UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM~~ ~~10-Q~~☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended June 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	~~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,, NC27604

(Address of principal executive offices) (Zip Code)

~~919~~-~~872-4924~~919-872-4924

(~~Registrants’~~Registrants’ telephone number, including area code)

___________________

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $.01 par value, of Highwoods Properties, Inc.	HIW	New 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 ~~Yes~~☒ ☒ No ☐☐ Highwoods Realty Limited Partnership Yes ~~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 ~~Yes~~☒ ☒ No ☐☐ Highwoods Realty Limited Partnership Yes ~~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~~“large accelerated filer,~~’ ‘accelerated~~” “accelerated filer,~~’ ‘smaller~~” “smaller reporting company,’” and ~~‘emerging~~“emerging growth ~~company’~~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 ~~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 ~~103,896,238~~104,209,513 shares of Common Stock outstanding as of July ~~21, 2020~~.20, 2021.

EXPLANATORY NOTE

We refer to Highwoods Properties, Inc. as the ~~“Company,”~~“Company,” Highwoods Realty Limited Partnership as the ~~“Operating~~“Operating Partnership,”” the ~~Company’s~~Company’s common stock as ~~“Common Stock”~~“Common Stock” or ~~“Common~~“Common Shares,”” the ~~Company’s~~Company’s preferred stock as ~~“Preferred Stock”~~“Preferred Stock” or ~~“Preferred~~“Preferred Shares,”” the Operating ~~Partnership’s~~Partnership’s common partnership interests as ~~“Common Units”~~“Common Units” and the Operating ~~Partnership’s~~Partnership’s preferred partnership interests as ~~“Preferred~~“Preferred Units.”” References to ~~“we”~~“we” and ~~“our”~~“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 ~~21, 2020~~,20, 2021, 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, ~~2020~~2021 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 better reflect how management and investors view the business as a single operating unit;~~

•


•	~~combined reports enhance investors’~~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.~~

•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;	~~Consolidated Financial Statements;~~


• •Item 4 - Controls and Procedures; and	~~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, ~~2020~~2021

TABLE OF CONTENTS


		Page

		~~Page~~

PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)		3
~~HIGHWOODS PROPERTIES, INC.:~~	3
HIGHWOODS PROPERTIES, INC.:
Consolidated Balance Sheets at June 30, ~~2020~~2021 and December 31, ~~2019~~2020		3
Consolidated Statements of Income for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		4
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		5
Consolidated Statements of Equity for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		6
Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		8
HIGHWOODS REALTY LIMITED PARTNERSHIP:
Consolidated Balance Sheets at June 30, ~~2020~~2021 and December 31, ~~2019~~2020		10
Consolidated Statements of Income for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		11
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		12
Consolidated Statements of Capital for the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		13
Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020		15
~~CONDENSED~~ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		17
ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		3132
Disclosure Regarding Forward-Looking Statements		3132
Executive Summary		3233
Results of Operations		3637
Liquidity and Capital Resources		3940
Critical Accounting Estimates		4244
Non-GAAP Information		4244
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		4547
ITEM 4. CONTROLS AND PROCEDURES		46
	48

PART II - OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		49
ITEM ~~1A.~~5. OTHER INFORMATION~~RISK FACTORS~~		4749
ITEM 6. EXHIBITS		4849

Table of Contents

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, 2021		December 31, 2020
Assets:
Real estate assets, at cost:
Land	$	489,894	$	466,872
Buildings and tenant improvements	5,139,518		4,981,637
Development in-process	250,338		259,681
Land held for development	147,386		131,474
	6,027,136		5,839,664
Less-accumulated depreciation	(1,478,227)		(1,418,379)
Net real estate assets	4,548,909		4,421,285
Real estate and other assets, net, held for sale	0		11,360
Cash and cash equivalents	6,535		109,322
Restricted cash	51,898		79,922
Accounts receivable	15,927		27,488
Mortgages and notes receivable	1,264		1,341
Accrued straight-line rents receivable	267,603		259,381
Investments in and advances to unconsolidated affiliates	714		27,104
Deferred leasing costs, net of accumulated amortization of $140,257 and $151,698, respectively	216,318		209,329
Prepaid expenses and other assets, net of accumulated depreciation of $19,717 and $21,154, respectively	127,853		62,885
Total Assets	$	5,237,021	$	5,209,417
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
Mortgages and notes payable, net	$	2,475,902	$	2,470,021
Accounts payable, accrued expenses and other liabilities	265,296		268,727


