10-Q 1 hiw-20220630.htm 10-Q hiw-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended June 30, 2022
or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from [ ] to [ ]
hiw-20220630_g1.jpg
HIGHWOODS PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland001-1310056-1871668
(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 Carolina000-2173156-1869557
(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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $.01 par value, of Highwoods Properties, Inc.HIWNew York Stock Exchange

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      No     Highwoods Realty Limited Partnership  Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Highwoods Properties, Inc.  Yes      No     Highwoods Realty Limited Partnership  Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Highwoods Properties, Inc.
Large accelerated filer    Accelerated filer    Non-accelerated filer    Smaller reporting company   Emerging growth company
Highwoods Realty Limited Partnership
Large accelerated filer    Accelerated filer    Non-accelerated filer    Smaller reporting company    Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Highwoods Properties, Inc.          Highwoods Realty Limited Partnership   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Highwoods Properties, Inc.  Yes      No     Highwoods Realty Limited Partnership  Yes      No

The Company had 105,184,854 shares of Common Stock outstanding as of July 19, 2022.




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 July 19, 2022, the latest practicable date for financial information prior to the filing of this Quarterly Report.

This report combines the Quarterly Reports on Form 10-Q for the period ended June 30, 2022 of the Company and the Operating Partnership. We believe combining the quarterly 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:

Consolidated Financial Statements;

Note 13 to Consolidated Financial Statements - Earnings Per Share and Per Unit;

Item 4 - Controls and Procedures; and

Item 6 - Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.





HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP

QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 2022

TABLE OF CONTENTS

Page
PART I - FINANCIAL INFORMATION
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS


2

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HIGHWOODS PROPERTIES, INC.
Consolidated Balance Sheets
(Unaudited and in thousands, except share and per share data)
June 30,
2022
December 31,
2021
Assets:
Real estate assets, at cost:
Land$532,215 $549,228 
Buildings and tenant improvements5,676,352 5,718,169 
Development in-process19,088 6,890 
Land held for development238,159 215,257 
6,465,814 6,489,544 
Less-accumulated depreciation(1,522,363)(1,457,511)
Net real estate assets4,943,451 5,032,033 
Real estate and other assets, net, held for sale 3,518 
Cash and cash equivalents25,045 23,152 
Restricted cash46,623 8,046 
Accounts receivable17,938 14,002 
Mortgages and notes receivable1,153 1,227 
Accrued straight-line rents receivable277,086 268,324 
Investments in and advances to unconsolidated affiliates14,457 7,383 
Deferred leasing costs, net of accumulated amortization of $155,594 and $143,111, respectively
243,624 258,902 
Prepaid expenses and other assets, net of accumulated depreciation of $19,968 and $21,408, respectively
112,937 78,551 
Total Assets$5,682,314 $5,695,138 
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
Mortgages and notes payable, net$2,804,314 $2,788,915 
Accounts payable, accrued expenses and other liabilities271,716 294,976 
Total Liabilities3,076,030 3,083,891 
Commitments and contingencies
Noncontrolling interests in the Operating Partnership84,583 111,689 
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), 28,821 shares issued and outstanding
28,821 28,821 
Common Stock, $.01 par value, 200,000,000 authorized shares;
105,184,854 and 104,892,780 shares issued and outstanding, respectively
1,052 1,049 
Additional paid-in capital3,065,208 3,027,861 
Distributions in excess of net income available for common stockholders(593,846)(579,616)
Accumulated other comprehensive loss(1,062)(973)
Total Stockholders’ Equity2,500,173 2,477,142 
Noncontrolling interests in consolidated affiliates21,528 22,416 
Total Equity2,521,701 2,499,558 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity$5,682,314 $5,695,138 

