(1,772	)	 	(864	)	 	(902	)	
Repayments of mortgages and notes receivable	9,381		 	17,239		 	405		
Investments in and advances to unconsolidated affiliates	(659	)	 	(6,489	)	 	(429	)	
Repayments from unconsolidated affiliates	20,800		 	—		 	—		
Redemption of investment in unconsolidated affiliate	—		 	4,660		 	—		
Changes in restricted cash and other investing activities	(9,293	)	 	(3,552	)	 	5,335		
Net cash used in investing activities	$	(654,157	)	 	$	(328,178	)	 	$	(356,603	)	

61

Table of Contents

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows – Continued
(in thousands)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Financing activities:	 	 	 	 	 	
Dividends on Common Stock	$	(160,337	)	 	$	(154,165	)	 	$	(145,964	)	
Redemptions/repurchases of Preferred Stock	(10	)	 	(17	)	 	—		
Redemptions of Common Units	—		 	(93	)	 	—		
Dividends on Preferred Stock	(2,506	)	 	(2,507	)	 	(2,508	)	
Distributions to noncontrolling interests in the Operating Partnership	(4,959	)	 	(4,994	)	 	(5,667	)	
Distributions to noncontrolling interests in consolidated affiliates	(1,398	)	 	(1,140	)	 	(546	)	
Proceeds from the issuance of Common Stock	131,341		 	117,716		 	316,081		
Costs paid for the issuance of Common Stock	(2,040	)	 	(1,586	)	 	(7,678	)	
Repurchase of shares related to tax withholdings	(3,764	)	 	(3,506	)	 	(2,557	)	
Borrowings on revolving credit facility	476,300		 	506,900		 	837,000		
Repayments of revolving credit facility	(386,300	)	 	(513,600	)	 	(644,300	)	
Borrowings on mortgages and notes payable	475,000		 	296,949		 	—		
Repayments of mortgages and notes payable	(156,120	)	 	(174,302	)	 	(259,202	)	
Payments on financing obligation	(1,722	)	 	(2,904	)	 	(1,941	)	
Payments of debt extinguishment costs	—		 	(369	)	 	—		
Contributions from noncontrolling interests in consolidated affiliates	—		 	—		 	16,240		
Changes in deferred financing costs and other financing activities	(2,003	)	 	(2,467	)	 	(2,391	)	
Net cash provided by financing activities	361,482		 	59,915		 	96,567		
Net decrease in cash and cash equivalents	(3,796	)	 	(1,352	)	 	(3,599	)	
Cash and cash equivalents at beginning of the period	8,832		 	10,184		 	13,783		
Cash and cash equivalents at end of the period	$	5,036		 	$	8,832		 	$	10,184		
 
Supplemental disclosure of cash flow information:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Cash paid for interest, net of amounts capitalized	$	82,242		 	$	83,086		 	$	85,919		
 
Supplemental disclosure of non-cash investing and financing activities:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Unrealized gains/(losses) on cash flow hedges	$	(4,040	)	 	$	(5,662	)	 	$	5,778		
Conversions of Common Units to Common Stock	1,645		 	162		 	28,788		
Changes in accrued capital expenditures	2,547		 	5,283		 	18,384		
Write-off of fully depreciated real estate assets	48,698		 	42,633		 	31,008		
Write-off of fully amortized deferred financing and leasing costs	38,264		 	25,286		 	27,347		
Adjustment of noncontrolling interests in the Operating Partnership to fair value	67		 	25,275		 	11,375		
Unrealized gains on tax increment financing bond	445		 	584		 	869		
Assumption of mortgages and notes payable related to acquisition activities	19,277		 	—		 	165,515		
Contingent consideration in connection with the acquisition of land	900		 	3,300		 	—		
Option deposit applied upon acquisition of real estate assets	—		 	—		 	5,000		
See accompanying notes to consolidated financial statements.

62

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of the General Partner of
Highwoods Realty Limited Partnership
Raleigh, North Carolina

We have audited the accompanying consolidated balance sheets of Highwoods Realty Limited Partnership and subsidiaries (the “Operating Partnership”) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, capital, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Operating Partnership's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Operating Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Operating Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Highwoods Realty Limited Partnership and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Operating Partnership changed its method of accounting for and disclosure of discontinued operations beginning April 1, 2014 due to the adoption of the Financial Accounting Standards Board accounting standard update on reporting discontinued operations and disclosures of disposals of components of an entity.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina
February 9, 2016

63

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except unit and per unit data)

								
 	December 31,	
 	2015	 	2014	
 	 	 	(as revised)	
Assets:	 	 	 	
Real estate assets, at cost:	 	 	 	
Land	$	443,705		 	$	367,895		
Buildings and tenant improvements	4,063,328		 	3,493,992		
Development in-process	194,050		 	201,409		
Land held for development	68,244		 	78,266		
 	4,769,327		 	4,141,562		
Less-accumulated depreciation	(1,007,104	)	 	(893,517	)	
Net real estate assets	3,762,223		 	3,248,045		
Real estate and other assets, net, held for sale	240,948		 	236,815		
Cash and cash equivalents	5,036		 	8,938		
Restricted cash	16,769		 	14,595		
Accounts receivable, net of allowance of $928 and $1,314, respectively	29,077		 	48,557		
Mortgages and notes receivable, net of allowance of $287 and $275, respectively	2,096		 	13,116		
Accrued straight-line rents receivable, net of allowance of $257 and $316, respectively	150,392		 	130,394		
Investments in and advances to unconsolidated affiliates	20,676		 	50,685		
Deferred financing and leasing costs, net of accumulated amortization of $123,723 and $108,122, respectively	241,663		 	222,448		
Prepaid expenses and other assets, net of accumulated amortization of $15,648 and $13,887,
respectively	24,552		 	25,636		
Total Assets	$	4,493,432		 	$	3,999,229		
Liabilities, Redeemable Operating Partnership Units and Capital:	 	 	 	
Mortgages and notes payable	$	2,499,614		 	$	2,071,389		
Accounts payable, accrued expenses and other liabilities	233,988		 	231,396		
Liabilities held for sale	14,119		 	15,113		
Total Liabilities	2,747,721		 	2,317,898		
Commitments and contingencies		 		
Redeemable Operating Partnership Units:	 	 	 	
Common Units, 2,899,752 and 2,936,955 outstanding, respectively	126,429		 	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	155,479		 	159,108		
Capital:	 	 	 	
Common Units:	 	 	 	
General partner Common Units, 985,829 and 954,355 outstanding, respectively	15,759		 	15,078		
Limited partner Common Units, 94,697,294 and 91,544,146 outstanding, respectively	1,560,309		 	1,492,948		
Accumulated other comprehensive loss	(3,811	)	 	(3,912	)	
Noncontrolling interests in consolidated affiliates	17,975		 	18,109		
Total Capital	1,590,232		 	1,522,223		
Total Liabilities, Redeemable Operating Partnership Units and Capital	$	4,493,432		 	$	3,999,229		
See accompanying notes to consolidated financial statements.

64

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Income
(in thousands, except per unit amounts)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Rental and other revenues	$	604,671		 	$	555,871		 	$	505,008		
Operating expenses:	 	 	 	 	 	
Rental property and other expenses	215,941		 	205,835		 	184,146		
Depreciation and amortization	201,918		 	180,637		 	162,937		
Impairments of real estate assets	—		 	588		 	—		
General and administrative	37,642		 	35,307		 	36,422		
Total operating expenses	455,501		 	422,367		 	383,505		
Interest expense:	 	 	 	 	 	
Contractual	82,245		 	82,287		 	88,838		
Amortization of deferred financing costs	3,645		 	3,082		 	3,802		
Financing obligation	162		 	(242	)	 	(754	)	
 	86,052		 	85,127		 	91,886		
Other income:	 	 	 	 	 	
Interest and other income	1,969		 	2,739		 	3,511		
Losses on debt extinguishment	(243	)	 	(308	)	 	(199	)	
 	1,726		 	2,431		 	3,312		
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates	64,844		 	50,808		 	32,929		
Gains/(losses) on disposition of property	11,444		 	44,352		 	(3	)	
Gain on disposition of investment in unconsolidated affiliate	4,155		 	—		 	—		
Gain on acquisition of controlling interest in unconsolidated affiliate	—		 	—		 	7,451		
Equity in earnings of unconsolidated affiliates	5,078		 	1,827		 	2,213		
Income from continuing operations	85,521		 	96,987		 	42,590		
Discontinued operations:	 	 	 	 	 	
Income from discontinued operations	15,739		 	18,601		 	26,858		
Impairments of real estate assets	—		 	—		 	(2,194	)	
Net gains on disposition of discontinued operations	—		 	384		 	63,792		
 	15,739		 	18,985		 	88,456		
Net income	101,260		 	115,972		 	131,046		
Net (income) attributable to noncontrolling interests in consolidated affiliates	(1,264	)	 	(1,466	)	 	(949	)	
Distributions on Preferred Units	(2,506	)	 	(2,507	)	 	(2,508	)	
Net income available for common unitholders	$	97,490		 	$	111,999		 	$	127,589		
Earnings per Common Unit – basic:	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.84		 	$	1.00		 	$	0.44		
Income from discontinued operations available for common unitholders	0.17		 	0.20		 	1.00		
Net income available for common unitholders	$	1.01		 	$	1.20		 	$	1.44		
Weighted average Common Units outstanding – basic	96,910		 	93,272		 	88,313		
Earnings per Common Unit – diluted:	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.84		 	$	1.00		 	$	0.44		
Income from discontinued operations available for common unitholders	0.17		 	0.20		 	1.00		
Net income available for common unitholders	$	1.01		 	$	1.20		 	$	1.44		
Weighted average Common Units outstanding – diluted	96,997		 	93,391		 	88,427		
Net income available for common unitholders:	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	81,751		 	$	93,014		 	$	39,133		
Income from discontinued operations available for common unitholders	15,739		 	18,985		 	88,456		
Net income available for common unitholders	$	97,490		 	$	111,999		 	$	127,589		
See accompanying notes to consolidated financial statements.

65

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Comprehensive Income
(in thousands)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Comprehensive income:	 	 	 	 	 	
Net income	$	101,260		 	$	115,972		 	$	131,046		
Other comprehensive income/(loss):	 	 	 	 	 	
Unrealized gains on tax increment financing bond	445		 	584		 	869		
Unrealized gains/(losses) on cash flow hedges	(4,040	)	 	(5,662	)	 	5,778		
Amortization of cash flow hedges	3,696		 	3,777		 	3,370		
Total other comprehensive income/(loss)	101		 	(1,301	)	 	10,017		
Total comprehensive income	101,361		 	114,671		 	141,063		
Less-comprehensive (income) attributable to noncontrolling interests	(1,264	)	 	(1,466	)	 	(949	)	
Comprehensive income attributable to common unitholders	$	100,097		 	$	113,205		 	$	140,114		

66

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Capital
(in thousands)

	
																				
 	Common Units	 	Accumulated
Other
Comprehensive Loss	 	Noncontrolling
Interests in
Consolidated
Affiliates	 	Total	
 	General
Partners’
Capital	 	Limited
Partners’
Capital	 						
 	(as revised)	 	(as revised)	 	 	 	 	 	(as revised)	
Balance at December 31, 2012	$	11,515		 	$	1,140,164		 	$	(12,628	)	 	$	4,753		 	$	1,143,804		
Issuances of Common Units, net of issuance costs and tax withholdings	3,058		 	302,788		 	—		 	—		 	305,846		
Distributions paid on Common Units	(1,509	)	 	(149,427	)	 	—		 	—		 	(150,936	)	
Distributions paid on Preferred Units	(25	)	 	(2,483	)	 	—		 	—		 	(2,508	)	
Share-based compensation expense, net of forfeitures	69		 	6,830		 	—		 	—		 	6,899		
Distributions to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	(546	)	 	(546	)	
Contributions from noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	16,240		 	16,240		
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	187		 	18,513		 	—		 	—		 	18,700		
Net (income) attributable to noncontrolling interests in consolidated affiliates	(9	)	 	(940	)	 	—		 	949		 	—		
Comprehensive income:	 	 	 	 	 	 	 	 	 	
Net income	1,310		 	129,736		 	—		 	—		 	131,046		
Other comprehensive income	—		 	—		 	10,017		 	—		 	10,017		
Total comprehensive income	 	 	 	 	 	 	 	 	141,063		
Balance at December 31, 2013	14,596		 	1,445,181		 	(2,611	)	 	21,396		 	1,478,562		
Issuances of Common Units, net of issuance costs and tax withholdings	1,126		 	111,498		 	—		 	—		 	112,624		
Redemptions of Common Units	(1	)	 	(92	)	 	—		 	—		 	(93	)	
Distributions paid on Common Units	(1,585	)	 	(156,879	)	 	—		 	—		 	(158,464	)	
Distributions paid on Preferred Units	(25	)	 	(2,482	)	 	—		 	—		 	(2,507	)	
Share-based compensation expense, net of forfeitures	69		 	6,870		 	—		 	—		 	6,939		
Acquisition of noncontrolling interest in consolidated affiliate	(5	)	 	(508	)	 	—		 	(3,613	)	 	(4,126	)	
Distributions to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	(1,140	)	 	(1,140	)	
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(242	)	 	(24,001	)	 	—		 	—		 	(24,243	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates	(15	)	 	(1,451	)	 	—		 	1,466		 	—		
Comprehensive income:	 	 	 	 	 	 	 	 	 	
Net income	1,160		 	114,812		 	—		 	—		 	115,972		
Other comprehensive loss	—		 	—		 	(1,301	)	 	—		 	(1,301	)	
Total comprehensive income	 	 	 	 	 	 	 	 	114,671		
Balance at December 31, 2014	15,078		 	1,492,948		 	(3,912	)	 	18,109		 	1,522,223		
Issuances of Common Units, net of issuance costs and tax withholdings	1,255		 	124,282		 	—		 	—		 	125,537		
Distributions paid on Common Units	(1,646	)	 	(162,955	)	 	—		 	—		 	(164,601	)	
Distributions paid on Preferred Units	(25	)	 	(2,481	)	 	—		 	—		 	(2,506	)	
Share-based compensation expense, net of forfeitures	69		 	6,815		 	—		 	—		 	6,884		
Distributions to noncontrolling interests in consolidated affiliates	—		 	—		 	—		 	(1,398	)	 	(1,398	)	
Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	28		 	2,704		 	—		 	—		 	2,732		
Net (income) attributable to noncontrolling interests in consolidated affiliates	(13	)	 	(1,251	)	 	—		 	1,264		 	—		
Comprehensive income:	 	 	 	 	 	 	 	 	 	
Net income	1,013		 	100,247		 	—		 	—		 	101,260		
Other comprehensive income	—		 	—		 	101		 	—		 	101		
Total comprehensive income	 	 	 	 	 	 	 	 	101,361		
Balance at December 31, 2015	$	15,759		 	$	1,560,309		 	$	(3,811	)	 	$	17,975		 	$	1,590,232		
See accompanying notes to consolidated financial statements.

67

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Operating activities:	 	 	 	 	 	
Net income	$	101,260		 	$	115,972		 	$	131,046		
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	
Depreciation and amortization	215,957		 	196,023		 	182,710		
Amortization of lease incentives and acquisition-related intangible assets and liabilities	86		 	442		 	345		
Share-based compensation expense	6,884		 	6,939		 	6,899		
Allowance for losses on accounts and accrued straight-line rents receivable	2,103		 	2,182		 	1,516		
Accrued interest on mortgages and notes receivable	(357	)	 	(477	)	 	(485	)	
Amortization of deferred financing costs	3,645		 	3,082		 	3,802		
Amortization of cash flow hedges	3,696		 	3,777		 	3,370		
Amortization of mortgages and notes payable fair value adjustments	(58	)	 	(788	)	 	(1,825	)	
Impairments of real estate assets	—		 	588		 	2,194		
Losses on debt extinguishment	243		 	308		 	199		
Net gains on disposition of property	(11,444	)	 	(44,736	)	 	(63,789	)	
Gain on disposition of investment in unconsolidated affiliate	(4,155	)	 	—		 	—		
Gain on acquisition of controlling interest in unconsolidated affiliate	—		 	—		 	(7,451	)	
Equity in earnings of unconsolidated affiliates	(5,078	)	 	(1,827	)	 	(2,213	)	
Changes in financing obligation	162		 	(241	)	 	(753	)	
Distributions of earnings from unconsolidated affiliates	4,901		 	2,687		 	3,965		
Changes in operating assets and liabilities:	 	 	 	 	 	
Accounts receivable	1,415		 	(3,114	)	 	(920	)	
Prepaid expenses and other assets	1,266		 	(615	)	 	684		
Accrued straight-line rents receivable	(22,756	)	 	(21,685	)	 	(18,253	)	
Accounts payable, accrued expenses and other liabilities	(8,805	)	 	8,383		 	15,421		
Net cash provided by operating activities	288,965		 	266,900		 	256,462		
Investing activities:	 	 	 	 	 	
Investments in acquired real estate and related intangible assets, net of cash acquired	(408,634	)	 	(163,641	)	 	(418,796	)	
Investments in development in-process	(136,664	)	 	(183,873	)	 	(34,474	)	
Investments in tenant improvements and deferred leasing costs	(115,503	)	 	(113,747	)	 	(103,243	)	
Investments in building improvements	(55,881	)	 	(50,033	)	 	(53,189	)	
Investment in acquired noncontrolling interest in consolidated affiliate	—		 	(4,126	)	 	—		
Investment in acquired controlling interest in unconsolidated affiliate	—		 	—		 	(32,818	)	
Net proceeds from disposition of real estate assets	26,748		 	172,442		 	254,022		
Net proceeds from disposition of investment in unconsolidated affiliate	6,919		 	—		 	—		
Distributions of capital from unconsolidated affiliates	10,401		 	3,806		 	27,486		
Investments in mortgages and notes receivable	(1,772	)	 	(864	)	 	(902	)	
Repayments of mortgages and notes receivable	9,381		 	17,239		 	405		
Investments in and advances to unconsolidated affiliates	(659	)	 	(6,489	)	 	(429	)	
Repayments from unconsolidated affiliates	20,800		 	—		 	—		
Redemption of investment in unconsolidated affiliate	—		 	4,660		 	—		
Changes in restricted cash and other investing activities	(9,293	)	 	(3,552	)	 	5,335		
Net cash used in investing activities	$	(654,157	)	 	$	(328,178	)	 	$	(356,603	)	

68

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - Continued
(in thousands)

												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Financing activities:	 	 	 	 	 	
Distributions on Common Units	$	(164,601	)	 	$	(158,464	)	 	$	(150,936	)	
Redemptions/repurchases of Preferred Units	(10	)	 	(17	)	 	—		
Redemptions of Common Units	—		 	(93	)	 	—		
Distributions on Preferred Units	(2,506	)	 	(2,507	)	 	(2,508	)	
Distributions to noncontrolling interests in consolidated affiliates	(1,398	)	 	(1,140	)	 	(546	)	
Proceeds from the issuance of Common Units	131,341		 	117,716		 	316,081		
Costs paid for the issuance of Common Units	(2,040	)	 	(1,586	)	 	(7,678	)	
Repurchase of units related to tax withholdings	(3,764	)	 	(3,506	)	 	(2,557	)	
Borrowings on revolving credit facility	476,300		 	506,900		 	837,000		
Repayments of revolving credit facility	(386,300	)	 	(513,600	)	 	(644,300	)	
Borrowings on mortgages and notes payable	475,000		 	296,949		 	—		
Repayments of mortgages and notes payable	(156,120	)	 	(174,302	)	 	(259,202	)	
Payments on financing obligation	(1,722	)	 	(2,904	)	 	(1,941	)	
Payments of debt extinguishment costs	—		 	(369	)	 	—		
Contributions from noncontrolling interests in consolidated affiliates	—		 	—		 	16,240		
Changes in deferred financing costs and other financing activities	(2,890	)	 	(3,142	)	 	(3,098	)	
Net cash provided by financing activities	361,290		 	59,935		 	96,555		
Net decrease in cash and cash equivalents	(3,902	)	 	(1,343	)	 	(3,586	)	
Cash and cash equivalents at beginning of the period	8,938		 	10,281		 	13,867		
Cash and cash equivalents at end of the period	$	5,036		 	$	8,938		 	$	10,281		
 
Supplemental disclosure of cash flow information:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Cash paid for interest, net of amounts capitalized	$	82,242		 	$	83,086		 	$	85,919		
 
Supplemental disclosure of non-cash investing and financing activities:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Unrealized gains/(losses) on cash flow hedges	$	(4,040	)	 	$	(5,662	)	 	$	5,778		
Changes in accrued capital expenditures	2,547		 	5,283		 	18,384		
Write-off of fully depreciated real estate assets	48,698		 	42,633		 	31,008		
Write-off of fully amortized deferred financing and leasing costs	38,264		 	25,286		 	27,347		
Adjustment of Redeemable Common Units to fair value	(3,619	)	 	23,568		 	(18,389	)	
Unrealized gains on tax increment financing bond	445		 	584		 	869		
Assumption of mortgages and notes payable related to acquisition activities	19,277		 	—		 	165,515		
Contingent consideration in connection with the acquisition of land	900		 	3,300		 	—		
Option deposit applied upon acquisition of real estate assets	—		 	—		 	5,000		
See accompanying notes to consolidated financial statements.

69

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
(tabular dollar amounts in thousands, except per share and per unit data)

1.    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 December 31, 2015 , we owned or had an interest in 32.5 million rentable square feet of in-service properties, 1.5 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 December 31, 2015 , the Company owned all of the Preferred Units and 95.7 million , or 97.1% , of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.9 million Common Units. In the event the Company issues shares of Common Stock, the net proceeds of the issuance are contributed to the Operating Partnership in exchange for additional Common Units. Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock. The Common Units owned by the Company are not redeemable. During 2015 , the Company redeemed 37,203 Common Units for a like number of shares of Common Stock. As a result of this activity, in conjunction with the proceeds from issuances of Common Stock (see Note 12), the percentage of Common Units owned by the Company increased from 96.9% at December 31, 2014 to 97.1% at December 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”). Our Consolidated Balance Sheets at December 31, 2014 were retrospectively revised from previously reported amounts to reclassify those properties classified as held for sale as of December 31, 2015 . Our Consolidated Statements of Income for the years ended December 31, 2014 and 2013 were retrospectively revised from previously reported amounts to reclassify the operations for those properties classified as discontinued operations.

The Company's Consolidated Financial Statements include the Operating Partnership, wholly owned subsidiaries and those entities in which the Company has the controlling interest. The Operating Partnership's Consolidated Financial Statements include wholly owned subsidiaries and those entities in which the Operating Partnership has the controlling interest. We consolidate partnerships, joint ventures and limited liability companies when we control the major operating and financial policies of the entity through majority ownership or in our capacity as general partner or managing member. At December 31, 2015 , three of the 50.0% or less owned in-service office properties in a joint venture were consolidated.

In addition, we consolidate those entities deemed to be variable interest entities in which we are determined to be the primary beneficiary. During 2015 , we acquired three buildings and a land parcel using special purpose entities owned by qualified intermediaries to facilitate a potential Section 1031 reverse exchange under the Internal Revenue Code. To realize the tax deferral available under the Section 1031 exchange, we must complete the Section 1031 exchange, and take title to the to-be-exchanged buildings within 180 days of the acquisition date. We have determined that these entities are variable interest entities of which we are the primary beneficiary; and therefore, we consolidate these entities. As of December 31, 2015 , these variable interest entities had total assets, liabilities and cash flows of $421.3 million , $16.3 million , and $7.1 million , respectively. At December 31, 2014 , we had involvement with, but were not the primary beneficiary in, an entity that we concluded to be a variable interest entity. All intercompany transactions and accounts have been eliminated.

70

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

1.    Description of Business and Significant Accounting Policies – Continued

During the second quarter of 2015, as a result of our partner’s irrevocable exercise of a buy-sell provision in our SF-HIW Harborview Plaza, LP ("Harborview") joint venture agreement, our partner’s right to put its 80.0% equity interest back to us became no longer exercisable. As a result, we recorded the original contribution transaction as a partial sale and recognized $2.2 million of gain. Our investment in this joint venture then qualified for the equity method of accounting, which resulted in the retrospective revision of our Consolidated Balance Sheets and Consolidated Statements of Equity and Capital for all prior periods presented. Such retrospective revision is denoted using "as revised" in our Consolidated Financial Statements and accompanying notes. The effects of the retrospective application of the equity method of accounting to our Consolidated Statements of Income, Comprehensive Income and Cash Flows were not material. The effects of the retrospective application of the equity method of accounting to the Company's December 31, 2014 Balance Sheet were as follows:

	
				
 	December 31,
2014	
 	Increase/(Decrease)	
Net real estate assets	$	(29,400	)	
Investments in and advances to unconsolidated affiliates	$	23,614		
Total Assets	$	(5,786	)	
Financing obligation	$	(14,557	)	
Distributions in excess of net income available for common stockholders	$	8,771		
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	(5,786	)	

Use of Estimates

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

Real Estate and Related Assets

Real estate and related assets are recorded at cost and stated at cost less accumulated depreciation. Renovations, replacements and other expenditures that improve or extend the life of assets are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful life of 40 years for buildings and depreciable land infrastructure costs, 15 years for building improvements and five to seven years for furniture, fixtures and equipment. Tenant improvements are amortized using the straight-line method over initial fixed terms of the respective leases, which generally are from three to 10 years. Depreciation expense for real estate assets was $ 168.7 million , $ 154.4 million and $ 138.2 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.

Expenditures directly related to the development and construction of real estate assets are included in net real estate assets and are stated at depreciated cost. Development expenditures include pre-construction costs essential to the development of properties, development and construction costs, interest costs on qualifying assets, real estate taxes, development personnel salaries and related costs and other costs incurred during the period of development. Interest and other carrying costs are capitalized until the building is ready for its intended use, but not later than a year from cessation of major construction activity. We consider a construction project as substantially completed and ready for its intended use upon the completion of tenant improvements. We cease capitalization on the portion that is substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with the portion under construction.

71

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

1.    Description of Business and Significant Accounting Policies – Continued

Expenditures directly related to the leasing of properties are included in deferred financing and leasing costs and are stated at amortized cost. Such expenditures are part of the investment necessary to execute leases and, therefore, are classified as investment activities in the statement of cash flows. All leasing commissions paid to third parties for new leases or lease renewals are capitalized. Internal leasing costs, which consist primarily of compensation, benefits and other costs, such as legal fees related to leasing activities, that are incurred in connection with successfully obtaining leases of properties are also capitalized. Capitalized leasing costs are amortized on a straight-line basis over the initial fixed terms of the respective leases, which generally are from three to 10 years. Estimated costs related to unsuccessful activities are expensed as incurred.

We record liabilities for the performance of asset retirement activities when the obligation to perform such activities is probable even when uncertainty exists about the timing and/or method of settlement.

Upon the acquisition of real estate assets, we assess the fair value of acquired tangible assets such as land, buildings and tenant improvements, intangible assets and liabilities such as above and below market leases, acquired in-place leases, customer relationships and other identifiable intangible assets and assumed liabilities. We assess fair value based on estimated cash flow projections that utilize discount and/or capitalization rates as well as available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. 

The above and below market rate portions of leases acquired in connection with property acquisitions are recorded in deferred financing and leasing costs and in accounts payable, accrued expenses and other liabilities, respectively, at fair value and amortized into rental revenue over the remaining term of the respective leases as described below. Fair value is calculated as the present value of the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) our estimate of fair market lease rates for each corresponding in-place lease, using a discount rate that reflects the risks associated with the leases acquired and measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any renewal option that the customer would be economically compelled to exercise for below-market leases.

In-place leases acquired are recorded at fair value in deferred financing and leasing costs and are amortized to depreciation and amortization expense over the remaining term of the respective lease. The value of in-place leases is based on our evaluation of the specific characteristics of each customer's lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, current market conditions, the customer's credit quality and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider tenant improvements, leasing commissions and legal and other related expenses.
 
Real estate and other assets are classified as long-lived assets held for use or as long-lived assets held for sale. Real estate is classified as held for sale when the sale of the asset is probable, has been duly approved by the Company, a legally enforceable contract has been executed and the buyer's due diligence period, if any, has expired.

Impairments of Real Estate Assets and Investments in Unconsolidated Affiliates

With respect to assets classified as held for use, we perform an impairment analysis if events or changes in circumstances indicate that the carrying value may be impaired, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, change in our designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost. This analysis is generally performed at the property level, except when an asset is part of an interdependent group such as an office park, and consists of determining whether the asset's carrying amount will be recovered from its undiscounted estimated future operating and residual cash flows. These cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers, changes in market rental rates, costs to operate each property and expected ownership periods. For properties under development, the cash flows are based on expected service potential of the asset or asset group when development is substantially complete.

72

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

1.    Description of Business and Significant Accounting Policies – Continued

If the carrying amount of a held for use asset exceeds the sum of its undiscounted future operating and residual cash flows, an impairment loss is recorded for the difference between estimated fair value of the asset and the carrying amount. We generally estimate the fair value of assets held for use by using discounted cash flow analyses. In some instances, appraisal information may be available and is used in addition to a discounted cash flow analysis. As the factors used in generating these cash flows are difficult to predict and are subject to future events that may alter our assumptions, the discounted and/or undiscounted future operating and residual cash flows estimated by us in our impairment analyses or those established by appraisal may not be achieved and we may be required to recognize future impairment losses on properties held for use.
 
We record assets held for sale at the lower of the carrying amount or estimated fair value. Fair value of assets held for sale is equal to the estimated or contracted sales price with a potential buyer, less costs to sell. The impairment loss is the amount by which the carrying amount exceeds the estimated fair value.
 
We also analyze our investments in unconsolidated affiliates for impairment. This analysis consists of determining whether an expected loss in market value of an investment is other than temporary by evaluating the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the unconsolidated affiliate, and our intent and ability to retain our investment for a period of time sufficient to allow for any anticipated recovery in market value. As the factors used in this analysis are difficult to predict and are subject to future events that may alter our assumptions, we may be required to recognize future impairment losses on our investments in unconsolidated affiliates.

Sales of Real Estate
 
For sales transactions meeting the requirements for full profit recognition, the related assets and liabilities are removed from the balance sheet and the resultant gain or loss is recorded in the period the transaction closes. For sales transactions with continuing involvement after the sale, if the continuing involvement with the property is limited by the terms of the sales contract, profit is recognized at the time of sale and is reduced by the maximum exposure to loss related to the nature of the continuing involvement. Sales to entities in which we have or receive an interest are accounted for using partial sale accounting.
 
For transactions that do not meet the criteria for a sale, we evaluate the nature of the continuing involvement, including put and call provisions, if present, and account for the transaction as a financing arrangement, profit-sharing arrangement, leasing arrangement or other alternate method of accounting, rather than as a sale, based on the nature and extent of the continuing involvement. Some transactions may have numerous forms of continuing involvement. In those cases, we determine which method is most appropriate based on the substance of the transaction.

Rental and Other Revenues
 
Minimum contractual rents from leases are recognized on a straight-line basis over the terms of the respective leases. This means that, with respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental revenue recognized for the period. Straight-line rental revenue is commenced when the customer assumes control of the leased premises. Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements. Contingent rental revenue, such as percentage rent, is accrued when the contingency is removed. Termination fee income is recognized at the later of when the customer has vacated the space or the lease has expired and a fully executed lease termination agreement has been delivered, the amount of the fee is determinable and collectability of the fee is reasonably assured. Rental revenue reductions related to co-tenancy lease provisions, if any, are accrued when events have occurred that trigger such provisions.

73

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

1.    Description of Business and Significant Accounting Policies – Continued

Cost recovery income is determined on a calendar year and a lease-by-lease basis. The most common types of cost recovery income in our leases are common area maintenance (“CAM”) and real estate taxes, for which a customer typically pays its pro-rata share of operating and administrative expenses and real estate taxes in excess of the costs incurred during a contractually specified base year. The computation of cost recovery income is complex and involves numerous judgments, including the interpretation of lease provisions. Leases are not uniform in dealing with such cost recovery income and there are many variations in the computation. Many customers make monthly fixed payments of CAM, real estate taxes and other cost reimbursement items. We accrue income related to these payments each month. We make quarterly accrual adjustments, positive or negative, to cost recovery income to adjust the recorded amounts to our best estimate of the final annual amounts to be billed and collected. After the end of the calendar year, we compute each customer's final cost recovery income and, after considering amounts paid by the customer during the year, issue a bill or credit for the appropriate amount to the customer. The differences between the amounts billed less previously received payments and the accrual adjustment are recorded as increases or decreases to cost recovery income when the final bills are prepared, which occurs during the first half of the subsequent year.
 
Allowance for Doubtful Accounts
 
Accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable are reduced by an allowance for amounts that may become uncollectible in the future. We regularly evaluate the adequacy of our allowance for doubtful accounts. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of our customer, historical trends of the customer and changes in customer payment terms. Additionally, with respect to customers in bankruptcy, we estimate the probable recovery through bankruptcy claims and adjust the allowance for amounts deemed uncollectible. If our assumptions regarding the collectability of receivables prove incorrect, we could experience losses in excess of our allowance for doubtful accounts. The allowance and its related receivable are written-off when we have concluded there is a low probability of collection and we have discontinued collection efforts.

Discontinued Operations
 
Subsequent to the early adoption of the Financial Accounting Standards Board ("FASB") accounting standards update on the presentation of discontinued operations beginning in April 2014, properties that are sold or classified as held for sale are classified as discontinued operations provided that the disposal represents a strategic shift that has (or will have) a major effect on our operations and financial results. Interest expense is included in discontinued operations if a related loan securing the sold property is to be paid off or assumed by the buyer in connection with the sale. If the property is sold to a joint venture in which we retain an interest, the property will not be accounted for as a discontinued operation due to our significant ongoing interest in the operations through our joint venture interest. If we are retained to provide property management, leasing and/or other services for the property owner after the sale, the property generally will be accounted for as a discontinued operation because the expected cash flows related to our management and leasing activities generally will not be significant in comparison to the cash flows from the property prior to sale.

Lease Incentives
 
Lease incentive costs, which are payments made to or on behalf of a customer as an incentive to sign a lease, are capitalized in deferred financing and leasing costs and amortized on a straight-line basis over the respective lease terms as a reduction of rental revenues.

Investments in Unconsolidated Affiliates
 
We account for our investments in less than majority owned joint ventures, partnerships and limited liability companies using the equity method of accounting when our interests represent a general partnership interest but substantive participating rights or substantive kick out rights have been granted to the limited partners or when our interests do not represent a general partnership interest and we do not control the major operating and financial policies of the entity. These investments are initially recorded at cost in investments in unconsolidated affiliates and are subsequently adjusted for our share of earnings and cash contributions and distributions. To the extent our cost basis at formation of the joint venture is different than the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in our share of equity in earnings of unconsolidated affiliates.

74

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

1.    Description of Business and Significant Accounting Policies – Continued

Cash Equivalents
 
We consider highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Restricted Cash
 
Restricted cash represents cash deposits that are legally restricted or held by third parties on our behalf, such as construction-related escrows, property disposition proceeds set aside and designated or intended to fund future tax-deferred exchanges of qualifying real estate investments, escrows and reserves for debt service, real estate taxes and property insurance established pursuant to certain mortgage financing arrangements and any deposits made with lenders to unencumber secured properties.

Redeemable Common Units and Preferred Units
 
Limited partners holding Common Units other than the Company (“Redeemable Common Units”) have the right to put any and all of the Common Units to the Operating Partnership and the Company has the right to put any and all of the Preferred Units to the Operating Partnership in exchange for their liquidation preference plus accrued and unpaid distributions in the event of a corresponding redemption by the Company of the underlying Preferred Stock. Consequently, these Redeemable Common Units and Preferred Units are classified outside of permanent partners’ capital in the Operating Partnership's accompanying balance sheets. The recorded value of the Redeemable Common Units is based on fair value at the balance sheet date as measured by the closing price of Common Stock on that date multiplied by the total number of Redeemable Common Units outstanding. The recorded value of the Preferred Units is based on their redemption value.
 
Income Taxes
 
The Company has elected and expects to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). A corporate REIT is a legal entity that holds real estate assets and, through the payment of dividends to stockholders, is generally permitted to reduce or avoid the payment of federal and state income taxes at the corporate level. To maintain qualification as a REIT, the Company is required to pay dividends to its stockholders equal to at least 90.0% of its annual REIT taxable income, excluding net capital gains. The partnership agreement requires the Operating Partnership to pay economically equivalent distributions on outstanding Common Units at the same time that the Company pays dividends on its outstanding Common Stock.

Other than income taxes related to its taxable REIT subsidiary, the Operating Partnership does not reflect any federal income taxes in its financial statements, since as a partnership the taxable effects of its operations are attributed to its partners. The Operating Partnership does record state income tax for states that tax partnership income directly.
 
We conduct certain business activities through a taxable REIT subsidiary, as permitted under the Code. The taxable REIT subsidiary is subject to federal, state and local income taxes on its taxable income. We record provisions for income taxes based on its income recognized for financial statement purposes, including the effects of temporary differences between such income and the amount recognized for tax purposes.
 
Concentration of Credit Risk
 
At December 31, 2015 , properties that we wholly own were leased to 1,910 customers. The geographic locations that comprise greater than 10.0% of our rental and other revenues are Raleigh, NC, Atlanta, GA, Tampa, FL and Nashville, TN. Our customers engage in a wide variety of businesses. No single customer of the properties that we wholly own generated more than 6.0% of our consolidated revenues during 2015 .
 
We maintain our cash and cash equivalents and our restricted cash at financial or other intermediary institutions. The combined account balances at each institution may exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Additionally, from time to time in connection with tax-deferred 1031 transactions, our restricted cash balances may be commingled with other funds being held by any such intermediary institution, which would subject our balance to the credit risk of the institution.

75

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

1.    Description of Business and Significant Accounting Policies – Continued
 
Derivative Financial Instruments
 
We borrow funds at a combination of fixed and variable rates. Borrowings under our revolving credit facility, bridge facility and bank term loans bear interest at variable rates. Our long-term debt typically bears interest at fixed rates. Our interest rate risk management objectives are to limit generally the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we enter into interest rate hedge contracts such as collars, swaps, caps and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We generally do not hold or issue these derivative contracts for trading or speculative purposes. The interest rate on all of our variable rate debt is generally adjusted at one or three month intervals, subject to settlements under these interest rate hedge contracts.

Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive loss ("AOCL") and is subsequently reclassified into interest expense in the period that the hedged forecasted transaction affects earnings.
 
We account for terminated derivative instruments by recognizing the related accumulated comprehensive income/loss balance in current earnings, unless the hedged forecasted transaction continues as originally planned, in which case we continue to amortize the accumulated comprehensive income/loss into earnings over the originally designated hedge period.

Earnings Per Share and Per Unit
 
Basic earnings per share of the Company is computed by dividing net income available for common stockholders by the weighted Common Shares outstanding - basic. Diluted earnings per share is computed by dividing net income available to common stockholders plus noncontrolling interests in the Operating Partnership by the weighted Common Shares outstanding - basic plus the dilutive effect of options, warrants and convertible securities outstanding, including Common Units, using the treasury stock method. Weighted Common Shares outstanding - basic includes all unvested restricted stock where dividends received on such restricted stock are non-forfeitable.
 
Basic earnings per unit of the Operating Partnership is computed by dividing net income available for common unitholders by the weighted Common Units outstanding - basic. Diluted earnings per unit is computed by dividing net income available to common unitholders by the weighted Common Units outstanding - basic plus the dilutive effect of options and warrants, using the treasury stock method. Weighted Common Units outstanding - basic includes all of the Company's unvested restricted stock where dividends received on such restricted stock are non-forfeitable.
 
Recently Issued Accounting Standards
 
The 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 2018. Retrospective application is required either to all periods presented or with the cumulative effect of initial adoption recognized in the period of adoption. We are in the process of evaluating this 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 to 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 do not expect such adoption to have a material effect on the balance sheet.

76

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

2.    Real Estate Assets

Acquisitions

During 2015, we acquired:

•	a building in Tampa, FL encompassing 528,000 rentable square feet for a net purchase price of $113.5 million and an adjacent land parcel for a purchase price of $2.2 million;	

•	two buildings in Atlanta, GA encompassing 896,000 rentable square feet for a net purchase price of $290.3 million;	

•	land in Atlanta, GA for a purchase price and related transaction costs of $5.2 million (including contingent consideration of $0.9 million); and	

•	our Highwoods DLF 98/29, LLC joint venture partner’s 77.2% interest in a building in Orlando, FL encompassing 168,000 rentable square feet in exchange for the assumption of secured debt recorded at fair value of $19.3 million (see Note 6).	

We expensed $1.0 million of acquisition costs (included in general and administrative expenses) in 2015 related to these acquisitions. The assets acquired and liabilities assumed were recorded at fair value as determined by management based on information available at the acquisition date and on current assumptions as to future operations.

The following table sets forth a summary of the fair value of the major assets acquired and liabilities assumed relating to the above-referenced acquisition of two buildings in Atlanta, GA during 2015:

	
				
 	Total
Purchase Price Allocation	
Real estate assets	$	275,639		
Acquisition-related intangible assets (in deferred financing and leasing costs)	23,722		
Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)	(9,076	)	
Total allocation	$	290,285		
 
The following table sets forth the Company's revenues and net income, adjusted for interest expense, straight-line rental income, depreciation and amortization related to purchase price allocations and acquisition costs, assuming the above-referenced acquisition of two buildings in Atlanta, GA during 2015 had been completed as of January 1, 2014:

	
								
 	Year Ended December 31,	
 	2015	 	2014	
 	(unaudited)	
Pro forma revenues	$	626,067		 	$	584,650		
Pro forma net income	$	103,485		 	$	113,284		
Pro forma net income available for common stockholders	$	96,797		 	$	105,769		
Pro forma earnings per share - basic	$	1.03		 	$	1.17		
Pro forma earnings per share - diluted	$	1.02		 	$	1.17		

The above-referenced acquisition of two buildings in Atlanta, GA during 2015 resulted in revenues of $7.3 million and net loss of $1.2 million recorded in the Consolidated Statements of Income for the year ended December 31, 2015.

77

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

2.      Real Estate Assets - Continued
 
During 2014, we acquired:

•	a building in Orlando, FL encompassing 246,000 rentable square feet for a purchase price of $67.4 million;	

•	our partner's 50.0% interest in a building owned by our consolidated Highwoods-Markel Associates, LLC joint venture in Richmond, VA encompassing 66,000 rentable square feet for a purchase price of $4.2 million, which is recorded as acquisition of noncontrolling interest in consolidated affiliate;	

•	land in Nashville, TN for a purchase price and related transaction costs of $15.8 million (including contingent consideration of $3.3 million); and	

•	a building in Raleigh, NC encompassing 374,000 rentable square feet for a purchase price of $83.8 million.	

We expensed $0.5 million of acquisition costs (included in general and administrative expenses) in 2014 related to these acquisitions. The assets acquired and liabilities assumed were recorded at fair value as determined by management based on information available at the acquisition date and on current assumptions as to future operations.  

During 2013, we acquired:

•	our joint venture partner's 60.0% interest in our HIW-KC Orlando, LLC joint venture, which owned five buildings in Orlando, FL encompassing 1.3 million rentable square feet, for a net purchase price of $112.8 million. We previously accounted for our 40.0% interest in this joint venture using the equity method of accounting. The assets and liabilities of the joint venture are now wholly owned and are recorded in our Consolidated Financial Statements, including assets recorded at fair value of $188.0 million and secured debt recorded at fair value of $127.9 million, with an effective interest rate of 3.11%. This debt has since been repaid. As a result of acquiring a controlling interest in this joint venture, our previously held equity interest was remeasured at a fair value of $75.2 million resulting in a gain of $7.5 million, which represents the difference between the fair market value of our previously held equity interest and the carrying value of our investment on the date of acquisition. The fair market value of our previously held equity interest was determined by management based on information available at the acquisition date and on current assumptions as to future operations;	

•	a building in Nashville, TN encompassing 520,000 rentable square feet for a net purchase price of $150.1 million;	

•	our Highwoods DLF 97/26 DLF 99/32, LP joint venture partner's 57.0% interest in two buildings in Atlanta, GA encompassing 505,000 rentable square feet for a net purchase price of $44.5 million, including the assumption of secured debt recorded at fair value of $37.6 million, with an effective interest rate of 3.34%. This debt has since been repaid;	

•	a building in Atlanta, GA encompassing 553,000 rentable square feet for a purchase price of $140.1 million;	

•	two buildings in Tampa, FL encompassing 372,000 rentable square feet for a purchase price of $52.5 million;	

•	two buildings in Greensboro, NC encompassing 195,000 rentable square feet for a purchase price of $30.8 million; and	

•	land in Memphis, TN for a purchase price of $4.8 million.	
 
We expensed $1.8 million of acquisition costs (included in general and administrative expenses) in 2013 related to these acquisitions. The assets acquired and liabilities assumed were recorded at fair value as determined by management based on information available at the acquisition date and on current assumptions as to future operations.  

78

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

2.      Real Estate Assets - Continued
 
The following table sets forth a summary of the fair value of the major assets acquired and liabilities assumed relating to the above-referenced acquisitions of a building in Orlando, FL and Nashville, TN and the 553,000 rentable square foot building in Atlanta, GA during 2013:

	
				
 	Total
Purchase Price Allocation	
Real estate assets	$	445,396		
Acquisition-related intangible assets (in deferred financing and leasing costs)	50,595		
Mortgages and notes payable	(127,891	)	
Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)	(17,818	)	
Total allocation	$	350,282		

The following table sets forth the Company's revenues and net income, adjusted for interest expense, straight-line rental income, depreciation and amortization related to purchase price allocations, acquisition costs and equity in earnings of unconsolidated affiliates previously recognized as income assuming the above-referenced acquisitions of buildings in Orlando, FL, Nashville, TN and Atlanta, GA during 2013 had been completed as of January 1, 2012:

	
				
 	Year Ended December 31,	
 	2013	
 	(unaudited)	
Pro forma revenues	$	538,890		
Pro forma net income	$	121,754		
Pro forma net income available for common stockholders	$	113,606		
Pro forma earnings per share - basic	$	1.33		
Pro forma earnings per share - diluted	$	1.33		
 
The above-referenced acquisitions of buildings in Orlando, FL, Nashville, TN and Atlanta, GA during 2013 resulted in revenues of $25.0 million and net losses of $0.2 million recorded in the Consolidated Statements of Income for the year ended December 31, 2013.

Dispositions

During 2015, we sold a total of three buildings and land for an aggregate sale price of $27.8 million and recorded aggregate gains on disposition of property of $9.2 million, net of $0.5 million in taxes payable by our taxable REIT subsidiary.

During 2014, we sold a total of 33 buildings and land for an aggregate sale price of $187.3 million (before closing credits to buyer of $8.6 million for unfunded building and tenant improvements and $2.9 million for free rent) and recorded aggregate gains on disposition of property of $44.4 million.

During 2013, we sold a total of 47 buildings and land for an aggregate sale price of $260.5 million (before closing credits to buyer of $3.6 million for unfunded tenant improvements and after $2.0 million in closing credits to buyer for free rent) and recorded aggregate gains on disposition of discontinued operations of $62.3 million. Additionally, in connection with the disposition of a building in 2012, we had the right to receive additional cash consideration of up to $1.5 million upon the satisfaction of a certain post-closing requirement. The post-closing requirement was satisfied and the cash consideration was received during 2013. Accordingly, we recognized $1.5 million in additional gain on disposition of discontinued operations in 2013.

79

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

2.      Real Estate Assets - Continued

Impairments

During 2014, we recorded an impairment of real estate assets of $0.6 million on a building in Greensboro, NC. During 2013, we recorded impairments of real estate assets of $1.1 million on four buildings in a single office park in Winston-Salem, NC and $1.1 million on seven buildings in Atlanta, GA. These impairments were due to a change in the assumed timing of future dispositions and leasing assumptions, which reduced the future expected cash flows from the impaired properties.

3.    Mortgages and Notes Receivable

Mortgages and notes receivable were $2.1 million and $13.1 million at December 31, 2015 and 2014 , respectively.

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 2014 , the $16.5 million of seller financing was fully repaid and the resultant $0.4 million gain on disposition of property was recorded.

During 2012, we provided $8.6 million of 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. During 2015 , $9.9 million of the secured acquisition financing was repaid, including accrued interest. Previously, we concluded this arrangement to be an interest in a variable interest entity. However, since we did not have the power to direct matters that most significantly impact the activities of the entity, we did not qualify as the primary beneficiary. Accordingly, the entity was not consolidated. Our risk of loss with respect to this arrangement was limited to the carrying value of the mortgage receivable.

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

4.    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 our ownership in unconsolidated affiliates at December 31, 2015 :

	
					
Joint Venture	 	Location of Properties	 	Ownership
Interest	
Concourse Center Associates, LLC	 	Greensboro, NC	 	50.0%	
Plaza Colonnade, LLC	 	Kansas City, MO	 	50.0%	
Highwoods DLF 97/26 DLF 99/32, LP	 	Orlando, FL	 	42.9%	
Kessinger/Hunter & Company, LC	 	Kansas City, MO	 	26.5%	
Highwoods DLF Forum, LLC	 	Raleigh, NC	 	25.0%	
Highwoods DLF 98/29, LLC	 	Orlando, FL	 	22.8%	
4600 Madison Associates, LP	 	Kansas City, MO	 	12.5%	

80

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

4.    Investments in and Advances to Affiliates – Continued

The following table sets forth the summarized balance sheets of our unconsolidated affiliates:

	
								
 	December 31,	
 	2015	 	2014	
 	 	 	(as revised)	
Balance Sheets:	 	 	 	
Assets:	 	 	 	
Real estate assets, net	$	163,852		 	$	239,142		
All other assets, net	53,511		 	61,290		
Total Assets	$	217,363		 	$	300,432		
Liabilities and Partners’ or Shareholders’ Equity:	 	 	 	
Mortgages and notes payable (1)	$	141,580		 	$	191,587		
All other liabilities	6,547		 	11,967		
Partners’ or shareholders’ equity	69,236		 	96,878		
Total Liabilities and Partners’ or Shareholders’ Equity	$	217,363		 	$	300,432		
Our share of historical partners’ or shareholders’ equity	$	21,022		 	$	30,784		
Advances to unconsolidated affiliates	448		 	20,864		
Difference between cost of investments and the net book value of underlying net assets	(794	)	 	(963	)	
Carrying value of investments in and advances to unconsolidated affiliates	$	20,676		 	$	50,685		
Our share of unconsolidated non-recourse mortgage debt (1)	$	49,242		 	$	60,972		
__________
		
(1)	Our share of scheduled future principal payments, including amortization, due on mortgages and notes payable at December 31, 2015 is as follows:	

				
2016	$	4,407		
2017	20,817		
2018	19,580		
2019	563		
2020	562		
Thereafter	3,313		
 	$	49,242		
 
All of this joint venture debt is non-recourse to us except in the case of customary exceptions pertaining to such matters as misuse of funds, environmental conditions, material misrepresentations and voluntary or uncontested involuntary bankruptcy events.