Total Liabilities	2,741,198		2,738,748
Commitments and contingencies	0		0
Noncontrolling interests in the Operating Partnership	128,180		112,499
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 and 28,826 shares issued and outstanding, respectively	28,821		28,826
Common Stock, $.01 par value, 200,000,000 authorized shares;
104,209,513 and 103,921,546 shares issued and outstanding, respectively	1,042		1,039
Additional paid-in capital	2,989,405		2,993,946
Distributions in excess of net income available for common stockholders	(672,239)		(686,225)
Accumulated other comprehensive loss	(1,225)		(1,462)
Total Stockholders’ Equity	2,345,804		2,336,124
Noncontrolling interests in consolidated affiliates	21,839		22,046
Total Equity	2,367,643		2,358,170
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	5,237,021	$	5,209,417

June 30,
2020

December 31,
2019
Assets:

Real estate assets, at cost:

Land
$
485,501

$
515,095

Buildings and tenant improvements
5,010,086

5,128,150

Development in-process
195,166

172,706

Land held for development
131,522

99,163

5,822,275

5,915,114

Less-accumulated depreciation
(1,376,817
)

(1,388,566
)
Net real estate assets
4,445,458

4,526,548

Real estate and other assets, net, held for sale
—

20,790

Cash and cash equivalents
4,752

9,505

Restricted cash
8,955

5,237

Accounts receivable
29,876

23,370

Mortgages and notes receivable
1,440

1,501

Accrued straight-line rents receivable
249,722

234,652

Investments in and advances to unconsolidated affiliates
26,775

26,298

Deferred leasing costs, net of accumulated amortization of $151,170 and $146,125, respectively
221,905

231,347

Prepaid expenses and other assets, net of accumulated depreciation of $20,532 and $20,017, respectively
67,905

58,996

Total Assets
$
5,056,788

$
5,138,244

Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:

Mortgages and notes payable, net
$
2,337,662

$
2,543,710

Accounts payable, accrued expenses and other liabilities
275,551

286,911

Total Liabilities
2,613,213

2,830,621

Commitments and contingencies

Noncontrolling interests in the Operating Partnership
106,103

133,216

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), 28,843 and 28,859 shares issued and outstanding, respectively
28,843

28,859

Common Stock, $.01 par value, 200,000,000 authorized shares;

103,896,936 and 103,756,046 shares issued and outstanding, respectively
1,039

1,038

Additional paid-in capital
2,996,442

2,954,779

Distributions in excess of net income available for common stockholders
(708,903
)

(831,808
)
Accumulated other comprehensive loss
(1,704
)

(471
)
Total Stockholders’ Equity
2,315,717

2,152,397

Noncontrolling interests in consolidated affiliates
21,755

22,010

Total Equity
2,337,472

2,174,407

Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity
$
5,056,788

$
5,138,244

See accompanying notes to consolidated financial statements.

Table of Contents

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,
	2021		2020		2021		2020
Rental and other revenues	$	185,502	$	183,153	$	369,307	$	375,953
Operating expenses:
Rental property and other expenses	56,226		55,119		112,415		117,321
Depreciation and amortization	61,949		59,461		122,876		120,611
Impairments of real estate assets	0		1,778		0		1,778
General and administrative	10,107		10,084		20,059		21,014
Total operating expenses	128,282		126,442		255,350		260,724




Interest expense	19,001		19,840		38,769		41,117



Other income	332		588		644		657

Gains on disposition of property	22,862		318		41,799		153,385



Equity in earnings of unconsolidated affiliates	431		1,179		1,068		2,142






Net income	61,844		38,956		118,699		230,296
Net (income) attributable to noncontrolling interests in the Operating Partnership	(1,624)		(1,017)		(3,117)		(5,977)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(294)		(289)		(575)		(574)
Dividends on Preferred Stock	(621)		(622)		(1,243)		(1,244)