See accompanying notes to consolidated financial statements.
3


HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Income
(Unaudited and in thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Rental and other revenues$203,841 $185,502 $410,219 $369,307 
Operating expenses:
Rental property and other expenses62,369 56,226 123,791 112,415 
Depreciation and amortization69,742 61,949 139,409 122,876 
Impairments of real estate assets35,000  35,000  
General and administrative9,591 10,107 23,147 20,059 
Total operating expenses176,702 128,282 321,347 255,350 
Interest expense25,027 19,001 49,420 38,769 
Other income120 332 483 644 
Gains on disposition of property50,044 22,862 54,144 41,799 
Equity in earnings of unconsolidated affiliates326 431 626 1,068 
Net income52,602 61,844 94,705 118,699 
Net (income) attributable to noncontrolling interests in the Operating Partnership(1,203)(1,624)(2,168)(3,117)
Net (income) attributable to noncontrolling interests in consolidated affiliates(266)(294)(523)(575)
Dividends on Preferred Stock(622)(621)(1,243)(1,243)
Net income available for common stockholders$50,511 $59,305 $90,771 $113,764 
Earnings per Common Share – basic:
Net income available for common stockholders$0.48 $0.57 $0.86 $1.09 
Weighted average Common Shares outstanding – basic105,163 104,106 105,049 104,035 
Earnings per Common Share – diluted:
Net income available for common stockholders$0.48 $0.57 $0.86 $1.09 
Weighted average Common Shares outstanding – diluted107,654 106,964 107,554 106,887 

See accompanying notes to consolidated financial statements.
4

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Comprehensive Income
(Unaudited and in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Comprehensive income:
Net income$52,602 $61,844 $94,705 $118,699 
Other comprehensive income/(loss):
Unrealized losses on cash flow hedges (11) (11)
Amortization of cash flow hedges(74)126 (89)248 
Total other comprehensive income/(loss)(74)115 (89)237 
Total comprehensive income52,528 61,959 94,616 118,936 
Less-comprehensive (income) attributable to noncontrolling interests(1,469)(1,918)(2,691)(3,692)
Comprehensive income attributable to common stockholders$51,059 $60,041 $91,925 $115,244 

See accompanying notes to consolidated financial statements.


5

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

Three Months Ended June 30, 2022
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at March 31, 2022105,143,984 $1,051 $28,821 $3,034,155 $(988)$21,262 $(591,780)$2,492,521 
Issuances of Common Stock, net of issuance costs and tax withholdings
9,537 1 — 261 — — — 262 
Conversions of Common Units to Common Stock30,909 1,251 1,251 
Dividends on Common Stock ($0.50 per share)
— — — — — (52,577)(52,577)
Dividends on Preferred Stock ($21.5625 per share)
— — — — — (622)(622)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
— — 28,696 — — — 28,696 
Issuances of restricted stock424 — — — — — —  
Share-based compensation expense, net of forfeitures  — 845 — — — 845 
Net (income) attributable to noncontrolling interests in the Operating Partnership
— — — — — (1,203)(1,203)
Net (income) attributable to noncontrolling interests in consolidated affiliates
— — — — 266 (266) 
Comprehensive income:
Net income— — — — — 52,602 52,602 
Other comprehensive loss— — — (74)— — (74)
Total comprehensive income52,528 
Balance at June 30, 2022105,184,854 $1,052 $28,821 $3,065,208 $(1,062)$21,528 $(593,846)$2,521,701 

Six Months Ended June 30, 2022
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at December 31, 2021104,892,780 $1,049 $28,821 $3,027,861 $(973)$22,416 $(579,616)$2,499,558 
Issuances of Common Stock, net of issuance costs and tax withholdings79,358 1 — 4,434 — — — 4,435 
Conversions of Common Units to Common Stock30,909 1,251 1,251 
Dividends on Common Stock ($1.00 per share)
— — — — — (105,001)(105,001)
Dividends on Preferred Stock ($43.125 per share)
— — — — — (1,243)(1,243)
Adjustment of noncontrolling interests in the Operating Partnership to fair value— — 25,528 — — — 25,528 
Distributions to noncontrolling interests in consolidated affiliates— — — — (1,411)— (1,411)
Issuances of restricted stock181,807 — — — — — —  
Share-based compensation expense, net of forfeitures 2 — 6,134 — — — 6,136 
Net (income) attributable to noncontrolling interests in the Operating Partnership— — — — — (2,168)(2,168)
Net (income) attributable to noncontrolling interests in consolidated affiliates— — — — 523 (523) 
Comprehensive income:
Net income— — — — — 94,705 94,705 
Other comprehensive loss— — — (89)— — (89)
Total comprehensive income94,616 
Balance at June 30, 2022105,184,854 $1,052 $28,821 $3,065,208 $(1,062)$21,528 $(593,846)$2,521,701 