81

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

4.    Investments in and Advances to Affiliates – Continued

The following table sets forth the summarized income statements of our unconsolidated affiliates:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Income Statements:	 	 	 	 	 	
Rental and other revenues	$	48,118		 	$	50,514		 	$	82,168		
Expenses:	 	 	 	 	 	
Rental property and other expenses	22,721		 	25,159		 	41,284		
Depreciation and amortization	12,257		 	13,310		 	20,928		
Impairments of real estate assets	—		 	—		 	20,077		
Interest expense	7,196		 	8,847		 	14,994		
Total expenses	42,174		 	47,316		 	97,283		
Income/(loss) before disposition of property	5,944		 	3,198		 	(15,115	)	
Gains on disposition of property	18,181		 	2,998		 	20,501		
Net income	$	24,125		 	$	6,196		 	$	5,386		

The following summarizes additional information related to certain of our unconsolidated affiliates:

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

During 2014, Board of Trade sold a building to an unrelated third party for gross proceeds of $8.3 million and recorded a gain of $1.9 million. As our cost basis was 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. Our 49.0% interest in Board of Trade was redeemed in exchange for $4.7 million in cash.

- Highwoods KC Glenridge Office, LLC ("KC Glenridge Office") and Highwoods KC Glenridge Land, LLC ("KC Glenridge Land")

During 2015, KC Glenridge Office and KC Glenridge Land collectively sold two buildings and land to an unrelated third party for an aggregate sale price of $24.5 million (before closing credits to buyer of $0.3 million for unfunded tenant improvements) and recorded gains on disposition of property of $2.4 million. We recorded $0.9 million as our share of these gains through equity in earnings of unconsolidated affiliates.

During 2014, KC Glenridge Office paid at maturity the remaining $14.9 million balance on a secured mortgage loan with an effective interest rate of 4.84%.

- HIW-KC Orlando, LLC

See Note 2 for a description of our acquisition of our partner's 60.0% equity interest in this joint venture during 2013.

82

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

4.    Investments in and Advances to Affiliates – Continued

- Lofts at Weston, LLC ("Weston Lofts")

During 2011, we and Ravin Partners, LLC (“Ravin”) formed Weston Lofts, in which we had a 50.0% ownership interest. We contributed 15.0 acres of land at an agreed upon value of $2.4 million to this joint venture, and Ravin contributed $1.2 million in cash and agreed to guarantee the joint venture's development loan. The joint venture then distributed $1.2 million to us and we recorded a gain of $0.3 million on this transaction. Ravin was the developer, manager and leasing agent and received customary fees from the joint venture, which constructed 215 residential units at a total cost of $25.9 million. During 2013, Weston Lofts sold the 215 residential units to an unrelated third party for gross proceeds of $38.3 million and recorded a gain of $12.2 million. As a result, we received aggregate net distributions of $9.4 million and recorded our share of the gain of $3.2 million, which is net of $1.7 million in taxes incurred by our taxable REIT subsidiary, in equity in earnings of unconsolidated affiliates. Our share of the gain was less than 50.0% due to Ravin's preferred return as the developer.

- Highwoods DLF 97/26 DLF 99/32, LP (“DLF II”)
 
During 2015, DLF II 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.

See Note 2 for a description of our acquisition of two buildings in Atlanta, GA from DLF II during 2013.
 
During 2013, DLF II sold a building to an unrelated third party for a sale price of $10.1 million (after $0.3 million in closing credits to buyer for free rent) and recorded a gain on disposition of property of less than $0.1 million. As our cost basis was different from the basis reflected at the joint venture level, we recorded $0.4 million of gain through equity in earnings of unconsolidated affiliates.
 
- Kessinger/Hunter & Company, LC ("Kessinger/Hunter")
 
Kessinger/Hunter, which is managed by our joint venture partner, provides leasing services, among other things, to certain buildings that we wholly own in Kansas City, MO in exchange for customary fees from us. Kessinger/Hunter received $ 0.3 million , $ 0.6 million and $ 0.2 million from us for these services in 2015 , 2014 and 2013 , respectively.
 
- Highwoods DLF Forum, LLC (“Forum”)
 
During 2013, Forum obtained a $71.7 million, five-year secured mortgage loan from a third party lender, bearing a floating interest rate of LIBOR plus 190 basis points, which was used by the joint venture to repay a secured loan at maturity to a third party lender. This loan is scheduled to mature in November 2018.

- Highwoods DLF 98/29, LLC (“DLF I”)

See Note 2 for a description of our acquisition of a building in Orlando, FL from DLF I during 2015. The joint venture recorded a gain on disposition of property of $13.7 million. Our share of $3.1 million was recorded as a reduction to real estate assets.

During 2014, DLF I sold a building to an unrelated third party for a sale price of $13.7 million (before $0.4 million in closing credits to buyer for free rent) and recorded a gain on disposition of property of $1.0 million. We recorded $0.2 million as our share of this gain through equity in earnings of unconsolidated affiliates.

During 2013, DLF I sold a building to an unrelated third party for a sale price of $5.9 million (after $0.1 million in closing credits to buyer for free rent) and recorded a gain on disposition of discontinued operations of less than $0.1 million. We recorded less than $0.1 million as our share of this gain through equity in earnings of unconsolidated affiliates.

83

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

4.    Investments in and Advances to Affiliates – Continued

During 2013, DLF I recorded impairments of real estate assets of $20.1 million on buildings in Orlando, FL, Atlanta, GA and Charlotte, NC. We recorded $4.5 million as our share of these impairment charges through equity in earnings of unconsolidated affiliates. These impairments were due to a change in the assumed timing of future dispositions and/or leasing assumptions, which reduced the future expected cash flows from the impaired properties.

- Other Activities
 
We receive development, management and leasing fees for services provided to certain of our joint ventures. These fees are recognized in income to the extent of our respective joint venture partner's interest. During the years ended December 31, 2015 , 2014 and 2013 , we recognized $ 1.4 million , $ 1.2 million and $ 2.9 million , respectively, of development/construction, management and leasing fees from our unconsolidated joint ventures. At December 31, 2015 and 2014 , we had receivables of $0.1 million and $0.5 million, respectively, related to these fees in accounts receivable.
 
Consolidated Affiliates
 
The following summarizes our consolidated affiliates:

- Highwoods-Markel Associates, LLC (“Markel”)

We have a 50.0% ownership interest in Markel. We are the manager and leasing agent for Markel's properties, which are located in Richmond, VA in exchange for customary management and leasing fees. We consolidate Markel since we are the managing member and control the major operating and financial policies of the entity. As controlling member, we have an obligation to cause this property-owning entity to distribute proceeds of liquidation to the noncontrolling interest member in these partially owned properties only if the net proceeds received by the entity from the sale of Markel's assets warrant a distribution as determined by the governing agreement. We estimate the value of noncontrolling interest distributions would have been $ 19.4 million had the entity been liquidated at December 31, 2015 . This estimated settlement value is based on the fair value of the underlying properties which is based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers, changes in market rental rates and costs to operate each property. If the entity's underlying assets are worth less than the underlying liabilities on the date of such liquidation, we would have no obligation to remit any consideration to the noncontrolling interest holder.

See Note 2 for a description of our acquisition of the noncontrolling member's 50.0% interest in a building owned by Markel during 2014.

- Harborview
 
We had a 20.0% interest in Harborview, which had been accounted for as a financing obligation since our partner had the right to put its 80.0% equity interest back to us any time prior to September 11, 2015. During 2012, we also provided a three-year $20.8 million interest-only secured loan to Harborview that was scheduled to mature in September 2015.

During the second quarter of 2015, as a result of our partner’s irrevocable exercise of a buy-sell provision in our Harborview joint venture agreement, our partner’s right to put its 80.0% equity interest back to us became no longer exercisable, which resulted in recording the original contribution transaction as a partial sale. As a result, we were required to begin accounting for Harborview using the equity method of accounting. See Note 1.

During the third quarter of 2015, we sold our 20.0% interest in Harborview to our partner for net proceeds of $6.9 million and recorded a $4.2 million gain on disposition of investment in unconsolidated affiliate. The $20.8 million interest-only secured loan previously provided by us to Harborview was paid in full upon consummation of the sale.

84

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

5.    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:

	
								
 	December 31,	
 	2015	 	2014	
Assets:	 	 	 	
Deferred financing costs	$	18,449		 	$	19,478		
Less accumulated amortization	(8,551	)	 	(7,953	)	
 	9,898		 	11,525		
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)	346,937		 	311,092		
Less accumulated amortization	(115,172	)	 	(100,169	)	
 	231,765		 	210,923		
Deferred financing and leasing costs, net	$	241,663		 	$	222,448		
 	 	 	 	
Liabilities (in accounts payable, accrued expenses and other liabilities):	 	 	 	
Acquisition-related below market lease liabilities	$	63,830		 	$	55,783		
Less accumulated amortization	(17,927	)	 	(13,548	)	
 	$	45,903		 	$	42,235		

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

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Amortization of deferred financing costs	$	3,645		 	$	3,082		 	$	3,802		
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)	$	43,332		 	$	38,144		 	$	35,941		
Amortization of lease incentives (in rental and other revenues)	$	1,493		 	$	1,419		 	$	1,361		
Amortization of acquisition-related intangible assets (in rental and other revenues)	$	5,062		 	$	4,549		 	$	3,676		
Amortization of acquisition-related intangible assets (in rental property and other expenses)	$	557		 	$	557		 	$	556		
Amortization of acquisition-related below market lease liabilities (in rental and other revenues)	$	(7,065	)	 	$	(6,129	)	 	$	(5,316	)	

85

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

5.    Intangible Assets and Below Market Lease Liabilities - Continued

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

	
																									
Years Ending December 31,	 	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)	
2016	 	$	3,185		 	$	45,903		 	$	1,254		 	$	3,808		 	$	553		 	$	(6,969	)	
2017	 	2,693		 	38,580		 	1,175		 	2,671		 	553		 	(6,626	)	
2018	 	1,530		 	31,827		 	1,076		 	1,709		 	553		 	(6,231	)	
2019	 	1,116		 	26,161		 	880		 	1,306		 	553		 	(5,739	)	
2020	 	804		 	21,584		 	652		 	989		 	525		 	(5,410	)	
Thereafter	 	570		 	45,008		 	1,883		 	2,562		 	—		 	(14,928	)	
 	 	$	9,898		 	$	209,063		 	$	6,920		 	$	13,045		 	$	2,737		 	$	(45,903	)	
Weighted average remaining amortization periods as of December 31, 2015 (in years)	 	3.9		 	6.6		 	7.4		 	6.1		 	5.0		 	7.9		

The following table sets forth the intangible assets acquired and below market lease liabilities assumed as a result of 2015 acquisition activity:

	
													
 	 	Acquisition-Related Intangible Assets (amortized in Rental and Other Revenues)	 	Acquisition-Related Intangible Assets (amortized in Depreciation and Amortization)	 	Acquisition-Related Below Market Lease Liabilities (amortized in Rental and Other Revenues)	
Amount recorded at acquisition	 	$	3,051		 	$	35,534		 	$	(10,733	)	
Weighted average remaining amortization periods as of December 31, 2015 (in years)	 	5.0		 	5.7		 	9.6		

86

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

6.    Mortgages and Notes Payable
 
Our mortgages and notes payable consist of the following:

	
								
 	December 31,	
 	2015	 	2014	
Secured indebtedness: (1)	 	 	 	
5.17% (6.43% effective rate) mortgage loan due 2015 (2)	$	—		 	$	39,324		
6.88% mortgage loans due 2016 (3)	—		 	107,556		
7.50% mortgage loan due 2016	43,852		 	44,501		
5.10% (4.22% effective rate) mortgage loan due 2017 (4)	112,230		 	115,229		
6.11% (5.36% effective rate) mortgage loan due 2017 (5)	19,199		 	—		
8.15% (7.65% effective rate) mortgage loan due 2016 (6)	—		 	6,258		
 	175,281		 	312,868		
Unsecured indebtedness:	 	 	 	
5.85% (5.88% effective rate) notes due 2017 (7)	379,544		 	379,427		
7.50% notes due 2018	200,000		 	200,000		
3.20% (3.363% effective rate) notes due 2021 (8)	297,639		 	297,207		
3.625% (3.752% effective rate) notes due 2023   (9)	248,150		 	247,887		
Variable rate term loan due 2019 (10)	200,000		 	200,000		
Variable rate term loan due 2020 (11)	350,000		 	225,000		
Bridge credit facility due 2016 (12)	350,000		 	—		
Revolving credit facility due 2018 (13)	299,000		 	209,000		
 	2,324,333		 	1,758,521		
Total	$	2,499,614		 	$	2,071,389		
__________
		
(1)	Our secured mortgage loans were collateralized by real estate assets with an aggregate undepreciated book value of $ 314.2 million at December 31, 2015 . Our fixed rate mortgage loans generally are either locked out to prepayment for all or a portion of their term or are prepayable subject to certain conditions including prepayment penalties.	
		
(2)	Net of unamortized fair market value discount of $0.4 million as of December 31, 2014 . This debt was repaid in 2015.	
		
(3)	This debt was repaid in 2015.	
		
(4)	Net of unamortized fair market value premium of $1.7 million and $2.7 million as of December 31, 2015 and 2014 , respectively.	
		
(5)	Net of unamortized fair market value premium of $0.2 million as of December 31, 2015 .	
		
(6)	Net of unamortized fair market value premium of $ 0.1 million as of December 31, 2014 . This debt was repaid in 2015.	
		
(7)	Net of unamortized original issuance discount of $ 0.1 million and $ 0.3 million as of December 31, 2015 and 2014 , respectively.	
		
(8)	Net of unamortized original issuance discount of $ 2.4 million and $ 2.8 million as of December 31, 2015 and 2014 , respectively.	
		
(9)	Net of unamortized original issuance discount of $1.9 million and $2.1 million as of December 31, 2015 and 2014 , respectively.	
		
(10)	The interest rate is 1.44% at December 31, 2015 .	
		
(11)	As more fully described in Note 7, we entered into floating-to-fixed interest rate swaps that effectively fix LIBOR for the original $225.0 million portion of this loan. Accordingly, the equivalent fixed rate of this amount is 2.78% . The interest rate on the remaining $125.0 million is 1.41% at December 31, 2015 .	
		
(12)	The interest rate is 1.49% at December 31, 2015 .	
		
(13)	The interest rate is 1.45% at December 31, 2015 .	

87

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

6.    Mortgages and Notes Payable - Continued

The following table sets forth scheduled future principal payments, including amortization, due on our mortgages and notes payable at December 31, 2015 :

	
					
Years Ending December 31,	 	Principal Amount	
2016	 	$	396,090		
2017	 	507,345		
2018	 	498,305		
2019	 	199,305		
2020	 	349,305		
Thereafter	 	549,264		
 	 	$	2,499,614		

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 $ 299.0 million and $ 313.7 million outstanding under our revolving credit facility at December 31, 2015 and January 29, 2016 , respectively. At both December 31, 2015 and January 29, 2016 , we had $ 0.2 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at December 31, 2015 and January 29, 2016 was $ 175.8 million and $ 161.1 million , respectively.

During 2015, we prepaid without penalty a secured mortgage loan with a fair market value of $5.9 million with an effective interest rate of 7.65% that was originally scheduled to mature in February 2016, the remaining $106.0 million balance on a secured mortgage loan with an effective interest rate of 6.88% that was originally scheduled to mature in January 2016 and the remaining $39.4 million balance on a secured mortgage loan with an effective interest rate of 6.43% that was originally scheduled to mature in November 2015. We recorded aggregate losses on debt extinguishment of $0.2 million related to these prepayments. Real estate assets having a gross book value of approximately $293 million became unencumbered in connection with the payoff of these secured loans. We also paid down $4.9 million of secured loan balances through principal amortization during 2015.

During 2015, we obtained a $350.0 million, six-month unsecured bridge facility. The bridge facility is originally scheduled to mature on March 28, 2016. Assuming no defaults have occurred, we have an option to extend the maturity for an additional six-month period. The interest rate on the bridge facility at our current credit ratings is LIBOR plus 110 basis points. There was $350.0 million outstanding under our bridge facility at December 31, 2015. We intend to repay this facility in the first quarter of 2016.

During 2015, we amended our $225.0 million, seven-year unsecured bank term loan, which was scheduled to mature in January 2019. We increased the borrowed amount to $350.0 million. The amended term loan is now scheduled to mature in June 2020 and the interest rate, based on our current credit ratings, was reduced from LIBOR plus 175 basis points to LIBOR plus 110 basis points. We incurred $1.3 million of deferred financing fees in connection with this amendment, which will be amortized along with existing unamortized deferred loan fees over the remaining term of the new loan.

88

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

6.    Mortgages and Notes Payable - Continued

During 2015, we acquired our joint venture partner’s 77.2% interest in a building in Orlando, FL. Simultaneously with this acquisition, the joint venture's previously existing mortgage note was restructured into a new $18.0 million first mortgage note and a $10.2 million subordinated note, both of which are scheduled to mature in July 2017. The first mortgage note is interest only with an effective interest rate of 5.36%, payable monthly. The subordinated note has an effective interest rate of 8.6%. Additionally, we deposited $3.0 million into escrow to fund tenant improvements, leasing commissions and building improvements. The first mortgage note and subordinated note can be prepaid at any time commencing October 2016 upon a sale or refinancing of the property. In such event, the subordinated note and any and all accrued interest thereon would be deemed fully satisfied upon payment of a "waterfall payment," if any. Such "waterfall payment" would be a cash payment equal to 50.0% of the amount, if any, by which the net sale proceeds or appraised value in the event of a refinancing exceeds (1) the outstanding principal of the first mortgage note, (2) the funds deposited by us into escrow to fund tenant improvements, leasing commissions and building improvements and (3) a 10.0% return on such funds deposited by us into escrow. The fair value of the first mortgage note was $18.3 million and the fair value of the subordinated note equaled the projected waterfall payment of $1.0 million.
 
During 2014, the Operating Partnership issued $300 million aggregate principal amount of 3.20% Notes due June 15, 2021, less original issue discount of $3.1 million. These notes were priced at 98.983% for an effective yield of 3.363%. Underwriting fees and other expenses were incurred that aggregated $2.4 million; these costs were deferred and will be amortized over the term of the notes.
 
During 2014, we prepaid the remaining $36.9 million balance on a secured mortgage loan with an effective interest rate of 3.34% that was originally scheduled to mature in April 2015. We recorded $0.3 million of loss on debt extinguishment related to this prepayment. We also prepaid without penalty the remaining $123.7 million balance on a secured mortgage loan with an effective interest rate of 3.11% that was originally scheduled to mature in July 2014 and the remaining $7.2 million balance on a secured mortgage loan with an effective interest rate of 3.32% that was originally scheduled to mature in August 2014. We recorded less than $0.1 million of gain on debt extinguishment related to this last prepayment.
 
During 2013, we prepaid without penalty a secured mortgage loan with a fair market value of $67.5 million bearing an effective interest rate of 5.12% that was originally scheduled to mature in January 2014. We also prepaid without penalty the remaining $114.7 million balance on two secured mortgage loans bearing interest at a weighted average rate of 5.75% that were originally scheduled to mature in December 2013. We recorded less than $0.1 million of loss on debt extinguishment related to these prepayments. During 2013, one of our consolidated affiliates also prepaid without penalty the remaining $32.3 million balance on four secured mortgage loans bearing interest at a weighted average rate of 5.79% that were originally scheduled to mature in January 2014.
 
During 2013, we prepaid the remaining $35.0 million balance on a $200.0 million unsecured bank term loan that was originally scheduled to mature in February 2016. We recorded $0.2 million of loss on debt extinguishment related to this prepayment.
 
We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
 
Our revolving credit facility, bridge facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on the revolving credit facility, the lenders having at least 51.0% of the total commitments under the revolving credit facility can accelerate all borrowings then outstanding, and we could be prohibited from borrowing any further amounts under our revolving credit facility, which would adversely affect our ability to fund our operations.
 
The Operating Partnership has $379.5 million carrying amount of 2017 bonds outstanding, $200.0 million carrying amount of 2018 bonds outstanding, $297.6 million carrying amount of 2021 bonds outstanding and $248.2 million carrying amount of 2023 bonds outstanding. The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0% in principal amount of either series of bonds can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.
 
Capitalized Interest
 
Total interest capitalized to development and significant building and tenant improvement projects was $ 6.9 million , $ 5.3 million and $ 2.7 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.

89

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
7.	Derivative Financial Instruments	

We have six floating-to-fixed interest rate swaps through January 2019 each with respect to an aggregate of $225.0 million LIBOR-based borrowings. These swaps effectively fix the underlying LIBOR rate at a weighted average of 1.678% . The counterparties under the swaps are major financial institutions. The swap agreements contain a provision whereby if we default on any of our indebtedness, if greater than $10.0 million , and which default results in repayment of such indebtedness being, or becoming capable of being, accelerated by the lender, then we could also be declared in default on our swaps. These swaps have been designated and 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 year ended December 31, 2015 . We have no collateral requirements related to our interest rate swaps.

Amounts reported in AOCL related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. During 2016 , we estimate that $2.3 million will be reclassified to interest expense.

The following table sets forth the fair value of our derivatives:

	
								
 	December 31,	
 	2015	 	2014	
Derivatives:	 	 	 	
Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:	 	 	 	
Interest rate swaps	$	3,073		 	$	2,412		

The following table sets forth the effect of our cash flow hedges on AOCL and interest expense:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Derivatives Designated as Cash Flow Hedges:	 	 	 	 	 	
Amount of unrealized gains/(losses) recognized in AOCL on derivatives (effective portion):	 	 	 	 	 	
Interest rate swaps	$	(4,040	)	 	$	(5,662	)	 	$	5,778		
Amount of losses reclassified out of AOCL into contractual interest expense (effective portion):	 	 	 	 	 	
Interest rate swaps	$	3,696		 	$	3,777		 	$	3,370		

8.	Financing Arrangement	

In connection with tax increment financing for a parking garage we constructed in 1999, we are obligated to pay fixed special assessments over a 20-year period ending in 2019 . The net present value of these assessments, discounted at the 6.93% interest rate on the underlying tax increment financing, is recorded as a financing obligation and is classified in liabilities held for sale on our Consolidated Balance Sheets. We receive special tax revenues and property tax rebates recorded in interest and other income, which are intended, but not guaranteed, to provide funds to pay the special assessments. We acquired the related tax increment financing bond in a privately negotiated transaction in 2007 . Under the definitive agreements, dated as of December 21, 2015, relating to the sale of substantially all of our wholly-owned Country Club Plaza assets in Kansas City, MO (which we refer to as the "Plaza assets"), this tax increment financing bond will be assigned to the buyer of the Plaza assets as of the closing date at the agreed upon value of the principal amount and accrued interest, if any, then outstanding. Such value is included as part of the $660.0 million purchase price for the Plaza assets. This tax increment financing bond is classified in liabilities held for sale on our Consolidated Balance Sheets and was $7.4 million and $9.0 million at December 31, 2015 and 2014 , respectively. For additional information about this tax increment financing bond, see Notes 11 and 16.

90

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
9.	Commitments and Contingencies	

Operating Ground Leases
 
Certain of our properties are subject to operating ground leases. Rental payments on these leases are adjusted periodically based on either the consumer price index or on a pre-determined schedule. Total rental property expense recorded for operating ground leases was $3.4 million , $3.4 million and $2.8 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.

The following table sets forth our scheduled obligations for future minimum payments on operating ground leases at December 31, 2015 :

	
					
Years Ending December 31,	 	Minimum Payments	
2016	 	$	3,033		
2017	 	3,067		
2018	 	3,103		
2019	 	3,140		
2020	 	3,179		
Thereafter	 	109,157		
 	 	$	124,679		

Lease and Contractual Commitments
 
We have $340.0 million of lease and contractual commitments at December 31, 2015 . Lease and contractual commitments represent commitments under signed leases and contracts for operating properties (excluding tenant-funded tenant improvements) and contracts for development/redevelopment projects, of which $55.9 million was recorded on our Consolidated Balance Sheet at December 31, 2015 .
 
Contingent Consideration
 
In 2015, we acquired development land in Atlanta, GA for a purchase price and related transaction costs of $5.2 million, which includes contingent consideration estimated to be $0.9 million. The contingent consideration is payable in cash to a third party thirty days subsequent to stabilization, which is projected to be in the second quarter of 2019, if and to the extent the stabilized value of the building constructed on the development site exceeds the total development cost.

In 2014, we acquired development land in Nashville, TN for a purchase price and related transaction costs of $15.8 million, which includes contingent consideration estimated to be $3.3 million. The contingent consideration is payable in cash to a third party no later than the first quarter of 2020 if and to the extent the stabilized value of the building constructed on the development site exceeds the total development cost.

Closure of Division Office

In the third quarter of 2015, we announced our intent to list for sale the Plaza assets. The Plaza assets consist of 776,000 square feet of in-service retail space, 468,000 square feet of in-service office space and a 28,000 square foot retail redevelopment project. We intend to close our Kansas City division office upon such sale, which is scheduled to occur on March, 1, 2016. In the fourth quarter of 2015, we accrued $1.6 million of the total $2.6 million severance costs expected to be incurred in connection with the sale.

91

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
9.	Commitments and Contingencies - Continued	

Environmental Matters
 
Substantially all of our in-service and development properties have been subjected to Phase I environmental assessments and, in certain instances, Phase II environmental assessments. Such assessments and/or updates have not revealed, nor are we aware of, any environmental liability that we believe would have a material adverse effect on our Consolidated Financial Statements.

Litigation, Claims and Assessments
 
We are from time to time a party to a variety of legal proceedings, claims and assessments arising in the ordinary course of our business. We regularly assess the liabilities and contingencies in connection with these matters based on the latest information available. For those matters where it is probable that we have incurred or will incur a loss and the loss or range of loss can be reasonably estimated, the estimated loss is accrued and charged to income in our Consolidated Financial Statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, a reasonable estimate of liability, if any, cannot be made. Based on the current expected outcome of such matters, none of these proceedings, claims or assessments is expected to have a material effect on our business, financial condition, results of operations or cash flows.

10.	Noncontrolling Interests	

Noncontrolling Interests in Consolidated Affiliates

At December 31, 2015 , our noncontrolling interests in consolidated affiliates relate to our joint venture partner's 50.0% interest in office properties in Richmond, VA. Our joint venture partner is an unrelated third party.

Noncontrolling Interests in the Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the ownership of Redeemable Common Units. Net income attributable to noncontrolling interests in the Operating Partnership is computed by applying the weighted average percentage of Redeemable Common Units during the period, as a percent of the total number of outstanding Common Units, to the Operating Partnership’s net income for the period after deducting distributions on Preferred Units. When a noncontrolling unitholder redeems a Common Unit for a share of Common Stock or cash, the noncontrolling interests in the Operating Partnership are reduced and the Company’s share in the Operating Partnership is increased by the fair value of each security at the time of redemption.

The following table sets forth the Company's noncontrolling interests in the Operating Partnership:

	
								
 	Year Ended December 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	67		 	25,275		
Conversions of Common Units to Common Stock	(1,645	)	 	(162	)	
Redemptions of Common Units	—		 	(93	)	
Net income attributable to noncontrolling interests in the Operating Partnership	2,918		 	3,542		
Distributions to noncontrolling interests in the Operating Partnership	(4,959	)	 	(4,994	)	
Total noncontrolling interests in the Operating Partnership	$	126,429		 	$	130,048		

92

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
10.	Noncontrolling Interests - Continued	

The following table sets forth net income available for common stockholders and transfers from the Company's noncontrolling interests in the Operating Partnership:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Net income available for common stockholders	$	94,572		 	$	108,457		 	$	122,949		
Increase in additional paid in capital from conversions of Common Units to Common Stock	1,645		 	162		 	28,788		
Change from net income available for common stockholders and transfers from noncontrolling interests	$	96,217		 	$	108,619		 	$	151,737		

11.	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 considered in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented.
 
Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Our Level 3 assets include (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.

93

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

 
		
11.	Disclosure About Fair Value of Financial Instruments – Continued	
 
Our Level 3 liability is the fair value of our financing obligation, which was estimated by the income approach to approximate the price that would be paid in an orderly transaction between market participants, utilizing: (1) contractual cash flows; (2) market-based interest rates; and (3) a number of other assumptions including demand for space, competition for customers, changes in market rental rates, costs of operation and expected ownership periods.
 
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 December 31, 2015:	 	 	 	 	 	 	 	
Assets:	 	 	 	 	 	 	 	
Mortgages and notes receivable, at fair value (1)	$	2,096		 	$	—		 	$	2,096		 	$	—		
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,736		 	2,736		 	—		 	—		
Tax increment financing bond (in real estate and other assets, net, held for sale)	11,197		 	—		 	—		 	11,197		
Total Assets	$	16,029		 	$	2,736		 	$	2,096		 	$	11,197		
Noncontrolling Interests in the Operating Partnership	$	126,429		 	$	126,429		 	$	—		 	$	—		
Liabilities:	 	 	 	 	 	 	 	
Mortgages and notes payable, at fair value (1)	$	2,525,390		 	$	—		 	$	2,525,390		 	$	—		
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)	3,073		 	—		 	3,073		 	—		
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,736		 	2,736		 	—		 	—		
Financing obligation, at fair value (in liabilities held for sale) (1)	7,402		 	—		 	—		 	7,402		
Total Liabilities	$	2,538,601		 	$	2,736		 	$	2,528,463		 	$	7,402		

																
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 real estate and other assets, net, held for sale)	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 obligation, at fair value (in liabilities held for sale) (as   revised)  (1)	8,623		 	—		 	—		 	8,623		
Total Liabilities (as revised)	$	2,156,004		 	$	3,635		 	$	2,143,746		 	$	8,623		
__________
(1)    Amounts recorded at historical cost on our Consolidated Balance Sheets at December 31, 2015 and 2014 .

94

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
11.	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:

	
								
 	December 31,	
 	2015	 	2014	
Asset:	 	 	 	
Tax Increment Financing Bond:	 	 	 	
Beginning balance	$	12,447		 	$	13,403		
Principal repayment	(1,695	)	 	(1,540	)	
Unrealized gains (in AOCL)	445		 	584		
Ending balance	$	11,197		 	$	12,447		
 
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 December 31, 2015 was equal to 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 $0.3 million lower or $0.3 million higher, respectively, as of December 31, 2015 . 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 years ended December 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. See Note 8.
 
During 2014, we recorded an impairment of real estate assets on a building, which was subsequently sold during the year, based upon fair value at the time of impairment of $4.9 million . The impaired real estate asset was deemed to be a Level 3 asset and valued based primarily on market-based inputs and our assumptions about the use of the asset, as observable inputs were not available. In the absence of observable inputs, we estimate the fair value of real estate using unobservable data such as estimated discount and capitalization rates. We also utilize local and national industry market data such as comparable sales, sales contracts and appraisals to assist us in our estimation of fair value. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement.
 
The following table sets forth quantitative information about the unobservable inputs of our Level 3 assets, which were recorded at fair value on our Consolidated Balance Sheets:

	
						
 	Valuation
Technique	 	Unobservable
Input	 	Rate/ Percentage	
2015 Asset:	 	 	 	 	 	
Tax increment financing bond	Income approach	 	Discount rate	 	6.93%	
2014 Assets:	 	 	 	 	 	
Tax increment financing bond	Income approach	 	Discount rate	 	8.4%	
Impaired real estate assets	Income approach	 	Capitalization rate	 	9.5%	
 	 	 	Discount rate	 	10.0%	

95

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
12.	Equity	
 
Common Stock Issuances
 
During 2015 and 2014, the Company issued 2,922,905 and 2,500,031 shares, respectively, of Common Stock in public offerings and received net proceeds of $124.9 million and $104.1 million , respectively. At December 31, 2015 , the Company had 103.9 million remaining shares of Common Stock authorized to be issued under its charter.

Common Stock Dividends
 
Dividends of the Company declared and paid per share of Common Stock aggregated $1.70 for each of the years ended December 31, 2015 , 2014 and 2013 .

The following table sets forth the Company's estimated taxability to the common stockholders of dividends per share for federal income tax purposes:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Ordinary income	$	1.50		 	$	1.31		 	$	1.28		
Capital gains	0.13		 	0.29		 	0.26		
Return of capital	0.07		 	0.10		 	0.16		
Total	$	1.70		 	$	1.70		 	$	1.70		
 
The Company's tax returns have not been examined by the Internal Revenue Service (“IRS”) and, therefore, the taxability of dividends is subject to change.
 
Preferred Stock
 
The following table sets forth the Company's Preferred Stock:

	
																				
Preferred Stock Issuances	 	Issue Date	 	Number of Shares Outstanding	 	Carrying Value	 	Liquidation Preference Per Share	 	Optional Redemption Date	 	Annual Dividends Payable Per Share	
 	 	 	 	(in thousands)	 	 	 	 	 	 	 	 	
December 31, 2015	 	 	 	 	 	 	 	 	 	 	 	 	
8.625% Series A Cumulative Redeemable	 	2/12/1997	 	29		 	$	29,050		 	$	1,000		 	2/12/2027	 	$	86.25		
December 31, 2014	 	 	 	 	 	 	 	 	 	 	 	 	
8.625% Series A Cumulative Redeemable	 	2/12/1997	 	29		 	$	29,060		 	$	1,000		 	2/12/2027	 	$	86.25		

96

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
12.	Equity - Continued	

The following table sets forth the Company's estimated taxability to the preferred stockholders of dividends per share for federal income tax purposes:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
8.625% Series A Cumulative Redeemable:	 	 	 	 	 	
Ordinary income	$	79.23		 	$	70.41		 	$	71.56		
Capital gains	7.02		 	15.84		 	14.69		
Total	$	86.25		 	$	86.25		 	$	86.25		

The Company's tax returns have not been examined by the IRS and, therefore, the taxability of dividends is subject to change.

Warrants
 
At December 31, 2015 and 2014 , we had 15,000 warrants outstanding with an exercise price of $32.50 per share. Upon exercise of a warrant, the Company will contribute the exercise price to the Operating Partnership in exchange for Common Units. Therefore, the Operating Partnership accounts for such warrants as if issued by the Operating Partnership. These warrants have no expiration date.

Dividend Reinvestment Plan
 
The Company has a Dividend Reinvestment and Stock Purchase Plan (“DRIP”) under which holders of Common Stock may elect to automatically reinvest their dividends in additional shares of Common Stock and make optional cash payments for additional shares of Common Stock.

Common Unit Distributions
 
Distributions of the Operating Partnership declared and paid per Common Unit aggregated $1.70 for each of the years ended December 31, 2015 , 2014 and 2013 .
 
Redeemable Common Units
 
Generally, the Operating Partnership is obligated to redeem each Redeemable Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company at its option may elect to acquire any such Redeemable Common Unit presented for redemption for cash or one share of Common Stock. When a holder redeems a Redeemable Common Unit for a share of Common Stock or cash, the Company’s share in the Operating Partnership will be increased. The Common Units owned by the Company are not redeemable.

97

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
12.	Equity - Continued	
 
Preferred Units
 
The following table sets forth the Operating Partnership's Preferred Units:

	
																				
Preferred Unit Issuances	 	Issue Date	 	Number of
Units
Outstanding	 	Carrying
Value	 	Liquidation Preference
Per Unit	 	Optional Redemption
Date	 	Annual
Distributions
Payable
Per Unit	
 	 	 	 	(in thousands)	 	 	 	 	 	 	 	 	
December 31, 2015	 	 	 	 	 	 	 	 	 	 	 	 	
8.625% Series A Cumulative Redeemable	 	2/12/1997	 	29		 	$	29,050		 	$	1,000		 	2/12/2027	 	$	86.25		
December 31, 2014	 	 	 	 	 	 	 	 	 	 	 	 	
8.625% Series A Cumulative Redeemable	 	2/12/1997	 	29		 	$	29,060		 	$	1,000		 	2/12/2027	 	$	86.25		

13.	Employee Benefit Plans	
 
Officer, Management and Director Compensation Programs
 
The officers of the Company participate in an annual non-equity incentive program pursuant to which they are eligible to earn cash payments based on a percentage of their annual base salary in effect for December of the applicable year. Under this component of our executive compensation program, officers are eligible to earn additional cash compensation to the extent specific performance-based metrics are achieved during the most recently completed year. The position held by each officer has a target annual incentive percentage that ranges from 35% to 130% of base salary. The more senior the position, the greater the portion of compensation that varies with performance.
 
The percentage amount an officer may earn under the annual non-equity incentive plan is the product of the target annual incentive percentage times an “actual performance factor,” which can range from zero to 200% . The actual performance factor depends upon the relationship between actual performance in specific areas at each of our divisions and predetermined goals. For corporate officers, the actual performance factor is based on the goals and criteria applied to the Company’s performance as a whole. For officers who oversee our divisions, the actual performance factor is based on the goals and criteria applied partly to that division’s performance and partly to the Company’s performance overall. Payments under our annual non-equity incentive plan are accrued and expensed in the year earned.
 
Certain other employees participate in a similar annual non-equity incentive program. Incentive eligibility ranges from 6% to 30% of annual base salary. The actual incentive payment is determined by a mix of the Company's overall performance, the performance of any applicable division and the individual’s performance during each year. These incentive payments are also accrued and expensed in the year earned.

98

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
13.	Employee Benefit Plans - Continued	

The Company's officers generally receive annual grants of stock options and restricted stock under the Company's long-term equity incentive plan on or about March 1 of each year. Restricted stock grants are also made annually to directors and certain other employees. Except as set forth in the next sentence, dividends received on restricted stock are non-forfeitable and are paid at the same rate and on the same date as on shares of Common Stock. With respect to shares of total return-based restricted stock issued to the Company's chief executive officer, dividends accumulate and are payable only if and to the extent the shares vest. Dividends paid on subsequently forfeited shares are expensed. Additional total return-based restricted stock may be issued at the end of the three-year periods if actual performance exceeds certain levels of performance. Such additional shares, if any, would be fully vested when issued. No expense is recorded for additional shares of total return-based restricted stock that may be issued at the end of the three-year period since that possibility is reflected in the grant date fair value. The following table sets forth the number of shares of Common Stock reserved for future issuance under the Company's long-term equity incentive plans:

	
						
 	December 31,	
 	2015	 	2014	
Outstanding stock options and warrants	702,228		 	592,321		
Possible future issuance under equity incentive plans	3,084,158		 	1,382,406		
 	3,786,386		 	1,974,727		

Of the possible future issuance under the Company' long-term equity incentive plan at December 31, 2015 , no more than an additional 1.1 million shares can be in the form of restricted stock.

During each of the years ended December 31, 2015 , 2014 and 2013 , we recognized $6.9 million of share-based compensation expense. Because REITs generally do not pay income taxes, we do not realize tax benefits on share-based payments. At December 31, 2015 , there was $4.9 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 2.3 years.

- Stock Options

Stock options issued prior to 2005 and after 2013 vest ratably on an annual basis over four years and expire after 10 years. Stock options issued from 2005 through 2013 vest ratably on an annual basis over four years and expire after seven years. The value of all options as of the date of grant is calculated using the Black-Scholes option-pricing model and is amortized over the respective vesting period or the service period, if shorter, for employees who are or will become eligible under the Company's retirement plan. The weighted average fair values of options granted during 2015 , 2014 and 2013 were $6.19 , $6.75 and $6.50 , respectively, per option. The fair values of the options granted were determined at the grant dates using the following assumptions:

	
									
 	2015	 	2014	 	2013	
Risk free interest rate (1)  	1.7	%	 	1.8	%	 	1.0	%	
Common stock dividend yield (2)  	3.7	%	 	4.5	%	 	4.7	%	
Expected volatility (3)  	22.4	%	 	30.3	%	 	32.4	%	
Average expected option life (years) (4)	5.75		 	5.75		 	5.75		
__________
		
(1)	Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the option grants.	
		
(2)	The dividend yield is calculated utilizing the dividends paid for the previous one -year period and the per share price of Common Stock on the date of grant.	
		
(3)	Based on the historical volatility of Common Stock over a period relevant to the related stock option grant.	
		
(4)	The average expected option life is based on an analysis of the Company's historical data.	

99

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
13.	Employee Benefit Plans - Continued	

The following table sets forth stock option activity:

	
							
 	Options Outstanding	
 	Number of Options	 	Weighted Average Exercise Price	
Balances at December 31, 2012	1,129,309		 	$	30.10		
Options granted	168,700		 	36.50		
Options exercised	(423,627	)	 	28.22		
Balances at December 31, 2013	874,382		 	32.24		
Options granted 	190,330		 	37.90		
Options canceled	(134,628	)	 	41.93		
Options exercised 	(352,763	)	 	27.21		
Balances at December 31, 2014	577,321		 	34.92		
Options granted	197,408		 	45.61		
Options canceled	(3,829	)	 	40.21		
Options exercised	(83,672	)	 	34.89		
Balances at December 31, 2015  (1) (2)	687,228		 	$	37.97		
__________
		
(1)	The outstanding options at December 31, 2015 had a weighted average remaining life of  6.1 years.	
		
(2)	The Company had 218,816 options exercisable at December 31, 2015 with a weighted average exercise price of $33.03 , weighted average remaining life of 3.2 years and intrinsic value of $2.3 million . Of these exercisable options, there were no exercise prices higher than the market price of our Common Stock at December 31, 2015 .	

Cash received or receivable from options exercised was $3.3 million , $11.1 million and $12.5 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2015 , 2014 and 2013 was $0.9 million , $5.0 million and $3.9 million , respectively. The total intrinsic value of options outstanding at December 31, 2015 , 2014 and 2013 was $4.3 million , $5.4 million and $4.3 million , respectively. The Company generally does not permit the net cash settlement of exercised stock options, but does permit net share settlement so long as the shares received are held for at least a year. The Company has a practice of issuing new shares to satisfy stock option exercises.

- Time-Based Restricted Stock

Shares of time-based restricted stock vest ratably on an annual basis over four years. The value of grants of time-based restricted stock is based on the market value of Common Stock as of the date of grant and is amortized to expense over the respective vesting period or the service period, if shorter, for employees who are or will become eligible under the Company's retirement plan.

100

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
13.	Employee Benefit Plans - Continued	
 
The following table sets forth time-based restricted stock activity:

	
							
 	Number of Shares	 	Weighted Average Grant Date Fair Value	
Restricted shares outstanding at December 31, 2012	222,502		 	$	30.31		
Awarded and issued (1)	86,144		 	36.64		
Vested (2)	(94,037	)	 	27.80		
Forfeited	(1,813	)	 	36.01		
Restricted shares outstanding at December 31, 2013	212,796		 	33.96		
Awarded and issued (1)	94,932		 	37.76		
Vested (2)	(85,660	)	 	32.87		
Restricted shares outstanding at December 31, 2014	222,068		 	35.97		
Awarded and issued (1)	71,994		 	45.91		
Vested (2)	(85,809	)	 	35.14		
Forfeited	(3,533	)	 	39.94		
Restricted shares outstanding at December 31, 2015	204,720		 	$	39.74		
__________
		
(1)	The weighted average fair value at grant date of time-based restricted stock issued during the years ended December 31, 2015 , 2014 and 2013 was $3.3 million , $3.6 million and $3.2 million , respectively.	
		
(2)	The vesting date fair value of time-based restricted stock that vested during the years ended December 31, 2015 , 2014 and 2013 was $3.9 million , $3.2 million and $3.4 million , respectively. Vested shares include those shares surrendered by employees to satisfy tax withholding obligations in connection with such vesting.	
 
- Total Return-Based Restricted Stock
 
Shares of total return-based restricted stock vest to the extent the Company's absolute total returns for certain pre-determined three -year periods exceed predetermined goals. The amount subject to vesting ranges from zero to 150% . Notwithstanding the Company’s absolute total returns, if the Company’s total return exceeds 100% of the peer group total return index, at least 50% of total return-based restricted stock issued in 2013 will vest at the end of the applicable period and at least 75% of total return-based restricted stock issued in 2015 and 2014 will vest at the end of the applicable period. The weighted average grant date fair value of such shares of total return-based restricted stock issued in 2015 , 2014 and 2013 was determined to be $43.77 , $35.58 and $31.73 , respectively, and is amortized over the respective three-year period or the service period, if shorter, for employees who are or will become eligible under the Company's retirement plan. The fair values of the total return-based restricted stock granted were determined at the grant dates using a Monte Carlo simulation model and the following assumptions:

	
									
 	2015	 	2014	 	2013	
Risk free interest rate (1)  	1.0	%	 	0.7	%	 	0.4	%	
Common stock dividend yield (2)  	3.8	%	 	4.7	%	 	4.9	%	
Expected volatility (3)  	43.0	%	 	43.4	%	 	43.4	%	
__________
		
(1)	Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the total return-based restricted stock grants.	
		
(2)	The dividend yield is calculated utilizing the dividends paid for the previous one -year period and the average per share price of Common Stock during the three-month period preceding the date of grant.	
		
(3)	Based on the historical volatility of Common Stock over a period relevant to the related total return-based restricted stock grant.	

101

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
13.	Employee Benefit Plans - Continued	

The following table sets forth total return-based restricted stock activity:

	
							
 	Number of Shares	 	Weighted Average Grant Date Fair Value	
Restricted shares outstanding at December 31, 2012	125,288		 	$	32.87		
Awarded and issued (1)	65,486		 	31.73		
Vested (2)	(41,863	)	 	24.75		
Forfeited	(15,523	)	 	24.75		
Restricted shares outstanding at December 31, 2013	133,388		 	35.29		
Awarded and issued (1)	74,569		 	35.58		
Restricted shares outstanding at December 31, 2014	207,957		 	35.70		
Awarded and issued (1) (3)	118,817		 	37.64		
Vested (2) (3)	(129,762	)	 	31.97		
Forfeited	(1,709	)	 	37.25		
Restricted shares outstanding at December 31, 2015	195,303		 	$	36.66		
__________
		
(1)	The fair value at grant date of total return-based restricted stock issued during the years ended December 31, 2015 , 2014 and 2013 was $2.5 million , $2.7 million and $2.1 million , respectively, at target.	
		
(2)	The vesting date fair value of total return-based restricted stock that vested during the years ended December 31, 2015 and 2013 was $5.9 million and $1.5 million , respectively, based on the performance of the specific plans. Vested shares include those shares surrendered by employees to satisfy tax withholding obligations in connection with such vesting. There were no vested shares of total return-based restricted stock during the year ended December 31, 2014 .	
		
(3)	The 2015 amounts include 61,860 additional shares from the 2012 plan since the plan's payout was in excess of the initial 100% target.	

401(k) Retirement Savings Plan
 
We have a 401(k) Retirement Savings Plan covering substantially all employees who meet certain age and employment criteria. We contribute amounts for each participant at a rate of 75% of the employee’s contribution (up to 6% of each employee’s bi-weekly salary and cash incentives, subject to statutory limits). During the years ended December 31, 2015 , 2014 and 2013 , we contributed $1.3 million , $1.2 million and $1.1 million , respectively, to the 401(k) savings plan. The assets of this qualified plan are not included in our Consolidated Financial Statements since the assets are not owned by us.

Retirement Plan

The Company has a retirement plan for employees with at least 30 years of continuous service or are at least 55 years old with at least 10 years of continuous service. Subject to advance written notice and a non-compete agreement, eligible retirees would be entitled to receive a pro rata amount of the annual non-equity incentive compensation earned during the year of retirement. Stock options and time-based restricted stock would be non-forfeitable and vest according to the terms of their original grants. Eligible retirees would also be entitled to retain any total return-based restricted stock that subsequently vests after the retirement date according to the terms of their original grants. For employees who meet the age and service eligibility requirements, 100% of their annual grants are expensed at the grant date as if fully vested. For employees who will meet the age and service eligibility requirements within the normal vesting periods, the grants are amortized over the shorter service period.

102

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
13.	Employee Benefit Plans - Continued	

Deferred Compensation

Prior to 2010, officers could elect to defer all or a portion of their cash compensation, which was then invested in unrelated mutual funds under our non-qualified deferred compensation plan. These investments are recorded at fair value, which aggregated $2.7 million and $3.6 million at December 31, 2015 and 2014 , respectively, and are included in prepaid expenses and other assets, with an offsetting deferred compensation liability recorded in accounts payable, accrued expenses and other liabilities. Deferred amounts ultimately payable to the participants are based on the value of the related mutual fund investments. Accordingly, changes in the value of the unrelated mutual funds are recorded in interest and other income and the corresponding offsetting changes in the deferred compensation liability are recorded in general and administration expense. As a result, there is no effect on our net income.

The following table sets forth our deferred compensation liability:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Beginning deferred compensation liability	$	3,635		 	$	3,996		 	$	3,354		
Mark-to-market adjustment to deferred compensation (in general and administrative expenses)	(32	)	 	235		 	803		
Distributions from deferred compensation plans	(867	)	 	(596	)	 	(161	)	
Total deferred compensation liability	$	2,736		 	$	3,635		 	$	3,996		

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan pursuant to which employees may contribute up to 25% of their cash compensation for the purchase of Common Stock. At the end of each quarterly offering period, each participant's account balance, which includes accumulated dividends, is applied to acquire shares of Common Stock at a cost that is calculated at 85% of the average closing price on the New York Stock Exchange on the five consecutive days preceding the last day of the quarter. In the years ended December 31, 2015 , 2014 and 2013 , the Company issued 29,496 , 28,682 and 27,250 shares, respectively, of Common Stock under this Plan. The 15% discount on newly issued shares, which is taxable income to the participants and is recorded by us as additional compensation expense, aggregated $0.2 million in each of the years ended December 31, 2015 , 2014 and 2013 . As a general rule, shares purchased under the Plan must be held for at least a year.