Net income available for common stockholders	$	59,305	$	37,028	$	113,764	$	222,501
Earnings per Common Share – basic:


Net income available for common stockholders	$	0.57	$	0.36	$	1.09	$	2.14
Weighted average Common Shares outstanding – basic	104,106		103,886		104,035		103,849
Earnings per Common Share – diluted:


Net income available for common stockholders	$	0.57	$	0.36	$	1.09	$	2.14
Weighted average Common Shares outstanding – diluted	106,964		106,730		106,887		106,681

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Rental and other revenues
$
183,153

$
184,070

$
375,953

$
356,433

Operating expenses:

Rental property and other expenses
55,119

60,558

117,321

121,109

Depreciation and amortization
59,461

59,460

120,611

128,664

Impairments of real estate assets
1,778

531

1,778

531

General and administrative
10,084

9,560

21,014

21,941

Total operating expenses
126,442

130,109

260,724

272,245

Interest expense
19,840

20,356

41,117

39,095

Other income/(loss)
588

321

657

(3,445
)
Gains on disposition of property
318

6,703

153,385

6,703

Equity in earnings of unconsolidated affiliates
1,179

765

2,142

1,429

Net income
38,956

41,394

230,296

49,780

Net (income) attributable to noncontrolling interests in the Operating Partnership
(1,017
)

(1,044
)

(5,977
)

(1,237
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
(289
)

(306
)

(574
)

(622
)
Dividends on Preferred Stock
(622
)

(622
)

(1,244
)

(1,244
)
Net income available for common stockholders
$
37,028

$
39,422

$
222,501

$
46,677

Earnings per Common Share – basic:

Net income available for common stockholders
$
0.36

$
0.38

$
2.14

$
0.45

Weighted average Common Shares outstanding – basic
103,886

103,693

103,849

103,647

Earnings per Common Share – diluted:

Net income available for common stockholders
$
0.36

$
0.38

$
2.14

$
0.45

Weighted average Common Shares outstanding – diluted
106,730

106,445

106,681

106,402

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Comprehensive Income

(Unaudited and in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Comprehensive income:
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Other comprehensive income/(loss):

Unrealized losses on cash flow hedges	(11)		(103)		(11)		(1,236)
Amortization of cash flow hedges	126		75		248		3
Total other comprehensive income/(loss)	115		(28)		237		(1,233)
Total comprehensive income	61,959		38,928		118,936		229,063
Less-comprehensive (income) attributable to noncontrolling interests	(1,918)		(1,306)		(3,692)		(6,551)
Comprehensive income attributable to common stockholders	$	60,041	$	37,622	$	115,244	$	222,512

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Comprehensive income:

Net income
$
38,956

$
41,394

$
230,296

$
49,780

Other comprehensive loss:

Unrealized losses on cash flow hedges
(103
)

(646
)

(1,236
)

(2,550
)
Amortization of cash flow hedges
75

(360
)

3

(875
)
Total other comprehensive loss
(28
)

(1,006
)

(1,233
)

(3,425
)
Total comprehensive income
38,928

40,388

229,063

46,355

Less-comprehensive (income) attributable to noncontrolling interests
(1,306
)

(1,350
)

(6,551
)

(1,859
)
Comprehensive income attributable to common stockholders
$
37,622

$
39,038

$
222,512

$
44,496

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Equity

(Unaudited and in thousands, except share amounts)