See accompanying notes to consolidated financial statements.
6


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

Three Months Ended June 30, 2021
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at March 31, 2021104,055,152 $1,041 $28,826 $2,986,462 $(1,340)$21,545 $(681,613)$2,354,921 
Issuances of Common Stock, net of issuance costs and tax withholdings
158,188 1 — 7,094 — — — 7,095 
Conversions of Common Units to Common Stock1,000 — — 44 — — — 44 
Dividends on Common Stock ($0.48 per share)
— — — — — (49,931)(49,931)
Dividends on Preferred Stock ($21.5625 per share)
— — — — — (621)(621)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
— — (6,068)— — — (6,068)
Issuances of restricted stock1,484 — — — — — —  
Redemptions/repurchases of Preferred Stock— (5)— — — — (5)
Share-based compensation expense, net of forfeitures(6,311) — 1,873 — — — 1,873 
Net (income) attributable to noncontrolling interests in the Operating Partnership
— — — — — (1,624)(1,624)
Net (income) attributable to noncontrolling interests in consolidated affiliates
— — — — 294 (294) 
Comprehensive income:
Net income— — — — — 61,844 61,844 
Other comprehensive income— — — 115 — — 115 
Total comprehensive income61,959 
Balance at June 30, 2021104,209,513 $1,042 $28,821 $2,989,405 $(1,225)$21,839 $(672,239)$2,367,643 

Six Months Ended June 30, 2021
Number of Common SharesCommon StockSeries A Cumulative Redeemable Preferred SharesAdditional Paid-In CapitalAccumulated Other Compre-hensive LossNon-controlling Interests in Consolidated AffiliatesDistributions in Excess of Net Income Available for Common StockholdersTotal
Balance at December 31, 2020103,921,546 $1,039 $28,826 $2,993,946 $(1,462)$22,046 $(686,225)$2,358,170 
Issuances of Common Stock, net of issuance costs and tax withholdings109,130 1 — 5,896 — — — 5,897 
Conversions of Common Units to Common Stock1,000 — — 44 — — — 44 
Dividends on Common Stock ($0.96 per share)
— — — — — (99,778)(99,778)
Dividends on Preferred Stock ($43.125 per share)
— — — — — (1,243)(1,243)
Adjustment of noncontrolling interests in the Operating Partnership to fair value— — (15,334)— — — (15,334)
Distributions to noncontrolling interests in consolidated affiliates— — — — (782)— (782)
Issuances of restricted stock184,584 — — — — — —  
Redemptions/repurchases of Preferred Stock— (5)— — — — (5)
Share-based compensation expense, net of forfeitures(6,747)2 — 4,853 — — — 4,855 
Net (income) attributable to noncontrolling interests in the Operating Partnership— — — — — (3,117)(3,117)
Net (income) attributable to noncontrolling interests in consolidated affiliates— — — — 575 (575) 
Comprehensive income:
Net income— — — — — 118,699 118,699 
Other comprehensive income— — — 237 — — 237 
Total comprehensive income118,936 
Balance at June 30, 2021104,209,513 $1,042 $28,821 $2,989,405 $(1,225)$21,839 $(672,239)$2,367,643 

See accompanying notes to consolidated financial statements.
7

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows
(Unaudited and in thousands)
Six Months Ended June 30,
20222021
Operating activities:
Net income$94,705 $118,699 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization139,409 122,876 
Amortization of lease incentives and acquisition-related intangible assets and liabilities(166)(1,439)
Share-based compensation expense6,136 4,855 
Net credit losses/(reversals) on operating lease receivables2,625 (489)
Accrued interest on mortgages and notes receivable(46)(54)
Amortization of debt issuance costs2,040 1,661 
Amortization of cash flow hedges(89)248 
Amortization of mortgages and notes payable fair value adjustments(41)776 
Impairments of real estate assets35,000  
Losses on debt extinguishment 134 
Net gains on disposition of property(54,144)(41,799)
Equity in earnings of unconsolidated affiliates(626)(1,068)
Distributions of earnings from unconsolidated affiliates598 1,402 
Changes in operating assets and liabilities:
Accounts receivable(3,758)6,694 
Prepaid expenses and other assets(6,534)(5,642)
Accrued straight-line rents receivable(13,053)(7,638)
Accounts payable, accrued expenses and other liabilities(158)(1,801)
Net cash provided by operating activities201,898 197,415 
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired(26,977)(120)
Investments in development in-process(20,869)(54,365)
Investments in tenant improvements and deferred leasing costs(60,661)(44,827)
Investments in building improvements(26,528)(24,109)
Investment in acquired controlling interest in unconsolidated affiliate (127,339)
Net proceeds from disposition of real estate assets107,362 71,501 
Investments in mortgages and notes receivable(24)(23)
Repayments of mortgages and notes receivable144 154 
Investments in and advances to unconsolidated affiliates(7,500) 
Payments of earnest money deposits(37,500)(55,000)
Changes in other investing activities2,684 5,711 
Net cash used in investing activities(69,869)(228,417)
Financing activities:
Dividends on Common Stock(105,001)(99,778)
Redemptions/repurchases of Preferred Stock (5)
Dividends on Preferred Stock(1,243)(1,243)
Distributions to noncontrolling interests in the Operating Partnership(2,495)(2,726)
Distributions to noncontrolling interests in consolidated affiliates(1,411)(782)
Proceeds from the issuance of Common Stock6,839 7,763 
Costs paid for the issuance of Common Stock(248)(185)
Repurchase of shares related to tax withholdings(2,156)(1,681)
Borrowings on revolving credit facility145,000 230,000 
Repayments of revolving credit facility(125,000)(75,000)
Borrowings on mortgages and notes payable200,000  
Repayments of mortgages and notes payable(203,187)(151,006)
Changes in debt issuance costs and other financing activities(2,657)(5,166)
Net cash used in financing activities(91,559)(99,809)
Net increase/(decrease) in cash and cash equivalents and restricted cash$40,470 $(130,811)