103

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
14.	Accumulated Other Comprehensive Loss	

The following table sets forth the components of AOCL:

	
								
 	December 31,	
 	2015	 	2014	
Tax increment financing bond:	 	 	 	
Beginning balance	$	(445	)	 	$	(1,029	)	
Unrealized gains on tax increment financing bond	445		 	584		
Ending balance	—		 	(445	)	
Cash flow hedges:	 	 	 	
Beginning balance	(3,467	)	 	(1,582	)	
Unrealized losses on cash flow hedges	(4,040	)	 	(5,662	)	
Amortization of cash flow hedges (1)	3,696		 	3,777		
Ending balance	(3,811	)	 	(3,467	)	
Total accumulated other comprehensive loss	$	(3,811	)	 	$	(3,912	)	
__________
		
(1)	Amounts reclassified out of AOCL into contractual interest expense.	

104

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
15.	Rental and Other Revenues; Rental Property and Other Expenses	

Our real estate assets are leased to customers under operating leases. The minimum rental amounts under the leases are generally subject to scheduled fixed increases. Generally, the leases also provide that we receive cost recovery income from customers for increases in certain costs above the costs incurred during a contractually specified base year. The following table sets forth our rental and other revenues from continuing operations:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Contractual rents, net	$	513,909		 	$	476,684		 	$	437,855		
Straight-line rental income, net	22,054		 	21,045		 	16,653		
Amortization of lease incentives	(1,493	)	 	(1,419	)	 	(1,361	)	
Cost recovery income, net	45,247		 	39,112		 	31,869		
Lease termination fees	990		 	658		 	1,436		
Fee income	3,717		 	3,313		 	5,282		
Other miscellaneous operating revenues	20,247		 	16,478		 	13,274		
 	$	604,671		 	$	555,871		 	$	505,008		

The following table sets forth our scheduled future minimum base rents to be received from customers for leases in effect at December 31, 2015 for the properties that we wholly own:

	
				
2016	$	566,672		
2017	539,352		
2018	502,547		
2019	437,797		
2020	362,295		
Thereafter	1,304,530		
 	$	3,713,193		

The following table sets forth our rental property and other expenses from continuing operations:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Utilities, insurance and real estate taxes	$	117,470		 	$	113,226		 	$	101,036		
Maintenance, cleaning and general building	79,091		 	74,109		 	67,319		
Property management and administrative expenses	12,446		 	12,093		 	11,515		
Other miscellaneous operating expenses	6,934		 	6,456		 	4,317		
 	$	215,941		 	$	205,884		 	$	184,187		

105

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
16.	Real Estate and Other Assets Held For Sale and Discontinued Operations	
 
As of December 31, 2015 and 2014 , real estate and other assets, net, held for sale and liabilities held for sale included 776,000 square feet of in-service retail space, 468,000 square feet of in-service office space and a 28,000 square foot retail redevelopment project in Kansas City. This planned sale represents a strategic shift in operations as the retail and office space in our Kansas City division are a major line of the Company's business. As such, the revenues and expenses related to these properties have been reclassified to income from discontinued operations on our Consolidated Statements of Income and the related assets and liabilities have been reclassified to real estate and other assets, net, held for sale and liabilities held for sale, respectively, on our Consolidated Balance Sheets. The following tables set forth the assets and liabilities related to discontinued operations at December 31, 2015 and 2014 and the results of operations and cash flows for the years ended December 31, 2015 , 2014 and 2013 :

	
								
 	December 31,	
 	2015	 	2014	
Assets:	 	 	 	
Land	$	16,681		 	$	16,406		
Buildings and tenant improvements	322,811		 	313,323		
Development in-process	—		 	4,562		
Land held for development	1,089		 	2,084		
Less-accumulated depreciation	(131,274	)	 	(131,419	)	
Net real estate assets	209,307		 	204,956		
Accrued straight-line rents receivable, net	11,730		 	11,643		
Deferred leasing costs, net	6,690		 	6,320		
Prepaid expenses and other assets, net	13,221		 	13,896		
Real estate and other assets, net, held for sale	$	240,948		 	$	236,815		
Liabilities:	 	 	 	
Accounts payable, accrued expenses and other liabilities	$	(6,717	)	 	$	(6,151	)	
Financing obligation	(7,402	)	 	(8,962	)	
Liabilities held for sale	$	(14,119	)	 	$	(15,113	)	

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Rental and other revenues	$	50,935		 	$	52,597		 	$	72,614		
Operating expenses:	 	 	 	 	 	
Rental property and other expenses	20,805		 	19,620		 	27,440		
Depreciation and amortization	14,039		 	15,386		 	19,773		
General and administrative	2,366		 	965		 	812		
Total operating expenses	37,210		 	35,971		 	48,025		
Interest expense	621		 	725		 	817		
Other income	2,635		 	2,700		 	3,086		
Income from discontinued operations	15,739		 	18,601		 	26,858		
Impairments of real estate assets	—		 	—		 	(2,194	)	
Net gains on disposition of discontinued operations	—		 	384		 	63,792		
Total income from discontinued operations	$	15,739		 	$	18,985		 	$	88,456		

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Cash flows from operating activities	$	27,579		 	$	32,485		 	$	32,644		
Cash flows from investing activities	$	(16,445	)	 	$	(8,279	)	 	$	(7,482	)	

106

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
17.	Earnings Per Share and Per Unit	

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

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Earnings per Common Share - basic:	 	 	 	 	 	
Numerator:	 	 	 	 	 	
Income from continuing operations	$	85,521		 	$	96,987		 	$	42,641		
Net (income) attributable to noncontrolling interests in the Operating Partnership from continuing operations	(2,443	)	 	(2,945	)	 	(1,294	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations	(1,264	)	 	(1,466	)	 	(949	)	
Dividends on Preferred Stock	(2,506	)	 	(2,507	)	 	(2,508	)	
Income from continuing operations available for common stockholders	79,308		 	90,069		 	37,890		
Income from discontinued operations	15,739		 	18,985		 	88,456		
Net (income) attributable to noncontrolling interests in the Operating Partnership from discontinued operations	(475	)	 	(597	)	 	(3,397	)	
Income from discontinued operations available for common stockholders	15,264		 	18,388		 	85,059		
Net income available for common stockholders	$	94,572		 	$	108,457		 	$	122,949		
Denominator:	 	 	 	 	 	
Denominator for basic earnings per Common Share – weighted average shares	94,404		 	90,743		 	85,335		
Earnings per Common Share - basic:	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.84		 	$	1.00		 	$	0.44		
Income from discontinued operations available for common stockholders	0.16		 	0.20		 	1.00		
Net income available for common stockholders	$	1.00		 	$	1.20		 	$	1.44		
Earnings per Common Share - diluted:	 	 	 	 	 	
Numerator:	 	 	 	 	 	
Income from continuing operations	$	85,521		 	$	96,987		 	$	42,641		
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations	(1,264	)	 	(1,466	)	 	(949	)	
Dividends on Preferred Stock	(2,506	)	 	(2,507	)	 	(2,508	)	
Income from continuing operations available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership	81,751		 	93,014		 	39,184		
Income from discontinued operations available for common stockholders	15,739		 	18,985		 	88,456		
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership	$	97,490		 	$	111,999		 	$	127,640		
Denominator:	 	 	 	 	 	
Denominator for basic earnings per Common Share – weighted average shares	94,404		 	90,743		 	85,335		
Add:	 	 	 	 	 	
Stock options using the treasury method	87		 	119		 	114		
Noncontrolling interests Common Units	2,915		 	2,938		 	3,387		
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions (1) (2)	97,406		 	93,800		 	88,836		
Earnings per Common Share - diluted:	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.84		 	$	0.99		 	$	0.44		
Income from discontinued operations available for common stockholders	0.16		 	0.20		 	1.00		
Net income available for common stockholders	$	1.00		 	$	1.19		 	$	1.44		
__________

107

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
17.	Earnings Per Share and Per Unit - Continued	

(1)	There were 0.2 million and 0.3 million options outstanding during the years ended December 31, 2015 and 2013 , respectively, that were not included in the computation of diluted earnings per share because the impact of including such options would be anti-dilutive. There were no such options outstanding during the year ended December 31, 2014 .	
		
(2)	Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.	

The following table sets forth the computation of basic and diluted earnings per unit of the Operating Partnership:

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Earnings per Common Unit - basic:	 	 	 	 	 	
Numerator:	 	 	 	 	 	
Income from continuing operations	$	85,521		 	$	96,987		 	$	42,590		
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations	(1,264	)	 	(1,466	)	 	(949	)	
Distributions on Preferred Units	(2,506	)	 	(2,507	)	 	(2,508	)	
Income from continuing operations available for common unitholders	81,751		 	93,014		 	39,133		
Income from discontinued operations available for common unitholders	15,739		 	18,985		 	88,456		
Net income available for common unitholders	$	97,490		 	$	111,999		 	$	127,589		
Denominator:	 	 	 	 	 	
Denominator for basic earnings per Common Unit – weighted average units	96,910		 	93,272		 	88,313		
Earnings per Common Unit - basic:	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.84		 	$	1.00		 	$	0.44		
Income from discontinued operations available for common unitholders	0.17		 	0.20		 	1.00		
Net income available for common unitholders	$	1.01		 	$	1.20		 	$	1.44		
Earnings per Common Unit - diluted:	 	 	 	 	 	
Numerator:	 	 	 	 	 	
Income from continuing operations	$	85,521		 	$	96,987		 	$	42,590		
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations	(1,264	)	 	(1,466	)	 	(949	)	
Distributions on Preferred Units	(2,506	)	 	(2,507	)	 	(2,508	)	
Income from continuing operations available for common unitholders	81,751		 	93,014		 	39,133		
Income from discontinued operations available for common unitholders	15,739		 	18,985		 	88,456		
Net income available for common unitholders	$	97,490		 	$	111,999		 	$	127,589		
Denominator:	 	 	 	 	 	
Denominator for basic earnings per Common Unit – weighted average units	96,910		 	93,272		 	88,313		
Add:	 	 	 	 	 	
Stock options using the treasury method	87		 	119		 	114		
Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions (1) (2)	96,997		 	93,391		 	88,427		
Earnings per Common Unit - diluted:	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.84		 	$	1.00		 	$	0.44		
Income from discontinued operations available for common unitholders	0.17		 	0.20		 	1.00		
Net income available for common unitholders	$	1.01		 	$	1.20		 	$	1.44		
__________
		
(1)	There were 0.2 million and 0.3 million options outstanding during the years ended December 31, 2015 and 2013 , respectively, that were not included in the computation of diluted earnings per unit because the impact of including such options would be anti-dilutive. There were no such options outstanding during the year ended December 31, 2014 .	
		
(2)	Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.	

108

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

 

18.	Income Taxes	

Our Consolidated Financial Statements include the operations of the Company's taxable REIT subsidiary, which is not entitled to the dividends paid deduction and is subject to federal, state and local income taxes on its taxable income. As a REIT, the Company may also be subject to federal excise taxes if it engages in certain types of transactions.

The minimum dividend per share of Common Stock required for the Company to maintain its REIT status was $1.31 , $1.13 and $1.08 per share in 2015 , 2014 and 2013 , respectively. Continued qualification as a REIT depends on the Company's ability to satisfy the dividend distribution tests, stock ownership requirements and various other qualification tests. The tax basis of the Company's assets (net of accumulated tax depreciation and amortization) and liabilities was approximately $4.2 billion and $2.6 billion , respectively, at December 31, 2015 and $3.6 billion and $2.2 billion , respectively, at  December 31, 2014 . The tax basis of the Operating Partnership's assets (net of accumulated tax depreciation and amortization) and liabilities was approximately $4.2 billion and $2.6 billion , respectively, at December 31, 2015 and $3.6 billion and $2.2 billion , respectively, at  December 31, 2014 .

During the years ended December 31, 2015 , 2014 and 2013 , the Company qualified as a REIT and incurred no federal income tax expense; accordingly, the only federal income taxes included in the accompanying Consolidated Financial Statements relate to activities of the Company's taxable REIT subsidiary.

The following table sets forth the Company's income tax expense/(benefit):

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Current tax expense:	 	 	 	 	 	
Federal	$	949		 	$	1,480		 	$	60		
State	351		 	161		 	312		
 	1,300		 	1,641		 	372		
Deferred tax expense/(benefit):	 	 	 	 	 	
Federal	(233	)	 	(1,628	)	 	1,479		
State	(115	)	 	(305	)	 	277		
 	(348	)	 	(1,933	)	 	1,756		
Less tax expense netted against gain included in equity in earnings of unconsolidated affiliates	—		 	—		 	(1,721	)	
Less tax expense netted against gain on disposition of property	(518	)	 	—		 	—		
Total income tax expense/(benefit)	$	434		 	$	(292	)	 	$	407		

The Company's net deferred tax asset/(liability) is $(0.2) million and $0.1 million as of December 31, 2015 and 2014 , respectively. The net deferred tax asset/(liability) is comprised primarily of tax versus book differences related to property (depreciation, amortization and basis differences).

For the years ended December 31, 2015 and 2014 , there were no unrecognized tax benefits. The Company is subject to federal, state and local income tax examinations by taxing authorities for 2012 through 2015 . The Company does not expect that the total amount of unrecognized benefits will materially change within the next year.

109

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
19.	Segment Information	

Our principal business is the operation, acquisition and development of rental real estate properties. We evaluate our business by product type and by geographic location. Each product type has different customers and economic characteristics as to rental rates and terms, cost per rentable square foot of buildings, the purposes for which customers use the space, the degree of maintenance and customer support required and customer dependency on different economic drivers, among others. The operating results by geographic grouping are also regularly reviewed by our chief operating decision maker for assessing performance and other purposes. There are no material inter-segment transactions.

Our accounting policies of the segments are the same as those used in our Consolidated Financial Statements. All operations are within the United States.

The following tables summarize the rental and other revenues and net operating income, the primary industry property-level performance metric used by our chief operating decision maker which is defined as rental and other revenues less rental property and other expenses, for each of our reportable segments. Our segment information for the years ended December 31, 2014 and 2013 have been retrospectively revised from previously reported amounts to reflect a change in our reportable segments.

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Rental and Other Revenues:	 	 	 	 	 	
Office:	 	 	 	 	 	
Atlanta, GA	$	108,590		 	$	96,075		 	$	80,330		
Greensboro, NC	21,251		 	25,018		 	26,047		
Greenville, SC	—		 	2,140		 	3,399		
Memphis, TN	47,137		 	41,016		 	38,369		
Nashville, TN	88,310		 	80,722		 	62,054		
Orlando, FL	44,621		 	36,574		 	21,798		
Pittsburgh, PA	59,392		 	56,692		 	56,125		
Raleigh, NC	102,841		 	87,428		 	85,417		
Richmond, VA	42,089		 	45,559		 	47,576		
Tampa, FL	75,715		 	69,693		 	68,519		
Total Office Segment	589,946		 	540,917		 	489,634		
Other	14,725		 	14,954		 	15,374		
Total Rental and Other Revenues	$	604,671		 	$	555,871		 	$	505,008		

110

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
19.	Segment Information - Continued	

	
												
 	Year Ended December 31,	
 	2015	 	2014	 	2013	
Net Operating Income:	 	 	 	 	 	
Office:	 	 	 	 	 	
Atlanta, GA	$	67,094		 	$	58,180		 	$	49,650		
Greensboro, NC	13,395		 	15,784		 	16,788		
Greenville, SC	—		 	1,150		 	1,893		
Memphis, TN	29,534		 	24,376		 	22,133		
Nashville, TN	62,387		 	55,354		 	42,598		
Orlando, FL	25,524		 	21,286		 	12,048		
Pittsburgh, PA	34,348		 	31,505		 	31,134		
Raleigh, NC	72,981		 	61,317		 	60,075		
Richmond, VA	27,922		 	30,021		 	32,454		
Tampa, FL	45,447		 	40,875		 	41,573		
Total Office Segment	378,632		 	339,848		 	310,346		
Other	10,098		 	10,139		 	10,475		
Total Net Operating Income	388,730		 	349,987		 	320,821		
Reconciliation to income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates:	 	 	 	 	 	
Depreciation and amortization	(201,918	)	 	(180,637	)	 	(162,937	)	
Impairments of real estate assets	—		 	(588	)	 	—		
General and administrative expenses	(37,642	)	 	(35,258	)	 	(36,381	)	
Interest expense	(86,052	)	 	(85,127	)	 	(91,886	)	
Other income	1,726		 	2,431		 	3,312		
Income from continuing operations before disposition of investment properties and activity in unconsolidated affiliates	$	64,844		 	$	50,808		 	$	32,929		

111

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
19.	Segment Information - Continued	

	
								
 	December 31,	
 	2015	 	2014	
 	 	 	(as revised)	
Total Assets:	 	 	 	
Office:	 	 	 	
Atlanta, GA	$	1,013,226		 	$	700,085		
Greensboro, NC	131,027		 	139,479		
Memphis, TN	277,866		 	280,186		
Nashville, TN	591,111		 	527,317		
Orlando, FL	303,843		 	291,611		
Pittsburgh, PA	339,186		 	334,539		
Raleigh, NC	663,617		 	669,450		
Richmond, VA	211,574		 	215,987		
Tampa, FL	548,814		 	415,042		
Total Office Segment	4,080,264		 	3,573,696		
Other (1)	413,168		 	425,427		
Total Assets	$	4,493,432		 	$	3,999,123		
__________
		
(1)	Includes the Plaza assets, which are included in real estate and other assets, net, held for sale on our Consolidated Balance Sheets.	

112

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
20.	Quarterly Financial Data (Unaudited)	

The following tables set forth quarterly financial information of the Company:

	
																				
 	Year Ended December 31, 2015	
 	First
Quarter	 	Second
Quarter	 	Third
Quarter	 	Fourth
Quarter	 	Total	
Rental and other revenues (1)	$	145,236		 	$	148,543		 	$	150,766		 	$	160,126		 	$	604,671		
 	 	 	 	 	 	 	 	 	 	
Income from continuing operations (1)	16,920		 	22,221		 	27,352		 	19,028		 	85,521		
Income from discontinued operations (1)	3,915		 	4,670		 	4,265		 	2,889		 	15,739		
Net income	20,835		 	26,891		 	31,617		 	21,917		 	101,260		
Net (income) attributable to noncontrolling interests in the Operating Partnership	(596	)	 	(782	)	 	(918	)	 	(622	)	 	(2,918	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates	(296	)	 	(328	)	 	(324	)	 	(316	)	 	(1,264	)	
Dividends on Preferred Stock	(627	)	 	(626	)	 	(626	)	 	(627	)	 	(2,506	)	
Net income available for common stockholders	$	19,316		 	$	25,155		 	$	29,749		 	$	20,352		 	$	94,572		
Earnings per Common Share – basic:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.17		 	$	0.22		 	$	0.27		 	$	0.18		 	$	0.84		
Income from discontinued operations available for common stockholders	0.04		 	0.05		 	0.04		 	0.03		 	0.16		
Net income available for common stockholders	$	0.21		 	$	0.27		 	$	0.31		 	$	0.21		 	$	1.00		
Earnings per Common Share – diluted:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.17		 	$	0.22		 	$	0.27		 	$	0.18		 	$	0.84		
Income from discontinued operations available for common stockholders	0.04		 	0.05		 	0.04		 	0.03		 	0.16		
Net income available for common stockholders	$	0.21		 	$	0.27		 	$	0.31		 	$	0.21		 	$	1.00		

113

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
20.	Quarterly Financial Data (Unaudited) - Continued	

	
																				
 	Year Ended December 31, 2014	
 	First
Quarter	 	Second
Quarter	 	Third
Quarter	 	Fourth
Quarter	 	Total	
Rental and other revenues (1)	$	135,821		 	$	139,956		 	$	139,370		 	$	140,724		 	$	555,871		
 	 	 	 	 	 	 	 	 	 	
Income from continuing operations (1)	8,979		 	20,374		 	49,483		 	18,151		 	96,987		
Income from discontinued operations (1)	4,597		 	4,138		 	4,816		 	5,434		 	18,985		
Net income	13,576		 	24,512		 	54,299		 	23,585		 	115,972		
Net (income) attributable to noncontrolling interests in the Operating Partnership	(398	)	 	(742	)	 	(1,673	)	 	(729	)	 	(3,542	)	
Net (income) attributable to noncontrolling interests in consolidated affiliates	(423	)	 	(438	)	 	(291	)	 	(314	)	 	(1,466	)	
Dividends on Preferred Stock	(627	)	 	(627	)	 	(627	)	 	(626	)	 	(2,507	)	
Net income available for common stockholders	$	12,128		 	$	22,705		 	$	51,708		 	$	21,916		 	$	108,457		
Earnings per Common Share – basic:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.09		 	$	0.21		 	$	0.52		 	$	0.18		 	$	1.00		
Income from discontinued operations available for common stockholders	0.04		 	0.04		 	0.05		 	0.06		 	0.20		
Net income available for common stockholders	$	0.13		 	$	0.25		 	$	0.57		 	$	0.24		 	$	1.20		
Earnings per Common Share – diluted:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common stockholders	$	0.09		 	$	0.21		 	$	0.52		 	$	0.18		 	$	0.99		
Income from discontinued operations available for common stockholders	0.04		 	0.04		 	0.05		 	0.06		 	0.20		
Net income available for common stockholders	$	0.13		 	$	0.25		 	$	0.57		 	$	0.24		 	$	1.19		
__________

114

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
20.	Quarterly Financial Data (Unaudited) – Continued	

(1)	As a result of discontinued operations, the amounts presented may not equal the amounts previously reported in the most recent Form 10-Qs or prior 10-K for each period. Below is a reconciliation to the amounts previously reported:	

	
												
 	Quarter Ended	
 	March 31,	 	June 30,	 	September 30,	
 	2015	 	2015	 	2015	
Rental and other revenues, as reported	$	157,310		 	$	161,136		 	$	163,736		
Discontinued operations	(12,074	)	 	(12,593	)	 	(12,970	)	
Rental and other revenues, as adjusted	$	145,236		 	$	148,543		 	$	150,766		
Income from continuing operations, as reported	$	20,835		 	$	26,891		 	$	31,617		
Discontinued operations	(3,915	)	 	(4,670	)	 	(4,265	)	
Income from continuing operations, as adjusted	$	16,920		 	$	22,221		 	$	27,352		
Income from discontinued operations, as reported	$	—		 	$	—		 	$	—		
Additional discontinued operations from properties sold subsequent to the respective reporting period	3,915		 	4,670		 	4,265		
Income from discontinued operations, as adjusted	$	3,915		 	$	4,670		 	$	4,265		

	
																
 	Quarter Ended	
 	March 31,	 	June 30,	 	September 30,	 	December 31,	
 	2014	 	2014	 	2014	 	2014	
Rental and other revenues, as reported	$	148,453		 	$	152,722		 	$	152,629		 	$	154,664		
Discontinued operations	(12,632	)	 	(12,766	)	 	(13,259	)	 	(13,940	)	
Rental and other revenues, as adjusted	$	135,821		 	$	139,956		 	$	139,370		 	$	140,724		
Income from continuing operations, as reported	$	13,192		 	$	24,512		 	$	54,299		 	$	23,585		
Discontinued operations	(4,213	)	 	(4,138	)	 	(4,816	)	 	(5,434	)	
Income from continuing operations, as adjusted	$	8,979		 	$	20,374		 	$	49,483		 	$	18,151		
Income from discontinued operations, as reported	$	384		 	$	—		 	$	—		 	$	—		
Additional discontinued operations from properties sold subsequent to the respective reporting period	4,213		 	4,138		 	4,816		 	5,434		
Income from discontinued operations, as adjusted	$	4,597		 	$	4,138		 	$	4,816		 	$	5,434		

115

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
20.	Quarterly Financial Data (Unaudited) - Continued	

The following tables set forth quarterly financial information of the Operating Partnership:

	
																				
 	Year Ended December 31, 2015	
 	First
Quarter	 	Second
Quarter	 	Third
Quarter	 	Fourth
Quarter	 	Total	
Rental and other revenues (1)	$	145,236		 	$	148,543		 	$	150,766		 	$	160,126		 	$	604,671		
 	 	 	 	 	 	 	 	 	 	
Income from continuing operations (1)	16,920		 	22,221		 	27,352		 	19,028		 	85,521		
Income from discontinued operations (1)	3,915		 	4,670		 	4,265		 	2,889		 	15,739		
Net income	20,835		 	26,891		 	31,617		 	21,917		 	101,260		
Net (income) attributable to noncontrolling interests in consolidated affiliates	(296	)	 	(328	)	 	(324	)	 	(316	)	 	(1,264	)	
Distributions on Preferred Units	(627	)	 	(626	)	 	(626	)	 	(627	)	 	(2,506	)	
Net income available for common unitholders	$	19,912		 	$	25,937		 	$	30,667		 	$	20,974		 	$	97,490		
Earnings per Common Unit – basic:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.17		 	$	0.22		 	$	0.27		 	$	0.18		 	$	0.84		
Income from discontinued operations available for common unitholders	0.04		 	0.05		 	0.05		 	0.03		 	0.17		
Net income available for common unitholders	$	0.21		 	$	0.27		 	$	0.32		 	$	0.21		 	$	1.01		
Earnings per Common Unit – diluted:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.17		 	$	0.22		 	$	0.27		 	$	0.18		 	$	0.84		
Income from discontinued operations available for common unitholders	0.04		 	0.05		 	0.05		 	0.03		 	0.17		
Net income available for common unitholders	$	0.21		 	$	0.27		 	$	0.32		 	$	0.21		 	$	1.01		

116

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
20.	Quarterly Financial Data (Unaudited) - Continued	

	
																				
 	Year Ended December 31, 2014	
 	First
Quarter	 	Second
Quarter	 	Third
Quarter	 	Fourth
Quarter	 	Total	
Rental and other revenues (1)	$	135,821		 	$	139,956		 	$	139,370		 	$	140,724		 	$	555,871		
 	 	 	 	 	 	 	 	 	 	
Income from continuing operations (1)	8,979		 	20,374		 	49,483		 	18,151		 	96,987		
Income from discontinued operations (1)	4,597		 	4,138		 	4,816		 	5,434		 	18,985		
Net income	13,576		 	24,512		 	54,299		 	23,585		 	115,972		
Net (income) attributable to noncontrolling interests in consolidated affiliates	(423	)	 	(438	)	 	(291	)	 	(314	)	 	(1,466	)	
Distributions on Preferred Units	(627	)	 	(627	)	 	(627	)	 	(626	)	 	(2,507	)	
Net income available for common unitholders	$	12,526		 	$	23,447		 	$	53,381		 	$	22,645		 	$	111,999		
Earnings per Common Unit – basic:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.09		 	$	0.21		 	$	0.52		 	$	0.18		 	$	1.00		
Income from discontinued operations available for common unitholders	0.05		 	0.04		 	0.05		 	0.06		 	0.20		
Net income available for common unitholders	$	0.14		 	$	0.25		 	$	0.57		 	$	0.24		 	$	1.20		
Earnings per Common Unit – diluted:	 	 	 	 	 	 	 	 	 	
Income from continuing operations available for common unitholders	$	0.09		 	$	0.21		 	$	0.52		 	$	0.18		 	$	1.00		
Income from discontinued operations available for common unitholders	0.05		 	0.04		 	0.05		 	0.06		 	0.20		
Net income available for common unitholders	$	0.14		 	$	0.25		 	$	0.57		 	$	0.24		 	$	1.20		
__________

117

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
20.	Quarterly Financial Data (Unaudited) – Continued	

(1)	As a result of discontinued operations, the amounts presented may not equal the amounts previously reported in the most recent Form 10-Qs or prior 10-K for each period. Below is a reconciliation to the amounts previously reported:	

	
												
 	Quarter Ended	
 	March 31,	 	June 30,	 	September 30,	
 	2015	 	2015	 	2015	
Rental and other revenues, as reported	$	157,310		 	$	161,136		 	$	163,736		
Discontinued operations	(12,074	)	 	(12,593	)	 	(12,970	)	
Rental and other revenues, as adjusted	$	145,236		 	$	148,543		 	$	150,766		
Income from continuing operations, as reported	$	20,835		 	$	26,891		 	$	31,617		
Discontinued operations	(3,915	)	 	(4,670	)	 	(4,265	)	
Income from continuing operations, as adjusted	$	16,920		 	$	22,221		 	$	27,352		
Income from discontinued operations, as reported	$	—		 	$	—		 	$	—		
Additional discontinued operations from properties sold subsequent to the respective reporting period	3,915		 	4,670		 	4,265		
Income from discontinued operations, as adjusted	$	3,915		 	$	4,670		 	$	4,265		

	
																
 	Quarter Ended	
 	March 31,	 	June 30,	 	September 30,	 	December 31,	
 	2014	 	2014	 	2014	 	2014	
Rental and other revenues, as reported	$	148,453		 	$	152,722		 	$	152,629		 	$	154,664		
Discontinued operations	(12,632	)	 	(12,766	)	 	(13,259	)	 	(13,940	)	
Rental and other revenues, as adjusted	$	135,821		 	$	139,956		 	$	139,370		 	$	140,724		
Income from continuing operations, as reported	$	13,192		 	$	24,512		 	$	54,299		 	$	23,585		
Discontinued operations	(4,213	)	 	(4,138	)	 	(4,816	)	 	(5,434	)	
Income from continuing operations, as adjusted	$	8,979		 	$	20,374		 	$	49,483		 	$	18,151		
Income from discontinued operations, as reported	$	384		 	$	—		 	$	—		 	$	—		
Additional discontinued operations from properties sold subsequent to the respective reporting period	4,213		 	4,138		 	4,816		 	5,434		
Income from discontinued operations, as adjusted	$	4,597		 	$	4,138		 	$	4,816		 	$	5,434		

118

Table of Contents
HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular dollar amounts in thousands, except per share and per unit data)

		
21.	Subsequent Events	

We entered into an agreement, dated as of January 29, 2016, to sell a 32,000 square foot building for $4.7 million. The buyer, which currently leases 79% of the building, is a family business controlled by a director of the Company. The sale price exceeds the value set forth in an appraisal performed by a reputable commercial real estate services firm that has no relationship with the director or any of his affiliates. We expect to record a gain of approximately $1.0 million upon completion of the sale, which is expected to close in the second quarter of 2016.

On January 4, 2016, we announced our agreement to sell the Plaza assets in Kansas City for $660.0 million. The buyer is Country Club Plaza KC Partners LLC, a joint venture between affiliates of Taubman Centers, Inc. (NYSE:TCO) and The Macerich Company (NYSE:MAC). The Plaza assets consist of 18 properties encompassing 776,000 square feet of in-service retail space, 468,000 square feet of in-service office space and a 28,000 square foot retail redevelopment project.

The parties have entered into a series of definitive agreements, dated as of December 21, 2015, relating to the sale of the Plaza assets. The sales, which are subject to customary closing conditions, are scheduled to close on March 1, 2016. The buyer’s contractual due diligence investigation period ended on December 31, 2015. The buyer has posted earnest money deposits, held by a third party, totaling $25.0 million that are non-refundable and the buyer would be obligated to pay us an additional $25.0 million in the event of a default, except in limited circumstances.

119

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP

SCHEDULE II
(in thousands)

The following table sets forth the activity of allowance for doubtful accounts:

	
																
 	Balance at December 31, 2014	 	Additions	 	Deductions	 	Balance at December 31, 2015	
Allowance for Doubtful Accounts - Straight-Line Rent	$	316		 	$	1,412		 	$	(1,471	)	 	$	257		
Allowance for Doubtful Accounts - Accounts Receivable	1,314		 	1,141		 	(1,527	)	 	928		
Allowance for Doubtful Accounts - Notes Receivable	275		 	12		 	—		 	287		
Totals	$	1,905		 	$	2,565		 	$	(2,998	)	 	$	1,472		

	
																
 	Balance at December 31, 2013	 	Additions	 	Deductions	 	Balance at December 31, 2014	
Allowance for Doubtful Accounts - Straight-Line Rent	$	601		 	$	1,271		 	$	(1,556	)	 	$	316		
Allowance for Doubtful Accounts - Accounts Receivable	1,648		 	1,342		 	(1,676	)	 	1,314		
Allowance for Doubtful Accounts - Notes Receivable	302		 	—		 	(27	)	 	275		
Totals	$	2,551		 	$	2,613		 	$	(3,259	)	 	$	1,905		

	
																
 	Balance at December 31, 2012	 	Additions	 	Deductions	 	Balance at December 31, 2013	
Allowance for Doubtful Accounts - Straight-Line Rent	$	381		 	$	496		 	$	(276	)	 	$	601		
Allowance for Doubtful Accounts - Accounts Receivable	2,848		 	851		 	(2,051	)	 	1,648		
Allowance for Doubtful Accounts - Notes Receivable	182		 	120		 	—		 	302		
Totals	$	3,411		 	$	1,467		 	$	(2,327	)	 	$	2,551		

120

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP

NOTE TO SCHEDULE III
(in thousands)

The following table sets forth the activity of real estate assets and accumulated depreciation:

	
												
 	December 31,	
 	2015	 	2014	 	2013	
 	 	 	(as revised)	 	(as revised)	
Real estate assets:	 	 	 	 	 	
Beginning balance	$	4,271,966		 	$	4,215,275		 	$	3,510,126		
Additions:	 	 	 	 	 	
Acquisitions, development and improvements	708,793		 	282,105		 	735,183		
Cost of real estate sold and retired	(64,901	)	 	(225,414	)	 	(30,034	)	
Ending balance (a)	$	4,915,858		 	$	4,271,966		 	$	4,215,275		
Accumulated depreciation:	 	 	 	 	 	
Beginning balance	$	1,024,936		 	$	977,074		 	$	868,276		
Depreciation expense	168,663		 	154,448		 	138,163		
Real estate sold and retired	(55,221	)	 	(106,586	)	 	(29,365	)	
Ending balance (b)	$	1,138,378		 	$	1,024,936		 	$	977,074		

(a)	Reconciliation of total real estate assets to balance sheet caption:	

												
 	2015	 	2014	 	2013	
 	 	 	(as revised)	 	(as revised)	
Total per Schedule III	$	4,915,858		 	$	4,271,966		 	$	4,215,275		
Development in-process exclusive of land included in Schedule III	194,050		 	201,409		 	44,621		
Real estate assets, net, held for sale	(340,581	)	 	(331,813	)	 	(334,722	)	
Total real estate assets	$	4,769,327		 	$	4,141,562		 	$	3,925,174		

(b)	Reconciliation of total accumulated depreciation to balance sheet caption:	

												
 	2015	 	2014	 	2013	
 	 	 	(as revised)	 	(as revised)	
Total per Schedule III	$	1,138,378		 	$	1,024,936		 	$	977,074		
Real estate assets, net, held for sale	(131,274	)	 	(131,419	)	 	(124,883	)	
Total accumulated depreciation	$	1,007,104		 	$	893,517		 	$	852,191		

121

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
 
December 31, 2015

																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
Atlanta, GA	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
1700 Century Circle	 	Office	 	 	 	$	—		 	$	2,482		 	$	2		 	$	1,240		 	$	2		 	$	3,722		 	$	3,724		 	$	920		 	1983	 	 5-40 yrs.	
1800 Century Boulevard	 	Office	 	 	 	1,444		 	29,081		 	—		 	13,556		 	1,444		 	42,637		 	44,081		 	22,790		 	1975	 	 5-40 yrs.	
1825 Century Parkway	 	Office	 	 	 	864		 	—		 	303		 	14,439		 	1,167		 	14,439		 	15,606		 	5,039		 	2002	 	 5-40 yrs.	
1875 Century Boulevard	 	Office	 	 	 	—		 	8,924		 	—		 	4,431		 	—		 	13,355		 	13,355		 	4,878		 	1976	 	 5-40 yrs.	
1900 Century Boulevard	 	Office	 	 	 	—		 	4,744		 	—		 	771		 	—		 	5,515		 	5,515		 	2,793		 	1971	 	 5-40 yrs.	
2200 Century Parkway	 	Office	 	 	 	—		 	14,432		 	—		 	4,566		 	—		 	18,998		 	18,998		 	9,069		 	1971	 	 5-40 yrs.	
2400 Century Parkway	 	Office	 	 	 	—		 	—		 	406		 	12,730		 	406		 	12,730		 	13,136		 	5,532		 	1998	 	 5-40 yrs.	
2500 Century Parkway	 	Office	 	 	 	—		 	—		 	328		 	14,423		 	328		 	14,423		 	14,751		 	5,577		 	2005	 	 5-40 yrs.	
2500/2635 Parking Garage	 	Office	 	 	 	—		 	—		 	—		 	6,317		 	—		 	6,317		 	6,317		 	1,592		 	2005	 	 5-40 yrs.	
2600 Century Parkway	 	Office	 	 	 	—		 	10,679		 	—		 	3,962		 	—		 	14,641		 	14,641		 	7,819		 	1973	 	 5-40 yrs.	
2635 Century Parkway	 	Office	 	 	 	—		 	21,643		 	—		 	4,139		 	—		 	25,782		 	25,782		 	11,767		 	1980	 	 5-40 yrs.	
2800 Century Parkway	 	Office	 	 	 	—		 	20,449		 	—		 	11,876		 	—		 	32,325		 	32,325		 	13,102		 	1983	 	 5-40 yrs.	
50 Glenlake	 	Office	 	 	 	2,500		 	20,006		 	—		 	3,491		 	2,500		 	23,497		 	25,997		 	10,569		 	1997	 	 5-40 yrs.	
Bluegrass Valley - Land	 	Industrial	 	 	 	19,711		 	—		 	(17,295	)	 	—		 	2,416		 	—		 	2,416		 	—		 	N/A	 	N/A	
Century Plaza I	 	Office	 	 	 	1,290		 	8,567		 	—		 	4,191		 	1,290		 	12,758		 	14,048		 	5,171		 	1981	 	 5-40 yrs.	
Century Plaza II	 	Office	 	 	 	1,380		 	7,733		 	—		 	2,805		 	1,380		 	10,538		 	11,918		 	4,154		 	1984	 	 5-40 yrs.	
Federal Aviation Administration	 	Office	 	 	 	1,196		 	—		 	1,416		 	15,188		 	2,612		 	15,188		 	17,800		 	4,015		 	2009	 	 5-40 yrs.	
Henry County - Land	 	Industrial	 	 	 	3,010		 	—		 	13		 	—		 	3,023		 	—		 	3,023		 	—		 	N/A	 	N/A	
Highwoods Ctr III at Tradeport	 	Office	 	 	 	409		 	—		 	130		 	4,040		 	539		 	4,040		 	4,579		 	1,126		 	2001	 	 5-40 yrs.	
5405 Windward Parkway	 	Office	 	 	 	3,342		 	32,111		 	—		 	18,716		 	3,342		 	50,827		 	54,169		 	15,765		 	1998	 	 5-40 yrs.	
Riverpoint - Land	 	Industrial	 	 	 	7,250		 	—		 	3,913		 	2,549		 	11,163		 	2,549		 	13,712		 	391		 	N/A	 	5-40 yrs.	
Riverwood 100	 	Office	 	 	 	5,785		 	64,913		 	(29	)	 	11,937		 	5,756		 	76,850		 	82,606		 	10,357		 	1989	 	5-40 yrs.	
South Park Residential - Land	 	Other	 	 	 	50		 	—		 	7		 	—		 	57		 	—		 	57		 	—		 	N/A	 	N/A	
South Park Site - Land	 	Industrial	 	 	 	1,204		 	—		 	754		 	—		 	1,958		 	—		 	1,958		 	—		 	N/A	 	N/A	
Tradeport - Land	 	Industrial	 	 	 	5,243		 	—		 	(4,559	)	 	—		 	684		 	—		 	684		 	—		 	N/A	 	N/A	
Two Point Royal	 	Office	 	 	 	1,793		 	14,964		 	—		 	3,298		 	1,793		 	18,262		 	20,055		 	7,722		 	1997	 	5-40 yrs.	

122

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
Two Alliance Center	 	Office	 	 	 	9,579		 	125,549		 	—		 	3,350		 	9,579		 	128,899		 	138,478		 	16,372		 	2009	 	5-40 yrs.	
One Alliance Center	 	Office	 	 	 	14,775		 	123,071		 	—		 	10,410		 	14,775		 	133,481		 	148,256		 	11,405		 	2001	 	5-40 yrs.	
10 Glenlake North	 	Office	 	 	 	5,349		 	26,334		 	—		 	638		 	5,349		 	26,972		 	32,321		 	3,693		 	2000	 	5-40 yrs.	
10 Glenlake South	 	Office	 	 	 	5,103		 	22,811		 	—		 	2,437		 	5,103		 	25,248		 	30,351		 	2,468		 	1999	 	5-40 yrs.	
Riverwood 300 Land	 	Office	 	 	 	—		 	—		 	400		 	—		 	400		 	—		 	400		 	—		 	N/A	 	N/A	
Monarch Tower	 	Office	 	 	 	—		 	—		 	22,717		 	143,068		 	22,717		 	143,068		 	165,785		 	2,090		 	1997	 	5-40 yrs.	
Monarch Plaza	 	Office	 	 	 	—		 	—		 	27,678		 	88,962		 	27,678		 	88,962		 	116,640		 	1,191		 	1983	 	5-40 yrs.	
Kansas City, MO	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Country Club Plaza	 	Retail	 	 	 	14,286		 	146,879		 	(198	)	 	139,896		 	14,088		 	286,775		 	300,863		 	117,945		 	1920-2002	 	5-40 yrs.	
Land - Hotel Land - Valencia	 	Office	 	 	 	978		 	—		 	111		 	—		 	1,089		 	—		 	1,089		 	—		 	N/A	 	N/A	
Park Plaza Building	 	Office	 	 	 	1,384		 	6,410		 	—		 	2,842		 	1,384		 	9,252		 	10,636		 	3,713		 	1983	 	 5-40 yrs.	
Two Emanuel Cleaver Boulevard	 	Office	 	 	 	984		 	4,402		 	—		 	2,192		 	984		 	6,594		 	7,578		 	2,930		 	1983	 	 5-40 yrs.	
Valencia Place Office	 	Office	 	 	 	1,576		 	—		 	970		 	34,270		 	2,546		 	34,270		 	36,816		 	12,519		 	1999	 	 5-40 yrs.	
Memphis, TN	 	 	 	 	 	 	 	 	 			 	 	 	 	 	 	 	 	 	 	 	 	 	 	
3400 Players Club Parkway	 	Office	 	 	 	1,005		 	—		 	207		 	6,221		 	1,212		 	6,221		 	7,433		 	2,533		 	1997	 	 5-40 yrs.	
Triad Centre I	 	Office	 	 	 	2,340		 	11,385		 	(849	)	 	4,663		 	1,491		 	16,048		 	17,539		 	6,467		 	1985	 	 5-40 yrs.	
Triad Centre II	 	Office	 	 	 	1,980		 	8,677		 	(404	)	 	4,564		 	1,576		 	13,241		 	14,817		 	4,634		 	1987	 	 5-40 yrs.	
Atrium I & II	 	Office	 	 	 	1,570		 	6,253		 	—		 	2,950		 	1,570		 	9,203		 	10,773		 	4,245		 	1984	 	 5-40 yrs.	
Centrum	 	Office	 	 	 	1,013		 	5,580		 	—		 	2,563		 	1,013		 	8,143		 	9,156		 	4,030		 	1979	 	 5-40 yrs.	
Comcast	 	Office	 	 	 	946		 	—		 	—		 	8,620		 	946		 	8,620		 	9,566		 	3,036		 	2008	 	 5-40 yrs.	
International Place Phase II	 	Office	 	 	 	4,884		 	27,782		 	—		 	5,227		 	4,884		 	33,009		 	37,893		 	15,842		 	1988	 	 5-40 yrs.	
PennMarc Centre	 	Office	 	 	 	3,607		 	10,240		 	—		 	3,008		 	3,607		 	13,248		 	16,855		 	3,094		 	2008	 	 5-40 yrs.	
Shadow Creek I	 	Office	 	 	 	924		 	—		 	466		 	7,302		 	1,390		 	7,302		 	8,692		 	2,710		 	2000	 	 5-40 yrs.	
Shadow Creek II	 	Office	 	 	 	734		 	—		 	467		 	6,901		 	1,201		 	6,901		 	8,102		 	2,521		 	2001	 	 5-40 yrs.	
Southwind Office Center A	 	Office	 	 	 	1,004		 	5,694		 	282		 	1,304		 	1,286		 	6,998		 	8,284		 	3,337		 	1991	 	 5-40 yrs.	
Southwind Office Center B	 	Office	 	 	 	1,366		 	7,754		 	—		 	1,261		 	1,366		 	9,015		 	10,381		 	4,321		 	1990	 	 5-40 yrs.	
Southwind Office Center C	 	Office	 	 	 	1,070		 	—		 	221		 	5,355		 	1,291		 	5,355		 	6,646		 	2,396		 	1998	 	 5-40 yrs.	
Southwind Office Center D	 	Office	 	 	 	744		 	—		 	193		 	5,639		 	937		 	5,639		 	6,576		 	2,316		 	1999	 	 5-40 yrs.	
Colonnade	 	Office	 	 	 	1,300		 	6,481		 	267		 	2,226		 	1,567		 	8,707		 	10,274		 	3,343		 	1998	 	 5-40 yrs.	
ThyssenKrupp Elevator Mfg Headquarters	 	Office	 	 	 	1,040		 	—		 	25		 	8,342		 	1,065		 	8,342		 	9,407		 	3,298		 	2007	 	 5-40 yrs.	
Crescent Center	 	Office	 	 	 	7,875		 	32,756		 	(547	)	 	8,774		 	7,328		 	41,530		 	48,858		 	7,410		 	1986	 	 5-40 yrs.	

123

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
Southwind - Land	 	Office	 	 	 	3,662		 	—		 	(1,477	)	 	—		 	2,185		 	—		 	2,185		 	—		 	N/A	 	N/A	
Triad Centre III	 	Office	 	 	 	1,253		 	—		 	—		 	36,795		 	1,253		 	36,795		 	38,048		 	7,136		 	2009	 	 5-40 yrs.	
Capital Grille	 	Office	 	 	 	—		 	—		 	311		 	3,258		 	311		 	3,258		 	3,569		 	506		 	2014	 	 5-40 yrs.	
Seasons 52	 	Office	 	 	 	—		 	—		 	320		 	3,741		 	320		 	3,741		 	4,061		 	570		 	2014	 	 5-40 yrs.	
International Place IV	 	Office	 	 	 	—		 	—		 	4,940		 	49,141		 	4,940		 	49,141		 	54,081		 	1,124		 	2015	 	 5-40 yrs.	
Nashville, TN	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
3322 West End	 	Office	 	 	 	3,025		 	27,490		 	—		 	3,658		 	3,025		 	31,148		 	34,173		 	12,830		 	1986	 	 5-40 yrs.	
3401 West End	 	Office	 	 	 	5,862		 	22,917		 	—		 	3,402		 	5,862		 	26,319		 	32,181		 	13,300		 	1982	 	 5-40 yrs.	
5310 Maryland Way	 	Office	 	 	 	1,863		 	7,201		 	—		 	3,651		 	1,863		 	10,852		 	12,715		 	4,037		 	1994	 	 5-40 yrs.	
Cool Springs 1 & 2 Deck	 	Office	 	 	 	—		 	—		 	—		 	3,989		 	—		 	3,989		 	3,989		 	809		 	2007	 	 5-40 yrs.	
Cool Springs 3 & 4 Deck	 	Office	 	 	 	—		 	—		 	—		 	4,461		 	—		 	4,461		 	4,461		 	969		 	2007	 	 5-40 yrs.	
Cool Springs I	 	Office	 	 	 	1,583		 	—		 	15		 	14,069		 	1,598		 	14,069		 	15,667		 	5,571		 	1999	 	 5-40 yrs.	
Cool Springs II	 	Office	 	 	 	1,824		 	—		 	346		 	17,826		 	2,170		 	17,826		 	19,996		 	6,413		 	1999	 	 5-40 yrs.	
Cool Springs III	 	Office	 	 	 	1,631		 	—		 	804		 	15,602		 	2,435		 	15,602		 	18,037		 	3,809		 	2006	 	 5-40 yrs.	
Cool Springs IV	 	Office	 	 	 	1,715		 	—		 	—		 	19,303		 	1,715		 	19,303		 	21,018		 	3,785		 	2008	 	 5-40 yrs.	
Cool Springs V – Healthways	 	Office	 	 	 	3,688		 	—		 	295		 	52,959		 	3,983		 	52,959		 	56,942		 	13,966		 	2007	 	 5-40 yrs.	
Harpeth On The Green II	 	Office	 	 	 	1,419		 	5,677		 	—		 	1,955		 	1,419		 	7,632		 	9,051		 	3,857		 	1984	 	 5-40 yrs.	
Harpeth On The Green III	 	Office	 	 	 	1,660		 	6,649		 	—		 	2,222		 	1,660		 	8,871		 	10,531		 	3,852		 	1987	 	 5-40 yrs.	
Harpeth On The Green IV	 	Office	 	 	 	1,713		 	6,842		 	—		 	1,674		 	1,713		 	8,516		 	10,229		 	4,028		 	1989	 	 5-40 yrs.	
Harpeth On The Green V	 	Office	 	 	 	662		 	—		 	197		 	5,427		 	859		 	5,427		 	6,286		 	2,090		 	1998	 	 5-40 yrs.	
Hickory Trace	 	Office	 	 	 	1,164		 	—		 	164		 	4,473		 	1,328		 	4,473		 	5,801		 	1,568		 	2001	 	5-40 yrs.	
Highwoods Plaza I	 	Office	 	 	 	1,552		 	—		 	307		 	8,844		 	1,859		 	8,844		 	10,703		 	4,192		 	1996	 	 5-40 yrs.	
Highwoods Plaza II	 	Office	 	 	 	1,448		 	—		 	307		 	8,805		 	1,755		 	8,805		 	10,560		 	2,953		 	1997	 	 5-40 yrs.	
Seven Springs - Land II	 	Office	 	 	 	3,715		 	—		 	(3,715	)	 	—		 	—		 	—		 	—		 	—		 	N/A	 	N/A	
Seven Springs I	 	Office	 	 	 	2,076		 	—		 	592		 	12,327		 	2,668		 	12,327		 	14,995		 	4,181		 	2002	 	 5-40 yrs.	
SouthPointe	 	Office	 	 	 	1,655		 	—		 	310		 	7,022		 	1,965		 	7,022		 	8,987		 	3,031		 	1998	 	 5-40 yrs.	
The Ramparts of Brentwood	 	Office	 	 	 	2,394		 	12,806		 	—		 	2,414		 	2,394		 	15,220		 	17,614		 	6,485		 	1986	 	 5-40 yrs.	
Westwood South	 	Office	 	 	 	2,106		 	—		 	382		 	10,247		 	2,488		 	10,247		 	12,735		 	3,756		 	1999	 	 5-40 yrs.	
100 Winners Circle	 	Office	 	 	 	1,497		 	7,258		 	—		 	1,924		 	1,497		 	9,182		 	10,679		 	4,124		 	1987	 	 5-40 yrs.	
The Pinnacle at Symphony Place	 	Office	 	 	 	—		 	141,469		 	—		 	5,748		 	—		 	147,217		 	147,217		 	12,358		 	2010	 	 5-40 yrs.	
Seven Springs East	 	Office	 	 	 	—		 	—		 	2,525		 	37,587		 	2,525		 	37,587		 	40,112		 	2,529		 	2013	 	 5-40 yrs.	

124

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
The Shops at Seven Springs	 	Office	 	 	 	—		 	—		 	803		 	8,223		 	803		 	8,223		 	9,026		 	674		 	2013	 	 5-40 yrs.	
Orlando, FL	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Berkshire at MetroCenter	 	Office	 	 	 	1,265		 	—		 	672		 	11,810		 	1,937		 	11,810		 	13,747		 	2,969		 	2007	 	 5-40 yrs.	
Capital Plaza III - Land	 	Office	 	 	 	2,994		 	—		 	18		 	—		 	3,012		 	—		 	3,012		 	—		 	N/A	 	 N/A	
Eola Park - Land	 	Office	 	 	 	2,027		 	—		 	—		 	—		 	2,027		 	—		 	2,027		 	—		 	N/A	 	 N/A	
Oxford - Land	 	Office	 	 	 	1,100		 	—		 	51		 	—		 	1,151		 	—		 	1,151		 	—		 	N/A	 	 N/A	
Stratford - Land	 	Office	 	 	 	2,034		 	—		 	(148	)	 	—		 	1,886		 	—		 	1,886		 	—		 	N/A	 	 N/A	
Windsor at MetroCenter	 	Office	 	 	 	—		 	—		 	2,060		 	8,353		 	2,060		 	8,353		 	10,413		 	2,553		 	2002	 	 5-40 yrs.	
The 1800 Eller Drive Building	 	Office	 	 	 	—		 	9,851		 	—		 	3,461		 	—		 	13,312		 	13,312		 	7,122		 	1983	 	 5-40 yrs.	
Seaside Plaza	 	Office	 	 	 	3,893		 	29,541		 	—		 	4,127		 	3,893		 	33,668		 	37,561		 	3,368		 	1982	 	 5-40 yrs.	
Capital Plaza Two	 	Office	 	 	 	4,346		 	43,394		 	—		 	2,491		 	4,346		 	45,885		 	50,231		 	3,822		 	1999	 	 5-40 yrs.	
Capital Plaza One	 	Office	 	 	 	3,482		 	27,321		 	—		 	1,693		 	3,482		 	29,014		 	32,496		 	3,119		 	1975	 	 5-40 yrs.	
Landmark Center Two	 	Office	 	 	 	4,743		 	22,031		 	—		 	3,579		 	4,743		 	25,610		 	30,353		 	2,545		 	1985	 	 5-40 yrs.	
Landmark Center One	 	Office	 	 	 	6,207		 	22,655		 	—		 	3,031		 	6,207		 	25,686		 	31,893		 	2,345		 	1983	 	 5-40 yrs.	
Lincoln Plaza	 	Office	 	 	 	3,490		 	56,079		 	—		 	611		 	3,490		 	56,690		 	60,180		 	2,130		 	2000	 	 5-40 yrs.	
Eola	 	Office	 	19,199	 	—		 	—		 	3,758		 	11,160		 	3,758		 	11,160		 	14,918		 	716		 	1969	 	 5-40 yrs.	
Greensboro, NC	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
6348 Burnt Poplar	 	Industrial	 	 	 	724		 	2,900		 	—		 	254		 	724		 	3,154		 	3,878		 	1,660		 	1990	 	 5-40 yrs.	
6350 Burnt Poplar	 	Industrial	 	 	 	341		 	1,374		 	—		 	343		 	341		 	1,717		 	2,058		 	804		 	1992	 	 5-40 yrs.	
420 Gallimore Dairy Road	 	Office	 	 	 	379		 	1,516		 	—		 	619		 	379		 	2,135		 	2,514		 	1,006		 	1990	 	 5-40 yrs.	
418 Gallimore Dairy Road	 	Office	 	 	 	462		 	1,849		 	—		 	589		 	462		 	2,438		 	2,900		 	1,207		 	1986	 	 5-40 yrs.	
416 Gallimore Dairy Road	 	Office	 	 	 	322		 	1,293		 	—		 	417		 	322		 	1,710		 	2,032		 	814		 	1986	 	 5-40 yrs.	
7031 Albert Pick Road	 	Office	 	 	 	510		 	2,921		 	—		 	2,587		 	510		 	5,508		 	6,018		 	2,700		 	1986	 	 5-40 yrs.	
7029 Albert Pick Road	 	Office	 	 	 	739		 	3,237		 	—		 	1,837		 	739		 	5,074		 	5,813		 	2,443		 	1988	 	 5-40 yrs.	
7025 Albert Pick Road	 	Office	 	 	 	2,393		 	9,576		 	—		 	5,190		 	2,393		 	14,766		 	17,159		 	6,988		 	1990	 	 5-40 yrs.	
7027 Albert Pick Road	 	Office	 	 	 	850		 	—		 	699		 	4,531		 	1,549		 	4,531		 	6,080		 	1,851		 	1997	 	 5-40 yrs.	
7009 Albert Pick Road	 	Industrial	 	 	 	224		 	1,068		 	—		 	275		 	224		 	1,343		 	1,567		 	629		 	1990	 	 5-40 yrs.	
426 Gallimore Dairy Road	 	Office	 	 	 	465		 	—		 	380		 	1,253		 	845		 	1,253		 	2,098		 	542		 	1996	 	 5-40 yrs.	
422 Gallimore Dairy Road	 	Industrial	 	 	 	145		 	1,081		 	—		 	377		 	145		 	1,458		 	1,603		 	743		 	1990	 	 5-40 yrs.	
406 Gallimore Dairy Road	 	Office	 	 	 	265		 	—		 	270		 	911		 	535		 	911		 	1,446		 	471		 	1996	 	 5-40 yrs.	
7021 Albert Pick Road	 	Industrial	 	 	 	237		 	1,103		 	—		 	286		 	237		 	1,389		 	1,626		 	698		 	1985	 	 5-40 yrs.	

125

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
7019 Albert Pick Road	 	Industrial	 	 	 	192		 	946		 	—		 	310		 	192		 	1,256		 	1,448		 	552		 	1985	 	 5-40 yrs.	
7015 Albert Pick Road	 	Industrial	 	 	 	305		 	1,219		 	—		 	283		 	305		 	1,502		 	1,807		 	757		 	1985	 	 5-40 yrs.	
7017 Albert Pick Road	 	Industrial	 	 	 	225		 	928		 	—		 	459		 	225		 	1,387		 	1,612		 	571		 	1985	 	 5-40 yrs.	
7011 Albert Pick Road	 	Industrial	 	 	 	171		 	777		 	—		 	380		 	171		 	1,157		 	1,328		 	541		 	1990	 	 5-40 yrs.	
424 Gallimore Dairy Road	 	Office	 	 	 	271		 	—		 	239		 	818		 	510		 	818		 	1,328		 	340		 	1997	 	 5-40 yrs.	
410 Gallimore Dairy Road	 	Industrial	 	 	 	356		 	1,613		 	—		 	734		 	356		 	2,347		 	2,703		 	1,058		 	1985	 	 5-40 yrs.	
412 Gallimore Dairy Road	 	Industrial	 	 	 	374		 	1,523		 	—		 	573		 	374		 	2,096		 	2,470		 	996		 	1985	 	 5-40 yrs.	
408 Gallimore Dairy Road	 	Industrial	 	 	 	341		 	1,486		 	—		 	768		 	341		 	2,254		 	2,595		 	1,189		 	1986	 	 5-40 yrs.	
414 Gallimore Dairy Road	 	Industrial	 	 	 	659		 	2,676		 	—		 	958		 	659		 	3,634		 	4,293		 	1,821		 	1988	 	 5-40 yrs.	
237 Burgess Road	 	Industrial	 	 	 	860		 	2,919		 	—		 	689		 	860		 	3,608		 	4,468		 	1,990		 	1986	 	 5-40 yrs.	
235 Burgess Road	 	Industrial	 	 	 	1,302		 	4,392		 	—		 	1,167		 	1,302		 	5,559		 	6,861		 	2,664		 	1987	 	 5-40 yrs.	
241 Burgess Road	 	Industrial	 	 	 	450		 	1,517		 	—		 	871		 	450		 	2,388		 	2,838		 	1,302		 	1988	 	 5-40 yrs.	
243 Burgess Road	 	Industrial	 	 	 	452		 	1,514		 	—		 	169		 	452		 	1,683		 	2,135		 	906		 	1988	 	 5-40 yrs.	
496 Gallimore Dairy Road	 	Industrial	 	 	 	546		 	—		 	—		 	2,635		 	546		 	2,635		 	3,181		 	1,340		 	1998	 	 5-40 yrs.	
494 Gallimore Dairy Road	 	Industrial	 	 	 	749		 	—		 	—		 	2,829		 	749		 	2,829		 	3,578		 	1,049		 	1999	 	 5-40 yrs.	
486 Gallimore Dairy Road	 	Industrial	 	 	 	603		 	—		 	—		 	2,613		 	603		 	2,613		 	3,216		 	928		 	1999	 	 5-40 yrs.	
488 Gallimore Dairy Road	 	Industrial	 	 	 	499		 	—		 	—		 	2,193		 	499		 	2,193		 	2,692		 	812		 	1999	 	 5-40 yrs.	
490 Gallimore Dairy Road	 	Industrial	 	 	 	1,733		 	—		 	—		 	5,909		 	1,733		 	5,909		 	7,642		 	3,431		 	1999	 	 5-40 yrs.	
Brigham Road - Land	 	Industrial	 	 	 	7,059		 	—		 	(4,610	)	 	—		 	2,449		 	—		 	2,449		 	—		 	N/A	 	N/A	
651 Brigham Road	 	Industrial	 	 	 	453		 	—		 	360		 	2,980		 	813		 	2,980		 	3,793		 	1,130		 	2002	 	 5-40 yrs.	
657 Brigham Road	 	Industrial	 	 	 	2,733		 	—		 	881		 	11,247		 	3,614		 	11,247		 	14,861		 	3,012		 	2006	 	 5-40 yrs.	
653 Brigham Road	 	Industrial	 	 	 	814		 	—		 	—		 	3,587		 	814		 	3,587		 	4,401		 	723		 	2007	 	 5-40 yrs.	
1501 Highwoods Boulevard	 	Office	 	 	 	1,476		 	—		 	—		 	8,034		 	1,476		 	8,034		 	9,510		 	2,758		 	2001	 	 5-40 yrs.	
Jefferson Pilot - Land	 	Office	 	 	 	11,759		 	—		 	(4,311	)	 	—		 	7,448		 	—		 	7,448		 	—		 	N/A	 	 N/A	
4200 Tudor Lane	 	Industrial	 	 	 	515		 	—		 	383		 	2,288		 	898		 	2,288		 	3,186		 	1,099		 	1996	 	 5-40 yrs.	
4224 Tudor Lane	 	Industrial	 	 	 	435		 	—		 	288		 	2,103		 	723		 	2,103		 	2,826		 	852		 	1996	 	 5-40 yrs.	
7023 Albert Pick Road	 	Office	 	 	 	834		 	3,459		 	—		 	1,027		 	834		 	4,486		 	5,320		 	2,134		 	1989	 	 5-40 yrs.	
370 Knollwood Street	 	Office	 	 	 	1,826		 	7,495		 	—		 	3,702		 	1,826		 	11,197		 	13,023		 	5,068		 	1994	 	 5-40 yrs.	
380 Knollwood Street	 	Office	 	 	 	2,989		 	12,029		 	—		 	4,181		 	2,989		 	16,210		 	19,199		 	8,289		 	1990	 	 5-40 yrs.	
Church St Medical Center I	 	Office	 	 	 	2,734		 	9,129		 	—		 	255		 	2,734		 	9,384		 	12,118		 	943		 	2003	 	 5-40 yrs.	
Church St Medical Center II	 	Office	 	 	 	2,376		 	5,451		 	—		 	42		 	2,376		 	5,493		 	7,869		 	877		 	2007	 	 5-40 yrs.	

126

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
Church St Medical Center III	 	Office	 	 	 	925		 	4,551		 	—		 	113		 	925		 	4,664		 	5,589		 	650		 	2008	 	 5-40 yrs.	
628 Green Valley Road	 	Office	 	 	 	2,906		 	12,141		 	—		 	914		 	2,906		 	13,055		 	15,961		 	1,153		 	1998	 	 5-40 yrs.	
701 Green Valley Road	 	Office	 	 	 	3,787		 	7,719		 	—		 	881		 	3,787		 	8,600		 	12,387		 	1,091		 	1996	 	 5-40 yrs.	
Pittsburgh, PA	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
One PPG Place	 	Office	 	(1)	 	9,819		 	107,643		 	—		 	36,578		 	9,819		 	144,221		 	154,040		 	20,301		 	1983-1985	 	 5-40 yrs.	
Two PPG Place	 	Office	 	(1)	 	2,302		 	10,978		 	—		 	3,949		 	2,302		 	14,927		 	17,229		 	1,623		 	1983-1985	 	 5-40 yrs.	
Three PPG Place	 	Office	 	(1)	 	501		 	2,923		 	—		 	3,851		 	501		 	6,774		 	7,275		 	758		 	1983-1985	 	 5-40 yrs.	
Four PPG Place	 	Office	 	(1)	 	620		 	3,239		 	—		 	1,445		 	620		 	4,684		 	5,304		 	688		 	1983-1985	 	 5-40 yrs.	
Five PPG Place	 	Office	 	(1)	 	803		 	4,924		 	—		 	1,611		 	803		 	6,535		 	7,338		 	1,116		 	1983-1985	 	 5-40 yrs.	
Six PPG Place	 	Office	 	(1)	 	3,353		 	25,602		 	—		 	5,824		 	3,353		 	31,426		 	34,779		 	3,603		 	1983-1985	 	 5-40 yrs.	
EQT Plaza	 	Office	 	 	 	—		 	83,812		 	—		 	9,423		 	—		 	93,235		 	93,235		 	10,773		 	1987	 	 5-40 yrs.	
Raleigh, NC	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
3600 Glenwood Avenue	 	Office	 	 	 	—		 	10,994		 	—		 	4,431		 	—		 	15,425		 	15,425		 	7,388		 	1986	 	 5-40 yrs.	
3737 Glenwood Avenue	 	Office	 	 	 	—		 	—		 	318		 	15,665		 	318		 	15,665		 	15,983		 	5,981		 	1999	 	 5-40 yrs.	
4800 North Park	 	Office	 	 	 	2,678		 	17,630		 	—		 	7,526		 	2,678		 	25,156		 	27,834		 	14,175		 	1985	 	 5-40 yrs.	
4900 North Park	 	Office	 	 	 	770		 	1,983		 	—		 	2,164		 	770		 	4,147		 	4,917		 	1,757		 	1984	 	 5-40 yrs.	
5000 North Park	 	Office	 	 	 	1,010		 	4,612		 	(49	)	 	3,033		 	961		 	7,645		 	8,606		 	4,177		 	1980	 	 5-40 yrs.	
801 Raleigh Corporate Center	 	Office	 	 	 	828		 	—		 	272		 	10,711		 	1,100		 	10,711		 	11,811		 	3,575		 	2002	 	 5-40 yrs.	
Blue Ridge I	 	Office	 	 	 	722		 	4,606		 	—		 	1,435		 	722		 	6,041		 	6,763		 	3,168		 	1982	 	 5-40 yrs.	
Blue Ridge II	 	Office	 	 	 	462		 	1,410		 	—		 	783		 	462		 	2,193		 	2,655		 	1,344		 	1988	 	 5-40 yrs.	
Cape Fear	 	Office	 	 	 	131		 	1,630		 	(2	)	 	1,123		 	129		 	2,753		 	2,882		 	2,262		 	1979	 	 5-40 yrs.	
Catawba	 	Office	 	 	 	125		 	1,635		 	(2	)	 	2,370		 	123		 	4,005		 	4,128		 	3,419		 	1980	 	 5-40 yrs.	
CentreGreen One	 	Office	 	 	 	1,529		 	—		 	(391	)	 	10,650		 	1,138		 	10,650		 	11,788		 	4,143		 	2000	 	 5-40 yrs.	
CentreGreen Two	 	Office	 	 	 	1,653		 	—		 	(389	)	 	9,652		 	1,264		 	9,652		 	10,916		 	3,095		 	2001	 	 5-40 yrs.	
CentreGreen Three - Land	 	Office	 	 	 	1,876		 	—		 	(585	)	 	—		 	1,291		 	—		 	1,291		 	—		 	N/A	 	N/A	
CentreGreen Four	 	Office	 	 	 	1,779		 	—		 	(397	)	 	13,510		 	1,382		 	13,510		 	14,892		 	2,952		 	2002	 	 5-40 yrs.	
CentreGreen Five	 	Office	 	 	 	1,280		 	—		 	55		 	12,762		 	1,335		 	12,762		 	14,097		 	4,141		 	2008	 	 5-40 yrs.	
Cottonwood	 	Office	 	 	 	609		 	3,244		 	—		 	588		 	609		 	3,832		 	4,441		 	2,057		 	1983	 	 5-40 yrs.	
Dogwood	 	Office	 	 	 	766		 	2,769		 	—		 	539		 	766		 	3,308		 	4,074		 	1,815		 	1983	 	 5-40 yrs.	
GlenLake - Land	 	Office	 	 	 	13,003		 	—		 	(8,359	)	 	114		 	4,644		 	114		 	4,758		 	42		 	N/A	 	5-40 yrs.	
GlenLake One	 	Office	 	 	 	924		 	—		 	1,324		 	20,442		 	2,248		 	20,442		 	22,690		 	6,903		 	2002	 	 5-40 yrs.	

127

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
GlenLake Four	 	Office	 	 	 	1,659		 	—		 	493		 	21,848		 	2,152		 	21,848		 	24,000		 	6,944		 	2006	 	 5-40 yrs.	
GlenLake Six	 	Office	 	 	 	941		 	—		 	(365	)	 	22,329		 	576		 	22,329		 	22,905		 	5,734		 	2008	 	 5-40 yrs.	
701 Raleigh Corporate Center	 	Office	 	 	 	1,304		 	—		 	540		 	14,649		 	1,844		 	14,649		 	16,493		 	7,566		 	1996	 	 5-40 yrs.	
Highwoods Centre	 	Office	 	 	 	531		 	—		 	(267	)	 	7,587		 	264		 	7,587		 	7,851		 	3,163		 	1998	 	 5-40 yrs.	
Highwoods Office Center North - Land	 	Office	 	 	 	357		 	49		 	—		 	—		 	357		 	49		 	406		 	35		 	N/A	 	 5-40 yrs.	
Highwoods Tower One	 	Office	 	 	 	203		 	16,744		 	—		 	4,276		 	203		 	21,020		 	21,223		 	11,861		 	1991	 	 5-40 yrs.	
Highwoods Tower Two	 	Office	 	 	 	365		 	—		 	503		 	21,564		 	868		 	21,564		 	22,432		 	8,164		 	2001	 	 5-40 yrs.	
Inveresk Parcel 2 - Land	 	Office	 	 	 	657		 	—		 	38		 	110		 	695		 	110		 	805		 	1		 	N/A	 	N/A	
Lake Boone Medical Center	 	Office	 	 	 	1,450		 	6,311		 	—		 	181		 	1,450		 	6,492		 	7,942		 	1,037		 	1998	 	5-40 yrs.	
4620 Creekstone Drive	 	Office	 	 	 	149		 	—		 	107		 	3,085		 	256		 	3,085		 	3,341		 	1,109		 	2001	 	 5-40 yrs.	
4825 Creekstone Drive	 	Office	 	 	 	398		 	—		 	293		 	10,080		 	691		 	10,080		 	10,771		 	4,415		 	1999	 	 5-40 yrs.	
Pamlico	 	Office	 	 	 	289		 	—		 	—		 	10,428		 	289		 	10,428		 	10,717		 	6,821		 	1980	 	 5-40 yrs.	
ParkWest One	 	Office	 	 	 	242		 	—		 	—		 	3,339		 	242		 	3,339		 	3,581		 	1,210		 	2001	 	 5-40 yrs.	
ParkWest Two	 	Office	 	 	 	356		 	—		 	—		 	3,285		 	356		 	3,285		 	3,641		 	1,215		 	2001	 	 5-40 yrs.	
Progress Center Renovation	 	Office	 	 	 	—		 	—		 	—		 	362		 	—		 	362		 	362		 	297		 	2003	 	 5-40 yrs.	
Raleigh Corp Center Lot D	 	Office	 	 	 	1,211		 	—		 	8		 	—		 	1,219		 	—		 	1,219		 	—		 	N/A	 	N/A	
PNC Plaza	 	Office	 	43,852	 	1,206		 	—		 	—		 	72,234		 	1,206		 	72,234		 	73,440		 	17,248		 	2008	 	5-40 yrs.	
Rexwoods Center I	 	Office	 	 	 	878		 	3,730		 	—		 	1,534		 	878		 	5,264		 	6,142		 	3,187		 	1990	 	5-40 yrs.	
Rexwoods Center II	 	Office	 	 	 	362		 	1,818		 	—		 	1,086		 	362		 	2,904		 	3,266		 	1,321		 	1993	 	5-40 yrs.	
Rexwoods Center III	 	Office	 	 	 	919		 	2,816		 	—		 	959		 	919		 	3,775		 	4,694		 	2,170		 	1992	 	5-40 yrs.	
Rexwoods Center IV	 	Office	 	 	 	586		 	—		 	—		 	4,314		 	586		 	4,314		 	4,900		 	2,016		 	1995	 	5-40 yrs.	
Rexwoods Center V	 	Office	 	 	 	1,301		 	—		 	184		 	6,353		 	1,485		 	6,353		 	7,838		 	2,525		 	1998	 	5-40 yrs.	
Riverbirch	 	Office	 	 	 	469		 	4,038		 	23		 	5,189		 	492		 	9,227		 	9,719		 	1,455		 	1987	 	5-40 yrs.	
Situs I	 	Office	 	 	 	692		 	4,646		 	178		 	(954	)	 	870		 	3,692		 	4,562		 	1,612		 	1996	 	5-40 yrs.	
Situs II	 	Office	 	 	 	718		 	6,254		 	181		 	(978	)	 	899		 	5,276		 	6,175		 	2,252		 	1998	 	5-40 yrs.	
Situs III	 	Office	 	 	 	440		 	4,078		 	119		 	(1,261	)	 	559		 	2,817		 	3,376		 	1,014		 	2000	 	5-40 yrs.	
Six Forks Center I	 	Office	 	 	 	666		 	2,665		 	—		 	1,874		 	666		 	4,539		 	5,205		 	2,271		 	1982	 	5-40 yrs.	
Six Forks Center II	 	Office	 	 	 	1,086		 	4,533		 	—		 	2,271		 	1,086		 	6,804		 	7,890		 	3,560		 	1983	 	5-40 yrs.	
Six Forks Center III	 	Office	 	 	 	862		 	4,411		 	—		 	2,724		 	862		 	7,135		 	7,997		 	3,836		 	1987	 	5-40 yrs.	
Smoketree Tower	 	Office	 	 	 	2,353		 	11,743		 	—		 	6,048		 	2,353		 	17,791		 	20,144		 	8,465		 	1984	 	5-40 yrs.	
4601 Creekstone Drive	 	Office	 	 	 	255		 	—		 	217		 	5,476		 	472		 	5,476		 	5,948		 	2,535		 	1997	 	5-40 yrs.	

128

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
Weston - Land	 	Other	 	 	 	22,771		 	—		 	(14,992	)	 	—		 	7,779		 	—		 	7,779		 	—		 	N/A	 	N/A	
4625 Creekstone Drive	 	Office	 	 	 	458		 	—		 	268		 	5,745		 	726		 	5,745		 	6,471		 	2,670		 	1995	 	5-40 yrs.	
11000 Weston Parkway	 	Office	 	 	 	2,651		 	18,850		 	—		 	483		 	2,651		 	19,333		 	21,984		 	2,900		 	1998	 	5-40 yrs.	
GlenLake Five	 	Office	 	 	 	—		 	—		 	2,263		 	30,264		 	2,263		 	30,264		 	32,527		 	1,004		 	2014	 	5-40 yrs.	
11800 Weston Parkway	 	Office	 	 	 	—		 	—		 	826		 	13,188		 	826		 	13,188		 	14,014		 	299		 	2014	 	5-40 yrs.	
CentreGreen Café	 	Office	 	 	 	—		 	—		 	41		 	3,509		 	41		 	3,509		 	3,550		 	96		 	2014	 	5-40 yrs.	
CentreGreen Fitness Center	 	Office	 	 	 	—		 	—		 	27		 	2,322		 	27		 	2,322		 	2,349		 	63		 	2014	 	5-40 yrs.	
One Bank of America Plaza	 	Office	 	 	 	11,288		 	68,375		 	—		 	10,405		 	11,288		 	78,780		 	90,068		 	3,222		 	1986	 	5-40 yrs.	
Weston Lakefront I	 	Office	 	 	 	—		 	—		 	8,522		 	42,267		 	8,522		 	42,267		 	50,789		 	1,209		 	2015	 	5-40 yrs.	
Weston Lakefront II	 	Office	 	 	 	—		 	—		 	8,522		 	45,870		 	8,522		 	45,870		 	54,392		 	1,068		 	2015	 	5-40 yrs.	
Other Property	 	Other	 	 	 	26,276		 	16,449		 	(24,595	)	 	1,538		 	1,681		 	17,987		 	19,668		 	8,750		 	N/A	 	N/A	
Richmond, VA	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
4900 Cox Road	 	Office	 	 	 	1,324		 	5,311		 	15		 	2,916		 	1,339		 	8,227		 	9,566		 	4,142		 	1991	 	 5-40 yrs.	
Colonnade Building	 	Office	 	 	 	1,364		 	6,105		 	—		 	1,713		 	1,364		 	7,818		 	9,182		 	2,431		 	2003	 	 5-40 yrs.	
Dominion Place - Pitts Parcel - Land	 	Office	 	 	 	1,101		 	—		 	(665	)	 	—		 	436		 	—		 	436		 	—		 	N/A	 	 N/A	
Markel 4521	 	Office	 	 	 	1,581		 	13,299		 	168		 	(1,656	)	 	1,749		 	11,643		 	13,392		 	4,575		 	1999	 	 5-40 yrs.	
Hamilton Beach/Proctor-Silex	 	Office	 	 	 	1,086		 	4,345		 	10		 	2,306		 	1,096		 	6,651		 	7,747		 	3,897		 	1986	 	 5-40 yrs.	
Highwoods Commons	 	Office	 	 	 	521		 	—		 	458		 	3,913		 	979		 	3,913		 	4,892		 	1,561		 	1999	 	 5-40 yrs.	
Highwoods One	 	Office	 	 	 	1,688		 	—		 	22		 	11,281		 	1,710		 	11,281		 	12,991		 	5,571		 	1996	 	 5-40 yrs.	
Highwoods Two	 	Office	 	 	 	786		 	—		 	226		 	6,133		 	1,012		 	6,133		 	7,145		 	2,947		 	1997	 	 5-40 yrs.	
Highwoods Five	 	Office	 	 	 	783		 	—		 	11		 	5,495		 	794		 	5,495		 	6,289		 	2,485		 	1998	 	 5-40 yrs.	
Highwoods Plaza	 	Office	 	 	 	909		 	—		 	187		 	5,892		 	1,096		 	5,892		 	6,988		 	2,499		 	2000	 	 5-40 yrs.	
Innslake Center	 	Office	 	 	 	845		 	—		 	195		 	6,486		 	1,040		 	6,486		 	7,526		 	2,238		 	2001	 	 5-40 yrs.	
Highwoods Centre	 	Office	 	 	 	1,205		 	4,825		 	—		 	1,294		 	1,205		 	6,119		 	7,324		 	2,958		 	1990	 	 5-40 yrs.	
Markel 4501	 	Office	 	 	 	1,300		 	13,259		 	213		 	(1,699	)	 	1,513		 	11,560		 	13,073		 	5,360		 	1998	 	 5-40 yrs.	
Markel 4600	 	Office	 	 	 	1,700		 	17,081		 	169		 	(49	)	 	1,869		 	17,032		 	18,901		 	7,621		 	1989	 	 5-40 yrs.	
North Park	 	Office	 	 	 	2,163		 	8,659		 	6		 	2,464		 	2,169		 	11,123		 	13,292		 	5,205		 	1989	 	 5-40 yrs.	
North Shore Commons I	 	Office	 	 	 	951		 	—		 	17		 	12,048		 	968		 	12,048		 	13,016		 	4,155		 	2002	 	 5-40 yrs.	
North Shore Commons II	 	Office	 	 	 	2,067		 	—		 	(89	)	 	10,544		 	1,978		 	10,544		 	12,522		 	2,123		 	2007	 	 5-40 yrs.	
North Shore Commons C - Land	 	Office	 	 	 	1,497		 	—		 	15		 	—		 	1,512		 	—		 	1,512		 	—		 	N/A	 	 N/A	
North Shore Commons D - Land	 	Office	 	 	 	1,261		 	—		 	—		 	—		 	1,261		 	—		 	1,261		 	—		 	N/A	 	N/A	

129

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
Nuckols Corner Land	 	Office	 	 	 	1,259		 	—		 	203		 	—		 	1,462		 	—		 	1,462		 	—		 	N/A	 	N/A	
One Shockoe Plaza	 	Office	 	 	 	—		 	—		 	356		 	15,778		 	356		 	15,778		 	16,134		 	7,921		 	1996	 	 5-40 yrs.	
Pavilion Land	 	Office	 	 	 	181		 	46		 	20		 	(46	)	 	201		 	—		 	201		 	—		 	N/A	 	N/A	
Lake Brook Commons	 	Office	 	 	 	1,600		 	8,864		 	21		 	2,189		 	1,621		 	11,053		 	12,674		 	2,883		 	1996	 	 5-40 yrs.	
Sadler & Cox Land	 	Office	 	 	 	1,535		 	—		 	343		 	—		 	1,878		 	—		 	1,878		 	—		 	N/A	 	 N/A	
4840 Cox Road	 	Office	 	 	 	1,918		 	—		 	358		 	13,559		 	2,276		 	13,559		 	15,835		 	5,704		 	2005	 	 5-40 yrs.	
Stony Point F Land	 	Office	 	 	 	1,841		 	—		 	(774	)	 	—		 	1,067		 	—		 	1,067		 	—		 	N/A	 	 N/A	
Stony Point I	 	Office	 	 	 	1,384		 	11,630		 	(267	)	 	3,561		 	1,117		 	15,191		 	16,308		 	6,798		 	1990	 	 5-40 yrs.	
Stony Point II	 	Office	 	 	 	1,240		 	—		 	103		 	12,084		 	1,343		 	12,084		 	13,427		 	5,094		 	1999	 	 5-40 yrs.	
Stony Point III	 	Office	 	 	 	995		 	—		 	—		 	9,936		 	995		 	9,936		 	10,931		 	3,407		 	2002	 	 5-40 yrs.	
Stony Point IV	 	Office	 	 	 	955		 	—		 	—		 	11,303		 	955		 	11,303		 	12,258		 	2,864		 	2006	 	 5-40 yrs.	
Virginia Mutual	 	Office	 	 	 	1,301		 	6,036		 	15		 	1,162		 	1,316		 	7,198		 	8,514		 	2,658		 	1996	 	 5-40 yrs.	
Waterfront Plaza	 	Office	 	 	 	585		 	2,347		 	8		 	1,191		 	593		 	3,538		 	4,131		 	2,103		 	1988	 	 5-40 yrs.	
Innsbrook Center	 	Office	 	 	 	914		 	8,249		 	—		 	394		 	914		 	8,643		 	9,557		 	2,661		 	1987	 	 5-40 yrs.	
Tampa, FL	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
4200 Cypress	 	Office	 	 	 	2,673		 	16,470		 	—		 	2,672		 	2,673		 	19,142		 	21,815		 	3,225		 	1989	 	5-40 yrs.	
Bayshore Place	 	Office	 	 	 	2,276		 	11,817		 	—		 	1,907		 	2,276		 	13,724		 	16,000		 	6,661		 	1990	 	 5-40 yrs.	
General Services Administration Building	 	Office	 	 	 	4,054		 	—		 	406		 	27,533		 	4,460		 	27,533		 	31,993		 	9,040		 	2005	 	 5-40 yrs.	
Highwoods Preserve Building I	 	Office	 	 	 	991		 	—		 	—		 	22,597		 	991		 	22,597		 	23,588		 	9,238		 	1999	 	 5-40 yrs.	
Highwoods Preserve - Land	 	Office	 	 	 	1,485		 	—		 	485		 	—		 	1,970		 	—		 	1,970		 	—		 	N/A	 	N/A	
Highwoods Preserve Building V	 	Office	 	 	 	881		 	—		 	—		 	25,361		 	881		 	25,361		 	26,242		 	9,844		 	2001	 	 5-40 yrs.	
Highwoods Bay Center I	 	Office	 	 	 	3,565		 	—		 	(64	)	 	36,680		 	3,501		 	36,680		 	40,181		 	8,540		 	2007	 	 5-40 yrs.	
HIW Bay Center II - Land	 	Office	 	 	 	3,482		 	—		 	—		 	—		 	3,482		 	—		 	3,482		 	—		 	N/A	 	N/A	
Highwoods Preserve Building VII	 	Office	 	 	 	790		 	—		 	—		 	12,498		 	790		 	12,498		 	13,288		 	2,730		 	2007	 	 5-40 yrs.	
HIW Preserve VII Garage	 	Office	 	 	 	—		 	—		 	—		 	6,789		 	—		 	6,789		 	6,789		 	1,513		 	2007	 	 5-40 yrs.	
Horizon	 	Office	 	 	 	—		 	6,257		 	—		 	3,327		 	—		 	9,584		 	9,584		 	4,583		 	1980	 	 5-40 yrs.	
LakePointe One	 	Office	 	 	 	2,106		 	89		 	—		 	44,010		 	2,106		 	44,099		 	46,205		 	17,726		 	1986	 	 5-40 yrs.	
LakePointe Two	 	Office	 	 	 	2,000		 	15,848		 	672		 	14,216		 	2,672		 	30,064		 	32,736		 	9,845		 	1999	 	 5-40 yrs.	
Lakeside	 	Office	 	 	 	—		 	7,369		 	—		 	4,907		 	—		 	12,276		 	12,276		 	4,169		 	1978	 	 5-40 yrs.	
Lakeside/Parkside Garage	 	Office	 	 	 	—		 	—		 	—		 	5,587		 	—		 	5,587		 	5,587		 	1,255		 	2004	 	 5-40 yrs.	
One Harbour Place	 	Office	 	 	 	2,016		 	25,252		 	—		 	7,107		 	2,016		 	32,359		 	34,375		 	12,161		 	1985	 	 5-40 yrs.	

130

Table of Contents

HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP
 
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)	
																																									
 	 	 	 	 	 	Initial Costs	 	Costs Capitalized
Subsequent to
Acquisition	 	Gross Value at Close of Period	 	 	 	 	 	 	
Description	 	Property
Type	 	2015
Encumbrance	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Land	 	Bldg &
Improv	 	Total
Assets (2)	 	Accumulated
Depreciation	 	Date of
Construction	 	Life on
Which
Depreciation
is
Calculated	
Parkside	 	Office	 	 	 	—		 	9,407		 	—		 	3,023		 	—		 	12,430		 	12,430		 	5,740		 	1979	 	 5-40 yrs.	
Pavilion	 	Office	 	 	 	—		 	16,394		 	—		 	4,017		 	—		 	20,411		 	20,411		 	8,885		 	1982	 	 5-40 yrs.	
Pavilion Parking Garage	 	Office	 	 	 	—		 	—		 	—		 	5,682		 	—		 	5,682		 	5,682		 	2,288		 	1999	 	 5-40 yrs.	
Spectrum	 	Office	 	 	 	1,454		 	14,502		 	—		 	6,477		 	1,454		 	20,979		 	22,433		 	9,450		 	1984	 	 5-40 yrs.	
Tower Place	 	Office	 	 	 	3,218		 	19,898		 	—		 	4,370		 	3,218		 	24,268		 	27,486		 	11,089		 	1988	 	 5-40 yrs.	
Westshore Square	 	Office	 	 	 	1,126		 	5,186		 	—		 	1,658		 	1,126		 	6,844		 	7,970		 	3,161		 	1976	 	 5-40 yrs.	
Independence Park - Land	 	Office	 	 	 	4,943		 	—		 	(4,943	)	 	—		 	—		 	—		 	—		 	—		 	N/A	 	N/A	
Independence Park I	 	Office	 	 	 	2,531		 	4,526		 	—		 	4,877		 	2,531		 	9,403		 	11,934		 	2,219		 	1983	 	 5-40 yrs.	
Meridian I	 	Office	 	 	 	1,849		 	22,363		 	—		 	1,302		 	1,849		 	23,665		 	25,514		 	2,222		 	1984	 	 5-40 yrs.	
Meridian II	 	Office	 	 	 	1,302		 	19,588		 	—		 	2,004		 	1,302		 	21,592		 	22,894		 	2,278		 	1986	 	 5-40 yrs.	
Suntrust Financial Centre	 	Office	 	 	 	—		 	—		 	1,980		 	102,138		 	1,980		 	102,138		 	104,118		 	1,298		 	1992	 	 5-40 yrs.	
Suntrust Financial Land	 	Office	 	 	 	—		 	—		 	2,225		 	17		 	2,225		 	17		 	2,242		 	—		 	N/A	 	 5-40 yrs.	
 	 	 	 		 	506,874		 	2,171,535		 	22,845		 	2,214,604		 	529,719		 	4,386,139		 	4,915,858		 	1,138,378		 	 	 	 	

2015 Encumbrance Notes
		
(1)	These assets are pledged as collateral for a $112.2 million first mortgage loan.	
		
(2)	The tax basis of aggregate land and buildings and tenant improvements as of December 31, 2015 is $4.5 billion .	

131

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on February 9, 2016 .

		
Highwoods Properties, Inc.
 	
By: 	 
/s/ Edward J. Fritsch	
 	Edward J. Fritsch	
 	President and Chief Executive Officer	

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.

	
					
Signature	 	Title	 	Date	
 	 	 	 	 	
/s/ O. Temple Sloan, Jr.	 	Chairman of the Board of Directors	 	February 9, 2016	
O. Temple Sloan, Jr.	 	 	 	 	
 	 	 	 	 	
/s/ Edward J. Fritsch	 	President, Chief Executive Officer and Director	 	February 9, 2016	
Edward J. Fritsch	 	 	 	 	
 	 	 	 	 	
/s/ Charles A. Anderson	 	Director	 	February 9, 2016	
Charles A. Anderson	 	 	 	 	
 	 	 	 	 	
/s/ Gene H. Anderson	 	Director	 	February 9, 2016	
Gene H. Anderson	 	 	 	 	
 	 	 	 	 	
/s/ Carlos E. Evans	 	Director	 	February 9, 2016	
Carlos E. Evans	 	 	 	 	
 	 	 	 	 	
/s/ David J. Hartzell	 	Director	 	February 9, 2016	
David J. Hartzell	 	 	 	 	
 	 	 	 	 	
/s/ Sherry A. Kellett	 	Director	 	February 9, 2016	
Sherry A. Kellett	 	 	 	 	
 	 	 	 	 	
/s/ Mark F. Mulhern	 	Senior Vice President and Chief Financial Officer	 	February 9, 2016	
Mark F. Mulhern	 	 	 	 	
 	 	 	 	 	
/s/ Daniel L. Clemmens	 	Vice President and Chief Accounting Officer	 	February 9, 2016	
Daniel L. Clemmens	 	 	 	 	

132

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on February 9, 2016 .

	
		
Highwoods Realty Limited Partnership
 	
By:	Highwoods Properties, Inc., its sole general partner	
By: 	 
/s/ Edward J. Fritsch	
 	Edward J. Fritsch	
 	President and Chief Executive Officer	

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.

	
					
Signature	 	Title	 	Date	
 	 	 	 	 	
/s/ O. Temple Sloan, Jr.	 	Chairman of the Board of Directors of the General Partner	 	February 9, 2016	
O. Temple Sloan, Jr.	 	 	 	 	
 	 	 	 	 	
/s/ Edward J. Fritsch	 	President, Chief Executive Officer and Director of the General Partner	 	February 9, 2016	
Edward J. Fritsch	 	 	 	 	
 	 	 	 	 	
/s/ Charles A. Anderson	 	Director of the General Partner	 	February 9, 2016	
Charles A. Anderson	 	 	 	 	
 	 	 	 	 	
/s/ Gene H. Anderson	 	Director of the General Partner	 	February 9, 2016	
Gene H. Anderson	 	 	 	 	
 	 	 	 	 	
/s/ Carlos E. Evans	 	Director of the General Partner	 	February 9, 2016	
Carlos E. Evans	 	 	 	 	
 	 	 	 	 	
/s/ David J. Hartzell	 	Director of the General Partner	 	February 9, 2016	
David J. Hartzell	 	 	 	 	
 	 	 	 	 	
/s/ Sherry A. Kellett	 	Director of the General Partner	 	February 9, 2016	
Sherry A. Kellett	 	 	 	 	
 	 	 	 	 	
/s/ Mark F. Mulhern	 	Senior Vice President and Chief Financial Officer of the General Partner	 	February 9, 2016	
Mark F. Mulhern	 	 	 	 	
 	 	 	 	 	
/s/ Daniel L. Clemmens	 	Vice President and Chief Accounting Officer of the General Partner	 	February 9, 2016	
Daniel L. Clemmens	 	 	 	 	

133

Exhibit 10.17

AGREEMENT FOR PURCHASE AND SALE
OF REAL ESTATE

By and Between

HIGHWOODS REALTY LIMITED PARTNERSHIP,

HIGHWOODS SERVICES, INC.

and

COUNTRY CLUB PLAZA KC PARTNERS LLC,

THE MACERICH PARTNERSHIP, L.P.
and
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

Dated: December 21, 2015

TABLE OF CONTENTS

	
					
 	 	 	 	Page	
1.	PURCHASE AND SALE OF PROPERTY, BONDS AND RELATED DOCUMENTS	1	
2.	PURCHASE PRICE; BOND PURCHASE PRICE	4	
3.	OPERATION OF PROPERTY THROUGH CLOSING	5	
4.	STATUS OF TITLE TO PROPERTY	6	
 	(a)	STATE OF TITLE	6	
 	(b)	SURVEY AND TITLE MATTERS	7	
 	 	(i)	Survey Matters	7	
 	 	(ii)	Title Commitment	7	
 	 	(iii)	Survey and Title Objections	7	
 	 	(iv)	Intervening Title Objections	8	
5.	CLOSING	8	
 	(a)	CLOSING DATE	8	
 	(b)	CLOSING DOCUMENTS	9	
 	 	(i)	Seller	9	
 	 	(ii)	Purchaser	11	
 	(c)	CLOSING PRORATIONS AND ADJUSTMENTS	12	
 	(d)	CLOSING COSTS	16	
 	 	(i)	Transfer Taxes	16	
 	 	(ii)	Title Insurance	16	
 	 	(iii)	Surveys	16	
 	 	(iv)	Escrow and Closing Charges	16	
 	 	(v)	Recording Charges	16	
 	 	(vi)	Attorney and Consultant Fees	16	
 	 	(vii)	Environmental Reports	16	
 	 	(viii)	Zoning Reports	16	
 	(e)	POSSESSION	17	
6.	CASUALTY LOSS AND CONDEMNATION	17	
7.	REPRESENTATIONS AND WARRANTIES	17	
 	(a)	REPRESENTATIONS AND WARRANTIES OF SELLER	17	
 	(b)	ACCURACY AT CLOSING	22	
 	(c)	LIMITATION ON PURCHASER'S CLAIMS	22	
 	(d)	SURVIVAL OF REPRESENTATIONS AND WARRANTIES	23	
 	(e)	"AS-IS" PURCHASE	23	
 	(f)	REPRESENTATIONS AND WARRANTIES OF PURCHASER	24	
 	(g)	REPRESENTATIONS AND WARRANTIES OF HSI	25	
8.	INSPECTION	25	
 	(a)	DUE DILIGENCE PERIOD	25	
 	(b)	TERMINATION OF AGREEMENT	26	
 	(c)	GENERAL INSPECTION OF PROPERTY	26	
 	(d)	INSURANCE	26	
 	(e)	INDEMNITY	27	
9.	PURCHASER'S AND SELLER'S CONDITIONS PRECEDENT TO CLOSING	27	
10.	BROKERAGE	30	

i

	
					
11.	DEFAULTS AND REMEDIES	30	
 	(a)	SELLER'S BREACH	30	
 	(b)	PUCHASER'S BREACH	31	
 	(c)	SURVIVAL	31	
12.	MISCELLANEOUS	31	
 	(a)	ASSIGNMENT	31	
 	(b)	ENTIRE AGREEMENT	32	
 	(c)	TIME IS OF THE ESSENCE	32	
 	(d)	HEADINGS	32	
 	(e)	FURTHER ASSURANCES	32	
 	(f)	CONSTRUCTION	32	
 	(g)	LEGAL FEES	33	
 	(h)	NOTICES	33	
 	(i)	GOVERNING LAW	34	
 	(j)	COUNTERPARTS	34	
 	(k)	TAX DEFERRED EXCHANGE	35	
 	(l)	CONFIDENTIAL INFORMATION	35	
 	(m)	PRESS RELEASES	36	
 	(n)	CROSS DEFAULT	36	
 	(o)	MUTUAL INDEMNITIES	36	
13.	MACERICH AND TAUBMAN BOARD OF DIRECTORS APPROVAL	37	
14.	EFFECTIVE DATE	38	
15.	REGULATIONS S-X	38	
16.	EXHIBITS AND SCHEDULES	38	

ii

AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE (the “Agreement”) is made and entered into as of this 21st day of December, 2015 (the “ Effective Date ”), by and between HIGHWOODS REALTY LIMITED PARTNERSHIP, a North Carolina limited partnership (“ Seller ”), and HIGHWOODS SERVICES, INC. , a North Carolina corporation (“ HSI ”) and COUNTRY CLUB PLAZA KC PARTNERS LLC, a Delaware limited liability company (“ Purchaser ”), THE MACERICH PARTNERSHIP, L.P. , a Delaware limited partnership (“ Macerich ”), and THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP , a Delaware limited partnership (” Taubman ”). Macerich and Taubman are executing this Agreement solely for the purpose of agreeing to be liable to Seller, severally and not jointly, each, for and only for (i) the payment of the Extension Payment Obligation (as set forth in Paragraph 2(a) hereof, (ii) Purchaser’s Continuing Obligations (as described in Paragraph 9(e) hereof, and (iii) the provisions of Section 13 hereof.
WITNESSETH:
WHEREAS, the parties desire to enter into this Agreement to set forth all of the terms, conditions, and provisions with respect to the purchase and sale of certain property hereinafter described; and
WHEREAS, HSI is executing this Agreement solely for the purpose of agreeing to sell the Bonds (as hereinafter defined) and providing its consent to the assignment of the Related 1998 Bond Documents (as hereinafter defined), and to make the representations and warranties of HSI set forth in Paragraph 7(g) of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the payment of earnest money, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. PURCHASE AND SALE OF PROPERTY, BONDS AND RELATED DOCUMENTS. Subject to the terms and conditions of this Agreement, Seller shall sell, convey and assign to Purchaser, and Purchaser shall purchase all rights, title and interest of Seller relating to the following described property (all of which is hereinafter collectively referred to as the “ Property ”):
(a) That certain tract of real estate located in Jackson County, Missouri, which real estate is legally described as Tract 17 on Exhibit A-1 to that Effective Date Letter between Seller and Purchaser dated of even date herewith (the “Side Letter” ), which Side Letter is made a part hereof, together with (i) all and singular easements, covenants, agreements, rights, privileges, tenements, hereditaments and appurtenances thereunto now or hereafter belonging or appertaining thereto and (ii) any and all oil, gas and mineral rights relating to such real estate, water and water rights, ditch and any other rights to use and appropriate water from or relating to such real estate (collectively, the “ Land ”).
(b) All of Seller’s right, title and interest in and to all strips and gores of land located on or adjacent to the Land, and all rights, privileges, and easements appurtenant to the Land, including all water rights, rights-of-way, roadways, parking areas, roadbeds, alleyways and reversions or other appurtenances used in connection with the beneficial use of the Land.
(c) All improvements and fixtures located on the Land and owned by Seller including, without limitation, the buildings (the “ Buildings ”), structures and amenities currently located on the Land, all fixtures, apparatus, equipment, vaults, machinery and built-in appliances used in connection

1

with the operation and occupancy of the Land, including, without limitation, heating and air conditioning systems, electrical systems, plumbing systems, sprinkler and other fire protection and life safety systems, refrigeration, ventilation, or other facilities or services on the Land (all of which are together hereinafter called the “ Improvements ”) (The Land and the Improvements are sometimes referred to herein as the “ Premises ”).
(d) The personal property owned by Seller currently used solely in connection with the Premises and the operation thereof identified for Tract 17 on Exhibit B of the Side Letter . (the “ Personal Property ”). The definition of Personal Property used herein shall exclude all personal property located on the Premises owned by tenants of the Buildings (the “ Tenants ”), or contractors who provide service to the Buildings or that is not otherwise owned by Seller.
(e) To the extent in Seller’s possession or control, all right, title and interest of Seller in the Seller Survey (as defined in Paragraph 4(b) below), blue prints, drawings, plans and specifications (including, without limitation, structural, HVAC, mechanical and plumbing plans and specifications), all books, records, receivables aging and collection reports, tenant or leasing files, and maintenance records related to the operation of the Premises, and other documentation for or with respect to the Property or any part thereof; all use, occupancy, building and operating permits, licenses, development rights, entitlements, and approvals relating to the Property or any part thereof; to the extent assignable, all existing guarantees and warranties issued in connection with the purchase, construction, alteration, installation or repair of all or any portion of the Property as described for Tract 17 on Exhibit B-1 attached to the Side Letter; to the extent assignable, all construction drawings, soil tests, and recently procured environmental reports related to the Premises. To the extent consents and reliance letters are required in order for Seller to effectively assign to Purchaser the items set forth in this Paragraph 1(e) , Seller will use commercially reasonable efforts to procure such consents and reliance letters, provided the cost thereof is de minimis.
(f) All right, title and interest of Seller in and to the Leases (as hereinafter defined) and, to the extent assignable, and except as provided below, Service Contracts (as hereinafter defined), which, except as provided below, Purchaser will assume at Closing, and all other intangible personal property, now or hereafter owned by Seller or in which Seller otherwise has an interest and used in connection with or arising from the operation of the Premises, or any part thereof, alone or with the Companion Properties, including, without limitation, lease and other contract rights, unexpired warranties (to the extent assignable), the domain name www.countryclubplaza.com , and trade names and trademarks, logos, service marks, copyrights, assumed names, brand names, certification marks, d/b/a’s, symbols, and fictitious names adopted or owned by Seller and utilized in connection with the Premises alone or with one or more of the Companion Properties, including Seller’s trade name “Country Club Plaza” and any trademark utilized in connection therewith, and the names of the Buildings, but excluding (i) the name Highwoods or Highwoods Properties, or any derivation thereof and trademarks adopted by Seller or any of its affiliates which identifies the name Highwoods; and (ii) the website operated under the domain name set forth above and all of its content. A list of all current leases affecting the Premises or any part thereof (hereinafter the “ Leases ”) is attached to the Side Letter as Exhibit C for Tract 17 (with such list being referred to herein as the “ List of Leases ”). The term “ Leases ” shall also include any modifications, amendments, renewals or extensions of existing Leases or any new lease in either case entered into by Seller in accordance with Paragraph 3(c) below, any guaranty of any Lease, and all security deposits given in connection therewith. A list of all service and maintenance agreements and any other agreements, contracts, licenses and permits affecting or pertaining in any way to the operation of the Property or any part thereof, exclusive of the Leases but including any property management agreements, employment agreements, sponsorship agreements and purchase agreements (the “ Service Contracts ”) is attached to the Side Letter as Exhibit D . Seller shall terminate all unassignable contracts, employment agreements, purchase agreements and management agreements

2

affecting or pertaining to the Property by no later than the Closing Date, and Seller shall specifically indicate on Exhibit D which contracts and agreements those are. Except as set forth below, Purchaser shall have the right, by written notice to Seller prior to expiration of the Due Diligence Period (as hereinafter defined), to require Seller to terminate any of the Service Contracts listed on Exhibit D by no later than the Closing Date and Purchaser shall have no obligation to assume any such Service Contracts which are specified to be terminated; provided Purchaser will not terminate any sponsorship agreements listed on Exhibit D , and Purchaser will assume any Service Contract, to the extent of obligations arising after the Closing which Purchaser fails to require (prior to the end of the Due Diligence Period) that Seller terminate prior to Closing as set forth above.
(g) All of Seller’s rights and all of Seller’s obligations set forth in those documents executed and delivered in connection with the issuance of the Bonds (the “ Related 1998 Bond Documents ”), including but not limited to, the following:
(i) Cooperative Agreement for Project Financing dated February 1, 1998, among the City of Kansas City, Missouri, Tax Increment Financing Commission of Kansas City, Missouri, and J.C. Nichols Company;
(ii) Financing Agreement dated February 1, 1998, by and among the City of Kansas City, Missouri, Tax Increment Financing Commission of Kansas City, Missouri, J.C. Nichols Company, and Commerce Bank, N.A.;
(iii) Trust Indenture dated February 1, 1998, by and between Tax Increment Financing Commission of Kansas City, Missouri, and Commerce Bank, N.A.;
(iv) Ground Lease dated February 1, 1998, by and between J.C. Nichols Company, Tax Increment Financing Commission of Kansas City, Missouri; and
(v) Garage Management Agreement dated February 1, 1998, by and between J.C. Nichols Company, Tax Increment Financing Commission of Kansas City, Missouri.
(h) All of Seller’s rights and all of Seller’s obligations with respect to the Property set forth in the Agreement dated October 22, 1997 between the Tax Increment Financing Commission of Kansas City, Missouri (the “ TIF Commission ”) and J.C. Nichols Company for the Implementation of the Country Club Plaza Tax Increment Financing Plan (the “ TIF Contract ”).
(i) All of Seller’s non-exclusive right to access and use 105 parking spaces reserved for Seller’s benefit within any parking facility now or hereinafter existing on that property described in the deed dated February 15, 2008, by and between Highwoods Realty Limited Partnership, as Grantor, and Hood Plaza, LLC, as Grantee, by Instrument Number 2008E0017619 filed in the Real Estate Records of Jackson County, Missouri.
(j) Seller’s right, title, and interest in and to all other personal property and real estate assets or rights, or interest in real estate or personal property,  owned or held by Seller and located on the Property (exclusive of personal property owned by Seller that is located in Seller’s division office and is not used solely in the operation of the Property and/or not otherwise shown on Exhibit B , or otherwise used in the ownership or operation of the Property, alone or with the other Companion Properties, not otherwise included in Paragraphs 1(c) , 1(d) , and 1(e) .