See accompanying notes to consolidated financial statements.
8

HIGHWOODS PROPERTIES, INC.
Consolidated Statements of Cash Flows – Continued
(Unaudited and in thousands)
Six Months Ended June 30,
20222021
Net increase/(decrease) in cash and cash equivalents and restricted cash$40,470 $(130,811)
Cash and cash equivalents and restricted cash at beginning of the period31,198 189,244 
Cash and cash equivalents and restricted cash at end of the period$71,668 $58,433 

Reconciliation of cash and cash equivalents and restricted cash:

Six Months Ended June 30,
20222021
Cash and cash equivalents at end of the period$25,045 $6,535 
Restricted cash at end of the period46,623 51,898 
Cash and cash equivalents and restricted cash at end of the period$71,668 $58,433 

Supplemental disclosure of cash flow information:
Six Months Ended June 30,
20222021
Cash paid for interest, net of amounts capitalized$47,762 $36,071 

Supplemental disclosure of non-cash investing and financing activities:
Six Months Ended June 30,
20222021
Unrealized losses on cash flow hedges$ $(11)
Conversions of Common Units to Common Stock1,251 44 
Changes in accrued capital expenditures (1)
(20,066)(23,599)
Write-off of fully depreciated real estate assets21,827 36,798 
Write-off of fully amortized leasing costs11,628 28,575 
Write-off of fully amortized debt issuance costs1,216 4,158 
Adjustment of noncontrolling interests in the Operating Partnership to fair value(25,528)15,334 
Future consideration in connection with the acquisition of land 16,000 
__________

(1)Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at June 30, 2022 and 2021 were $34.5 million and $42.3 million, respectively.

See accompanying notes to consolidated financial statements.
9

HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Balance Sheets
(Unaudited and in thousands, except unit and per unit data)
June 30,
2022
December 31,
2021
Assets:
Real estate assets, at cost:
Land$532,215 $549,228 
Buildings and tenant improvements5,676,352 5,718,169 
Development in-process19,088 6,890 
Land held for development238,159 215,257 
6,465,814 6,489,544 
Less-accumulated depreciation(1,522,363)(1,457,511)
Net real estate assets4,943,451 5,032,033 
Real estate and other assets, net, held for sale 3,518 
Cash and cash equivalents25,045 23,152 
Restricted cash46,623 8,046 
Accounts receivable17,938 14,002 
Mortgages and notes receivable1,153 1,227 
Accrued straight-line rents receivable277,086 268,324 
Investments in and advances to unconsolidated affiliates14,457 7,383 
Deferred leasing costs, net of accumulated amortization of $155,594 and $143,111, respectively
243,624 258,902 
Prepaid expenses and other assets, net of accumulated depreciation of $19,968 and $21,408, respectively
112,937 78,551 
Total Assets$5,682,314 $5,695,138 
Liabilities, Redeemable Operating Partnership Units and Capital:
Mortgages and notes payable, net$2,804,314 $2,788,915 
Accounts payable, accrued expenses and other liabilities271,716 294,976 
Total Liabilities3,076,030 3,083,891 
Commitments and contingencies
Redeemable Operating Partnership Units:
Common Units, 2,473,896 and 2,504,805 outstanding, respectively
84,583 111,689 
Series A Preferred Units (liquidation preference $1,000