3

Subject to the terms and conditions of this Agreement, HSI shall sell, convey and assign to Purchaser, and Purchaser shall purchase from HSI, those Taxable Tax Increment Revenue Bonds, Series 1998 (47 th & Penn Redevelopment Project) owned by HSI (the “ Bonds ”).

2. PURCHASE PRICE; BOND PURCHASE PRICE. The total consideration to be paid by Purchaser to Seller and HSI for the Property and the Bonds (the “ Purchase Price ”) is as set forth in the Side Letter. The Purchase Price (exclusive of the portion attributable to the Bond Purchase Price [as defined below]) is subject to prorations and adjustments as provided below in this Agreement, and shall be paid as follows:
(a)    Within two (2) Business Days after the Effective Date (as defined in Section 14 below), Purchaser shall pay and deliver to Chicago Title Insurance Company, c/o Maxine J. Lievois, Esq., 1050 Wilshire Drive, Suite 310, Troy, Michigan 48084 (the “ Title Company ” or “ Escrowee ”), in United States currency, the sum set forth in the Side Letter as “Earnest Money” for Tract 17 as a down payment of the Purchase Price (such amount, together with all interest earned thereon, being referred to herein as the “ Earnest Money ”). If, prior to Closing (as defined in Paragraph 5(a) below), Seller notifies Purchaser of its intent to postpone the Closing Date for up to thirty (30) days as set forth in Paragraph 5(a)(i) below, and in the further event Purchaser shall default under this Agreement, and as a result thereof the Earnest Money is payable to Seller, Purchaser shall be obligated to pay to Seller (in addition to the Earnest Money being paid to Seller as a result of Purchaser’s default) the sum set forth in the Side Letter as the “Extension Obligation Payment” for Tract 17 (the “Extension Obligation Payment” ), which Extension Obligation Payment shall be payable by Purchaser to Seller within five (5) Business Days after the Escrow Agent has paid the Earnest Money to Seller as a result of Purchaser’s default hereunder. Macerich and Taubman agree to be liable to Seller, severally, and not jointly, each, for and only for (i) the payment of the Extension Obligation Payment (as set forth in Paragraph 2(a) hereof, and (ii) Purchaser’s Continuing Obligations (described in Paragraph 8(e) hereof.
The Title Company shall hold the Earnest Money in trust for the mutual benefit of the parties. If Purchaser so directs the Escrowee, Escrowee shall invest the Earnest Money in an interest bearing savings account or short term U.S. Treasury Bills or similar cash equivalent securities. Any and all interest earned on the Earnest Money shall be reported to Purchaser’s federal tax identification number and shall be payable to Purchaser or Seller as set forth herein. The Earnest Money shall be held by Escrowee pursuant to a joint order escrow agreement between Seller and Purchaser in the form of the Escrow Agreement attached as Exhibit E to the Side Letter.
If the transaction contemplated by this Agreement closes in accordance with the terms and conditions of this Agreement, at Closing, the Earnest Money shall be delivered by the Escrowee to Seller as payment toward the Purchase Price. Notwithstanding anything to the contrary contained herein, if a contingency or condition set forth in this Agreement for the benefit of Purchaser is not satisfied or removed and if this Agreement is terminated by Purchaser pursuant to any of the terms hereof for any reason other than solely by reason of a default on the part of Purchaser, the Earnest Money shall be delivered by the Escrowee to Purchaser, together with any and all interest earned thereon, without deduction or setoff. If the transaction fails to close solely due to a default on the part of Purchaser, the Earnest Money, including all interest accrued thereon, shall be delivered by the Escrowee to Seller as its sole and exclusive remedy (provided Purchaser shall be responsible for its Continuing Obligations [as hereinafter defined in Paragraph 8(e) below] regardless of the amount thereof).
(b)    At Closing, Purchaser shall pay to Seller the Purchase Price less the Earnest Money delivered by the Escrowee to Seller, subject to the adjustments and prorations required by this

4

Agreement, by wire transfer of federal funds to an account designated by Seller in writing by notice to Purchaser (unless the Closing is conducted through escrow with Escrowee, in which case the funds shall be wire transferred to Escrowee) (such amount, as adjusted, being referred to herein as the “ Cash Balance ”). Provided Seller delivers a gap indemnity to the Title Company as contemplated herein by Paragraph 5(b)(12) acceptable to the Title Company, Purchaser’s lender, if any, agrees to release funds prior to recordation of the applicable Closing Documents, and all of the conditions in Purchaser’s closing escrow instructions are satisfied, the Cash Balance shall be wire transferred to Seller’s designated account before any Closing Documents described in Paragraph 5(b) which are required to be recorded, are in fact recorded.
(c)    At Closing, Purchaser, or an affiliate of Purchaser, shall pay to HSI Eleven Million One Hundred Ninety Five Thousand and no/100 Dollars ($11,195,000.00) (the “ Bond Purchase Price ”), which amount is included in the Purchase Price. The Bond Purchase Price shall be payable at Closing by wire transfer of federal funds to an account designated by HSI in writing.
(d)    Purchaser shall also pay to Seller, upon the execution hereof, One Hundred and no/100 Dollars ($100.00) as independent consideration for this Agreement and the terms and provisions hereof (the “ Independent Consideration ”).

3.    OPERATION OF PROPERTY THROUGH CLOSING. From the Effective Date through and including the first to occur of (i) the termination of this Agreement or (ii) the Closing Date:
(a)    Seller shall manage and operate the Property in the same manner that it is currently managing same, shall timely perform all of Seller’s obligations under the Leases and Service Contracts, keep the Premises and the tangible Personal Property in the same condition and repair as exists as of the date hereof, ordinary wear and tear and casualty damage excepted, and maintain the current casualty insurance policies insuring the Property and the Personal Property as they currently exist.
(b)    Without the prior written consent of Purchaser, which consent may be withheld in Purchaser’s sole and absolute discretion, Seller shall not sell, mortgage, pledge, hypothecate or otherwise transfer or dispose of all or any part of the Property or any interest therein, or enter into any agreement to do so, nor shall Seller initiate, consent to, approve or otherwise take any action with respect to zoning or any other governmental rules or regulations presently applicable to all or any part of the Property, other than (i) such action as is necessary to maintain the Property in compliance with such rules and regulations applicable to all or any part thereof, (ii) Seller’s support of Kansas City, Missouri’s proposed amendment to Chapter 88 of the Kansas City, Missouri Zoning and Development Code (Case No. 254-S-315, as reflected by that City Planning and Development Department, Development Management Division’s Staff Report dated December 15, 2015, Applicant Jeffrey Williams, Director of City Planning and Development), provided, Seller will not take any direct action in connection with such support without prior notice to Purchaser and affording Purchaser an opportunity to participate therein, (iii) leases and modifications thereof as set forth in Paragraph 3(c) below, and (iv) general utility easements if necessary for the proper operation thereof.
(c)    During the Due Diligence Period (as defined in Section 8 below), Seller shall not enter into new leases and service contracts, and terminate, modify, renew, extend or amend any existing Lease or Service Contract with respect to the Property without Purchaser’s consent, not to be unreasonably withheld or delayed by Purchaser. After the expiration of the Due Diligence Period, without the prior written consent of Purchaser, which consent may be withheld in Purchaser’s sole discretion, Seller shall not terminate, modify, extend, or amend any Service Contract or Lease or enter into any new service contract or lease with respect to the Property. Seller shall deliver written notice to Purchaser requesting Purchaser’s consent to any termination, modification, extension or amendment, or any new lease or service contract, which notice

5

shall include all pertinent terms and conditions of such termination, modification, extension, amendment, or new lease or service contract, and information with respect to any third party agreements for the payment of real estate commissions or tenant improvement costs in connection therewith. If Purchaser fails to grant or deny its consent within five (5) business days following receipt of such written notice, then Purchaser’s consent shall be deemed given, so long as Seller’s request contains the following legend in capital letters of not less than twelve-point type: “IF PURCHASER FAILS TO PROVIDE THE DISAPPROVAL OR APPROVAL REQUESTED IN THIS NOTICE WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT OF THIS NOTICE, PURCHASER’S APPROVAL WILL BE DEEMED TO HAVE BEEN GIVEN.” Any modification, extension, amendment, or any new lease or service contract entered into in accordance with this Paragraph 3(c) shall be deemed a “Lease” or “Service Contract” subject to the covenants, representations and warranties set forth in this Agreement with respect to Leases and Service Contracts.
(d)    Seller shall perform all of its obligations under the Leases and Service Contracts.
(e)    Seller shall promptly advise Purchaser of (i) any litigation, arbitration proceeding or administrative hearing (including condemnation) before any governmental body or agency which affects the Property and of which Seller is aware, and (ii) receipt of a written notice of any default by Seller under any Service Contract. Lease or other contract affecting the Property, or any such written notice given by Seller.
(f)    Seller shall not, without the prior written approval of Purchaser, cancel, amend or modify, in a manner adverse to the Property, any license or permit held by Seller with respect to the Property or any part thereof which would be binding upon Purchaser after the Closing, other than in the ordinary course of business consistent with past practices.
(g)    Seller shall not commence any new proceeding to contest taxes with respect to the Property without Purchaser’s prior written consent, not to be unreasonably withheld.
(h)    Seller will not institute any proceedings for termination or eviction against a tenant without Purchaser’s prior approval which approval shall be in Purchaser’s reasonable discretion. Seller shall not institute a proceeding for delinquent rent (including, without limitation, base rent, percentage rent, tax, CAM, insurance or other payments due under any Lease) without Purchaser’s approval, which approval shall be in Purchaser’s sole discretion; provided, however, notwithstanding anything contained herein to the contrary, Purchaser’s approval shall not be unreasonably withheld in connection with Seller instituting any such proceedings prior to the Closing if such actions are reasonably consistent with Seller’s operation of the Property in the ordinary course of business consistent with past practice.

4.    STATUS OF TITLE TO PROPERTY.

(a) State of Title . At Closing, Seller shall convey to Purchaser the entire fee simple estate in and to the Land by a recordable special warranty deed, subject only to: (i) the Permitted Exceptions (as defined in Paragraph 4(b)(iii) ); (ii) the lien of general real estate taxes for the current year and subsequent years which are not yet due or payable, and (iii) the rights of the Tenants under the Leases as Tenants only, and provided further, that notwithstanding the foregoing or any other provisions of this Agreement to the contrary, Seller shall pay and have discharged or released at or prior to Closing (x) all mortgages, deeds of trust, deeds to secure debt, collateral assignments of leases and rents, UCC financing statements and mechanics liens affecting or encumbering any part of the Property and (y) all other liens and encumbrances

6

and judgments, etc. of a definite ascertainable amount (collectively the “ Monetary Liens ”) and in no event shall the term “Permitted Exceptions” include any Monetary Liens whether or not Purchaser objects thereto.

(b)     Survey and Title Matters .

(i)     Survey Matters . On or before the third (3rd) business day after the Effective Date, Seller will cause a survey of the Premises recently procured by Seller (the “ Seller Survey ”) to be delivered to Purchaser. The Purchaser may procure its own survey of the Premises, or may procure updates of the Seller Survey (either of which is hereinafter referred to as “ Purchaser Survey ”).

(ii)     Title Commitment . On or before the fifth (5th) business day after the Effective Date, Seller shall deliver to Purchaser (i) a current commitment for an owner’s policy of title insurance issued by the Title Company committing to insure the fee simple title to the Land (the “ Title Commitment ”) setting forth the status of title of the Land and committing the Title Company to issue to Purchaser at then-current standard premium rates an ALTA owner’s policy of title insurance (using Form 2006) insuring Purchaser’s fee simple interest in the Land in the amount of the Purchase Price, without the standard exceptions, and insuring the “gap” (the “ Title Insurance Policy ”), and (ii) a legible copy of all recorded instruments (if any) that are disclosed in Schedule B-Section 2 of the Title Commitment.

(iii)     Survey and Title Objections . Prior to the expiration of the Due Diligence Period, Purchaser may give Seller written notice of any objections which Purchaser has to Seller’s title to the Land, including without limitation, objections that are revealed by the Seller Survey and the Purchaser Survey, and any objection to the Schedule B-Section 2 exceptions encumbering the Land set forth in the Title Commitment or to any other matter in the Title Commitment (“ Unacceptable Title Matters ”), except that Purchaser need not give notice of any Monetary Liens, as all Monetary Liens shall be deemed to be Unacceptable Title Matters subject to Seller’s obligation to remove the same as set forth in this Paragraph 4(b)(iii).  If Purchaser gives notice of Unacceptable Title Matters as permitted above, Seller may have twenty (20) days from receipt of such notice (the “ Cure Period ”) to have such Unacceptable Title Matters cured or removed in a manner satisfactory to Purchaser in its sole and absolute discretion, or to give Purchaser written notice of Seller’s inability or refusal to cure or remove the Unacceptable Title Matters (but notwithstanding anything contained herein or elsewhere in this Agreement to the contrary, Seller shall cause all Monetary Liens to be discharged and released on or prior to Closing). If such Unacceptable Title Matters are not properly cured or removed in a manner satisfactory to Purchaser in its sole and absolute discretion, within the Cure Period, Purchaser may either elect (i) to terminate this Agreement and receive a refund of the Earnest Money, or (ii) to accept and approve all Unacceptable Title Matters (except Seller must remove Monetary Liens), in which case they will become Permitted Exceptions, and to complete the purchase of the Property (provided however, that if Seller shall fail to remove any Monetary Lien, Purchaser shall also retain and have all the rights set forth in Paragraph 11(a)(i) and (ii) of this Agreement) as well as the right to pay such Monetary Lien(s) by deducting from the Purchase Price amounts to have such Monetary Lien(s) extinguished. Purchaser shall notify Seller of its choice of (i) or (ii) above within ten (10) Business Days following the expiration of the Cure Period; provided, however, if Purchaser fails to notify Seller of its election within said ten (10) Business Day period, Purchaser shall be deemed conclusively to have elected the option set forth in (i) immediately

7

above. Any matter not revealed in the Title Commitment and discovered by the Purchaser or the Title Company and added to the Title Commitment prior to Closing (collectively “ Intervening Title Matters ”) shall be governed by the terms of Paragraph 4(b)(iv) below. In the event Seller elects to cure an Unaccepted Title Matter and such cure requires more than twenty (20) days to effectuate such cure, the Closing may be extended by Seller, if necessary, to accommodate the time periods referenced in this Section for Seller’s cure of an Unacceptable Title Matter, but not longer than twenty (20) days. The term “ Permitted Exceptions ” means all exceptions to Seller’s title identified on Section B-Schedule 2 of the Title Commitment and matters shown on the Purchaser Survey which in either case are not objected to by Purchaser and those Unacceptable Title Matters which are either cured by Seller as provided herein or the objection to which is subsequently waived by Purchaser in writing.

(iv)     Intervening Title Objections . In the event there are any Intervening Title Matters which are discovered by or disclosed to Purchaser prior to Closing, the Purchaser shall advise Seller of same and the Closing shall be postponed for no more than seven (7) days in order to permit Seller a reasonable opportunity to cure or remove same in a manner satisfactory to Purchaser in its sole and absolute discretion. If Seller does not cure or remove the Intervening Title Matters within the 7-day period referenced above in a manner satisfactory to Purchaser in its sole and absolute discretion, Purchaser shall elect within ten (10) business days following the end of such 7-day period either (i) to waive its objection(s) to such Intervening Title Matters(s) (except for Monetary Liens and any matters created by Seller after the date of the Title Commitment which Seller shall discharge and pay or otherwise correct at or prior to Closing) and to close its purchase of the Property with no reduction in the Purchase Price, in which event such Intervening Title Matter(s) shall (except for any Monetary Liens) be deemed Permitted Exceptions for purposes of this Agreement, or (ii) to terminate this Agreement and receive a refund of the Earnest Money. If Purchaser fails to notify Seller of its election within said ten (10) business day period, Purchaser shall be deemed conclusively to have elected the option set forth in (i) immediately above.

5.    CLOSING.

(a) Closing Date . The Closing of the transaction contemplated by this Agreement (that is, the payment of the Cash Balance, the transfer of title to the Property, and the satisfaction of all other terms and conditions of this Agreement) shall occur at the offices of the Title Company on February 1, 2016, subject to extension by Seller (i) for a period of up to thirty (30) days in Seller’s sole discretion upon five (5) Business Days’ prior written notice by Seller to Purchaser, and (ii) as provided in this Agreement to allow Seller to cure an Unacceptable Title Matter, and/or procure the Tax Increment Financing Commission’s consents set forth in Paragraphs 9(a)(4) and 9(a)(5) (the “ TIF Consents ”), or at such other time and place as Seller and Purchaser shall subsequently agree upon in writing (the “ Closing Date ”). With respect to an extension of the Closing Date to obtain the TIF Consents, in the event the TIF Consents have not been procured by the Closing Date, Purchaser shall have the right to extend the Closing Date on a month to month basis, up to a maximum of six (6) months. The Closing may take place in escrow through the Title Company by delivery of documents and escrow instructions to the Title Company. Except as set forth in Paragraph 12(c) hereof, time is of the essence with respect to the Closing Date. The Closing and Purchaser’s obligation to close shall be subject to the satisfaction of the conditions precedent set forth in Section 9 herein, unless waived in writing by Purchaser.

8

(b) Closing Documents .

(i)     Seller . Not later than three (3) Business Days prior to the Closing Date, Seller shall deliver or cause to be delivered to Purchaser an unexecuted copy of each of the following (the original of each, in form and substance acceptable to Purchaser to be executed, if necessary, and delivered one (1) Business Day prior to Closing to the Escrowee):
(1)    a special warranty deed for the Land in the form attached to the Side Letter as Exhibit F (the “ Deed ”), subject only to the Permitted Exceptions (exclusive of Monetary Liens which must be removed by Seller, it being understood that Seller has no obligation to remove any Permitted Exceptions other than Monetary Liens), sufficient to transfer and convey to Purchaser fee simple and marketable title to the Land as required by this Agreement, and otherwise in form acceptable to the Title Company;
(2)    a bill of sale in form attached to the Side Letter as Exhibit G , sufficient to transfer to Purchaser title to the tangible Personal Property and containing appropriate warranties of title and condition as required by this Agreement;
(3)    a letter in the form attached to the Side Letter as Exhibit G-1 advising the Tenants under the Leases of the change in ownership of the Premises and directing them to pay rent and other sums to Purchaser or as Purchaser may direct, and a letter in form attached to the Side Letter as Exhibit G-2 advising all vendors under those Service Contracts, and any other contracts assumed by Purchaser, of the change in ownership thereof and directing them to deal with Purchaser or its designee from and after the Closing with respect to any such Service Contracts;
(4)    any and all affidavits, certificates or other documents required by the Title Company (and reasonably approved by Seller and Purchaser) in order to cause the Title Company to issue the Title Insurance Policy in the form and condition required by this Agreement, and Seller and Purchaser shall comply with any requirement set forth in Schedule B-Section 1 of the Title Commitment and shall provide a fully executed instrument in recordable form with respect to each Monetary Lien which unconditionally releases and discharges such Monetary Liens with respect to the Land and all of which shall have been approved by the Title Company;
(5)    an Assignment and Assumption of the Leases, in form attached to the Side Letter as Exhibit H , (the “ Assignment and Assumption of Leases ”);
(6)    an Assignment and Assumption of Assumed Service Contracts in form attached to the Side Letter as Exhibit I (the “ Assignment and Assumption of Service Contracts ”);
(7)    the originals of the Leases and Service Contracts and any and all building plans, the Seller Survey, site plans, engineering plans and studies, utility plans, landscaping plans, development plans, specifications, drawings, construction drawings, lease files of existing Tenants in possession or control of Seller and related to the Premises;

9

(8)    all keys and security codes for the Premises, including without limitation, keys for maintenance shops, storage rooms and maintenance equipment, with identification of the lock to which each such key relates;
(9)    good standing certificates from the Secretary of State of North Carolina evidencing Seller’s good standing, a good standing certificate from the Secretary of State of Missouri evidencing Seller’s good standing as a foreign entity qualified to do business in the State of Missouri, and a certificate from an appropriate officer of Seller, or its sole general partner (if applicable) or other appropriate person certifying the resolutions adopted by them and such other evidence of their power and authority to enter into this Agreement and to convey the Property as Purchaser reasonably requests;
(10)    Seller’s affidavit stating, under penalty of perjury, Seller’s U.S. taxpayer identification number and that Seller is not a foreign person within the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended (the “ Internal Revenue Code ”);
(11)    all other documents reasonably required by Purchaser or the Title Company (and reasonably approved by Seller) in order to perfect the conveyance, transfer and assignment of the Property to Purchaser and the issuance of the Title Insurance Policy;
(12)    if required by the Title Company, a personal undertaking gap indemnity executed by Seller, or an affiliate of Seller, shall be delivered to the Title Company protecting, defending and saving harmless the Title Company and Purchaser from and against any defect, lien, encumbrance or adverse claim or other matter, if any, created and first appearing in the public records of Jackson County, Missouri, after the effective date of the Title Commitment issued by the Title Company for the benefit of Purchaser;
(13)    to the extent assignable, an assignment of Seller’s interest in all warranties, guaranties of contractors, subcontractors, suppliers and manufacturers, licenses, permits, records and plans and miscellaneous items in the form attached to the Side Letter as Exhibit J (the “ General Assignment ”);
(14)    originals of all assignable warranties and guaranties of contractors, subcontractors, suppliers and manufacturers, and to the extent to be enforceable is required to be re-issued to Purchaser, re-issued to Purchaser (at Purchaser’s expense, provided the costs thereof are commercially reasonable);
(15)    a certificate reaffirming Seller’s representations and warranties as of the Closing Date, provided that if any such representations and warranties are no longer true, Seller shall specify to Purchaser the reason therefor and in what respect any such representation or warranty is no longer true;
(16)    an assignment of the Bonds in the form attached to the Side Letter as Exhibit K ;

10

(17)    an assignment and assumption of the Related 1998 Bond Documents in the form attached to the Side Letter as Exhibit L (“ Assignment and Assumption of Related 1998 Bond Documents ”);
(18)    an assignment and assumption of the TIF Contract in the form attached to the Side Letter as Exhibit M (“ Assignment and Assumption of TIF Contract ”);
(19)    an assignment and assumption of Parking Rights in the form attached to the Side Letter as Exhibit N (“ Assignment and Assumption of Parking Rights ”);
(20)    a closing statement;
(21)    required transfer tax forms and affidavits;
(22)    an updated Rent Roll as of five (5) Business Days prior to Closing;
(23)    an updated Delinquency Report as of five (5) Business Days prior to Closing;
(24)    originals of tenant estoppel letters, and/or other estoppel letters which have been received by Seller;
(25)    a legal opinion required to be delivered by the Related 1998 Bond Documents upon an assignment of the Bonds; and
(26)    an Investor’s Certificate required to be delivered by the Related 1998 Bond Documents upon an assignment of the Bonds.

(ii)     Purchaser . Purchaser shall deliver or cause to be delivered to Seller one (1) Business Day prior to Closing (except the Cash Balance which will be delivered at Closing):
(1)    the Cash Balance;
(2)    duly executed Assignment and Assumption of Leases;
(3)    duly executed Assignment and Assumption of Assumed Service Contracts;
(4)    duly executed General Assignment;
(5)    any and all affidavits, certificates or other documents required by the Title Company (and reasonably approved by Purchaser) in order to cause the Title Company to issue the Title Insurance Policy in the form and condition required by this Agreement;
(6)    the Assignment and Assumption of Related 1998 Bond Documents;

11

(7)    the Assignment and Assumption of TIF Contract; and
(8)     the closing statement.

(c)     Closing Prorations and Adjustments . Statements of prorations and other adjustments shall be prepared by Seller in conformity with the provisions of this Agreement and submitted to Purchaser for review and approval not less than five (5) Business Days prior to the Closing Date. For purposes of prorations, Purchaser shall be deemed the owner of the Property on the Closing Date. In addition to prorations and other adjustments that may otherwise be provided for in this Agreement, the following items are to be prorated or adjusted, as the case may require, as of the Closing Date:
(i)    to the extent not paid directly by the Tenants under the Leases, non-delinquent real estate and personal property taxes and assessments (which are billed on a calendar year basis, in arrears) for the calendar year of Closing (initially prorated on the basis of the most recent ascertainable bill, but subject to reproration upon issuance of the actual bill therefor to effectuate the actual proration), provided that, to the extent not paid directly by the Tenants under the Leases, Seller shall pay prior to Closing, or give Purchaser a credit at Closing for, the amount of all installments of special assessments levied prior to Closing which are payable after Closing, excluding, however, any NID special assessments levied by the Tax Increment Financing Commission of Kansas City, Missouri which are applied to the payment of sums due under the Bonds;
(ii)    the rent, charges and other amounts payable by Tenants to Seller (as landlord) under the Leases for the month of Closing (including amounts payable by Tenants to Seller under the Leases which are billed for trash collection, a marketing fund and common area maintenance and similar expense pass-through items), provided, however, that rent payable to Seller by any Tenant but uncollected as of the Closing Date (the “ Delinquent Amounts ”), exclusive of “percentage rent” (as that term is referred to and/or defined in the Leases) and expense “pass throughs” paid on a periodic basis after Closing, both of which are dealt with in subparagraphs (xi) and (xii) of this Paragraph 5(c) , shall not be prorated, but Purchaser shall cause the Delinquent Amounts to be remitted to Seller if, as and when collected (and Purchaser shall make a commercially reasonable good faith effort to collect such Delinquent Amounts for a period of three months following Closing), but Purchaser shall not be required to take legal action with respect to Delinquent Amounts. Seller shall not have the right to bring an action for Delinquent Amounts. At Closing, Seller shall deliver to Purchaser a schedule of all Delinquent Amounts. Notwithstanding the foregoing or any direction from Tenants to the contrary, rental and other payments received by Purchaser from Tenants shall first be applied toward Purchaser’s actual out-of-pocket costs of collection, then toward the payment of rent and other charges owed to Purchaser for periods after the Closing, and any excess monies received shall be applied toward the payment of Delinquent Amounts. Purchaser may not waive any Delinquent Amounts or modify a Lease so as to reduce amounts or charges owed under Leases for any period in which Purchaser is entitled to receive a share of charges or amounts, without first obtaining the written consent of Seller. Seller shall not have the right to collect same after Closing. Additionally, rents collected by Seller during the month of Closing to be applied for the month or months after Closing shall be credited to the Purchaser by allowing the Purchaser a credit against the Purchase Price;
(iii)    the full amount of security deposits, if any, paid under the Leases, and not theretofore applied, together with interest thereon to the extent any interest is required by

12

law or otherwise to be paid to the Tenants, shall be delivered by Seller to Purchaser on the Closing Date, or alternatively, Purchaser shall receive a credit against the Purchase Price in the amount of such security deposits (together with interest, if applicable). Prior to the expiration of the Due Diligence Period, Seller will only apply such security deposits in the manner set forth in the Leases and will provide written notice of any such application to Purchaser prior to the expiration of the Due Diligence Period. In the event the security deposits are provided in the form of a letter of credit or guaranty (the “ Non-cash Security Deposits ”), the Non-cash Security Deposits shall be transferred to Purchaser at Closing by way of assignment or other appropriate method, and Seller shall be responsible for the payment of all transfer fees, if any, in connection therewith;
(iv)    to the extent not paid directly by the Tenants under the Leases, water, electric, cable, internet, telephone and all other utility and fuel charges shall be prorated ratably on the basis of the last ascertainable bills (and reprorated upon receipt of the actual bills or invoices) unless final meter readings and final invoices can be obtained. To the extent practicable, Seller shall cause meters for utilities to be read not more than one (1) business day prior to the Closing Date;
(v)    amounts paid or owing under any Service Contracts;
(vi)    assignable license and permit fees;
(vii)    assessments, special assessments and other periodic payments and charges levied by, or payable to, any owners’ association and/or pursuant to any restrictive covenants, declaration(s) of covenants, conditions and restrictions or other similar documents, and existing exceptions encumbering the Property;
(viii)    Except as set forth below in this Paragraph 5(c)(viii) , Seller agrees to pay any unpaid leasing commissions due at Closing or after with respect to the current term of any Lease. Notwithstanding the preceding sentence, all obligations to pay leasing commissions due from and after the Effective Date as the result of the execution of a new Lease, the renewal of a Lease, the extension of a term of a Lease, or the expansion of the premises demised by a Lease to space within a Building on the Premises (collectively, the “ Commissions Assumed ”), shall be assumed by Purchaser on the Closing Date without adjustment to the Purchase Price if, and only if, (i) such new Lease, renewal, extension, or expansion was approved by Purchaser pursuant to Paragraph 3(c) above and any commission due in connection therewith was also approved by Purchaser, or (ii) such commission is listed on Exhibit C-2 attached to the Side Letter. Seller shall receive a credit on the Purchase Price at Closing for any Commissions Assumed paid by Seller prior to Closing. Notwithstanding the foregoing, to the extent any portion of the term of any such Lease (and any such renewals, extensions and expansions) for which a Commissions Assumed is due, occurs prior to the Closing Date, the amount of the Purchase Price will be reduced by a pro rata share of such Commissions Assumed based upon the percentage of total rent for such term (exclusive of any renewal options) which is due and payable prior to the Closing Date, provided no leasing commissions shall be payable by Purchaser to Seller or any affiliate of Seller who may participate in the procurement of a Lease for the Property.
(ix)    All obligations to pay the cost of any Tenant improvement work owed or to be owed in connection with new leases executed after the Effective Date, (provided such new lease is entered into in accordance with the terms of Paragraph 3(c) hereof, or the result

13

of (i) the renewal or the extension of the term of a Lease which is exercised after the Effective Date in accordance with the terms of Paragraph 3(c) hereof or the express terms of such Lease, (ii) the relocation after the Effective Date of a Tenant currently a party to a Lease within a building on the Land or any building on the Companion Properties (as defined in Paragraph 9(a)(5) below) (“ Building ”) pursuant to an amendment entered into in accordance with the terms of Paragraph 3(c) hereof, (iii) the expansion after the Effective Date of the Premises demised by a Lease to space within a Building in accordance with the terms of Paragraph 3(c) hereof or the express terms of such Lease, or (iv) the exercise after the Effective Date of an option to lease additional space in a Building pursuant to the express terms set forth in a Lease [collectively, “ New TI Costs ”), which New TI Costs shall include, but not be limited to, all sums expended by Seller, if any, for such New TI Costs and any other work on the Premises not necessarily in a tenant space in a Building made in accordance with the terms of an applicable Lease]) shall be assumed and paid by Purchaser on the Closing Date by reimbursing Seller for the New TI Costs previously paid by Seller (if any), or if the New TI Costs are not yet due and payable by paying the same when they otherwise become due without an adjustment to the Purchase Price. Notwithstanding the foregoing, to the extent any portion of the term of a Lease, and renewals, extensions, expansions and relocations for which New TI Costs are incurred prior to the Closing Date, the amount of the Purchase Price will be reduced by a pro rata share of such New TI Costs based upon the percentage of such term (exclusive of any renewal options) which occurs prior the Closing Date. Notwithstanding anything contained herein to the contrary, Seller shall be solely responsible for any and all Tenant improvement costs and Tenant incentives not yet paid in connection with the current term of any Lease not falling within the provisions of (i) through (iv) of this Paragraph 5(c)(ix) ) (“ Seller TI Costs ”), which includes Tenant improvement costs to be constructed in connection with the current term of any Lease in existence as of the date hereof for those Tenants of the Property set forth on Exhibit C-1 with respect to Tract 17 on such Exhibit, which Exhibit is attached to the Side Letter, and any Lease renewals, extensions, expansions and relocations occurring prior to the Effective Date. Purchaser shall receive a credit against the Purchase Price at Closing in an amount equal to the then-unpaid Seller TI Costs. At the Closing, Seller shall deliver to Purchaser a schedule certified by Seller setting forth all Seller TI Costs which have not been paid in full at Closing, which certificate will survive Closing. Upon the Closing, Purchaser shall receive a credit against the Purchase Price for any unpaid Seller TI Costs;
(x)    Seller shall make year-end reconciliations of reimbursements owed by Tenants to the landlord under the Leases of the Tenants’ share of property taxes and assessments, insurance premiums, common area maintenance and other expenses related to the operation of the Property for the calendar year 2015. Seller will bill the Tenants for these sums, however, it is anticipated that these sums shall be paid to Purchaser (as new landlord under the Leases) after Closing. Purchaser shall remit all sums paid by Tenants to Purchaser for the 2015 expense pass-throughs referenced above within five (5) business days after Purchaser’s receipt of same.
Purchaser shall make year-end reconciliations of reimbursements owed by Tenants to the landlord under the Leases of the Tenants’ share of property taxes and assessments, insurance premiums, common area maintenance and other expenses related to the operation of the Property for the calendar year of Closing (collectively, “ Reimbursable Tenant Expenses ”). In order to enable Purchaser to make any year-end reconciliations of Reimbursable Tenant Expenses for the calendar year of Closing, Seller shall deliver to Purchaser, in writing, within forty five (45) days after the Closing Date, the Reimbursable Tenant

14

Expenses actually paid or incurred by Seller for the portion of the calendar year of Closing during which Seller owned the Property (“ Seller’s Actual Reimbursable Tenant Expenses ”) and the Tenant reimbursements for such Reimbursable Tenant Expenses actually paid to Seller by Tenants for the portion of the calendar year of Closing during which Seller owned the Property (“ Seller’s Actual Tenant Reimbursements ”). On or before March 31 of the calendar year immediately after Closing, Purchaser shall deliver to Seller a reconciliation statement (the “ Reconciliation Statement ”) setting forth (i) the Actual Reimbursable Tenant Expenses paid or incurred during calendar year of Closing, (ii) the Actual Tenant Reimbursements actually paid in calendar year of Closing, and (iii) a calculation of the difference between the two (i.e., establishing that the Actual Reimbursable Tenant Expenses were either more or less than the Actual Tenant Reimbursements for the calendar year of Closing), with Purchaser utilizing the information delivered to Purchaser by Seller related to the period of the calendar year of Closing which is prior to the Closing Date.
Any amount due Seller pursuant to the foregoing calculation (in the event Seller’s Actual Tenant Reimbursements for the period from January 1 of the year of Closing to the day prior to Closing are less than Seller’s Actual Reimbursable Tenant Expenses for the same period) or Purchaser (in the event the Actual Tenant Reimbursements are more than the Actual Reimbursable Tenant Expenses), as the case may be, shall be paid by Purchaser to Seller within fourteen (14) business days after Purchaser has collected such sums from any Tenant who owes same, or if Seller owes Purchaser for any such sum, Seller shall pay to Purchaser within fourteen (14) business days after delivery of the Reconciliation Statement to Seller, all such sums owed by Seller to Purchaser. If Purchaser is paid any such amount by Seller, Purchaser thereafter shall be obligated to promptly remit the applicable portion to the particular Tenants entitled thereto. If Purchaser has transferred its interest in the Property to a successor-in-interest or assignee prior to such date, then, on or before the transfer of its interest in the Property, Purchaser shall (i) in writing expressly obligate such successor-in-interest or assignee to be bound by the provisions of this Section, and (ii) deliver written notice of such transfer to Seller, and thereafter Seller shall make the deliveries specified above to Purchaser’s successor-in-interest or assignee. Seller’s Reconciliation Statement shall be final and binding for purposes of this Agreement; and
(xi)    With respect to percentage rent (as that term is referred to and/or defined in the Leases), Seller shall have delivered to Purchaser prior to Closing, a copy of all Tenant records which Seller has received and were required by the Leases to be delivered by Tenants to Seller as landlord thereunder related to the Tenants’ percentage rent payment obligation due under the Leases prior to Closing. Purchaser shall deliver to Seller within fifteen (15) business days after Purchaser’s receipt of all similar Tenant records related to percentage rent that was due but unpaid for the months prior to Closing, as well as percentage rent payable for the month of Closing. Seller shall be entitled to all percentage rent collected by Purchaser after Closing which is attributable to the months prior to Closing and which remain unpaid on the Closing Date. Seller shall also be entitled to its “prorata share” of percentage rent attributable to the month of Closing. Seller’s “prorata share” of percentage rent attributable to the month of Closing shall be determined by multiplying the amount of percentage rent attributable to the month of Closing by a fraction, the numerator of which is the number of days Seller owned the Property during the month of Closing and the denominator of which is the number of days in such month. Purchaser shall be entitled to all percentage rent attributable to the month of Closing not paid to Seller as set forth in the preceding sentence.
Except with respect to general real estate and personal property taxes not paid by the Tenants under the Leases (which shall be reprorated upon the issuance of the actual bills, if necessary), any proration which must be estimated at Closing shall be reprorated and finally adjusted as soon as practicable after the

15

Closing Date with any refunds payable to Seller or Purchaser to be made as soon as practicable; otherwise all prorations shall be final. To the extent applicable, amounts on deposit by Seller with utility companies, if any, shall not be prorated; provided, however, that promptly following the Closing, Purchaser shall substitute its own deposit for any amounts on deposit by Seller with utility companies and shall refund to Seller any portion of Seller’s deposit which is refunded to Purchaser by the utility company. The rights, covenants and obligations contained in this Paragraph 5(c) shall survive the Closing.

(d)     Closing Costs .

(i)     Transfer Taxes . All state, county, city and other transfer taxes, if any, and documentary stamps, intangible taxes and similar taxes or charges, if any, shall be paid by Seller.

(ii)     Title Insurance . The cost of the Title Commitment, including all searches and lien letters related thereto, and the premium for the Title Insurance Policy shall be shared by Seller and Purchaser in equal amounts. Any endorsements issued in connection therewith requested by Purchaser shall be paid for by Purchaser.

(iii)     Surveys . The cost of the Purchaser Survey, if any, shall be paid for by the Purchaser. The cost of the Seller Survey shall be shared by Seller and Purchaser in equal amounts, provided the cost of the Seller Survey and Seller Surveys (as defined in the companion contracts) do not exceed $125,000.00 in total.

(iv)     Escrow and Closing Charges . Seller and Purchaser shall each pay one-half of the escrow charges charged by the Escrowee and any closing costs charged by the Escrowee (including all closing and settlement fees).

(v)     Recording Charges . Purchaser shall pay the cost of recording the Deeds.

(vi)     Attorney and Consultant Fees . Seller and Purchaser shall each be responsible for the fees and costs of their respective attorneys and consultants.

(vii)     Environmental Reports . Purchaser and Seller shall share in equal amounts the cost of any recently procured environmental reports (that is, environmental reports specifically procured by Seller in anticipation of this transaction and dated within six (6) months of the Closing) delivered to Purchaser by Seller after the date hereof (the “Recent Environmental Reports” ), provided the costs of the Recent Environmental Reports and the Recent Environmental Reports (as defined in the Companion Contracts) do not exceed $35,000.00 in total.

(viii)     Zoning Reports . Purchaser and Seller shall share in equal amounts the cost of any recently procured zoning report for the Property (that is, a zoning report specifically

16

procured by Seller in anticipation of this transaction and dated within six (6) months of the Closing [“ Recent Zoning Report ”]) delivered to Purchaser by Seller after the date hereof, provided the costs of the Recent Zoning Report and the Recent Zoning Reports (as described in the Companion Contracts) do not exceed $25,000.00 in total.

(e)     Possession . Upon Closing, Seller shall deliver to Purchaser full, complete and exclusive possession of the Property, subject only to the Leases.

6.    CASUALTY LOSS AND CONDEMNATION.
If, prior to Closing any Building(s) on the Land or any building(s) on a Companion Property (a “Companion Building ”) shall be condemned, or destroyed or materially damaged by fire or other casualty (that is, damage or destruction which Purchaser reasonably believes could be in excess of Ten Million and No/100 Dollars ($10,000,000.00) for such Building(s) or Companion Building(s), or in the event of a condemnation which materially prevents access to the Property or a Companion Property, or any part thereof), Purchaser shall have the option which shall be exercised not later than ten (10) business days following the date Purchaser receives written notice from Seller of the condemnation or damage (with Closing being extended, if necessary, to accommodate such time periods) either to (a) to terminate this Agreement, or (b) to consummate the transaction contemplated by this Agreement notwithstanding such condemnation, destruction or material damage. If Purchaser elects to consummate the transaction contemplated by this Agreement, Purchaser shall be entitled to receive all of the condemnation proceeds or settle the loss under all policies of insurance applicable to the destruction or damage and receive all of the proceeds of insurance applicable thereto, and Seller shall, at Closing and thereafter, execute and deliver to Purchaser all required proofs of loss, assignments of claims and other similar items. If there is any other damage or destruction to any Building(s) or Companion Building(s) (that is, damage or destruction to such Building(s) or Companion Building(s) which Purchaser reasonably believes could be Ten Million and No/100 Dollars ($10,000,000.00) or less for such Building(s) or Companion Building(s), or which does not substantially prevent access to the Land or the Companion Properties or otherwise materially adversely affect the Property or the Companion Properties), at Purchaser’s election, Seller shall either completely repair such damage prior to Closing in a manner satisfactory to Purchaser or, at Seller’s option, either assign all insurance claims pertaining to such damage or destruction to Purchaser by executing and delivering to Purchaser at Closing and thereafter all required proofs of loss, assignments of claims and other similar items, or allow Purchaser a credit against the Purchase Price in an amount equal to Purchaser’s reasonably estimated cost of repair. If Purchaser elects to take an assignment of all insurance claims as provided for in this Section 6 , Purchaser shall receive at Closing a credit against the Cash Balance in an amount equal to any deductible(s) and uninsured amounts applicable thereto.

7.    REPRESENTATIONS AND WARRANTIES.

(a)     Representations and Warranties of Seller . Seller represents and warrants to Purchaser that the following are true, complete and correct as of the Effective Date and as of the Closing Date:
(i)    Seller will warrant and forever defend the Property and the quiet and peaceful possession of Purchaser, its successors and assigns, against all and every person or persons claiming the whole or any part thereof by, through or under Seller.

17

(ii)    The Property is not subject to any lease, license, or occupancy agreement or to any agreement to lease, or to Seller’s knowledge, any sublease (other than the Leases disclosed on Exhibit C ). The Property is not subject to any agreement to sell, mortgage or otherwise encumber or dispose of Seller’s interest in the Property or any part thereof (nor any options or rights of first or last refusal or first or last offer or other agreements to do any of the foregoing), except for this Agreement, and, with respect to options or rights of first or last refusal relating to the lease of space within the Buildings, as set forth in the Leases.
(iii)    To Seller’s knowledge, there is no action, proceeding (including, without limitation, condemnation proceedings) or investigation pending or, to Seller’s knowledge, threatened against Seller related to the Property or the Leases or any licenses, permits or approvals related to the Leases or Property or the construction or use thereof before any court or governmental department, commission, board, agency or instrumentality; and Seller does not know of any basis for any such action, proceeding or investigation, including without limitation any condemnation action.
(iv)    Seller has not received written notice from any governmental authority, governing body of a property owner’s association or similar body of which the Premises is a part, or any other person or entity entitled to enforce any right, covenant or restriction against the Seller or the Property of any violation or breach of, as applicable, (a) any zoning, building, fire or health code or any other federal, state, or municipal statute, ordinance rule or regulation applicable (or alleged to be applicable) to the Property, or any part thereof, (b) any restrictive covenants encumbering the Premises, or (c) agreement with Seller relating to the Property or any part thereof.
(v)    The Service Contracts described on Exhibit D attached hereto have been or will be delivered to Purchaser for review, are true, accurate and complete copies thereof, and comprise every service contract, relationship and commitment, oral or written, which affects the operation of the Property (but not the leasing), or any portion thereof, to which Seller is a party, or by which Seller is bound.
(vi)    Seller is a North Carolina limited partnership which is duly organized, validly existing and qualified and empowered to conduct its business, is duly qualified to do business and is in good standing in all jurisdictions where such qualification is necessary to carry on their business as now conducted, and has full power and authority to enter into and fully perform and comply with the terms of this Agreement. Neither the execution and delivery of this Agreement nor its performance by Seller will violate its constituent documents, does not and will not conflict with, violate or result in the breach of any condition or provision of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance, upon any of its assets by reason of the terms of any contract, mortgage, deed of trust, deed to secure debt, lien, lease, agreement, indenture instrument or judgment or law, rule or regulation to which it is a party or by which it or the Property is bound. The execution and delivery of this Agreement and the performance by Seller of its obligations hereunder have been duly authorized by such action as may be required by law and Seller’s constituent documents and no further action or approval is required in order to constitute this Agreement as a binding and enforceable obligation of Seller.
(vii)    The List of Leases affecting the Premises attached to the Side Letter as Exhibit C is true and correct in all respects as of the Effective Date and constitute all of

18

the Leases encumbering the Premises as of the date hereof, exclusive of subleases and short term occupancy and licensing agreements not known to Seller. Seller has delivered to Purchaser true, complete, and correct copies of the Leases on the List of Leases. Each such Lease (i) constitutes the entire agreement between Seller and the tenant thereunder, (ii) is in full force and effect, and (iii) has not been amended, supplemented or otherwise modified except as shown on the List of Leases. Notwithstanding anything to the contrary contained herein, Seller does not represent or warrant that any particular Lease will be in full force and effect as of the Closing or that any particular Lease will be free from default as of Closing. Seller has received no written notice of a default by Seller (as landlord) under the Leases. With respect to Commissions Assumed (as defined in Paragraph 5(c)(viii) , to Seller’s knowledge, all Commissions Assumed related to the Property are set forth on Exhibit C-1 with respect to Tract 17 on such Exhibit. With respect to Seller TI Costs (as defined in Paragraph 5(c)(ix) , to Seller’s knowledge, all Seller TI Costs related to the Property are set forth on Exhibit C-1 with respect to Tract 17 on such Exhibit.
(viii)    Seller is not a person or entity with whom Purchaser is restricted from doing business with under regulations of the Office of Foreign Asset Control (“ OFAC ”) of the Department of the Treasury (including, but not limited to, those named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transaction or be otherwise associated with such person or entities.
(ix)    Seller is not a “foreign person” as defined in Section 1445(f)(3) of the Internal Revenue Code.
(x)    There are no proceedings pending or, to the best of Seller’s knowledge, threatened by or against Seller in bankruptcy, insolvency or reorganization in any state or federal court.
(xi)    Except as set forth on Schedule 7(a)(xi) attached to the Side Letter, there is no actual or pending, or to the best of Seller’s knowledge, threatened, litigation, suit, action or proceeding by any organization, person, individual or governmental agency against Seller with respect to the Property or which would affect Seller’s ability to perform its obligations hereunder or against the Property as of the date of this Agreement.
(xii)     Schedule 7(a)(xii)_ attached to the Side Letter is a rent roll for the Property as of the date shown thereon in the form which Seller relies upon in the operation of the Property (and Seller is not aware of any material inaccuracies therein) (the “ Rent Roll ”) which indicates the amount of fixed rent payable for the then current month, and other matters shown thereon. The Rent Roll shall be updated as set forth in Paragraph 5(b)(i)(22) .
(xiii)     Schedule 7(a)(xiii) attached to the Side Letter contains a list, as of the Effective Date (to be updated by Seller as of the Closing) in the form which Seller relies upon in the operation of the Property (and Seller is not aware of any material inaccuracies therein), of (x) the Security Deposits (whether in the form of cash, letter of credit or otherwise) under the Leases being held by Seller, including whether any such Security Deposit is being held in the form of a letter of credit, and (y) the prepaid rents under the Leases or credits which

19

reduce future rents. Seller has complied with the terms of the Leases and all applicable laws regarding the handling and application of such Security Deposits.
(xiv)    Except as set forth on Schedule 7(a)(xiv) attached to the Side Letter, (i) Seller has not delivered written notice to any tenants of any tenant default, or received written notices alleging any landlord default under Leases that remain uncured and (ii)  Seller has not received a written notice from a tenant under a Lease that such tenant has an offset, counterclaim, or defense to its obligation to pay rent in accordance with the terms of such Lease after the Effective Date.
(xv)    Other than the TIF Contract and the Related 1998 Bond Documents, there are no other contracts or agreements with the TIF Commission relating to the Property. The TIF Contract and the Related 1998 Bond Documents are in full force and effect and have not been amended or modified. Seller is not in default under the TIF Contract and the Related 1998 Bond Documents, and to Seller’s knowledge, no other party (that is, other than the Seller) to the TIF Contract and the Related 1998 Bond Documents is in default of their obligations thereunder.
(xvi)     Schedule 7(a)(xvi) attached to the Side Letter contains a copy of an aging report dated as of the date shown thereon with respect to the Property in the form which Seller relies upon in the operation of the Property (and Seller is not aware of any material inaccuracies therein) (the “ Delinquency Report ”). The Delinquency Report shall be updated at Closing.
(xvii)    Except as set forth on Schedule 7(a)(xvii) attached to the Side Letter, Seller has not received any written notice from any governmental body or agency of any pending or currently threatened condemnation proceeding against the Property or any formal notice of a current condemnation proceeding with respect to the Property.
(xviii)    To Seller’s knowledge, Seller has provided or made available to Purchaser complete copies of all environmental reports in its possession dated subsequent to July 13, 1998, including the Recent Environmental Reports. Other than as disclosed in the Recent Environmental Reports, (i) Seller has not received any written notice from any governmental body or agency of any violation or alleged violation of any applicable law (including Environmental Laws) with respect to Hazardous Materials (as hereinafter defined) on its Property and (ii) Seller does not have actual knowledge of any violations of any Environmental Laws (as defined below) with respect to Hazardous Materials on its Property. “ Hazardous Materials ” shall mean any hazardous or toxic materials, substances or wastes, such as (a) substances defined as “hazardous substances,” “hazardous materials,” “hazardous waste,” “toxic waste,” “toxic pollutant,” “contaminant,” “toxic substances” or words of similar import in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“ CERCLA ”), the Resource Conservation and Recovery Act of 1976 (“ RCRA ”), the Superfund Amendment and Reauthorization Act (commonly known as “ SARA ”), and/or the Hazardous Materials Transportation Act (49 USC Section 1801, et seq.), or any other federal, state or county legislation or ordinances applicable, as any of such acts, legislation or ordinances are amended from time to; (b) any materials, substances or wastes which are toxic, ignitable, corrosive or reactive and which are regulated by any state or local governmental authority or any agency of the United States of America; and (c) asbestos, petroleum and petroleum based products, urea formaldehyde foam insulation, polychlorinated biphenyls (PCBs), and Freon and other chlorofluorocarbons (collectively, “ Environmental Laws ”).

20

(xix)    Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors; (iii) suffered the appointment of a receiver to take possession of any of its assets; or (iv) suffered the attachment or other judicial seizure of any of its assets.
(xx)     Schedule 7(a)(xx) attached to the Side Letter contains a true, complete and correct list of all of the Related 1998 Bond Documents. The Related 1998 Bond Documents have not been amended, supplemented or otherwise modified except as (i) shown on such Schedule 7(a)(xx), true, complete and correct copies of the Related 1998 Bond Documents have been provided, or made available, to Purchaser. The outstanding principal amount of the Related 1998 Bond Documents as of the Effective Date is Eleven Million One Hundred Ninety Five Thousand and no/100 Dollars ($11,195,000.00). All interest and other amounts that are currently due and payable on the Related 1998 Bond Documents have been paid in full.
(xxi)    To Seller’s knowledge, Exhibit D contains a list of all of the contracts and agreements relating to the Property other than the Leases and the Schedule B-II exceptions set forth in the Title Commitment. Seller has not received or delivered any written notice of any defaults under such contracts or agreements that remain uncured, and there are no other such contracts or agreements that will be binding on Purchaser after Closing.
(xxii) Except as set forth on Schedule 7(a)(xxii) attached to the Side Letter, Seller is not currently protesting or challenging the assessed value of the Property for real estate tax purposes. To Seller’s knowledge, there are no impositions of new special assessments with respect to the Property.
(xxiii)    The operating statements which have been delivered or made available to Purchaser were prepared in the ordinary course of Seller’s business. The tenant sales reports that Seller delivered or made available to Purchaser were prepared in the ordinary course of business and are based on information provided by the applicable tenants.
(xxiv)    Although Seller does have employees at the Premises, all employment contracts with respect to such employees will be terminated as of, or soon after, the Closing, and Purchaser will have no liability to Seller’s employees under these employment contracts, under any collective bargaining agreement or other union contract, or otherwise.
(xxv)    Except as set forth on Schedule 7(a)(xxv) attached to the Side Letter, and except for the Companion Properties, neither Seller, nor any of its affiliates, owns, leases, ground leases or has an option to purchase, lease or ground lease any real property within the one-mile radius of the Property.
(xxvi)    Except for (i) street parking, (ii) parking in any TIF finance parking facilities, (iii) Seller’s non-exclusive right to access and use 105 parking spaces as set forth in Paragraph 1(i) of this Agreement, (iv) the rights set forth in the Declaration of Access and Parking Easements described in Document #K2495P1791 recorded in the real estate records of Jackson County, Missouri, and (v) the rights set forth in the Declaration of Covenants and Restrictions for Neptune Condominiums, recorded December 27, 1991, as Document No. K-1003223, in Book K-2194 at Page 448 and First Amendment to Declaration of Covenants and Restrictions for Neptune Condominium recorded December 21, 2011 at Page 2011E0119312 and re-recorded December 22, 2011, as Document No. 2011E0119579 , the P

21

roperty does not now rely on any property not included in the Property and the Companion Property for parking required under a zoning law or for any other reason.
(xxvii)    Other than as set forth on Schedule 7(a)(xxvii) attached to the Side Letter, Seller has not received written notice in the prior two (2) years from any Tenant of the Premises which states they intend to close their store located on the Premises.
Notwithstanding anything contained herein to the contrary, if Seller obtains actual knowledge during the pendency of this Agreement prior to Closing of any matters which make any of its representations or warranties untrue, Seller shall promptly disclose such matters to Purchaser in writing.
Any representation or warranty by Seller made to Seller’s knowledge, actual knowledge, or words of similar meaning, shall mean the knowledge of Glenn Stephenson (who is a vice president of Seller’s general partner being responsible for managing the Property), Jeffrey D. Miller, Senior Vice President and General Counsel of Seller’s general partner, or Carman J. Liuzzo, Vice President of Seller’s general partner, but no others, who are collectively knowledgeable about the matters set forth in the Seller’s representations above, provided, none of them are knowledgeable about all such matters.

(b)     Accuracy at Closing . Seller represents and warrants to Purchaser that, as of the Closing Date, each of the warranties and representations set forth in Paragraph 7(a) above shall be true, complete and correct in every respect except for inaccuracies resulting from changes in the condition of the Land or Buildings occurring prior to Closing which are specifically permitted by this Agreement (but such exception for any such inaccuracies shall be disregarded in determining whether any condition to Purchaser’s obligation to close has been satisfied). If the foregoing representations and warranties are true as of the Effective Date, but are not true in every respect at any time prior to and/or as of the Closing Date, and Purchaser first discovers such untruth prior to Closing, Purchaser shall not be entitled to consider the untruth of the representation or warranty as an event of default under this Agreement (unless the untruth is caused by Seller), but instead Purchaser may, at its election and as its sole remedy, terminate this Agreement, but only in the event the facts and/or circumstances causing the representation or warranty to not be true have a material adverse effect on the use, operation or value of the Property, in which event all obligations of Purchaser under this Agreement shall terminate, and the Earnest Money shall be refunded to Purchaser. In the event a representation or warranty made above is not true as of the date made, or in the event a representation or warranty made above is true as of the Effective Date, but not true in every material respect as of the Closing Date as a result of Seller’s act, Purchaser may terminate this Agreement, the Earnest Money shall be promptly returned to Purchaser, and Seller shall pay to Purchaser for Purchaser’s due diligence and out-of-pocket costs, legal fees and damages (but only as evidenced by reasonable and proper invoices therefor), and the parties shall have no further obligations to the other hereunder, except for Purchaser’s Continuing Obligations.

(c)     Limitation on Purchaser’s Claims . Purchaser shall have no claim against Seller for damages if any representation or warranty of Seller in Paragraph 7(a) of this Agreement was untrue, inaccurate or incorrect when made by Seller as of the Effective Date, but the facts or circumstances which caused such representation or warranty to be untrue, inaccurate or incorrect are made known to Purchaser by Seller at least ten (10) Business Days prior to Closing, and Purchaser closes the transaction with such knowledge. Furthermore, in the event Purchaser does not have actual knowledge prior to Closing that a representation or warranty of Seller made herein was untrue, inaccurate or incorrect when made (or remains as such at Closing) and closes this transaction without such knowledge, Seller shall have no liability to Purchaser unless the damages suffered by Purchaser because of such untrue, inaccurate or incorrect representation or warranty exceed, in the aggregate, Two Hundred Fifty Thousand and No/100 Dollars

22

($250,000.00) including damages under Companion Agreements (the “ Basket ”), in which event, Purchaser shall be entitled to file a claim for all actual damages suffered by Purchaser, including the Basket amount. Furthermore, Seller’s aggregate liability for all claims arising out of breaches of Seller’s representations and warranties with respect to the Property under this Agreement and the Companion Properties under the Companion Contracts shall not exceed Nineteen Million Eight Hundred Thousand and No/100 Dollars ($19,800,000.00) (the “ Cap ”) in the aggregate under any circumstances, provided however, the Cap shall not apply to the limitation on Seller’s aggregate liability for losses and damages incurred by Purchaser as the result of a breach of the Seller’s representations contained in Section 7(a)(i) , (vi) , (viii) , and/or (ix) . Purchaser shall provide written notice to Seller within thirty (30) days after the expiration of the Limitation Period (as defined in Paragraph 7(d) below) of any alleged breach of such warranties or representations that occurred prior to the expiration of the Limitation Period and shall allow Seller thirty (30) days within which to cure such breach, or, if such breach cannot reasonably be cured within thirty (30) days and Seller notifies Purchaser in writing within said thirty (30) days, an additional time period, but not to exceed thirty (30) days, so long as such cure has been commenced within such thirty (30) day period and is being diligently pursued. If Seller fails to cure such breach after written notice and within such cure period, Purchaser’s sole and exclusive remedy shall be an action at law for actual damages (subject to the Basket and Cap) as a consequence thereof, which must be commenced, if at all, within ninety (90) days after the end of the applicable cure period.

(d)     Survival of Representations and Warranties . The representations and warranties set forth in this Section 7 shall expire on that date which is three hundred sixty-five (365) days after the Closing Date (the “ Limitation Period ”), except for claims which Purchaser shall have given Seller written notice of within such Limitation Period. Any such claim shall (subject to Paragraph 11(a) hereof) be limited to actual damages (including without limitation, actual and reasonable attorneys’ fees and expenses and court costs) suffered by Purchaser and shall exclude any claims for punitive, indirect, consequential or secondary damages, which are expressly waived hereby, unless actually paid by Purchaser as a result of a claim by a third‑party.

(e)    “ As-Is” Purchase . Purchaser acknowledges for Purchaser and Purchaser’s successors, and assigns, that Purchaser will have been given a reasonable opportunity to inspect and investigate the Property, all improvements thereon and all aspects relating thereto, including all documents and contracts related to the Property, either independently or through agents and experts of Purchaser’s choosing. Except for the representations, warranties and agreements of Seller set forth in this Agreement or the closing documents delivered pursuant to this Agreement (“ Closing Documents ”), Seller and Purchaser agree that the Property shall be sold and that Purchaser shall accept possession of the Property on the Closing Date “as is, where is, with all faults” with no right of set-off or reduction in the Purchase Price, and except for the representations, warranties and agreements of Seller as expressly set forth in this Agreement or the Closing Documents that such sale shall be without representation or warranty of any kind, express or implied, including without limitation, warranty of income which may be earned in the future, future operating expenses, uses, merchantability or fitness for a particular purpose (but specifically excluding the limited or special warranty of title to be given in the Deeds from Seller to Purchaser), and Seller does hereby disclaim and renounce any such representation or warranty not set forth in this Agreement or in the Closing Documents. Except for Seller’s representations, warranties and agreements which are expressly set forth in this Agreement or the Closing Documents, Purchaser specifically acknowledges that Purchaser is not relying on any representations or warranties of any kind whatsoever, express or implied, from Seller or Seller’s agent, or other agents or brokers as to the following matters: (1) the condition or safety of the Property or any sewer, heating and electrical systems, roofing, air conditioning, if any, foundations, soils and geology including hazardous materials; lot size, or suitability of the Property or its Improvements for a particular purpose; (2)

23

whether the appliances, if any, plumbing or utilities are in working order; (3) the habitability or suitability for occupancy of any structure and the quality of its construction; (4) the fitness of any Personal Property; or (5) whether the Improvements are structurally sound, in good condition, or in compliance with applicable city, county, state or federal statutes, codes or ordinances (including any laws governing or regulating environmental matters). Except for Seller’s representations, warranties and agreements expressly set forth in this Agreement or the Closing Documents, Purchaser is relying solely upon its own inspection of the Property with regard to the above-referenced matters, and not upon any representations to the above-referenced matters, and not upon any representations made to it by any person whomsoever concerning such matters.

(f)     Representations and Warranties of Purchaser . Purchaser hereby represents and warrants to Seller as follows:
(i)    Purchaser has been duly formed, is validly existing and is, or will be by Closing, duly qualified to do business and will be in good standing in all jurisdictions where such qualification is necessary to carry on its business as now conducted and is duly qualified or in the process of becoming duly qualified in all jurisdictions where the ownership of its property would necessitate such qualification. Upon the approval of this transaction by the board of directors of Macerich and Taubman, pursuant to Section 13 below, Purchaser has all power and authority under its constituent documents to enter into this Agreement and to enter into and deliver all of the documents and instruments required to be executed and delivered by Purchaser and to perform its obligations hereunder and thereunder;
(ii)    The execution and delivery of this Agreement and the performance by Purchaser of its obligations hereunder have been duly authorized by such action as may be required by law and Purchaser’s constituent documents and no further action or approval is required in order to constitute this Agreement as a binding and enforceable obligation of Purchaser; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder on the part of Purchaser do not and will not violate the constituent documents of Purchaser, and do not and will not conflict with or result in the breach of any condition or provision of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Purchaser by reason of the terms of any contract, mortgage, lien, lease, agreement, indenture, instrument or judgment to which Purchaser is a party or which is or purports to be binding upon Purchaser or which affects Purchaser; and no action by any federal, state or municipal or other governmental department, commission, board, bureau or instrumentality is necessary to make this Agreement a valid instrument binding upon Purchaser in accordance with its terms;
(iii)    To the actual knowledge of Purchaser, Purchaser is not in violation of any of its organizational documents;
(iv)    To the actual knowledge of Purchaser, there is no existing or threatened action nor governmental proceeding of any kind involving Purchaser, any of its assets, or the operation thereof which if determined adversely to Purchaser or its assets would interfere with Purchaser’s ability to close the transaction contemplated hereby; and
(v)    To its knowledge, Purchaser is not a person or entity with whom Seller is restricted from doing business with under regulations of OFAC of the Department of the

24

Treasury (including, but not limited to, those named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, but not limited to, the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not knowingly engage in any dealings or transaction with such persons or entities in connection with this transaction.

(g)     Representations and Warranties of HSI . HSI hereby represents and warrants to Purchaser as follows:
(i)    HSI is the sole owner of the Bonds, which are owned by HSI free and clear or all encumbrances; and
(ii)    The unpaid principal amount of the Bonds as of the date hereof is Eleven Million One Hundred Ninety Five Thousand and no/100 Dollars ($11,195,000.00), which amount is a valid obligation of the issuer thereof to be paid in accordance with the terms of the Bonds.

8.    INSPECTION.

(a)     Due Diligence Period . During the period commencing on the Effective Date (as defined in Section 14 hereof) and continuing until and including 5:00 P.M., eastern time, on December 31, 2015, which period is referred to herein as the “ Due Diligence Period ”), Purchaser shall have the right to verify, inspect, investigate and review, in the Purchaser’s sole discretion, and at Purchaser’s sole expense, but subject to the terms, conditions and restrictions set forth in next paragraph hereof: (i) the physical condition of the Property, including the surveying and testing thereof, including without limitation systems, structural and environmental investigation related thereto, (ii) the Leases, (iii) the Service Contracts, and (iv) any and all other documentation or evidence relating to the zoning, construction, income, expense, operation, leasing, options and maintenance and repair of the Property and to meet with and interview the Tenants under the Leases and with all governmental authorities who have jurisdiction of, or are in any way related to, the Premises.
An environmental investigation may include a Phase I environmental assessment (the “ Phase I ”) and if recommended by the Phase I consultant, a Phase II environmental assessment (the “ Phase II ”), but such Phase II may only be procured with Seller’s prior written consent, not to be unreasonably withheld or delayed. If Seller does not consent to such Phase II Assessment of the Premises within five (5) days of Purchaser’s request therefor, this Agreement may be terminated by Purchaser in which event all obligations of Purchaser under this Agreement shall terminate, the Earnest Money and all interest thereon shall be refunded to Purchaser, and the parties shall have no further obligations to the other hereunder, except for Purchaser’s Continuing Obligations, but only if Purchaser notifies Seller of such termination within ten (10) Business Days after Seller withholds its consent for Purchaser to procure a Phase II of the Premises. If, as the result of a Phase II, any local, state or federal environmental agency is required to be notified with respect to information set forth in such Phase II, Seller shall be informed that a regulatory agency must be notified and Seller shall have a right to participate in any meetings or discussions with such regulatory agency concerning the results of a Phase II.

25

(b)     Termination of Agreement . Except as otherwise stated in this Agreement, if for any reason whatsoever (or for no reason) Purchaser determines in its sole and absolute discretion that the Property is unsuitable for its purposes or that Purchaser has elected not to purchase the Property, and delivers written notice to Seller of such decision within the Due Diligence Period, the Earnest Money shall be refunded to Purchaser (it being understood that the Independent Consideration is consideration for Purchaser’s right to terminate this Agreement pursuant to this Paragraph 8(b) , at which time this Agreement and the Companion Contracts shall be null and void and neither party shall have any rights or obligations under this Agreement, or under the Companion Contracts, except for (i) Purchaser’s Continuing Obligations hereunder (as defined in Paragraph 8(e) below), and (ii) Purchaser’s Continuing Obligations as described in the Companion Contracts. In the event Purchaser terminates this Agreement pursuant to this Paragraph 8(b) , or should this Agreement be terminated for any other reason, Purchaser shall deliver to Seller, within ten (10) days after request from Seller all reports and due diligence information procured by Purchaser during the Due Diligence Period related to the Property. The obligation of Purchaser in this Paragraph 8(b) shall survive the Closing.

(c)     General Inspection of Property . From the Effective Date through Closing, and subject to the provisions of the second paragraph of Paragraph 8(a) above, Purchaser and its agents, engineers, surveyors, appraisers, auditors and other representatives shall, upon at least two (2) business days’ notice to Seller (which may also be made by telephone or email), have the right to enter upon the Premises to consult with the Tenants, inspect, examine, survey, obtain engineering inspections, perform environmental testing and studies, appraise, and otherwise do that which, in the opinion of Purchaser, is reasonably necessary to determine the boundaries, acreage and condition of the Property and to determine the suitability of the Property for the uses intended by Purchaser (including, without limitation, inspect, review and copy any and all documents in the possession of Seller, its agents or employees, and which pertain to the construction, use, occupancy or operation of the Property or any part thereof). In engaging in these activities, Purchaser and its agents will not materially interfere with the Tenants’ use and enjoyment of their leased premises, provided, Seller may in its discretion be present for such inspection and consultation with the Tenants, but only if such inspections and consultations are taking place on the Premises. Seller shall cooperate with Purchaser in connection with Purchaser’s activities, and during ordinary business hours, after reasonable advance notice (two (2) business days being deemed reasonable and telephonic or email notice being sufficient) to Seller, Seller shall make the Property and Seller’s books, files and records currently utilized by Seller in connection with its operation of the Premises available for examination by Purchaser and Purchaser’s agents and representatives, who shall have the right, all at Purchaser’s expense, to make copies of such books, files and records and to extract therefrom such information as they may desire, and who shall have the right to verify the income and expenses, profits and losses, and operational results of the Property for the three (3) calendar years prior to the Closing Date and for the current calendar year to date. Purchaser shall also have the right to meet with all local governmental authorities having jurisdiction (with regard to matters such as zoning, building code, ad valorem tax, and similar matters) with respect to the Property, and Seller shall have the right to attend any such meetings, provided, however, Purchaser shall not have the right to confer with the TIF Commission in person, via telephone or electronic mail without Seller’s participation (unless Seller otherwise consents), and Seller agrees to notify Purchaser of any scheduled meetings (in person, by telephone or electronic mail) it may have with the TIF Commission regarding the TIF Commission’s consent to that portion of this transaction in which the TIF Contract and the Related 1998 Bond Documents are affected.

(d)     Insurance . Before Purchaser begins its general inspection of the Property, and at all time during such inspections, Purchaser shall maintain commercial general liability insurance with limits of at least Two Million Dollars ($2,000,000.00) (which may be satisfied through a combination of a primary liability policy and an excess liability umbrella policy). Purchaser shall deliver to Seller a certificate evidencing the commercial general liability and property damage insurance before conducting any

26

investigation on the Premises. The insurance policy shall be written by a reputable insurance company authorized to provide coverage in the State of Missouri. Such insurance policies shall name the Seller as an additional insured.

(e)     Indemnity . Purchaser shall indemnify and hold Seller and the Tenants harmless from and against any losses and damages for death or injury to persons or for physical damage to property suffered by Seller and/or the Tenants caused by Purchaser’s due diligence activities hereunder; provided, however, that this indemnity shall not apply to the extent such liability arises in connection with the negligence or willful misconduct of Seller, nor to the extent that such liability relates to the discovery of the presence or Release of Hazardous Materials not placed on the Premises by Purchaser or its agents or the discovery of any possible violations of applicable law including, without limitation, any Environmental Laws or any reporting obligations under Environmental Laws or other laws or any existing conditions at the Property. The indemnity obligations of Purchaser to Seller and the Tenants under this Paragraph 8(e) shall survive the termination of this Agreement for any reason, and such surviving obligations are referred to herein as “ Purchaser’s Continuing Obligations .”

9.    PURCHASER’S AND SELLER’S CONDITIONS PRECEDENT TO CLOSING.
(a)    The obligations of Purchaser under this Agreement are contingent and conditional upon the following conditions being satisfied. In the event any of the conditions set forth below are not satisfied at Closing, Purchaser may (i) terminate this Agreement, or (ii) waive such failed condition and close this transaction as contemplated hereby. In the event Purchaser terminates this Agreement, the Earnest Money shall be promptly returned to Purchaser, the Companion Contracts shall be deemed terminated, and neither party shall have any obligation to the other hereunder, or under the Companion Contracts (as defined below), except for (i) Purchaser’s Continuing Obligations, unless such termination is due to Seller’s default under this Agreement or any Companion Contract, [ and (ii) if Seller or Purchaser has defaulted under this Agreement, the defaulting party shall remain liable to the other party hereto for the defaulting party’s breach of its obligations under this Agreement and the Companion Contracts Purchaser’s conditions precedent are:
(i) Each and every representation and warranty of Seller with respect to the Property must be true, correct and complete in all material respects when given and also as of Closing as if first then given, provided, however, if any of the representations and warranties of Seller with respect to the Property are true as of the Effective Date, but are not true at any time prior to and/or as of the Closing Date as a result of a matter, circumstance or event beyond the reasonable control of Seller or of which Seller had no actual knowledge, and Purchaser first discovers such untruth prior to Closing, Purchaser shall not be entitled to consider the untruth of the representation or warranty as an event of default under this Agreement, but instead Purchaser may, at its election, terminate this Agreement (and, upon such termination, the Earnest Money together with interest which has been earned thereon shall be refunded to Purchaser). In the event a representation or warranty made above is true as of the Effective Date, but is not true in every material respect at any time prior to and/or as of the Closing Date as a result of Seller’s intentional act, if Purchaser terminates this Agreement as a result thereof, Seller shall pay to Purchaser for Purchaser’s due diligence and out-of-pocket costs, legal fees and damages, as evidenced by proper invoices therefor, and all obligations of Purchaser under this Agreement shall terminate, except for Purchaser’s Continuing Obligations), or waive the failure of this condition precedent and close this

27

transaction, in which event Purchaser shall have no claim against Seller after Closing for the failure of this condition as to such particular representation or warranty.
(ii) As of Closing, Seller shall have fully performed and satisfied in all material respects each and every obligation, term and condition to be performed and satisfied by Seller under this Agreement.
(iii) Seller shall have delivered to Purchaser, no less than five (5) Business Days before Closing, Tenant Estoppel Certificates (as defined below) not older than sixty (60) days prior to Closing (as the Closing may be extended) from the Major Tenants (as defined below) of the Property and the Companion Properties, and with respect to the Property and Companion Properties, other tenants therein which occupy that number of square feet thereof, which when added to the total square feet occupied by the Major Tenants of the Property and the Companion Properties (as set forth in the Rent Roll), equals at least eighty percent (80%) of the occupied square footage of the Buildings and the buildings on the Companion Properties (the “Estoppel Requirement” ). The term “Major Tenants” shall mean the following Tenants: Kansas City Series of Lockton Companies, LLC, Cinemark USA, Inc., Barnes & Noble Booksellers, Inc., Forever 21 Retail, Inc., H & M Hennes & Maurize, L.P., The Gap, Inc., Banana Republic, Nabil I. Haddad and Peggy A. Haddad d/b/a Plaza III , The Limited Stores, Inc., Bravo Development, Inc., d/b/a Brio Tuscan Grille, and Vetterott Educational Centers, Inc., provided that any estoppel certificate under this Paragraph 9(a)(3) shall be acceptable (an “ Acceptable Tenant Estoppel ”) if and only if it ( 1 ) does not indicate the existence of a landlord default under the applicable Lease (other than minor technical or de minimis breaches), ( 2 ) confirms the amount of current base monthly rent under the applicable Lease, ( 3 ) does not indicate any conflict with or contain information contradictory to the terms and conditions of the applicable Lease (other than minor technical or de minimis conflicts or contradictions) and ( 4 ) does not state that the applicable Lease is not in full force and effect, provided, however, any Tenant Estoppel Certificate received from The Gap, Inc. evidencing only unresolved issues with respect to the reconciliation of common area maintenance payments between Seller and The Gap, Inc. shall be an Acceptable Tenant Estoppel as delivered.
For purposes of this Paragraph 9(a)(3) , the term “ Tenant Estoppel Certificate ” shall mean an estoppel certificate executed by Tenants and tenants of the Companion Properties which are either in substantially the form of Exhibit O attached to the Side Letter, such other form as may be contemplated by the terms of any Lease or lease of a Companion Property which is the subject of a Tenant Estoppel Certificate, or the standard form routinely utilized by a national Tenant or national tenants of the Companion Properties from time to time when asked to deliver an estoppel certificate to its landlord. In determining whether the foregoing requirement has been satisfied, Purchaser agrees not to object to any non-material qualifications or modifications which a Tenant or tenant of a Companion Property may make to the form of its Tenant Estoppel Certificate, including qualifying any statement made therein to Tenant’s or a tenant’s (of any Companion Property) knowledge. If any Tenant or tenant of a Company Property indicates in its Tenant Estoppel Certificate that it has a claim (relating to a single default of a non-recurring nature) which would entitle it to set-off the amount of the claim against rent due under its Lease, the amount of such claim is ascertainable, and such default does not give the Tenant or the tenant of a Companion Property the right to terminate its Lease, or such Tenant or a tenant of a Companion Property has otherwise given Purchaser assurances satisfactory to Purchaser that it will not terminate its Lease as the result thereof, Seller shall have the right, at Seller’s sole option, to give Purchaser a credit against the cash portion of the Purchase Price in the amount of the claim, in which event, such Tenant Estoppel Certificate shall be deemed acceptable. Seller

28

shall deliver copies of each signed and completed Tenant Estoppel Certificate to Purchaser promptly after Seller receives it, but no later than five (5) Business Days prior to the Closing Date. Purchaser shall notify Seller within five (5) Business Days following Purchaser’s receipt of any Tenant Estoppel Certificate in the event Purchaser determines that such Tenant Estoppel is not acceptable. If Seller has not obtained Acceptable Tenant Estoppels from a sufficient number of Tenants and tenants of the Companion Properties to meet the Estoppel Requirement, Seller may, at Seller’s option, elect to: (A) adjourn the Closing for a period not to exceed ten (10) business days to continue its efforts to obtain a sufficient number of Tenant Estoppel Certificates and/or (B) execute Seller estoppel certificates/affidavits, in substantially the form of Exhibit O-1 attached to the Side Letter (“ Seller Estoppel Certificates ”), for a sufficient number of Tenants and/or tenants of Companion Properties who fail to deliver Tennant Estoppel Certificates, in each case in order to satisfy the Estoppel Requirement of this Paragraph 9(a)(3) , provided, Seller may not deliver Seller Estoppel Certificates regarding more than 10% of the occupied square footage of all of the Buildings and the buildings on the Companion Properties, and Seller cannot deliver a Seller Estoppel Certificate with respect to the lease of any Major Tenant. Notwithstanding the foregoing provisions of this Paragraph 9(a)(3) , Seller agrees to request a Tenant Estoppel Certificate from each of the Tenants and the tenants of the Companion Properties and to diligently pursue the execution and delivery thereof, provided, Seller shall not be required to pay any money or sue any Tenant or any tenant of a Companion Property to procure a Tenant Estoppel Certificate.
(iv) The TIF Commission shall have consented to the assignment by Seller, and the assumption by Purchaser, of the Related 1998 Bond Documents, which consent shall also include confirmation reasonably satisfactory to Purchaser that Seller is not in default under the Related 1998 Bond Documents. If this condition is not satisfied and Purchaser terminates this Agreement, Seller shall reimburse Purchaser for Purchaser’s due diligence and out-of-pocket costs, including legal fees, as evidenced by proper invoices therefor .
(v) The TIF Commission shall have consented to the assignment by Seller, and the assumption by Purchaser, of the TIF Contract, which consent shall also include confirmation reasonably satisfactory to Purchaser that Seller is not in default under the TIF Contract. If this condition is not satisfied and Purchaser terminates this Agreement, Seller shall reimburse Purchaser for Purchaser’s due diligence and out-of-pocket costs, including legal fees, as evidenced by proper invoices therefor.
(vi) At Closing, Purchaser shall have received the Title Insurance Policy or marked Commitment insuring the Property, said Title Insurance Policy or marked Commitment being in the form required by this Agreement, and containing gap coverage, no standard exceptions, the endorsements requested by Purchaser during the Due Diligence Period, and containing no Schedule B-II exceptions other than the Permitted Exceptions.
(vii) Seller shall have simultaneously, with the Closing of the purchase of the Property pursuant to the terms of this Agreement, sold, transferred and conveyed to Purchaser all of the land, improvements and other property described in those Agreements for the Purchase and Sale of Real Estate of even date herewith between Seller and Purchaser (the “ Companion Properties ”) for the purchase and sale of land located in Country Club Plaza in Kansas City, Missouri (the “ Companion Contracts ”). In the event this Purchaser’s condition precedent is not satisfied, Purchaser shall have no obligation to close the transaction contemplated hereby, and may terminate this Agreement. Upon such termination, the Earnest Money shall be promptly returned to Purchaser and neither party shall have any obligation to the other hereunder except for (i) Purchaser’s Continuing Obligations,(unless due to Seller’s default under any of the Companion Contracts) and (ii) Seller shall remain liable to Purchaser for Seller’s breach of its obligations under this Agreement and the Companion Contracts, and

29

Purchaser shall have all rights and remedies related thereto as set forth in this Agreement and the Companion Contracts.
(b)    The obligations of Seller under this Agreement are contingent and conditional upon the following conditions being satisfied. In the event any of the conditions set forth below are not satisfied at Closing, Seller may (i) terminate this Agreement, or (ii) waive such failed condition and close this transaction as contemplated hereby. In the event Seller terminates this Agreement, upon such termination, the Earnest Money shall be promptly returned to Purchaser and neither party shall have any obligation to the other hereunder except for Purchaser’s Continuing Obligations. Seller’s conditions precedent are:
(i) The TIF Commission shall have consented to the assignment by Seller, and the assumption by Purchaser, of the Related 1998 Bond Documents.
(ii) The Tax Increment Financing Commission shall have consented to the assignment by Seller, and the assumption by Purchaser, of the TIF Contract.
(iii) Purchaser shall have simultaneously, with the Closing of the purchase of the Property pursuant to the terms of this Agreement, purchased from Seller all of the Companion Properties pursuant to the Companion Contracts. Upon such termination, neither party shall have any obligation to the other hereunder except for Purchaser’s Continuing Obligations.

10.    BROKERAGE. Each party represents and warrants to the other party that it has dealt with no broker or finder in connection with this transaction, except for Eastdil Secured, which has represented Seller in this transaction. In the event this transaction closes, Seller agrees to pay a real estate commission to Eastdil Secured pursuant to a separate agreement between Seller and Eastdil Secured. Each party indemnifies and holds the other party harmless from and against any and all other claims of all brokers and finders claiming by, through or under said party and in any way related to the sale and purchase of the Property pursuant to this Agreement, including, without limitation, attorney’s fees incurred by the other party in connection with such claims. The rights, covenants and obligations contained in this Section 10 shall survive the Closing.

11.    DEFAULTS AND REMEDIES.

(a)     Seller’s Breach . Notwithstanding anything to the contrary contained in this Agreement, if Seller fails to perform in accordance with the terms of this Agreement or knowingly and willfully breaches a representation, covenant or warranty made herein, and fails to cure such failure or breach within five (5) business days after written notice, at Purchaser’s option, Purchaser may elect:
(i)    to terminate this Agreement, in which case the Earnest Money shall be returned to Purchaser and this Agreement shall, without further action of the parties, become null and void and neither party shall have any rights or obligations under this Agreement (other than for Purchaser’s Continuing Obligations), except that, in the event specific performance is not an available remedy for Purchaser as a result of Seller’s intentional or willful acts, Seller shall remain liable to Purchaser for Purchaser’s due diligence and out-of-pocket costs, legal fees and damages, but only as evidenced by proper invoices therefor; or

30

(ii)    to sue for, and be entitled to, specific performance of the sale of the Property in accordance with the terms of this Agreement.

(b)     Purchaser’s Breach . Notwithstanding anything to the contrary contained in this Agreement, if Purchaser fails to close the transaction contemplated by this Agreement in violation of this Agreement, and fails to cure such default within five (5) business days after written notice thereof from Seller, the Earnest Money, together with interest which has been earned thereon, shall be delivered to the Seller by the Escrowee as liquidated damages, and the parties shall have no further obligation to the other, except Purchaser shall remain liable to Seller for Purchaser’s Continuing Obligations. Purchaser and Seller acknowledge that the damages to Seller in the event of a breach of this Agreement by Purchaser would be difficult or impossible to determine, that the amount of the Earnest Money represents the parties’ best and most accurate estimate of the damages that would be suffered by Seller if the transaction should fail to close as the result of Purchaser’s default hereunder, and that such estimate is reasonable under the circumstances existing as of the date of this Agreement. Purchaser and Seller agree that Seller’s right to retain the Earnest Money shall be Seller’s sole and exclusive remedy, at law and in equity, in the event of Purchaser’s failure to close the transaction contemplated in violation of this Agreement.

(c)     Survival . The rights, covenants and obligations contained in this Section 11 shall survive the Closing or earlier termination hereof. In addition, the foregoing provisions of this Section 11 shall not be deemed a waiver or limitation of any right or remedy either party may have for a breach by the other party of a representation, warranty or covenant contained in this Agreement that is intended to survive Closing or that is intended to be performed on a post-Closing basis.

12.    MISCELLANEOUS.

(a)     Assignment . Neither this Agreement nor any interest hereunder shall be assigned or transferred by Seller except to a qualified intermediary in furtherance of a like-kind exchange under Section 1031 of the Internal Revenue Code as set forth in Paragraph 12(k) hereof. Except as set forth below, this Agreement may not be assigned or transferred by Purchaser without the prior written consent of Seller. Notwithstanding the preceding sentence, Purchaser may assign and transfer this Agreement to one or more limited liability companies or partnerships which are affiliates of Purchaser, provided, however, such assignment shall not relieve Purchaser from its obligations hereunder. Purchaser may also assign and transfer its right to purchase the Bonds or other components of the Property to one or more affiliates of Purchaser and may transfer to such transferee(s) the rights and remedies with respect thereto.
Seller and its respective successors, subsidiaries, affiliates, officers, directors, shareholders, partners, members, agents and employees (collectively referred to herein as “ Seller Parties ”) shall have no liability to any member of a “syndicate” formed for the purpose of purchasing the Property, or any other property, for any loss, cost, damages, and/or expenses, arising out of, or incurred as the result of, any representation or warranty made by the Purchaser with respect to the Property to the member of any syndicate (in any disclosure document prepared by Purchaser or its representative which is disseminated to any syndicate member, or otherwise), except for representations or warranties made by Purchaser which are consistent with the Seller’s representations and warranties in this Agreement (or any amendment thereto) or in any of the Closing Documents. Also, all knowledge of Purchaser with respect to an untrue, inaccurate or incorrect representation or warranty of Seller shall be and is hereby imputed to any syndicate member. Furthermore, Seller hereby expressly disclaims any representation or warranty made by Purchaser or any of its affiliates

31

(except those made which are consistent with Seller’s representations in Paragraph 7(a) herein), to any assignee in connection with the “syndication” and the sale of the Property thereto or in connection with any other assignment of this Agreement. Additionally, Purchaser hereby agrees to indemnify and hold harmless Seller, and its respective successors, subsidiaries, affiliates, officers, directors, shareholders, partners, members, agents and employees (collectively referred to herein as “ Indemnitees ”) from and against all loss, cost, damages, and/or expenses, including amounts paid, or to be paid, in settlement of any claim made against the Indemnitees arising out of, or incurred as the result of, any representation or warranty made by the Purchaser with respect to the Property to anyone (in any disclosure document or otherwise), except for representations or warranties made by Purchaser which are consistent with the Seller’s representations of Paragraph 7(a) hereof. Subject to the foregoing, this Agreement shall inure to the benefit of and shall be binding upon Seller and Purchaser and their respective successors and assigns.

(b)     Entire Agreement . This Agreement and the Side Letter constitute the entire agreement between Seller and Purchaser with respect to the Property and shall not be modified or amended except in a written document signed by Seller and Purchaser. Any prior agreement or understanding between Seller and Purchaser concerning the Property is hereby rendered null and void.

(c)     Time is of the Essence . Time is of the essence in the execution and performance of this Agreement and of each of its provisions, provided however, if the last day for the exercise of any right (including, without limitation, the last day of the Due Diligence Period) or performance of any obligation by a party hereunder falls on a week-end or federal holiday or state holiday in Missouri (all other days being referred to herein as a “Business Day” ), the time for such exercise or performance shall automatically be extended to the first business day thereafter, or if Closing does not occur on the Closing Date because of the occurrence of a “Force Majeure” (but unless Purchaser and Seller otherwise agrees in writing, no such Force Majeure extension shall exceed fifteen (15) days in the aggregate), the Closing Date shall be extended to the next practical business day subsequent to such occurrence. For purposes of this Section 12 , the term “Force Majeure” means acts of God (including, but not limited to tornadoes, floods, hurricanes or other national disasters), expropriation or confiscation of facilities by any governmental authority, compliance with any order or request of any governmental authority, strikes, lockouts, riots, or other labor troubles or a national emergency, or similar causes not within Purchaser’s control.

(d)     Headings . The captions and headings of this Agreement are for convenience of reference only and do not in any way limit or amplify the terms and provisions hereof.

(e)     Further Assurances . As requested by one party, the other party will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the requesting party, all rights, interests, powers or benefits intended to be conferred upon it by this Agreement. The rights, covenants and obligations contained in this Paragraph 12(e) shall survive the Closing hereof.

(f)     Construction . The parties acknowledge that each party and its counsel have reviewed and revised this Agreement, and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits or any schedules attached to the Side Letter.

32

(g)     Legal Fees . In the event of a default by either party of its obligations under this Agreement, the prevailing party in any action or proceeding in any court in connection therewith shall be entitled to recover from such other party its costs and expenses, including reasonable legal fees and associated court costs.

(h)     Notices . All notices, requests, demands or other communications required or permitted under this Agreement shall be in writing and delivered personally or by certified mail, return receipt requested, postage prepaid, by electronic mail (and in the case of email transmission, so long as such email expressly identifies in the subject line in all capital letters that the attached correspondence constitutes an official notice pursuant to this Section 12 and is followed by one of the other means of notice as set forth in this subparagraph) or by overnight courier (such as Federal Express), addressed as follows:

	
				
 	If to Seller:	c/o Highwoods Properties, Inc.	
 	 	3100 Smoketree Court, Suite 600	
 	 	Raleigh, North Carolina 27604-1051	
 	 	Attn: Jeffrey D. Miller	
 	 	Telephone: 919/875-6683	
 	 	Email: jeff.miller@highwoods.com	

	
				
 	If to HSI:	Highwoods Services, Inc.	
 	 	3100 Smoketree Court, Suite 600	
 	 	Raleigh, North Carolina 27604-1051	
 	 	Attn: Jeffrey D. Miller	
 	 	Telephone: 919/875-6683	
 	 	Email: jeff.miller@highwoods.com	

	
				
 	And a copy to:	Allman Spry Davis Leggett & Crumpler, P.A.	
 	 	380 Knollwood Street, Suite 700	
 	 	Winston-Salem, North Carolina 27103	
 	 	Attn: Thomas T. Crumpler	
 	 	Telephone: 336/631-1429	
 	 	Email: tcrumpler@allmanspry.com	

	
				
 	If to Purchaser:	c/o The Taubman Realty Group Limited Partnership	
 	 	200 East Long Lake Road, Suite 300	
 	 	Bloomfield Hills, Michigan 48304-2324	
 	 	Attn: Simon Leopold	
 	 	Telephone: 248/258-7656	
 	 	Email: sleopold@taubman.com	

33

	
				
 	And:	c/o The Taubman Realty Group Limited Partnership	
 	 	200 East Long Lake Road, Suite 300	
 	 	Bloomfield Hills, Michigan 48304-2324	
 	 	Attn: Chris B. Heaphy, Executive Vice President	
 	 	Telephone: 248-258-7489	
 	 	Email: cheaphy@taubman.com	

	
				
 	And:	c/o The Macerich Partnership, L.P.	
 	 	401 Wilshire Boulevard, Suite 700	
 	 	Santa Monica, CA 90401-1452	
 	 	Telephone: 424/229-3300	
 	 	Email: Thomas.Leanse@Macerich.com	

	
				
 	And:	Manatt, Phelps & Phillips, LLP	
 	 	11355 W. Olympic Boulevard	
 	 	Los Angeles, CA 90064	
 	 	Telephone: 310-312-4171	
 	 	Email: tmuller@manatt.com	

	
				
 	If to Escrow Agent:	Chicago Title Insurance Company	
 	 	c/o Maxine Lievois	
 	 	1050 Wilshire Drive, Suite 310	
 	 	Troy, Michigan 48084	
 	 	Telephone: 248/816-3850	
 	 	Email: Maxine.lievois@fnf.com	

Any such notice or communication shall be effective when delivered or when delivery is refused and an email notice shall also be effective when emailed provided that an original or copy of such notice is sent via one of the alternative methods noted above upon sending such email notice; provided further, that if such delivery occurs after 5:00 p.m. (local time where received) or on a day which is not a Business Day, then such notice or demand shall be deemed delivered on the immediately following Business Day after the actual day of delivery. Notices given by counsel to a party in accordance with the above shall be deemed given by such party.

(i)     Governing Law . This Agreement shall be governed and interpreted in accordance with the laws of the State of Missouri.

(j)     Counterparts . This Agreement may be executed in any number of identical counterparts, any or all of which may contain the signatures of fewer than all of the parties but all of which shall be taken together as a single instrument. Signatures to this Agreement transmitted by email shall be valid and effective to bind the party so signing. Each party agrees to promptly deliver an execution original to this Agreement with its actual signature to the other party, but a failure to do so shall not affect the

34

enforceability of this Agreement, it being expressly agreed that each party to this Agreement shall be bound by its own emailed signature and shall accept the emailed signature of the other party to this Agreement.

(k)     Tax-Deferred Exchange . The parties acknowledge that the conveyance of the Property to Purchaser may be structured by Seller as a like-kind exchange (which may include a “forward” exchange and/or a “reverse” exchange pursuant to Section 1031 of the Internal Revenue Code). Purchaser agrees to reasonably cooperate with Seller in effecting such like-kind exchange, provided that (a) Seller shall bear all of the expenses associated therewith, (b) that Seller’s ability to undertake any such exchange (and/or the consummation thereof) shall not in any manner be considered a condition of Seller’s obligations under this Agreement. It is contemplated that Seller may assign all or a portion of its rights and obligations under this Agreement to a “qualified intermediary” pursuant to Treasury Regulation Section 1.103(k)-I(g)4(v) and, notwithstanding any other provision hereof, Purchaser expressly consents to such assignment. Accordingly, in the event of such assignment, Purchaser shall, upon notice from Seller, direct Purchaser’s payment for the Property directly to the qualified intermediary and shall to the extent of the assignment, treat the qualified intermediary as the valid assignee hereof. Notwithstanding anything contained herein, Purchaser shall not be required to acquire or hold legal or beneficial title to, or any other interest, in any property other than the Property for purposes of consummating the exchange. Purchaser shall incur no costs, expenses, obligations or liabilities in connection with Seller’s exchange, and Purchaser shall not be required to contract for purchase of any other property. In the event of any exchange, and notwithstanding that in connection with such exchange record title to the Property may be conveyed by Seller to an accommodation entity which thereupon conveys title to the Property to Purchaser, all covenants, agreements and indemnifications of Seller pursuant to this Agreement shall be deemed to be made by Seller, shall survive any conveyance to an accommodation party, shall continue in favor of and inure to the benefit of Purchaser and shall be enforceable by Purchaser against Seller to the extent provided in this Agreement as though the Property had been conveyed directly by Seller to Purchaser and the exchange shall in no way reduce, abridge or modify any of Seller’s obligations or any of Purchaser’s rights or remedies hereunder. Purchaser will have no liability to Seller under or in connection with the exchange, including in the event the exchange is not consummated, or in the event Seller does not achieve the desired tax treatment. It shall be a further condition that Purchaser’s obligations under this Section that Purchaser shall in no way be obligated to pay escrow costs, brokerage commissions, title charges, recording costs or other charges incurred with respect to any exchange property and/or the exchange and (b) in no way shall the Closing be subject to the consummation of the exchange, and the Seller shall not be relieved of its obligation to timely perform in accordance with the terms of this Agreement notwithstanding any failure, for any reason, of the exchange to be consummated, (c) if, for any reason, the Closing does not occur, Purchaser shall have no responsibility or liability to any third party involved in the exchange, (d) Purchaser will not be required to make any representations or warranties nor assume any obligations or liabilities, nor spend any sum or incur any liability whatsoever in connection with the exchange, and (e) the exchange shall not release the Seller from any representation, warranty or covenant of Seller or diminish any right or remedy with respect to Seller. The obligations of the Seller under this Section and the provisions of this Section shall survive the Closing and shall also survive any termination of this Agreement.

(l)     Confidential Information . Purchaser acknowledges that all material information with respect to the Property furnished by Seller to Purchaser other than information available generally to the public or brokers and all information regarding the Property discovered by Purchaser during the Due Diligence Period (collectively, the “ Confidential Information ”), is and has been so furnished, and Purchaser’s inspection rights are granted herein, on the condition that, subject to the terms hereof, Purchaser maintains the confidentiality thereof. Accordingly, Purchaser shall, and shall cause its members, officers, employees, agents, contractors and representatives to, hold in strict confidence, and not disclose to any other person or entity without the prior written consent of Seller until the Closing shall have been consummated,

35

any of the Confidential Information in respect of the Property delivered to Purchaser by Seller or any of its agents, representatives, members, officers or employees, or discovered by Purchaser, its employees, agents or contractors during its due diligence related to the Property. If the Closing does not occur and this Agreement is terminated, Purchaser shall promptly return, or cause to be returned or destroy, to Seller all copies of such Confidential Information without retaining, or permitting retention of, any copy thereof. Notwithstanding anything to the contrary hereinabove set forth, Purchaser may disclose such Confidential Information (i) on a need to know basis to its offices, directors, members, shareholders, employees, its title insurer, its mortgage brokers, its brokers, its prospective lenders, its prospective investors, partners and members of professional firms serving it in connection with this transaction, including, without limitation, its (and their) attorneys, employees, officers, directors, accountants, architects, environmental and other consultants and engineers; (ii) as any governmental agency or authority may require in order to comply with applicable laws or regulations, including Seller’s and Purchaser’s required filings with the Securities and Exchange Commission, provided, however, Purchaser shall not have the right to confer with the TIF Commission in person, by telephone or electronic mail without Seller’s participation (unless Seller otherwise consents), and Seller agrees to notify Purchaser of any scheduled meetings (in person, by telephone or electronic mail) it may have with the TIF Commission regarding the TIF Commission’s consent to that portion of this transaction in which the TIF Contract and the Related 1998 Bond Documents are affected; (iii) in order to comply with law or NYSE rules or regulations; and (iv) if required by an order of any court of competent jurisdiction. Seller and Purchaser agree not to disclose to anyone the financial terms of the transactions contemplated by this Agreement, other than as set forth in (i) through (iv) above, or as required by law or a court order. The provisions of this subparagraph shall not survive Closing.

(m)     Press Releases . Each party agrees that it will not make any public statement, including without limitation, any press release, with respect to this Agreement and the transactions contemplated hereby any earlier than the first Business Day after the Due Diligence Period has expired and without first allowing the other party twenty four (24) hours to review such statement and provide comments thereon. Any such public statements shall be reasonably consistent with such party’s past disclosure practices and shall not contain disparaging or critical statements about any other party or its respective affiliates. Notwithstanding the foregoing, a party may at any time disclose information related to this Agreement and/or the transactions contemplated hereby (including, without limitation, Confidential Information) without the other’s prior approval or agreement to the extent such party or its respective affiliates determine, in consultation with its legal counsel, that such disclosure is required by applicable Law or in connection with any filing by such party or its respective affiliates with the SEC or any stock exchange rule applicable to such party or its respective affiliate, after first allowing the other party twenty-four (24) hours to review such statement and provide comments thereon.

(n)     Cross Default . In the event of a default by Seller or Purchaser under one of the Companion Contracts, the non-defaulting party may elect to terminate this Agreement and all of the Companion Contracts, but only if the non-defaulting party has the right to terminate the Companion Contract with respect to which the default occurred, and further provided, however, that the non-defaulting party’s right to terminate this Agreement and the Companion Contracts shall not be the non-defaulting party’s sole remedy, and the non-defaulting party shall also have whatever remedies are available to it under this Agreement and the Companion Contracts, and at law or equity.

(o)     Mutual Indemnities . The Seller agrees that as between Seller and Purchaser, the Seller shall be liable for all liabilities, loss, cost and/or damage (including attorney fees) which are asserted as (i) claims by third parties based upon a breach or alleged breach of Seller occurring prior to Closing of any of the Leases, the Service Contracts, other contracts related to the Property, and (ii) third party tort claims

36

based upon acts or events occurring prior to the Closing (collectively, the “ Claims ”). The claims by third parties for loss or damage for which the Seller shall be responsible as set forth above are hereinafter referred to as “ Claims Against Seller .” In this regard, the Seller agrees to indemnify and hold harmless Purchaser from and against all loss and damage (including costs and reasonable attorney fees) incurred by Purchaser as a result of Claims Against Seller.
Purchaser agrees that as between the Seller and Purchaser, from and after the Closing Date, Purchaser shall be liable for all liabilities, loss, cost and/or damage (including attorney fees) which are asserted as Claims, but only if such asserted Claims arise and accrue on or after the Closing Date. The claims by third parties for loss or damage for which Purchaser shall be responsible as set forth above are hereinafter referred to as “ Claims Against Purchaser .” In this regard, Purchaser agrees to indemnify and hold harmless the Seller from and against all loss and damage (including costs and reasonable attorney fees) incurred by the Seller, or any of them, as the result of Claims Against Purchaser.
Any party entitled to indemnification under this Agreement (the “Indemnified Party”) shall, within ten (10) days after the receipt of notice of the assertion or imposition of any claim (but in no event later than ten (10) days prior to the date any response or answer is due in any proceeding) in respect of which indemnity may be sought from the party against whom an indemnity obligation is asserted pursuant to this Agreement (the “Indemnifying Party”), shall notify the Indemnifying Party in writing of the receipt of existence of such claim. The failure of the Indemnified Party to notify the Indemnifying Party shall not relieve it from any liability in respect of such claim which it may have to the Indemnified Party on account of this Agreement, except, however, the Indemnifying Party shall be relieved of liability to the extent that the failure to so notify (a) shall have caused prejudice to the defense of such claim, or (b) shall have increased the costs or liability of the Indemnifying Party by reason of the inability or failure of the Indemnifying Party (because of the lack of prompt notice from the Indemnified Party) to be involved in any investigations or negotiations regarding any such claim, nor shall it relieve the Indemnifying Party from any other liability which it may have to the Indemnified Party. In case any such claim shall be asserted or commenced against an Indemnified Party and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall assume the defense thereof with legal counsel reasonably satisfactory to the Indemnified Party, and, after the defense thereof, the Indemnifying Party will not be liable to the Indemnified Party hereunder for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation. In the event that the Indemnifying Party does not assume the defense, or arrange settlement of any claim, the Indemnified Party may defend itself at the Indemnifying Party’s cost and may settle such claim without the written consent of the Indemnifying Party. Nothing in this paragraph shall be construed to mean that Purchaser shall be responsible for any obligations, acts or omissions of Seller prior to the Effective Date, except for those obligations and liabilities expressly assumed by Purchaser pursuant to this Agreement; and nothing in this Agreement shall be construed to mean that Seller shall be responsible for any obligations, acts or omissions of Purchaser after the Effective Date, except for those obligations and liabilities arising after the Effective Date expressly assumed by Seller pursuant to this Agreement.
The provisions of this Paragraph 12(o) shall survive the Closing.

13.    MACERICH AND TAUBMAN BOARD OF DIRECTORS APPROVAL. Macerich and Taubman shall each diligently seek to obtain the approval of this Agreement, the Companion Contracts and the transactions contemplated thereby, and the transaction contemplated hereby by the Board of Directors of Macerich and Taubman by no later than December 23, 2015 at 5:00 PM, eastern standard time. In the event the Board of Directors of Macerich and/or Taubman do not approve this Agreement no later than 5:00

37

PM, eastern standard time, on December 23, 2015, then this Agreement shall automatically terminate and be deemed null and void.

14.    EFFECTIVE DATE. The “Effective Date” for the purpose of this Agreement shall be the date set forth in the first paragraph of this Agreement.

15.    REGULATION S-X. Purchaser has advised Seller that Purchaser or its affiliates must comply with Securities Exchange Commission Regulation S-X (17 C.F.R. § Part 210) ( “Regulation S-X ”), including, but not limited to, Item 3-14 thereof, which may require Purchaser to prepare up to three (3) years of audited income statements for the Property. From and after the date of this Agreement, Seller shall provide, (i) at no material cost to Seller, within thirty (30) days of Seller’s receipt of such written request from Purchaser, to Purchaser any reasonable financial information, financial statements and supporting documentation actually in Seller’s possession or under Seller’s control as are reasonably necessary for Purchaser to prepare such income statements in compliance with Regulation S-X, (ii) at reasonable times during the business day, at no material cost to Seller at times convenient to Seller, within fifteen (15) days of Seller’s receipt of such written request from Purchaser therefor, Purchaser’s independent auditor access to the books and records of the Property and all related information for the period or periods for which Purchaser is required to have the Property audited pursuant to Regulation S-X, and (iii) to such auditor a customary representation letter regarding the books and records of the Property in connection with such auditor’s normal course of auditing the Property in accordance with generally accepted auditing standards. The provisions of this Section 15 shall survive the Closing. Seller will cooperate with Purchaser’s reasonable requests in connection with financial reporting for Purchaser or its affiliates and Purchaser will take customary steps to insure the confidentiality of the audit process.

16.    EXHIBITS AND SCHEDULES. The Side Letter contains certain Exhibits and Schedules which are hereby incorporated into this Agreement by reference.
IN WITNESS WHEREOF , the parties have executed Signature Pages to this Agreement as of the day, month and year first written above.

[SIGNATURE PAGES FOLLOW]

38

SIGNATURE PAGE
TO
AGREEMENT FOR PURCHASE AND SALE OF
REAL ESTATE
BY AND BETWEEN

HIGHWOODS REALTY LIMITED PARTNERSHIP,

HIGHWOODS SERVICES, INC.
And
COUNTRY CLUB PLAZA KC PARTNERS LLC,
THE MACERICH PARTNERSHIP, L.P.,
And
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

Dated as of December 21, 2015

	
				
SELLER:	 	HIGHWOODS REALTY LIMITED PARTNERSHIP,	
 	 	a North Carolina limited partnership	
 	 	 	
 	 	By:	Highwoods Properties, Inc.,	
 	 	 	a Maryland corporation, its Sole General Partner	
 	 	 	 	
December 21, 2015	 	By:	/s/ Jeffrey D. Miller	
Date of Execution	 	Name:	Jeffrey D. Miller	
 	 	Title:	Senior Vice President and General Counsel	

	
				
HSI:	 	HIGHWOODS SERVICES, INC. ,	
 	 	a North Carolina corporation	
 	 	 	 	
December 21, 2015	 	By:	/s/ Jeffrey D. Miller	
Date of Execution	 	Name:	Jeffrey D. Miller	
 	 	Title:	Senior Vice President and General Counsel	

39

SIGNATURE PAGE
TO
AGREEMENT FOR PURCHASE AND SALE OF
REAL ESTATE
BY AND BETWEEN

HIGHWOODS REALTY LIMITED PARTNERSHIP,

HIGHWOODS SERVICES, INC.
And
COUNTRY CLUB PLAZA KC PARTNERS LLC,
THE MACERICH PARTNERSHIP, L.P.,
And
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

Dated as of December 21, 2015

	
				
PURCHASER:	 	COUNTRY CLUB PLAZA KC PARTNERS LLC ,	
 	 	a Delaware limited liability company	
 	 	 	
 	 	By:	TRG CCP Holdings LLC,	
 	 	 	a Delaware limited liability company	
 	 	 	 	
December 21, 2015	 	By:	/s/ Chris B. Heaphy	
Date of Execution	 	Name:	Chris B. Heaphy	
 	 	Its:	Authorized Signatory	
 	 	 	 	
 	 	By:	MACERICH CCP LLC,	
 	 	 	a Delaware limited liability company	
 	 	 	 	
December 21, 2015	 	By:	/s/ Thomas J. Leanse	
Date of Execution	 	Name:	Thomas J. Leanse	
 	 	Its:	Authorized Signatory	

40

SIGNATURE PAGE
TO
AGREEMENT FOR PURCHASE AND SALE OF
REAL ESTATE
BY AND BETWEEN

HIGHWOODS REALTY LIMITED PARTNERSHIP,

HIGHWOODS SERVICES, INC.
And
COUNTRY CLUB PLAZA KC PARTNERS LLC,
THE MACERICH PARTNERSHIP, L.P.,
And
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

Dated as of December 21, 2015

	
				
MACERICH:	 	THE MACERICH PARTNERSHIP, L.P. ,	
 	 	a Delaware limited partnership	
 	 	 	
 	 	By:	The Macerich Company,	
 	 	 	its General Partner	
 	 	 	 	
December 21, 2015	 	By:	/s/ Thomas J. Leanse	
Date of Execution	 	Name:	Thomas J. Leanse	
 	 	Its:	Senior Executive Vice President,	
 	 	 	Chief Legal Officer and Secretary	

41

SIGNATURE PAGE
TO
AGREEMENT FOR PURCHASE AND SALE OF
REAL ESTATE
BY AND BETWEEN

HIGHWOODS REALTY LIMITED PARTNERSHIP,

HIGHWOODS SERVICES, INC.
And
COUNTRY CLUB PLAZA KC PARTNERS LLC,
THE MACERICH PARTNERSHIP, L.P.,
And
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

Dated as of December 21, 2015

	
				
TAUBMAN:	 	THE TAUBMAN REALTY GROUP	
 	 	LIMITED PARTNERSHIP ,	
 	 	a Delaware limited partnership	
 	 	 	 	
December 21, 2015	 	By:	/s/ Chris B. Heaphy	
Date of Execution	 	Name:	Chris B. Heaphy	
 	 	Its:	Authorized Representative	

42

Exhibit 10.18

AGREEMENT FOR PURCHASE AND SALE OF

REAL ESTATE AND RELATED PROPERTY

BY AND BETWEEN

HIGHWOODS REALTY LIMITED PARTNERSHIP

And

SJ COMPANY I LLC

Dated January 29, 2016

TABLE OF CONTENTS

	
					
 	 	 	 	Page	
1.	PURCHASE AND SALE OF PROPERTY	1	
2.	PURCHASE PRICE	2	
 	(A)	EARNEST MONEY	2	
 	(B)	CASH AT CLOSING	2	
3.	OPERATION OF PROPERTY THROUGH CLOSING	2	
4.	STATUS OF TITLE TO PREMISES	3	
 	(A)	STATE OF TITLE	3	
 	(B)	PRELIMINARY EVIDENCE OF TITLE	4	
 	(C)	SURVEY	4	
 	(D)	TITLE DEFECTS	4	
5.	CLOSING	4	
 	(A)	CLOSING DATE	4	
 	(B)	CLOSING DOCUMENTS	4	
 	(C)	CLOSING PRORATIONS AND ADJUSTMENTS	5	
 	(D)	CLOSING COSTS	7	
 	(E)	POSSESSION	8	
6.	CASUALTY LOSS AND CONDEMNATION	8	
7.	REPRESENTATIONS AND WARRANTIES	8	
 	(A)	REPRESENTATIONS AND WARRANTIES OF SELLER	8	
 	(B)	ACCURACY AT CLOSING	10	
 	(C)	SURVIVAL OF REPRESENTATIONS AND WARRANTIES	10	
 	(D)	"AS-IS" PURCHASE	10	
 	(E)	REPRESENTATIONS AND WARRANTIES OF PURCHASER	11	
8.	DUE DILIGENCE DELIVERIES	12	
9.	INSPECTION	13	
 	(A)	DUE DILIGENCE PERIOD	13	
 	(B)	TERMINATION OF AGREEMENT	13	
 	(C)	GENERAL INSPECTION OF PROPERTY	13	
 	(D)	INDMENITY	13	
 	(E)	ASSURED SERVICE CONTACTS	14	
10.	PURCHASER’S CONDITIONS PRECEDENT TO CLOSING	14	
11.	BROKERAGE	15	
12.	DEFAULTS AND REMEDIES	15	
 	(A)	SELLER'S BREACH GENERALLY	15	
 	(B)	PUCHASER'S BREACH	15	
 	(C)	SURVIVAL	15	
13.	MISCELLANEOUS	15	
 	(A)	ASSIGNMENT	15	
 	(B)	ENTIRE AGREEMENT	15	
 	(C)	TIME IS OF THE ESSENCE	15	
 	(D)	HEADINGS	16	
 	(E)	FURTHER ASSURANCES	16	
 	(F)	CONSTRUCTION	16	

i

	
					
 	(G)	LEGAL FEES	16	
 	(H)	NOTICES	16	
 	(I)	GOVERNING LAW	17	
 	(J)	COUNTERPARTS	17	
 	(K)	TAX-DEFERRED EXCHANGE	17	
 	(L)	CONFIDENTIAL INFORMATION	17	
 	(M)	PRESS RELEASES	18	
 	(N)	INTENTIONALLY OMITTED	18	
 	(O)	INTENTIONALLY OMITTED	18	
 	(P)	EXHIBITS	18	
14.	INDEMNITOR’S RIGHTS OF PARTICIPATION	18	

ii

AGREEMENT FOR PURCHASE AND SALE OF
REAL ESTATE AND RELATED PROPERTY

THIS AGREEMENT FOR PURCHASE AND SALE OF REAL ESTATE AND RELATED PROPERTY (this “ Agreement ”) is made and entered into as of this 29th day of January, 2016 (the “ Effective Date ”), by and between HIGHWOODS REALTY LIMITED PARTNERSHIP , a North Carolina limited partnership (“ Seller ”), and SJ COMPANY I LLC, a North Carolina limited liability company (or its Permitted Assignee, as defined in Paragraph 13(a) hereof), both of which are, or will be, authorized to do business in the State of North Carolina as a foreign limited liability company (“ Purchaser ”).

R E C I T A L S :

A. Seller is the owner of fee simple title to the Property (as such term is hereinafter defined).

B. Seller desires to sell the Property to Purchaser, and Purchaser desires to purchase the Property from Seller, each upon and subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of and in reliance upon the above Recitals which are incorporated herein, the terms, covenants and conditions contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

1. PURCHASE AND SALE OF PROPERTY .

Subject to the terms and conditions of this Agreement, Seller shall sell, convey and assign to Purchaser or its nominee or assignee, and Purchaser or its nominee or assignee shall purchase all rights, title and interest of Seller relating to the following described property (all of which is hereinafter collectively referred to as the “ Property ”):

(a) That certain tract of real estate containing approximately 2.942 acres improved with one (1) building containing approximately 32,527 rentable square feet, a parking lot and other improvements located in Wake County, North Carolina, which real estate is legally described on Exhibit A attached hereto and made a part hereof, together with (i) all and singular easements, covenants, agreements, rights, privileges, tenements, hereditaments and appurtenances thereunto now or hereafter belonging or appertaining thereto, (ii) any and all oil, gas and mineral rights relating to such real estate, water and water rights, ditch and any other rights to use and appropriate water from or relating to such real estate; and a permanent non-exclusive easement for parking (the “Parking Easement”) on that portion of the Adjacent Property (as hereinafter defined) as shown on Exhibit A-1 attached hereto, which area shall be more particularly described by Buyer's survey subject to Seller's approval such approval not to be unreasonably withheld, conditioned or delayed (collectively, the “ Land ”); and

(b) all right, title and interest of Seller (whether now or hereafter existing) in and to any land lying in the bed of any street, alley, road or avenue (whether open, closed or proposed) within, in front of, behind or otherwise adjoining the Land or any of it, and, subject to the provisions of Section 6 , all right, title and interest of Seller (whether now or hereafter existing) in and to any award made or to be made as a result of or in lieu of condemnation, and in and to any award for damage to the Premises (as hereinafter defined) or any part thereof by reason of casualty (all of the foregoing being included within the term “ Land ”); and

(c) all of the buildings, structures, fixtures, facilities, installations and other improvements of every kind and description now or hereafter in, on, over and under the Land, including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, loading docks, parking lots and facilities, landscaping, roadways, sidewalks, security devices, signs and light fixtures (collectively, the “ Improvements ”) (the Land and Improvements being collectively referred to as the “ Premises ”); and

(d) all furniture, furnishings, fixtures, equipment, machinery, maintenance vehicles and equipment, tools, parts, recreational equipment, carpeting, and window treatments utilized by Seller exclusively in connection with the Premises, and other tangible personal property owned by Seller or in which Seller otherwise has an interest (other than a leasehold interest) if utilized by Seller solely in connection with the Premises which is not owned by a Tenant under a Lease (as such terms are hereinafter defined), as described on Exhibit B attached to this Agreement, together with all replacements and substitutions therefor (together with the intangible personal property hereinafter identified, collectively the “ Personal Property ”); and

1

(e) all right, title and interest of Seller in all existing surveys, blue prints, drawings, plans and specifications (including, without limitation, structural, HVAC, mechanical and plumbing plans and specifications) and other documentation for or with respect to the Premises or any part thereof; all use, occupancy, building and operating permits, licenses and approvals relating to the Premises or any part thereof; to the extent assignable, all existing guarantees and warranties issued in connection with the purchase, construction, alteration, installation or repair of all or any portion of the Premises; to the extent assignable, construction drawings, soil tests, and environmental reports related to the Premises, all available correspondence relating to the leasing, repair, maintenance and operation of the Premises with the Tenants, vendors, suppliers, utility companies and other third parties; and such other existing books, records and documents (including, without limitation, those relating to ad valorem taxes and the lease) used in connection with the operation of the Premises or any part thereof; and

(f) all right, title and interest of Seller in and to the Leases and, to the extent assignable, Service Contracts (as hereinafter defined) which Purchaser elects to assume, if any, and the other intangible personal property, together with any associated good will, now or hereafter owned by Seller or in which Seller otherwise has an interest and used in connection with or arising from the business now or hereafter conducted on or from the Property or any part thereof, including, without limitation, lease and other contract rights, names, but excluding the name Highwoods, Highwoods Properties, Highwoods Realty Limited Partnership, or any derivation thereof and trademarks adopted by Seller or any of its affiliates which identifies the name Highwoods and also excluding claims and other choses in action of Seller. The only leases encumbering the Premises, or any part thereof, are described on Exhibit C attached hereto and incorporated herein by reference (the “ Leases ”). The term “ Leases ” shall also include any modifications, amendments, renewals or extensions of the Lease. A list of all employment, union, purchase, service and maintenance agreements, equipment leases and any other agreements, contracts, licenses and permits affecting or pertaining in any way to the Premises or any part thereof to which Seller is a party (the “ Service Contracts ”) is attached to this Agreement as Exhibit D .

2. PURCHASE PRICE .

The total consideration to be paid by Purchaser to Seller for the Property (the “ Purchase Price ”) is Four Million Six Hundred Ninety-Two Thousand and No/100 Dollars ($4,692,000.00). The Purchase Price is subject to any adjustments as provided below in this Agreement, and shall be paid as follows:

(a) Earnest Money .

(i) Within two (2) business days of the Effective Date of this Agreement, Purchaser shall deliver to the Title Insurer (as hereinafter defined), as escrowee (“ Escrowee ”), the sum of One Hundred Thousand and No/100 Dollars ($100,000.00) (the “ Earnest Money ”) in the form of a check payable to Escrowee, or a federal funds wire transfer to an account designated by Escrowee. The Earnest Money shall be held by Escrowee in an interest bearing account pursuant to a joint order escrow agreement between Seller and Purchaser in the form of the Escrow Agreement attached as Exhibit E hereto.

(ii) If the transaction contemplated by this Agreement closes in accordance with the terms and conditions of this Agreement, at Closing (as hereinafter defined), the Earnest Money shall be delivered by the Escrowee to Seller as payment toward the Purchase Price. Notwithstanding anything to the contrary contained herein, if this Agreement is terminated in its entirety by Purchaser pursuant to the terms hereof, or if the transaction fails to close with respect to the Property for any reason other than solely by reason of a default on the part of Purchaser, the Earnest Money shall be delivered by the Escrowee to Purchaser, together with any and all interest earned thereon, without deduction or setoff. If the transaction fails to close solely due to a default on the part of Purchaser, the Earnest Money shall be delivered by the Escrowee to Seller as its sole and exclusive remedy (provided Purchaser shall be responsible for Purchaser’s Continuing Obligations [as hereinafter defined in Paragraph 9(d) below] regardless of the amount thereof), as more particularly provided for in Paragraph 12(b) below.

(b) Cash at Closing . At Closing, Purchaser shall pay to Seller the Purchase Price less the Earnest Money delivered by the Escrowee to Seller, subject to the adjustments and prorations required by this Agreement, by wire transfer of federal funds to Escrowee (such amount, as adjusted, being referred to herein as the “Cash Balance ”).

3. OPERATION OF PROPERTY THROUGH CLOSING . From the Effective Date through and including the first to occur of (i) the termination of this Agreement or (ii) the Closing Date (as hereinafter defined):

(a) Seller shall manage and operate the Property in the same manner that it is currently managing same and keep the Premises and the tangible Personal Property in good condition and repair, ordinary wear and tear and casualty damage excepted. Seller shall not transfer nor remove any Personal Property that is material to the operation or value of the Premises subsequent to the Effective Date unless Seller replaces the same prior to the Closing Date with Personal Property of equivalent or better utility and quality to the items replaced.

2

(b) Without the prior written consent of Purchaser, which consent may be withheld in Purchaser’s sole and absolute discretion, Seller shall not sell, mortgage, pledge, hypothecate or otherwise transfer or dispose of all or any part of the Property or any interest therein, nor shall Seller initiate, consent to, approve or otherwise take any action with respect to zoning or any other governmental rules or regulations presently applicable to all or any part of the Property other than such action as is necessary to maintain the Property in compliance with such rules and regulations applicable to all or any part of the Property, provided Seller may encumber the Premises with deeds of trust (which deeds of trust shall be canceled at Closing) and general utility easements if necessary for the proper operation thereof, but only after consent by Purchaser, which consent shall not be unreasonably withheld or delayed.

(c) From and after Effective Date, without the prior written consent of Purchaser, which consent may be withheld in Purchaser’s sole and absolute discretion, Seller shall not modify, extend, amend or renew the Leases or enter into any new lease with respect to the Premises (including without limitation reducing the amount of any security deposit or releasing or modifying any guaranty, if any, of the Lease). Any modification, extension, amendment, or renewal entered into in accordance with this Paragraph 3(c) shall be deemed a part of the Leases, subject to the covenants, representations and warranties set forth in this Agreement with respect to the Lease.

(d) Seller shall comply with all federal, state, municipal and other governmental laws, ordinances, requirements, rules, regulations, notices and orders, and all agreements, covenants, conditions, easements and restrictions relating to the Property, including, without limitation, any such requirements, rules, regulations, notices or orders issued or imposed after the date of this Agreement.

(e) If and when Seller has knowledge of the occurrence of any event which affects the truth or accuracy of any representations or warranties made by Seller under or pursuant to this Agreement, Seller shall promptly give written notice to Purchaser of such event, including, but not limited to, Seller’s receipt of (i) any written notices of material default or alleged material default by Seller or any Tenant under the Leases or by any party under any of the Service Contracts delivered or received by Seller from and after the Effective Date, and (ii) any written notices of alleged material violations of applicable law with respect to the Premises received by Seller from and after the Effective Date.

(f) Purchaser shall have access to the Premises upon reasonable prior notice to Seller (oral or written) or during normal business hours as is reasonably necessary for it to inspect same to assure that Seller is complying with the requirements of this Section 3 , provided Purchaser’s access shall not unreasonably interfere with the Tenants’ use and enjoyment thereof under the Lease, nor shall such access violate the terms and provisions thereof.

(g) Seller shall cause to be maintained in force fire and extended coverage insurance and commercial general liability insurance upon the Premises in amounts of not less than One Million and 00/100 Dollars ($1,000,000.00).

(h) Seller shall not enter into any new Service Contract that is not terminable within thirty days of written notice relating to the Premises without the prior written consent of Purchaser, which shall not be unreasonably withheld, and Seller shall comply in all material respects with its obligations under any Service Contracts that exist as of the Effective Date. Seller hereby agrees and acknowledges that Purchaser may require Seller to terminate the existing Service Contracts, if any, at Seller’s sole cost and expense effective not later than thirty (30) days after the Closing Date as a condition of Purchaser’s consummating the purchase of the Premises. Seller further agrees that any and all management agreements and brokers’ agreements affecting the Premises shall be terminated as of the Closing Date. Seller shall provide Purchaser with evidence confirming the termination of all such Service Contracts prior to Closing.

(i) Seller shall not construct or permit to be constructed any improvements or capital items to or on the Improvements, including Tenant improvements, without the prior written approval of Purchaser, which approval shall not be unreasonably withheld or delayed, except i) for Tenant improvements that a Tenant is entitled to, or that Seller is required to, make pursuant to the Leases, and ii) the Elevator Work (as hereinafter defined).

4. STATUS OF TITLE TO PREMISES .

(a) State of Title . At Closing, Seller shall convey to Purchaser, or Purchaser’s permitted designee or assignee, the entire fee simple estate in and to the Premises by a recordable special warranty deed, subject only to: (i) those covenants, conditions and restrictions and other exceptions to title to the Premises which are not disclosed by Purchaser to Seller as Unacceptable Title Matters pursuant to Paragraph 4(d) below (or implicitly approved by Purchaser not objecting to any such Unacceptable Title Matters during the Title Review Period [as defined in Paragraph 4(d) below] for the Premises), (ii) the lien of general real estate taxes for the current year and subsequent years which are not yet due or payable, and (iii) the rights of the

3

Tenants to occupy the Premises pursuant to the Leases (the above enumerated exceptions collectively referred to as the “ Permitted Exceptions ”). In addition to the foregoing and to the extent not reasonably provided as part of the Permitted Exceptions, Purchaser and Seller hereby agree to enter into the Parking Easement and a commercially reasonable cross access agreement between the Premises and that certain property located at 4800 Falls of Neuse Road, Raleigh, North Carolina (the “ Adjacent Parcel ”) to provide perpetual ingress, egress and regress in, on and across the both the Premises and the Adjacent Property in favor of the Premises and the Adjacent Parcel.

(b) Preliminary Evidence of Title . Within fifteen (15) days after the Effective Date, Purchaser shall obtain (and deliver copies to Seller of) a commitment (the “ Title Commitment ”) (and copies of the documents of record disclosed by the Title Commitment) for an Owner’s Title Insurance Policy proposing to insure Purchaser and committing to insure the Premises in the amount of the Purchase Price, issued by a title insurance company selected by Purchaser in its reasonable discretion (the “ Title Insurer ”). The Title Commitment shall be effective as of a date after the date of this Agreement.

(c)     Survey . Purchaser, at Purchaser’s sole cost and expense, may cause an accurate as-built survey and legal description of the Premises to be prepared and certified to Purchaser and the Title Insurer (the “ Survey ”), which shall be delivered to Seller upon the completion thereof.

(d)     Title Defects . If the Title Commitment or Survey discloses with respect to the Premises, exceptions to title or other matters unacceptable to Purchaser in its sole discretion (the “ Unacceptable Title Matters ”), Purchaser shall notify Seller of any Unacceptable Title Matter related to the Premises on or before the date which is twenty (20) business days after the Purchaser receives the Title Commitment (such twenty (20) business day period from the delivery to Purchaser of the Title Commitment, hereinafter referred to as the “ Title Review Period ” for the Premises, provided such notice shall be delivered to Seller, if at all, no later than five (5) business days prior to the end of the Due Diligence Period (as hereinafter defined)), and Seller shall have ten (10) business days from the date of such notice (a) to have each such Unacceptable Title Matter removed (without any obligation to do so, except Seller will be obligated to remove at Closing any monetary liens encumbering the Premises), or (b) to attempt to have the Title Insurer commit to insure over such Unacceptable Title Matter, in a manner reasonably acceptable to Purchaser (provided if the Title Insurer fails to insure over such Unacceptable Title Matter, Purchaser may terminate this Agreement, and as its sole remedy receive a refund of the Earnest Money), or (c) to correct each such other matter, in each case to the reasonable satisfaction of Purchaser. If within the time specified, Seller fails to have each such Unacceptable Title Matter removed, insured over or corrected as aforesaid, Purchaser may elect to either (i) terminate this Agreement and receive a refund of the Earnest Money, or (ii) elect to accept title to the Premises subject to the Unacceptable Title Matter. If Purchaser fails to make either such election, Purchaser shall be deemed to have elected option (ii) above.

5. CLOSING .

(a) Closing Date . The “ Closing ” of the transaction contemplated by this Agreement (that is, the payment of the Cash Balance, the transfer of good and marketable title to the Property, and the satisfaction of all other terms and conditions of this Agreement) shall occur at 10:00 a.m. Eastern time at the office of the Title Insurer or such other place as agreed to by the parties on the date that is the later to occur of (i) the tenth (10 th ) day after the end of the Due Diligence Period, or (ii) on such other date as may be mutually agreed upon by the parties hereto (the “ Closing Date ”). Except as set forth in Paragraph 13(c) hereof, time is of the essence with respect to the Closing Date. The Closing shall be subject to the satisfaction of the conditions precedent set forth in Section 10 herein, unless waived by the party in whose favor the condition runs. If the date of Closing above provided for falls on a Saturday, Sunday or legal holiday, the Closing Date shall be the next business day. Notwithstanding the foregoing, in the event that Purchaser is unable to complete Closing on the Closing Date as set forth herein, Purchaser shall have the right to postpone the Closing by written notice to Seller for a maximum of thirty (30) days.

(b) Closing Documents .

(i) Seller . Except as specifically provided herein, not later than three (3) business days prior to the Closing Date, Seller shall deliver or cause to be delivered to Purchaser a copy of each of the following (the original of each, in form and substance acceptable to Purchaser, if not attached as an Exhibit to this Agreement, to be executed (if necessary)) and delivered at Closing to the Escrowee:

(1) a special warranty deed for the Premises, in form attached hereto as Exhibit F , subject only to the Permitted Exceptions, sufficient to transfer and convey to Purchaser or Purchaser’s designee or assignee fee simple title to the Premises as required by this Agreement, and otherwise in form acceptable to the Title Insurer;

4

(2) a bill of sale for the tangible Personal Property, in form attached hereto as Exhibit G , sufficient to transfer to Purchaser or Purchaser’s designee or assignee title to the tangible Personal Property and containing appropriate warranties of title and condition as required by this Agreement;

(3) a letter advising Tenants under the Leases of the change in ownership of the Premises and directing it to pay rent to Purchaser or as Purchaser may direct;

(4) any and all affidavits, certificates or other documents customarily required by the Title Insurer in order to cause it to issue the Owner’s Title Insurance Policies in the form and condition required by this Agreement;

(5) an Assignment and Assumption of the Leases, in form attached hereto as Exhibit H , which will provide that Seller shall indemnify Purchaser with respect to all obligations that accrue under the Leases prior to the date of Closing (except for Tenant security deposits which are turned over to Purchaser);

(6) to the extent applicable, an Assignment and Assumption of Assumed Service Contracts, in form attached hereto as Exhibit I , which shall provide that Seller shall indemnify Purchaser with respect to all obligations that accrue under the Assumed Service Contracts (defined in Section 9 below) on and prior to the date of Closing; and evidence of termination of all Service Contracts not assumed, including any and all management contracts affecting the Premises;

(7) no later than two (2) business days after Closing, the original Leases and Assumed Service Contracts and any and all building plans, surveys, site plans, engineering plans and studies, utility plans, landscaping plans, development plans, specifications, drawings, marketing artwork, construction drawings, soil tests, complete warranty book including all contractors and subcontractors and other documentation concerning all or any part of the Premises and in the possession of Seller or any manager or submanager of the Premises;

(8) any assignable bonds, warranties or guaranties which are in any way applicable to the Property or any part thereof;

(9) Seller’s affidavit stating, under penalty of perjury, Seller’s U.S. taxpayer identification number and that Seller is not a foreign person within the meaning of Paragraph 1445 of the Internal Revenue Code;

(10) all other documents reasonably required by Purchaser or the Title Insurer in order to perfect the conveyance, transfer and assignment of the Premises to Purchaser or Purchaser’s designee and issue the Owner’s Title Insurance Policy;

(11) the Tenants’ security deposits, if any, if in the form of a letter of credit or other form which is not cash shall be transferred to Purchaser in a form sufficient for Purchaser to draw upon the same;

(12)    a recertification of Seller’s representations and warranties hereunder as of Closing, if true, or if not true, a statement informing Purchaser why such representation or warranty is not true; and

(ii) Purchaser . Purchaser, or its nominee or assignee, shall deliver or cause to be delivered to Seller at Closing:

(1)    the Cash Balance;

(2)    duly executed Assignment and Assumption of Leases, in form attached hereto as Exhibit H , which will provide that Purchaser shall indemnify Seller with respect to all obligations that accrue under the Leases after the date of Closing;

(3)     to the extent applicable, the duly executed Assignment and Assumption of Assumed Service Contracts, in form attached hereto as Exhibit I , which will provide that Purchaser shall indemnify Seller with respect to all obligations that accrue under the respective Assumed Service Contracts after the date of Closing;

(4)    any and all affidavits, certificates or other documents required by the Title Insurer in order to cause it to issue the Owner’s Title Insurance Policies in the form and condition required by this Agreement.

(c) Closing Prorations and Adjustments . Statements of prorations and other adjustments shall be prepared by Seller in conformity with the provisions of this Agreement and submitted to Purchaser for review and approval not less than

5

three (3) business days prior to the Closing Date. For purposes of prorations, Purchaser shall be deemed the owner of the Property on the Closing Date. In addition to prorations and other adjustments that may otherwise be provided for in this Agreement, the following items are to be prorated or adjusted, as the case may require, as of the Closing Date:

(i) If not paid by the Tenants pursuant to the Leases (the “ Tenants ”), real estate and personal property taxes and assessments (initially prorated on the basis of the most recent ascertainable bill, but subject to reproration upon issuance of the actual bill therefor to effectuate the actual proration), provided that Seller shall pay prior to Closing or give Purchaser a credit at Closing for, the amount of all installments of special assessments levied prior to Closing and which are payable after Closing;

(ii)    Seller and Purchaser shall prorate the rent, charges and other amounts payable by Tenants to Seller for the month of Closing, including expense “pass-throughs” which are due for the month of Closing. With respect to rent, charges and other amounts payable by Tenants to Seller (including expense “pass-throughs”) for months prior to the month of Closing (“ Delinquent Amounts ”), Purchaser shall make a commercially reasonable good faith effort to collect such Delinquent Amounts for a period of three months following Closing), but Purchaser shall not be required to take legal action with respect to Delinquent Amounts. At Closing, Seller shall deliver to Purchaser a schedule of all Delinquent Amounts. Notwithstanding the foregoing or any direction from Tenants to the contrary, rental and other payments received by Purchaser from Tenants shall first be applied toward Purchaser’s actual out-of-pocket costs of collection, then toward the payment of rent and other charges owed to Purchaser for periods after the Closing, and any excess monies received shall be applied toward the payment of Delinquent Amounts. Purchaser may not waive any Delinquent Amounts or modify any Lease so as to reduce amounts or charges owed under any such Lease for any period in which Seller is entitled to receive a share of charges or amounts, without first obtaining the written consent of Seller and Seller shall have the right to collect same after Closing.

Purchaser shall make year-end reconciliations of reimbursements owed by Tenants under the Leases to the landlord thereunder of the Tenants’ share of property taxes and assessments, insurance premiums, common area maintenance and other expenses related to the operation of the Property for the calendar year 2016 (collectively, “ Reimbursable Tenant Expenses ”). In order to enable Purchaser to make any year-end reconciliations of Reimbursable Tenant Expenses for calendar year 2016, Seller shall deliver to Purchaser, in writing, within sixty (60) days after the Closing Date, the Reimbursable Tenant Expenses actually paid or incurred by Seller for the portion of the calendar year 2016 during which Seller owned the Property (“ Seller’s Actual Reimbursable Tenant Expenses ”) and the Tenants’ reimbursements for such Reimbursable Tenant Expenses actually paid to Seller by Tenants for the portion of the calendar year 2016 during which Seller owned the Property (“ Seller’s Actual Tenant Reimbursements ”). On or before March 31, 2017, Purchaser shall deliver to Seller a reconciliation statement (the “ Reconciliation Statement ”) setting forth (i) the Actual Reimbursable Tenant Expenses paid or incurred during calendar year 2016, (ii) the Actual Tenant Reimbursements actually paid in calendar year 2016, and (iii) a calculation of the difference between the two (i.e., establishing that the Actual Reimbursable Tenant Expenses were either more or less than the Actual Tenant Reimbursements for the calendar year 2016), with Purchaser utilizing the information delivered to Purchaser by Seller related to the period of the calendar year 2016 which is prior to the Closing Date.

Any amount due Seller pursuant to the foregoing calculation (in the event Seller’s Actual Tenant Reimbursements for the period January 1 to the date prior to Closing are less than Seller’s Actual Reimbursable Tenant Expenses for the same period) or Purchaser (in the event the Actual Tenant Reimbursements are more than the Actual Reimbursable Tenant Expenses), as the case may be, shall be paid by Purchaser to Seller within fourteen (14) business days after Purchaser has collected such sums from any tenant who owes same, or if Seller owes Purchaser for any such sum, Seller shall pay to Purchaser within fourteen (14) business days after delivery of the Reconciliation Statement to Seller, all such sums owed by Seller to Purchaser.  If Purchaser is paid any such amount by Seller, Purchaser thereafter shall be obligated to promptly remit the applicable portion to the Tenants entitled thereto. If Purchaser has transferred its interest in the Property to a successor-in-interest or assignee prior to such date, then, on or before the transfer of its interest in the Property, Purchaser shall (i) in writing expressly obligate such successor-in-interest or assignee to be bound by the provisions of this Section, and (ii) deliver written notice of such transfer to Seller, and thereafter Seller shall make the deliveries specified above to Purchaser’s successor-in-interest or assignee. Seller’s Reconciliation Statement shall be final and binding for purposes of this Contract;

(iii) the full amount of the security deposits, paid under the Leases, if any, and not theretofore applied, together with interest thereon to the extent any interest is required by law or otherwise to be paid to the Tenants, shall be delivered by Seller to Purchaser on the date of Closing. Prior to the Closing, Seller shall not apply the security deposit;

(iv) water, electric, telephone and all other utility and fuel charges not paid by the Tenants under the Leases shall be prorated ratably on the basis of the last ascertainable bills (and reprorated upon receipt of the actual bills or invoices) unless final meter readings and final invoices can be obtained. To the extent practicable, if Tenants do not pay the water,

6

electric, telephone and other utility charges pursuant to the Leases, Seller shall cause meters for utilities to be read not more than one (1) business day prior to the date of Closing;

(v) amounts paid or owing under any Assumed Service Contracts, if any;

(vi) assignable license and permit fees;

(vii) other expenses of operation and similar items;

(viii) Seller shall be responsible for all leasing commissions and other leasing costs due and payable prior to the Effective Date with respect to the Leases. Purchaser shall be responsible for all leasing commissions and other leasing costs attributable to the Leases or the renewal, extension or expansion of the Leases due and payable after the Effective Date. If Seller has, prior to the Closing, paid any leasing commissions or other leasing costs which are Purchaser’s responsibility hereunder, Seller will receive a credit for same from Purchaser at the Closing. Purchaser shall have no obligation to pay for any leasing commissions in connection with the initial terms of the Leases. This subsection shall survive Closing;

(ix)    The scheduled improvements to the elevators located in the building (the “ Elevator Work ”) shall be the responsibility of Seller. Purchaser and Seller acknowledge and agree that the estimated cost of the Elevator Work is Eighty-Six Thousand and 00/100 Dollars ($86,000.00) and that the Elevator Work will not be complete by the date of Closing. Irrespective of the actual cost and timing of the Elevator Work, Seller is solely responsible for contracting and paying for the Elevator Work. At Closing, Escrowee shall retain Eighty-Six Thousand and 00/100 Dollars ($86,000.00) of the Cash Balance (the “ Holdback ”) in escrow pursuant to the Escrow Agreement attached hereto as Exhibit E until Seller’s architect or engineer, duly certified and licensed by the State of North Carolina, delivers to Escrowee (copied to Buyer) a certification that the Elevator Work is complete. Upon receipt of said certification, Escrowee shall release the Holdback to Seller; and

(x)    All obligations to pay Tenant improvement work owed or to be owed in connection with extension or renewal terms of the Leases shall be paid by Purchaser when due after the Closing Date without an adjustment to the Purchase Price. Notwithstanding the foregoing, to the extent any portion of the term of the Leases for which Purchaser shall pay the Tenant improvement cost in connection therewith occurs prior to the Closing Date, the amount of the Purchase Price will be reduced by a pro rata share of such cost based upon the percentage of such term (exclusive of any renewal options) which occurs prior to the Closing Date.

Except with respect to general real estate and personal property taxes (which shall be reprorated upon the issuance of the actual bills, if necessary), and expense “pass throughs” (which shall be trued up within the sixty (60) day period set forth above) any proration which must be estimated at Closing shall be reprorated and finally adjusted as soon as practicable after the Closing Date with any refunds payable to Seller or Purchaser to be made as soon as practicable after such amounts are determined, otherwise all prorations shall be final. Amounts on deposit with utility companies shall be disclosed to Purchaser within ten (10) days after the Effective Date and shall not be prorated; provided, however, that promptly following the Closing, Purchaser shall substitute its own deposit for any amounts on deposit with utility companies and shall refund to Seller any portion of Seller’s deposit which is refunded by the utility company. The rights, covenants and obligations contained in this Paragraph 5(c) shall survive the Closing.

(d) Closing Costs .

(i)     Transfer Taxes . All transfer taxes, documentary stamps, intangible taxes and similar taxes or charges shall be paid by Seller.
 
(ii)     Title Insurance . The cost of any title insurance commitment and title insurance commitment cancellation fees shall be paid by Purchaser and the Owner’s Title Insurance Policy as well as any endorsements issued in connection therewith shall be paid for by Purchaser.

(iii)     Survey . Any Survey obtained for the Premises shall be paid for by Purchaser.

(iv)     Recording Charges . Purchaser shall pay the cost of recording the deed referenced in Paragraph 5(b)(i)(1) .

(v)     Attorney and Consultant Fees . Seller and Purchaser shall each be responsible for the fees and costs of their respective attorneys and consultants.

(vi)     UCC Searches . Purchaser shall pay all charges for UCC Searches.

7

(vii)     Loan Costs . In the event Purchaser procures a loan from a lender in connection with this transaction, all financing and other costs related to such loan shall be paid by Purchaser.

(e) Possession . Upon Closing, Seller shall deliver to Purchaser full, complete and exclusive possession of the Property, including keys and pass codes, subject only to the rights of possession of the Tenants under the Leases and the other Permitted Exceptions.

6. CASUALTY LOSS AND CONDEMNATION .

If, prior to Closing the building on the Land or any part thereof shall be condemned, or destroyed or materially damaged by fire or other casualty (that is, damage or destruction which Purchaser reasonably believes could be in excess of Five Hundred Thousand and No/100 Dollars ($500,000.00) for such building located on the Premises, or in the event of a condemnation or eminent domain taking which materially prevents access to the Premises or any part thereof), Purchaser shall have the option which shall be exercised not later than twenty (20) business days following the date Purchaser receives written notice of the condemnation or damage (with Closing being extended, if necessary, to accommodate such time periods) either to (a) to terminate this Agreement, or (b) to consummate the transaction contemplated by this Agreement notwithstanding such condemnation, destruction or material damage. If Purchaser elects to consummate the transaction contemplated by this Agreement, Purchaser shall be entitled to receive all of the condemnation proceeds or settle the loss under all policies of insurance applicable to the destruction or damage and receive all of the proceeds of insurance applicable thereto, and Seller shall, at Closing and thereafter, execute and deliver to Purchaser all required proofs of loss, assignments of claims and other similar items. If there is any other damage or destruction to the Land (that is, damage or destruction to the Land which Purchaser reasonably believes could be Five Hundred Thousand and No/100 Dollars ($500,000.00) or less for the building located on the Land, or which does not substantially prevent access to the Land or any part thereof), Seller shall either completely repair such damage prior to Closing in a manner satisfactory to Purchaser or, at Seller’s option, either assign all insurance claims pertaining to such damage or destruction to Purchaser by executing and delivering to Purchaser at Closing and thereafter all required proofs of loss, assignments of claims and other similar items, or allow Purchaser a credit against the Purchase Price in an amount equal to Purchaser’s reasonably estimated cost of repair. If Purchaser elects to take an assignment of all insurance claims as provided for in this Section 6 , Purchaser shall receive at Closing a credit against the Cash Balance in an amount equal to any deductible(s) and uninsured amounts applicable thereto. In the event this Agreement is terminated pursuant to this Section 6 , the Earnest Money shall be refunded to Purchaser, whereupon this Agreement and all rights and obligations of the parties hereunder shall be null and void. In the event Seller shall assign its insurance proceeds to Purchaser then, in addition thereto, Purchaser shall be entitled to a reduction in the Purchase Price equal to the amount of Seller’s deductible.

Notwithstanding anything to the contrary herein, the provisions of this Section shall not waive or release any duty or obligation of Seller herein or waive any condition to Purchaser’s obligations at Closing.

7. REPRESENTATIONS AND WARRANTIES .

(a) Representations and Warranties of Seller . Seller represents and warrants to Purchaser that the following are true, complete and correct as of the date of this Agreement:

(i) Seller has no employees at the Premises.

(ii) Seller has not entered into any agreement to lease (other than the Leases), sell, mortgage or otherwise encumber or dispose of its interest in the Premises or any part thereof, except for this Agreement and any of the Permitted Exceptions executed by Seller.

(iii) Except as set forth on Exhibit J , there is no action, proceeding or investigation pending or to Seller’s knowledge, threatened against Seller related to the Premises before any court or governmental department, commission, board, agency or instrumentality; and Seller does not know of any basis for any such action, proceeding or investigation.

(iv) Seller agrees that it will not create, suffer or permit to be created (except as provided in Section 3(b) and pursuant to the Elevator Work), and that it will promptly remove or discharge, any liens or encumbrances against the Premises arising subsequent to the Effective Date of this Agreement.

(v) Except as set forth on Exhibit K attached hereto, Seller has not received notice of any violation from (i) any governmental authority of any zoning, building, fire or health code or any other statute, ordinance rule or regulation applicable (or alleged to be applicable) to the Premises, or any part thereof, (ii) the governing body of the office, industrial, business

8

or similar park or association of which the Premises or any part thereof is a part, or (iii) any other person or entity entitled to enforce any right, covenant or restriction against Seller or the Premises or any part thereof.

(vi) There are no proceedings at law or in equity before any court, grand jury, administrative agency or other investigative agency, bureau or instrumentality of any kind pending or, to Seller’s knowledge, threatened, against or affecting Seller or the Premises that (i) involve, or in any way may affect, the validity or enforceability of this Agreement or any other instrument or document to be delivered by Seller pursuant hereto, (ii) enjoin or prevent or threaten to enjoin or prevent the performance of Seller’s obligations hereunder or (iii) relate specifically to the Premises (including, without limitation, the environmental condition of the Premises) or the title thereto; and there is no other pending or, to Seller's knowledge, threatened litigation, governmental investigation or administrative proceeding affecting Seller or the Premises.

(vii) Except for the sale of the Premises to Purchaser as set forth in this Agreement, Seller has not entered into any agreement nor otherwise granted to any person, and no person or entity has any right or option from Seller to (i) acquire any or all of the Premises, (ii) right of first offer or right of first refusal to purchase all or any portion of the Premises, and (iii) except with respect to the Leases, no right to lease, license or otherwise occupy any portion of the Premises.

(viii) The Service Contracts described on Exhibit D attached hereto comprise every material contract, agreement, relationship and commitment, oral or written, (exclusive of the Leases and agreements of record encumbering the Premises) which affects the Premises, to which Seller is a party, or by which it is bound. Neither Seller nor, to Seller’s knowledge, any other party is in default under the terms of any Service Contract.

(ix) Seller is duly organized, validly existing and qualified and empowered to conduct its business, and has full power and authority to enter into and fully perform and comply with the terms of this Agreement. Neither the execution and delivery of this Agreement nor its performance by Seller, will conflict with or result in the breach of any contract, agreement, law, rule or regulation to which Seller is a party or by which Seller is bound. This Agreement is valid and enforceable against Seller in accordance with its terms and each instrument to be executed by Seller pursuant to this Agreement or in connection herewith will, when executed and delivered, be valid and enforceable against Seller in accordance with its terms.

(x) The Leases, which have or will be delivered to Purchaser, constitutes the entire agreement between Seller and Tenants with respect to the Premises. No commissions to any broker or leasing agent are currently due on account of any Lease. Seller has received no notice of any default on the part of the Tenants. To Seller’s knowledge, no right or claim of setoff against rent exists, or has been asserted by the Tenants under the Leases. Seller has not received any advance payment of rent (other than for the current month) on account of the Leases. There are no written or oral leases or tenancies or rights of possession affecting the Premises other than the Leases. All obligations of Seller under the Leases with respect to the performance of work or the installation of equipment or materials required to have been performed at or prior to the date hereof have been fully observed and performed in all material respects.

(xi) Seller has not received any notice of any pending condemnation of the Land or Improvements or any portion thereof, or any change in any law, ordinance or regulation that would materially affect the Land or Improvements or the use thereof.

(xii) Except as set forth on Exhibit L , Seller has not received any notice of any civil, criminal or administrative suit, claim, hearing, violation, investigation, proceeding or demand against Seller related to the Premises relating in any way to a Release, the use of Hazardous Materials or compliance with Environmental Laws. For purposes of this Agreement, the phrase “ Environmental Laws ” shall mean any federal, state or local law, statute, ordinance, order, decree, rule or regulation and any common laws regarding radioactive materials, or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601, et seq . (“ CERCLA ”); the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq . (“ RCRA ”); the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq . (“ TSCA ”), the Clean Air Act, 42 U.S.C. § 7401, et seq . (“ CAA ”), the Federal Water Pollution Control Act, 33 U.S.C. § 1251, et seq . (“ FWPCA ”), the Safe Drinking Water Act, 42 U.S.C. § 3001, et seq . (“ SDWA ”), the Hazardous Materials Transportation Act, 49 U.S.C. § 1802, et seq . (“ HMTA ”) and the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001, et seq . (“ EPCRA ”), the Endangered Species Act of 1973, 16 U.S.C. § 1531 et seq . (“ESA”), the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq . (“ FIFRA ”) and other comparable federal, state or local laws, each as amended, and all rules, regulations and guidance documents promulgated pursuant thereto or published thereunder. The phrase “ Hazardous Materials ” shall mean each and every element, compound, chemical mixture, contaminant, pollutant, material, waste or other substance which is defined, determined or identified as hazardous or toxic under Environmental Laws (as hereinafter defined) or the Release of which is regulated under Environmental Laws. Without limiting the generality of the foregoing, the term “Hazardous Materials” will include: crude oil, used oil, petroleum and petroleum products or any fraction thereof; radioactive materials including source, by-product or special nuclear materials; asbestos or asbestos-containing materials (whether or not

9

friable); lead paint; polychlorinated biphenyls, ureaformaldehyde in any of its forms; and any substance defined as “hazardous substances,” “extremely hazardous substances,” “hazardous waste,” “hazardous materials,” “chemical substance or mixture,” “solid waste,” “hazardous chemicals,” “toxic substances,” “hazardous air pollutants,” “pollutants,” contaminants,” or “toxic chemicals” under any of the CAA, CWA, RCRA, CERCLA, EPCRA, SDWA, TSCA or OSHA. The term “ Release ” shall mean the discharge, disposal, deposit, injection, dumping, spilling, leaking, leaching, placing, presence, pumping, pouring, emitting, emptying, escaping, or other release of any Hazardous Material.

(xiii) All bills and invoices for labor and material of any kind relating to the Premises has been, or prior to the Closing will be, paid in full, and there are no mechanic’s liens or claims outstanding in connection with any of the Premises (except for those created through the Elevator Work, which Seller warrants will be promptly discharged).

(xiv) Seller is not a Foreign Person within the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1954, as amended, and any applicable regulations thereunder.

(xv) There are no attachments, executions, assignments for the benefit of creditors, receiverships, conservatorships, or voluntary or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws contemplated or filed by Seller and Seller has received no notice of any of the same pending or threatened against Seller or the Premises.

(xvi) Seller is not in the hands of a receiver nor is an application for the appointment of a receiver pending; Seller has not made an assignment for the benefit of creditors, nor has Seller filed, or had filed against it, any petition in bankruptcy.

Any representation or warranty by Seller made to Seller’s knowledge or words of similar meaning, shall mean, with the knowledge of Thomas S. Hill, III, the Vice President of Seller’s Raleigh, North Carolina Division, who is knowledgeable about the Premises, and any individual who replaces him in that capacity as an employee of Seller, but no others, and such knowledge shall be without having made or having any obligation to make any investigation related to Sellers’ representations and warranties herein.

(b) Accuracy at Closing . As of the date of Closing, each of the warranties and representations set forth in Paragraph 7(a) above shall be true, complete and correct in every respect with respect to the Premises, except for changes in the operation of the Premises occurring prior to Closing, which are specifically permitted by this Agreement. Seller shall notify Purchaser promptly upon obtaining knowledge of any material change in any of Seller’s representations and warranties contained in this Section 7. If any of the foregoing representations and warranties is true as of the Effective Date, but are not true in every material respect with respect to the Premises as of the date of Closing as a result of a matter, circumstance or event beyond the reasonable control of Seller, and such matter is disclosed by Seller to Purchaser expressly in writing at any time and from time to time prior to Closing promptly upon such occurrence, or Purchaser first discovers such untruth prior to Closing, and Seller does not cure such matter prior to Closing, then Purchaser shall not be entitled to consider the untruth of the representation or warranty as an event of default under this Agreement, but instead Purchaser may, at its election and as its sole remedy, either (i) close and consummate the Closing contemplated by this Agreement; or (ii) terminate this Agreement by notice to Seller, whereupon Escrowee shall return the Earnest Money to Purchaser.

(c) Survival of Representations and Warranties . The representations and warranties set forth in this Section 7 shall expire on that date which is twelve (12) months after the date of Closing unless (and only to the extent), on or before such date, Purchaser delivers written notice to Seller of a breach of any representation or warranty hereunder and, within twelve (12) months after the date of Closing, Purchaser files a claim against Seller for breach of a representation or warranty in a court of competent jurisdiction. Any such claim shall be limited to actual damages (including actual, reasonable attorneys’ fees and expenses and court costs) suffered by Purchaser up to a maximum amount of Five Hundred Thousand and No/100 Dollars ($500,000.00). In addition to the foregoing, Purchaser shall have no claim against Seller for any representation or warranty which was untrue, inaccurate or incorrect when made by Seller as of the Effective Date if the facts or circumstances which caused such representation or warranty to be untrue, inaccurate or incorrect were disclosed in writing to Purchaser prior to Closing or of which Purchaser had actual knowledge prior to Closing and Purchaser nevertheless closed the acquisition of the Property and paid the Purchase Price to Seller, or unless the damages suffered by Purchaser because of such untrue, inaccurate or incorrect representation or warranty exceeds Twenty Thousand and No/100 Dollars ($25,000.00), in which case Purchaser shall be entitled to file a claim for all actual damages suffered by Purchaser including the said Twenty Five Thousand and No/100 Dollars ($25,000.00) threshold amount.

(d) “As-Is” Purchase . Purchaser acknowledges for Purchaser and Purchaser’s successors, and assignees, the Due Diligence Period set forth in Section 9 of this Agreement is a reasonable opportunity to inspect and investigate the Property, all improvements thereon and all aspects relating thereto, including all documents and contracts related to the Property, either independently or through agents and experts of Purchaser’s choosing. EXCEPT AS LIMITED BELOW OR AS OTHERWISE

10

SET FORTH IN THIS AGREEMENT OR THE CLOSING DOCUMENTS DELIVERED PURSUANT TO THIS AGREEMENT (“ CLOSING DOCUMENTS ”), SELLER AND PURCHASER AGREE THAT THE PROPERTY SHALL BE SOLD AND THAT PURCHASER SHALL ACCEPT POSSESSION OF THE PROPERTY ON THE CLOSING DATE “AS IS, WHERE IS, WITH ALL FAULTS” WITH NO RIGHT OF SET-OFF OR REDUCTION IN THE PURCHASE PRICE, AND EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE CLOSING DOCUMENTS THAT SUCH SALE SHALL BE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, WARRANTY OF INCOME WHICH MAY BE EARNED IN THE FUTURE, FUTURE OPERATING EXPENSES, USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE (BUT SPECIFICALLY EXCLUDING THE LIMITED WARRANTY OF TITLE TO BE GIVEN IN THE DEED FROM SELLER TO PURCHASER), AND SELLER DOES HEREBY DISCLAIM AND RENOUNCE ANY SUCH REPRESENTATION OR WARRANTY. EXCEPT FOR SELLER’S REPRESENTATIONS WHICH ARE EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE CLOSING DOCUMENTS, PURCHASER SPECIFICALLY ACKNOWLEDGES THAT PURCHASER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER, AGENT OR OTHER AGENTS OR BROKERS AS TO THE FOLLOWING MATTERS: (1) THE CONDITION OR SAFETY OF THE PROPERTY OR ANY SEWER, HEATING AND ELECTRICAL SYSTEMS, ROOFING, AIR CONDITIONING, IF ANY, FOUNDATIONS, SOILS AND GEOLOGY INCLUDING HAZARDOUS MATERIALS; LOT SIZE, OR SUITABILITY OF THE PROPERTY OR ITS IMPROVEMENTS FOR A PARTICULAR PURPOSE; (2) WHETHER THE APPLIANCES, IF ANY, PLUMBING OR UTILITIES ARE IN WORKING ORDER; (3) THE HABITABILITY OR SUITABILITY FOR OCCUPANCY OF ANY STRUCTURE AND THE QUALITY OF ITS CONSTRUCTION; (4) THE FITNESS OF ANY PERSONAL PROPERTY; OR (5) WHETHER THE IMPROVEMENTS ARE STRUCTURALLY SOUND, IN GOOD CONDITION, OR IN COMPLIANCE WITH APPLICABLE CITY, COUNTY, STATE OR FEDERAL STATUTES, CODES OR ORDINANCES. EXCEPT FOR SELLER’S REPRESENTATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE CLOSING DOCUMENTS PURCHASER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE PROPERTY WITH REGARD TO THE ABOVE-REFERENCED MATTERS, AND NOT UPON ANY REPRESENTATIONS TO THE ABOVE-REFERENCED MATTERS, MADE TO IT BY ANY PERSON WHOMSOEVER CONCERNING SUCH MATTERS.

(e) Representations and Warranties of Purchaser . Purchaser hereby represents and warrants to Seller as follows:

(i)    Purchaser and/or the Permitted Assignee has been, or will be, duly formed and is validly existing as a North Carolina limited liability company and is duly qualified to do business and is in good standing in all jurisdictions where such qualification is necessary to carry on its business as now conducted. Purchaser has all power and authority under its constituent documents to enter into this Agreement and to enter into and deliver all of the documents and instruments required to be executed and delivered by Purchaser and to perform its obligations hereunder and thereunder.

(ii)    Purchaser has full power and authority to enter into this Agreement and to assume and perform all of its obligations hereunder; the execution and delivery of this Agreement and the performance by Purchaser of its obligations hereunder have been duly authorized by such limited liability company action as may be required (including, without limitation, proper approval by the members thereof) and no further action or approval is required in order to constitute this Agreement as a binding and enforceable obligation of Purchaser; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder on the part of Purchaser do not and will not violate the constituent documents of Purchaser, and do not and will not conflict with or result in the breach of any condition or provision of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Purchaser by reason of the terms of any contract, mortgage, lien, lease, agreement, indenture, instrument or judgment to which Purchaser is a party or which is or purports to be binding upon Purchaser or which affects Purchaser; and no action by any federal, state or municipal or other governmental department, commission, board, bureau or instrumentality is necessary to make this Agreement a valid instrument binding upon Purchaser in accordance with its terms;

(iii)    To the knowledge of Purchaser, Purchaser is not in violation of any of its organizational documents;

(iv)    To the knowledge of Purchaser, there is no existing or threatened action nor governmental proceeding of any kind involving Purchaser, any of its assets, or the operation thereof which if determined adversely to Purchaser or its assets would interfere with Purchaser’s ability to close the transaction contemplated hereby; and

(v)    Neither Purchaser nor any owner, officer, director or manager of Purchaser is or will become a person described by Section 1 of The Anti-Terrorism Executive Order 13,224 of September 23, 2001, blocking property and prohibiting transactions with persons who commit, threaten to commit, or support terrorism, 66 Fed. Reg. 49,049 (2001), or described in any rule or regulation implementing the same and, to Purchaser’s knowledge, neither Purchaser nor any owner, officer,

11

director or manager of Purchaser engages or will engage in any dealings or transactions, or be otherwise associated with, any such persons.

8. DUE DILIGENCE DELIVERIES.

Seller has previously furnished to Purchaser, or will, not later than three (3) business days after the Effective Date, at Seller’s expense, deliver to Purchaser, or make available to Purchaser on a secure website (except where as indicated below information is to be made available at Seller’s office) the following materials (collectively, the “ Seller’s Information ”) to the extent in Seller’s possession or in the possession of any manager or submanager of any portion of the Premises, together with any other information on the Property that Purchaser may reasonably request:

(a) A copy of the most recent title policy for the Premises;

(b) A true, correct and complete copy of the Leases, guaranty of Leases, if any, and any letters of credit, if any, given by the Tenants as a security deposit;

(c) A true, correct and complete copy of each written Service Contract, if any, and a true, correct and complete written summary of each oral Service Contract, if any, together with copies of any and all other contracts and agreements relating to the ownership, operation, maintenance and repair of the Premises;

(d) That Phase I Environment Site Assessment Update prepared by Trigon Engineering Consultants, Inc., dated November 3, 1997 (Job #151-97-081) which is the only environmental assessment of the Premises prepared for Seller in Seller’s possession.

(e) Certificates of occupancy for the Premises, if available;

(f) At a single office of Seller, copies of any available plans and specifications relating to the improvements on the Premises;

(g) A list of all Personal Property owned by Seller and utilized by it exclusively in connection with the operation of the Premises;

(h) Copies of all permits, warranties and unexpired guaranties for the Property, if available;

(i) At a single office of Seller, all Tenant correspondence files and copies of outstanding Tenant work order requests for the Property and will allow Purchaser, at Purchaser’s expense, to make copies of any such information if requested;

(j) Copies of all Tenant billings for the Premises;

(k) A copy of each notice from any tenant claiming or asserting a landlord default under any lease affecting the Premises; and copies of all notices from any governmental authority within the past 24 months respecting the Premises or any violations with respect to the Premises;

(l) Copy of existing property level loan documents, if any;

(m) Copies of all State and local applications or approvals for historic tax credits, rezoning, site plans or building permits;

(n) Copies of most recent and prior two years’ property tax records, tax bills, assessments and assessment appeals;

(o) Copies of all current construction warranties on materials, labor and equipment, and all as-built architectural and engineering plans for the Premises;

(p) Copies of all operating statements for the past three fiscal years, as well as the current year’s budget which are accurate and complete in every material respect.

12

(q) A list of all capital expenditure made in the past five (5) years and all tenant improvements under each lease affecting the Premises which was paid for, in whole or in part, by landlord which is accurate and complete in every material respect.

Seller makes no representation or warranty with respect to the accuracy or completeness of items (a), (d), (f), (j), (l), (m) and (o) above, but Seller states that it does not know of any inaccuracies or lack of completeness of any of the foregoing.

9. INSPECTION .

(a)     Due Diligence Period . During the period commencing on the Effective Date and continuing until 5:00 PM Eastern Standard Time on the forty-fifth (45 th ) day thereafter (the “ Due Diligence Period ”), subject to the rights of the Tenants under the Leases, Purchaser shall have the right to make such physical inspections, studies and tests of the Premises that Purchaser deems necessary or advisable in Purchaser’s sole discretion, including, but not limited to, the right to verify, inspect, investigate and review, in the Purchaser’s sole discretion: (i) physical inspection, surveying and testing of the Premises including without limitation engineering investigation, (ii) valuation appraisal of the Premises, (iii) the Leases, (iv) the Service Contracts, (v) environmental condition of the Premises (including conducting a Phase I Environmental Assessment (the “ Phase I ”) and if recommended by the Phase I consultant, a Phase II Environmental Report (the “ Phase II ”), and (vi) any and all other documentation or evidence relating to the ownership, zoning, financing, value, construction, income, expense, operation, leasing, options and maintenance and repair of the Premises. In addition, during the Due Diligence Period, Purchaser shall have the right, at its sole cost, to have a licensed termite exterminator conduct an inspection of the Premises to determine whether there is a visible, active termite infestation, and Purchaser shall also have the right to interview Tenants under the Leases and their respective employees prior to Closing, upon reasonable advance notice to Seller.

(b)     Termination of Agreement . If for any reason whatsoever, or for no reason, Purchaser determines, in its sole and absolute discretion, that the Property is unsuitable for its purposes and delivers written notice to Seller of such decision within the Due Diligence Period, the Earnest Money, less One Hundred and No/100 Dollars ($100) (which shall be paid to Seller as consideration for Purchaser’s right to terminate this Agreement pursuant to the terms of this Paragraph 9(b) ) and any interest earned thereon, shall be returned to Purchaser, at which time this Agreement shall be null and void and neither party shall have any rights or obligations under this Agreement, except for Purchaser’s Continuing Obligations (as defined in Paragraph 9(d) below). In the event Purchaser terminates this Agreement, Purchaser shall deliver to Seller upon such termination copies of all reports, studies or other assessments of the Property procured by Purchaser and in Purchaser’s possession or control during the Due Diligence Period.

(c)     General Inspection of Property . From the Effective Date through Closing, Purchaser and its agents, engineers, surveyors, appraisers, auditors and other representatives shall have the right to enter upon the Premises to inspect, examine, survey, obtain engineering inspections, perform environmental testing and studies, appraise, and otherwise do that which, in the opinion of Purchaser, is necessary to determine the boundaries, acreage and condition of the Premises and to determine the suitability of the Property for the uses intended by Purchaser (including, without limitation, inspect, review and copy any and all documents in the possession of Seller, its agents, contractors or employees, and which pertain to the construction, ownership, use, occupancy or operation of the Property or any part thereof), provided these activities will not interfere with the Tenants’ use and enjoyment of its leased premises and will not violate the terms and provisions of such Tenants’ Leases therefor. Seller shall cooperate with Purchaser in connection with Purchaser’s activities, and during ordinary business hours, after reasonable advance notice to Seller. Seller shall, subject to the rights of the Tenants under the Leases, make the Property and all of Seller’s books, files and records relating to the Property available for examination by Purchaser and Purchaser’s agents and representatives, who shall have the right, all at Purchaser’s expense, to make copies of such books, files and records and to extract therefrom such information as they may desire.

(d)     Indemnity . Purchaser shall indemnify and hold Seller and the Tenants under the Leases harmless against any losses and damages to persons or property suffered by Seller and/or Tenants arising out of Purchaser’s due diligence activities hereunder; provided, however, that (i) this indemnity shall not apply to the extent such liability arises in connection with the negligence or willful misconduct of Seller or the Tenants, and (ii) Purchaser shall have no liability to Seller, the Tenants or to any other person or entity by reason of, nor shall Purchaser have any duty to indemnify, defend or hold any person or entity harmless from or against, any claim, demand, damage, loss, action, liability, cause of action or judgment, including, without limitation, any claim, for diminution in value of the Property or for environmental remediation or clean-up costs, arising out of or in connection with the fact of having discovered and/or reported (as may be required by law) any adverse physical condition, title condition or other defect with respect to the Property, unless such condition was caused by Purchaser. The indemnity obligations of Purchaser to Seller and the Tenants under this Paragraph 9(d) shall survive the termination of this Agreement for any reason, and such surviving obligations are referred to herein as “ Purchaser ’ s Continuing Obligations ”.

13

(e)     Assumed Service Contracts . On or prior to the expiration of the Due Diligence Period, Purchaser shall deliver a written list to Seller identifying the Service Contracts, if any, that Purchaser desires to assume at Closing, if any (the “ Assumed Service Contracts ”).

10. PURCHASER’S CONDITIONS PRECEDENT TO CLOSING  The obligations of Purchaser under this Agreement are contingent and conditional upon the conditions precedent set forth below in (a) through (m) of this Section being satisfied at Closing (the “ Purchaser’s Conditions Precedent ”). If any Purchaser’s Condition Precedent is not satisfied, Purchaser, as its sole remedy, may (Y) terminate this Agreement and receive a refund of the Earnest Money, or (Z) waive the failure of any condition precedent and proceed to Closing unless Seller has intentionally or willfully caused same in which case Seller shall be considered in default hereunder and shall have the remedies set forth in Paragraph 12(a) hereof:
 
(a)    Each and every representation and warranty of Seller with respect to the Property must be true, correct and complete in all material respects as of Closing, provided, however, if any of the representations and warranties of Seller with respect to the Property are true as of the Effective Date, but are not true as of the date of Closing as a result of a matter, circumstance or event beyond the reasonable control of Seller, and Purchaser first discovers such untruth prior to Closing, Purchaser shall not be entitled to consider the untruth of the representation or warranty as an event of default under this Agreement, but instead Purchaser may, at its election proceed in accordance with the terms in Paragraph 7(b) hereof;

(b)    As of Closing, Seller shall have fully performed and satisfied in all material respects each and every obligation, term and condition to be performed and satisfied by Seller under this Agreement with respect to the Property;

(c)    Except with respect to the Assumed Service Contracts, Seller shall have terminated all Service Contracts, including any management contracts affecting the Premises;

(d) At Closing, Purchaser shall have received good and marketable title in accordance with a reasonable Title Commitment obtained by Purchaser;

(e) No new adverse environmental matter has been discovered which was not included in the report delivered by Seller to Purchaser prior to the execution of this Agreement;

(f) The Tenants under the Leases have not:

(i) filed for bankruptcy or been the subject of an involuntary bankruptcy; or

(ii) had any material adverse change in its financial condition since the Effective Date.

(g) There is no pending or threatened litigation or arbitration affecting or relating to this Agreement, the transactions contemplated in this Agreement, or affecting the Property or the Leases;

(h) Seller has not breached any of the provisions, obligations, undertakings or promises of Seller under this Agreement;

(i) This Agreement has been approved by the disinterested members of Seller’s General Partner’s Board of Directors;

(j) All of the covenants and obligations of Seller required to be performed or complied with by Seller pursuant to this Agreement at or prior to the Closing, and each of the covenants and obligations (considered individually) of Seller hereunder, shall have been duly performed and complied with in all material respects;

(k) Since the Effective Date of this Agreement, there shall not have been commenced or threatened against Purchaser, Seller or Tenants, or against any of the foregoing’s respective affiliates, any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, this Agreement or any of the transactions contemplated under this Agreement, or (b) that may have the effect of preventing, delaying, making illegal, imposing limitations or conditions on, or otherwise interfering with any of the transactions contemplated hereunder;

(l) Neither the consummation nor the performance of any of undertakings of the parties to this Agreement or the transactions contemplated hereunder, will, directly or indirectly (with or without notice or lapse of time), contravene, or conflict with, or result in a violation of, or cause Purchaser or any of Purchaser’s affiliates to suffer any adverse consequence

14

under, (a) any applicable legal requirement or order, or (b) any legal requirement or order that has been published, introduced, or otherwise proposed by or before any governmental body, authority, agency regulatory authority; and

(m) At Closing, no orders, decrees, judgments or injunctions of any court or governmental body shall be in effect, and no claims, actions, suits, proceedings, arbitrations or investigations shall be pending or threatened, which challenge or seek to challenge, or which could reasonably be expected to prevent or cause the rescission of the consummation of the transactions contemplated in this Agreement.

11. BROKERAGE . Each party represents and warrants to the other party that it has dealt with no broker or finder in connection with this transaction. Each party indemnifies, defends and holds the other party harmless from and against any all other claims of all brokers and finders claiming by, through or under said party and in any way related to the sale and purchase of the Property pursuant to this Agreement, including, without limitation, actual, reasonable attorneys’ fees incurred by the other party in connection with such claims. The rights, covenants and obligations contained in this Section 11 shall survive the Closing.

12. DEFAULTS AND REMEDIES .

(a) Seller’s Breach Generally . Notwithstanding anything to the contrary contained in this Agreement, if Seller fails to perform in accordance with the terms of this Agreement and Seller fails to cure such failure or breach, or remedy, within five (5) business days after written notice, at Purchaser’s option, Purchaser may elect:

(i)    to terminate this Agreement and receive the Earnest Money and all interest earned thereon;

(ii)    to sue for specific performance of the sale of the Property in accordance with the terms of this Agreement.

(b) Purchaser’s Breach . Notwithstanding anything to the contrary contained in this Agreement, if Purchaser fails to close the transaction contemplated by this Agreement solely by reason of a default by Purchaser hereunder, and fails to cure such default within ten (10) business days after written notice thereof from Seller, the Earnest Money shall be forfeited to Seller as liquidated damages, which shall be Seller’s sole and exclusive remedy against Purchaser, at which time this Agreement shall be null and void and neither party shall have any rights or obligations under this Agreement, except that Purchaser shall remain obligated for Purchaser’s Continuing Obligations. Seller acknowledges and agrees that, except for Purchaser’s Continuing Obligations, (1) the Earnest Money is a reasonable estimate of and bears a reasonable relationship to the damages that would be suffered and costs incurred by Seller as a result of having withdrawn the Property from sale and the failure of Closing to occur due to a default of Purchaser under this Agreement; (2) the actual damages suffered and costs incurred by Seller as a result of such withdrawal and failure to close due to a default of Purchaser under this Agreement would be extremely difficult and impractical to determine; and (3) the Earnest Money shall be and constitute valid liquidated damages (except for any sums due Seller in connection with Purchaser’s Continuing Obligations).

(c)     Survival . The rights, covenants and obligations contained in this Section 12 shall survive the Closing or earlier termination hereof.

13.     MISCELLANEOUS .

(a)     Assignment . Except as set forth in the next sentence hereof, it is expressly understood that Purchaser may not assign this Agreement without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the above, Purchaser may assign this Agreement to an entity authorized to do business in the State of North Carolina which is owned and/or controlled by Purchaser (a “ Permitted Assignee ”), however an assignment of this Agreement by Purchaser to a Permitted Assignee shall in no way relieve Purchaser of its obligations hereunder, and Purchaser shall remain liable for same.

(b)     Entire Agreement . This Agreement constitutes the entire agreement between Seller and Purchaser with respect to the Property and shall not be modified or amended except in a written document signed by Seller and Purchaser. Any prior agreement or understanding between Seller and Purchaser concerning the Property is hereby rendered null and void.

(c) Time is of the Essence . Time is of the essence of this Agreement. In the computation of any period of time provided for in this Agreement or by law, the day of the act or event from which the period of time runs shall be excluded, and the last day of such period shall be included, unless it is a Saturday, Sunday, or legal holiday, in which case the period shall be deemed to run until the end of the next day which is not a Saturday, Sunday or legal holiday. Furthermore, if the Closing does not occur on the Closing Date because of the occurrence of a “Force Majeure”, the Closing Date shall be extended to the next

15

practical business day subsequent to such occurrence. For purposes of this Paragraph 13(c) , the term “ Force Majeure ” means acts of God (including, but not limited to tornadoes, floods, hurricanes or other national disasters) expropriation or confiscation of facilities by any governmental authority, compliance with any order or request of any governmental authority, strikes, lockouts, riots, or other labor troubles or a national emergency, or similar causes not within Purchaser’s control. Additionally, notwithstanding that time is of the essence of this Agreement (except as set forth above), the parties hereto shall also have the notice and cure rights set forth in Section 12 of this Agreement prior to being in default hereunder.

(d) Headings . The captions and headings of this Agreement are for convenience of reference only and do not in any way limit or amplify the terms and provisions hereof.

(e) Further Assurances . As requested by one party, the other party will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the requesting party, all rights, interests, powers or benefits intended to be conferred upon it by this Agreement. The rights, covenants and obligations contained in this Paragraph 13(e) shall survive the Closing hereof.

(f) Construction . The parties acknowledge that each party and its counsel have reviewed and revised this Agreement, and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.

(g) Legal Fees . In the event of a default by either party of its obligations under this Agreement, the prevailing party in any action or proceeding in any court in connection therewith shall be entitled to recover from such other party its costs and expenses, including actual, reasonable legal fees and associated court costs.

(h) Notices . All notices, requests, demands or other communications required or permitted under this Agreement shall be in writing and delivered personally or by certified mail, return receipt requested, postage prepaid, by overnight courier (such as Federal Express) or by facsimile or other electronic transmission (email) (provided any notice given by facsimile or email shall be followed the same notice given by overnight courier, personal delivery or certified mail), addressed as follows:

	
				
 	If to Seller:	HIGHWOODS REALTY LIMITED PARTNERSHIP	
 	 	3100 Smoketree Court, Suite 600	
 	 	Raleigh, North Carolina 27604-1051	
 	 	Attn: Jeffrey D. Miller	
 	 	Fax: 919.431.1446	
 	 	Email: jeff.miller@highwoods.com	

	
				
 	With a copy to:	ELLIS & WINTERS LLP	
 	 	4131 Parklake Avenue, Suite 400	
 	 	Raleigh, North Carolina 27612	
 	 	Attn: Tom Blue	
 	 	Fax: 919.865.7010	
 	 	Email: tom.blue@elliswinters.com	

	
				
 	If to Purchaser:	SJ COMPANY I LLC	
 	 	4900 Falls of Neuse Road, Suite 100	
 	 	Raleigh, North Carolina 27609	
 	 	Attn: Chuck Henline	
 	 	Fax:	
 	 	Email: chuck.henline@trailcreekinv.com	

16

	
				
 	With a copy to:	MANNING, FULTON & SKINNER	
 	 	3605 Glenwood Avenue, Suite 500	
 	 	Raleigh, North Carolina 27612	
 	 	Attn: Samuel T. Oliver, Jr.	
 	 	Fax: 919.325.4620	
 	 	Email: oliver@manningfulton.com	

	
				
 	If to Escrowee:	Chicago Title Insurance Company	

 	 	 	

(i) Governing Law . This Agreement shall be governed and interpreted in accordance with the laws of the State of North Carolina.

(j) Counterparts . This Agreement may be executed in any number of identical counterparts, any or all of which may contain the signatures of fewer than all of the parties but all of which shall be taken together as a single instrument. Facsimile copies or electronic images of signature pages shall be treated and deemed as originals.

(k)     Tax Deferred Exchange . The parties acknowledge that the conveyance of the Property to Purchaser may be structured by Seller as a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code (the “Code”). Purchaser agrees to cooperate with Seller in effecting such like-kind exchange, provided that Seller shall bear all of the expenses associated therewith, and provided further that Seller’s ability to undertake any such exchange shall not in any manner be considered a condition of Seller’s obligations under this Agreement. It is contemplated that Seller may assign this Agreement to a “qualified intermediary” pursuant to Treasury Regulation Section 1.103(k)-I(g)4(v) and, notwithstanding any other provision hereof, Purchaser expressly consents to such assignment. Accordingly, in the event of such assignment, Purchaser shall, upon notice from Seller, direct Purchaser’s payment for the Property directly to the qualified intermediary and shall to the extent of the assignment, treat the qualified intermediary as the valid assignee hereof. Notwithstanding anything contained herein, Purchaser shall not be required to acquire or hold legal or beneficial title to, or any other interest, in any property other than the Property for purposes of consummating the exchange. In the event of any exchange, and notwithstanding that in connection with such exchange record title to the Property may be conveyed by Seller to an accommodation entity which thereupon conveys title to the Property to Purchaser, all covenants, agreements and indemnifications of Seller pursuant to this Agreement shall be deemed to be made by Seller, shall survive any conveyance to an accommodation party, shall continue in favor of and inure to the benefit of Purchaser and shall be enforceable by Purchaser against Seller to the extent provided in this Agreement as though the Property had been conveyed directly by Seller to Purchaser and the exchange shall in no way reduce, abridge or modify any of Seller’s obligations or any of Purchaser’s rights or remedies hereunder. Purchaser will have no liability to Seller under or in connection with the exchange, including in the event the exchange is not consummated, or in the event Seller does not achieve the desired tax treatment.

Seller acknowledges that Purchaser may, at Purchaser’s option, include Purchaser’s purchase of the Property in a like-kind exchange under the Code. Seller shall reasonably cooperate with Purchaser and shall execute any documents reasonably required to permit Purchaser to effect such a like-kind exchange pursuant to the Code, provided there shall be no additional cost to Seller.

(l)     Confidential Information . Purchaser acknowledges that all material information with respect to the Property furnished by Seller to Purchaser and information regarding the Property discovered by Purchaser during its due diligence thereof, other than information available generally to the public (collectively, the “ Confidential Information ”), is and has been so furnished, or will be discovered by Purchaser, on the condition that Purchaser maintains the confidentiality thereof. Accordingly, Purchaser shall, and shall cause its members, officers, employees, agents, contractors and representatives to, hold in strict confidence, and not disclose to any other person or entity without the prior written consent of Seller until the Closing shall have been consummated, any of the Confidential Information in respect of the Property. If the Closing does not occur and this Agreement is terminated, Purchaser shall promptly return, or cause to be returned, to Seller all copies of such Confidential Information without

17

retaining, or permitting retention of, any copy thereof. Notwithstanding anything to the contrary hereinabove set forth, Purchaser may disclose such Confidential Information (i) on a need-to-know basis to its employees, its title insurer, equity investors, lenders and members of professional firms serving it in connection with this transaction, including, without limitation, its attorneys, accountants, architects, environmental consultants and engineers, and its clients; (ii) as any governmental agency or authority may require in order to comply with applicable laws or regulations; and (iii) if required by an order of any court of competent jurisdiction. Seller and Purchaser agree not to disclose to anyone the financial terms of the transactions contemplated by this Agreement, other than as required by law or a court order. The provisions of this subparagraph shall survive Closing.

(m)     Press Releases . Purchaser agrees that it will not make any public statement, including without limitation, any press release, with respect to this Agreement and the transaction contemplated hereby.

(n)    Intentionally omitted.

(o)    Intentionally omitted.

(p) Exhibits . The following exhibits are acknowledged to be attached to and form a part of this Agreement, provided that any exhibit not attached hereto on the Effective Date shall be agreed to and attached within ten (10) days after the Effective Date:

Exhibit A    Legal Description of the Premises

Exhibit B    List of Personal Property

Exhibit C    List of Leases

Exhibit D    List of Service Contracts for the Premises

Exhibit E    Form of Escrow Agreement

Exhibit F    Form of Special Warranty Deed

Exhibit G    Form of Bill of Sale

Exhibit H    Form of Assignment and Assumption of Leases

Exhibit I        Form of Assignment and Assumption of Assumed Service Contracts

Exhibit J        Pending Actions, Proceedings or Investigations

Exhibit K    Building Code, Zoning Violations or Other Violations

Exhibit L    Environmental Notices

14. INDEMNITOR’S RIGHTS OF PARTICIPATION . Any party entitled to indemnification under this Agreement (the “ Indemnified Party ”) shall, within ten (10) business days after the receipt of written notice of the assertion or imposition of any claim (but in no event later than fifteen (15) business days prior to the date any response or answer is due in any proceeding) in respect of which indemnity may be sought from the party against whom an indemnity obligation is asserted pursuant to this Agreement (the “ Indemnifying Party ”), notify the Indemnifying Party in writing of the receipt of existence of such claim and afford the Indemnifying Party the right and opportunity to participate in any litigation or arbitration related to such claim (but without any obligation to so participate). The omission of the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability in respect of such claim which it may have to the Indemnified Party on account of this Agreement, except, however, the Indemnifying Party shall be relieved of liability to the extent that the failure to so notify (a) shall have caused prejudice to the defense of such claim, or (b) shall have increased the costs or liability of the Indemnifying Party by reason of the inability or failure of the Indemnifying Party (because of the lack of prompt notice from the Indemnified Party) to be involved in any investigations or negotiations regarding any such claim, nor shall it relieve the Indemnifying Party from any other liability which it may have to the Indemnified Party. In case any such claim shall be asserted or commenced against an Indemnified Party and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall assume the defense thereof with counsel free of conflict and otherwise reasonably satisfactory to the Indemnified Party, and, after actually so assuming the defense thereof, the Indemnifying Party will not be liable to the Indemnified Party hereunder for any legal or other expenses subsequently

18

incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation. In the event that the Indemnifying Party does not assume the defense, or conduct settlement of any claim, the Indemnified Party may settle such claim without the written consent of the Indemnifying Party. Nothing in this Section 14 shall be construed to mean that Purchaser shall be responsible for any obligations, acts or omissions of Seller prior to Closing, except for those obligations and liabilities expressly assumed by Purchaser pursuant to this Agreement, and nothing in this Agreement shall be construed to mean that Seller shall be responsible for any obligations, acts or omissions of Purchaser on or after Closing, except for those obligations and liabilities arising on or after Closing expressly assumed (if any) by Seller pursuant to this Agreement.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement on the day and year first above written.

[SIGNATURE PAGES FOLLOW]

19

SIGNATURE PAGE
TO
AGREEMENT FOR PURCHASE AND SALE OF
REAL ESTATE AND RELATED PROPERTY
BY AND BETWEEN
HIGHWOODS REALTY LIMITED PARTNERSHIP (“Seller”)
AND
SJ COMPANY I LLC (“Purchaser”)

DATED JANUARY 29, 2016

	
				
SELLER:	 	HIGHWOODS REALTY LIMITED PARTNERSHIP,	
 	 	a North Carolina limited partnership	
 	 	 	
 	 	By:	Highwoods Properties, Inc.,	
 	 	 	a Maryland corporation, its Sole General Partner	
 	 	 	 	
 	 	By:	/s/ Jeffrey D. Miller	
 	 	Name:	Jeffrey D. Miller	
 	 	Title:	Senior Vice President & General Counsel	

20

SIGNATURE PAGE
TO
AGREEMENT FOR PURCHASE AND SALE OF
REAL ESTATE AND RELATED PROPERTY
BY AND BETWEEN
HIGHWOODS REALTY LIMITED PARTNERSHIP (“Seller”)
AND
SJ COMPANY I LLC (“Purchaser”)

DATED JANUARY 29, 2016

	
				
PURCHASER:	 	SJ COMPANY I LLC	
 	 	a North Carolina limited liability company	
 	 	 	
 	 	By:	/s/ O. Temple Sloan, Jr.	
 	 	Name:	O. Temple Sloan, Jr.	
 	 	Its:	Manager	

21

Exhibit 12.1

HIGHWOODS PROPERTIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS

	

 	 	2015	 	2014	 	2013	 	2012	 	2011	
Earnings:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before equity in earnings of unconsolidated affiliates	 	$	80,443		 	$	95,160		 	$	40,377		 	$	16,543		 	$	20,745		
Fixed charges	 	96,367		 	93,889		 	97,423		 	97,739		 	86,605		
Capitalized interest	 	(6,888	)	 	(5,310	)	 	(2,731	)	 	(1,031	)	 	(589	)	
Distributions of earnings from unconsolidated affiliates	 	4,901		 	2,687		 	3,985		 	4,618		 	5,029		
Total earnings	 	$	174,823		 	$	186,426		 	$	139,054		 	$	117,869		 	$	111,790		
 	 	 	 	 	 	 	 	 	 	 	
Fixed charges and Preferred Stock dividends:	 	 	 	 	 	 	 	 	 	 	
Contractual interest expense	 	$	82,245		 	$	82,287		 	$	88,838		 	$	92,838		 	$	81,596		
Amortization of deferred financing costs	 	3,645		 	3,082		 	3,802		 	3,685		 	3,232		
Financing obligation interest expense/(income)	 	162		 	(242	)	 	(754	)	 	(1,317	)	 	(248	)	
Capitalized interest	 	6,888		 	5,310		 	2,731		 	1,031		 	589		
Interest component of rental expense	 	3,427		 	3,452		 	2,806		 	1,502		 	1,436		
Total fixed charges	 	96,367		 	93,889		 	97,423		 	97,739		 	86,605		
Preferred Stock dividends	 	2,506		 	2,507		 	2,508		 	2,508		 	4,553		
Total fixed charges and Preferred Stock dividends	 	$	98,873		 	$	96,396		 	$	99,931		 	$	100,247		 	$	91,158		
 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges	 	1.81		 	1.99		 	1.43		 	1.21		 	1.29		
Ratio of earnings to combined fixed charges and Preferred Stock dividends	 	1.77		 	1.93		 	1.39		 	1.18		 	1.23		

Exhibit 12.2

HIGHWOODS REALTY LIMITED PARTNERSHIP
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED UNIT DISTRIBUTIONS

	

 	 	2015	 	2014	 	2013	 	2012	 	2011	
Earnings:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before equity in earnings of unconsolidated affiliates	 	$	80,443		 	$	95,160		 	$	40,377		 	$	16,543		 	$	20,745		
Fixed charges	 	96,367		 	93,889		 	97,423		 	97,739		 	86,605		
Capitalized interest	 	(6,888	)	 	(5,310	)	 	(2,731	)	 	(1,031	)	 	(589	)	
Distributions of earnings from unconsolidated affiliates	 	4,901		 	2,687		 	3,965		 	4,592		 	5,005		
Total earnings	 	$	174,823		 	$	186,426		 	$	139,034		 	$	117,843		 	$	111,766		
 	 	 	 	 	 	 	 	 	 	 	
Fixed charges and Preferred Unit distributions:	 	 	 	 	 	 	 	 	 	 	
Contractual interest expense	 	$	82,245		 	$	82,287		 	$	88,838		 	$	92,838		 	$	81,596		
Amortization of deferred financing costs	 	3,645		 	3,082		 	3,802		 	3,685		 	3,232		
Financing obligation interest expense/(income)	 	162		 	(242	)	 	(754	)	 	(1,317	)	 	(248	)	
Capitalized interest	 	6,888		 	5,310		 	2,731		 	1,031		 	589		
Interest component of rental expense	 	3,427		 	3,452		 	2,806		 	1,502		 	1,436		
Total fixed charges	 	96,367		 	93,889		 	97,423		 	97,739		 	86,605		
Preferred Unit distributions	 	2,506		 	2,507		 	2,508		 	2,508		 	4,553		
Total fixed charges and Preferred Unit distributions	 	$	98,873		 	$	96,396		 	$	99,931		 	$	100,247		 	$	91,158		
 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges	 	1.81		 	1.99		 	1.43		 	1.21		 	1.29		
Ratio of earnings to combined fixed charges and Preferred Unit distributions	 	1.77		 	1.93		 	1.39		 	1.18		 	1.23		

Exhibit 21
 
Subsidiaries of Highwoods Properties, Inc.

Highwoods Realty Limited Partnership, a North Carolina limited partnership
 
HRLP Fourth Avenue, LLC, a Delaware limited liability company

	
		
*	We have omitted the names of other direct and indirect subsidiaries of Highwoods Properties, Inc. because such other subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.	

Subsidiaries of Highwoods Realty Limited Partnership

HRLP Fourth Avenue, LLC, a Delaware limited liability company

	
		
*	We have omitted the names of other direct and indirect subsidiaries of Highwoods Realty Limited Partnership because such other subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.	

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements Nos. 333-12117, 333-29759, 333-55901, 333-160521, 333-168356, and 333-204128 on Form S-8 and Registration Statements Nos. 333-193864 and 333-193865 on Form S-3 of our reports dated February 9, 2016, relating to the consolidated financial statements and financial statement schedules of Highwoods Properties, Inc. and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the Company’s adoption of the accounting standard update for reporting discontinued operations), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2015.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina
February 9, 2016

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-193864-01 on Form S-3 of our report dated February 9, 2016, relating to the consolidated financial statements and financial statement schedules of Highwoods Realty Limited Partnership and subsidiaries (the “Operating Partnership”) (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the Operating Partnership’s adoption of the accounting standard update for reporting discontinued operations) appearing in this Annual Report on Form 10-K of the Operating Partnership for the year ended December 31, 2015 .

/s/ Deloitte & Touche LLP

Raleigh, North Carolina
February 9, 2016

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT

I, Edward J. Fritsch, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Highwoods Properties, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;	

4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:	

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)	evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)	disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and	

5.	The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):	

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and	

(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.	

Date: February 9, 2016

	
	
/s/ Edward J. Fritsch	
Edward J. Fritsch
President and Chief Executive Officer	

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT

I, Mark F. Mulhern, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Highwoods Properties, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;	

4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:	

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)	evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)	disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and	

5.	The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):	

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and	

(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.	

Date: February 9, 2016

	
	
/s/ Mark F. Mulhern	
Mark F. Mulhern
Senior Vice President and Chief Financial Officer	

Exhibit 31.3

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT

I, Edward J. Fritsch, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Highwoods Realty Limited Partnership;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;	

4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:	

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)	evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)	disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and	

5.	The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):	

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and	

(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.	

Date: February 9, 2016

	
	
/s/ Edward J. Fritsch	
Edward J. Fritsch
President and Chief Executive Officer of the General Partner	

Exhibit 31.4

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT

I, Mark F. Mulhern, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Highwoods Realty Limited Partnership;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;	

4.	The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:	

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)	evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)	disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and	

5.	The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):	

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and	

(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.	

Date: February 9, 2016

	
	
/s/ Mark F. Mulhern	
Mark F. Mulhern
Senior Vice President and Chief Financial Officer of the General Partner	

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT

In connection with the Annual Report of Highwoods Properties, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward J. Fritsch, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
		
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	
	
/s/ Edward J. Fritsch	
Edward J. Fritsch
President and Chief Executive Officer	
February 9, 2016	

Exhibit 32.2

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT

In connection with the Annual Report of Highwoods Properties, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark F. Mulhern, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
		
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	
	
/s/ Mark F. Mulhern	
Mark F. Mulhern
Senior Vice President and Chief Financial Officer	
February 9, 2016	

Exhibit 32.3

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT

In connection with the Annual Report of Highwoods Realty Limited Partnership (the “Operating Partnership”) on Form 10-K for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward J. Fritsch, President and Chief Executive Officer of Highwoods Properties, Inc., general partner of the Operating Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
		
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.	

	
	
/s/ Edward J. Fritsch	
Edward J. Fritsch
President and Chief Executive Officer of the General Partner	
February 9, 2016	

Exhibit 32.4

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT

In connection with the Annual Report of Highwoods Realty Limited Partnership (the “Operating Partnership”) on Form 10-K for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark F. Mulhern, Senior Vice President and Chief Financial Officer of Highwoods Properties, Inc., general partner of the Operating Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
		
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.	

	
	
/s/ Mark F. Mulhern	
Mark F. Mulhern
Senior Vice President and Chief Financial Officer of the General Partner	
February 9, 2016