																							Three Months Ended June 30, 2021
	Three Months Ended June 30, 2020																						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
	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
Balance at March 31, 2020	103,885,918	$	1,039	$	28,856		$	3,000,614		$	(1,676	)	$	22,097		$	(696,070	)	$	2,354,860
Balance at March 31, 2021																						Balance at March 31, 2021	104,055,152	$	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	11,018	—		—			362			—			—			—			362			Issuances of Common Stock, net of issuance costs and tax withholdings	158,188	1		—		7,094		—		—		—		7,095
Conversions of Common Units to Common Stock																						Conversions of Common Units to Common Stock	1,000	—		—		44		—		—		—		44
Dividends on Common Stock ($0.48 per share)		—		—			—			—			—			(49,861		)	(49,861		)	Dividends on Common Stock ($0.48 per share)		—		—		—		—		—		(49,931)		(49,931)
Dividends on Preferred Stock ($21.5625 per share)		—		—			—			—			—			(622		)	(622		)	Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(621)		(621)
Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—			(5,776		)	—			—			—			(5,776		)	Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		(6,068)		—		—		—		(6,068)
Distributions to noncontrolling interests in consolidated affiliates		—		—			—			—			(631		)	—			(631		)

Issuances of restricted stock																						Issuances of restricted stock	1,484	—		—		—		—		—		—		0
Redemptions/repurchases of Preferred Stock		—		(13		)	—			—			—			—			(13		)	Redemptions/repurchases of Preferred Stock		—		(5)		—		—		—		—		(5)
Share-based compensation expense, net of forfeitures	—	—		—			1,242			—			—			—			1,242			Share-based compensation expense, net of forfeitures	(6,311)	0		—		1,873		—		—		—		1,873
Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—			—			—			—			(1,017		)	(1,017		)	Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(1,624)		(1,624)
Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—			—			—			289			(289		)	—			Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		294		(294)		0
Comprehensive income:																						Comprehensive income:
Net income		—		—			—			—			—			38,956			38,956			Net income		—		—		—		—		—		61,844		61,844
Other comprehensive loss		—		—			—			(28		)	—			—			(28		)
Other comprehensive income																						Other comprehensive income		—		—		—		115		—		—		115
Total comprehensive income																			38,928			Total comprehensive income														61,959
Balance at June 30, 2020	103,896,936	$	1,039	$	28,843		$	2,996,442		$	(1,704	)	$	21,755		$	(708,903	)	$	2,337,472
Balance at June 30, 2021																						Balance at June 30, 2021	104,209,513	$	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 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
Balance at December 31, 2020	103,921,546	$	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 withholdings	109,130	1		—		5,896		—		—		—		5,897
Conversions of Common Units to Common Stock	1,000	—		—		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 stock	184,584	—		—		—		—		—		—		0
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)		0
Comprehensive income:
Net income		—		—		—		—		—		118,699		118,699
Other comprehensive income		—		—		—		237		—		—		237
Total comprehensive income														118,936
Balance at June 30, 2021	104,209,513	$	1,042	$	28,821	$	2,989,405	$	(1,225)	$	21,839	$	(672,239)	$	2,367,643

Six Months Ended June 30, 2020

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
Balance at December 31, 2019
103,756,046

$
1,038

$
28,859

$
2,954,779

$
(471
)

$
22,010

$
(831,808
)

$
2,174,407

Issuances of Common Stock, net of issuance costs and tax withholdings
(2,248
)

—

—

1,401

—

—

—

1,401

Dividends on Common Stock ($0.96 per share)

—

—

—

—

—

(99,596
)

(99,596
)
Dividends on Preferred Stock ($43.125 per share)

—

—

—

—

—

(1,244
)

(1,244
)
Adjustment of noncontrolling interests in the Operating Partnership to fair value

—

—

36,525

—

—

—

36,525

Distributions to noncontrolling interests in consolidated affiliates

—

—

—

—

(829
)

—

(829
)
Issuances of restricted stock
149,304

—

—

—

—

—

—

—

Redemptions/repurchases of Preferred Stock

—

(16
)

—

—

—

—

(16
)
Share-based compensation expense, net of forfeitures
(6,166
)

1

—

3,737

—

—

—

3,738

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

—

—

—

—

—

(5,977
)

(5,977
)
Net (income) attributable to noncontrolling interests in consolidated affiliates

—

—

—

—

574

(574
)

—

Comprehensive income:

Net income

—

—

—

—

—

230,296

230,296

Other comprehensive loss

—

—

—

(1,233
)

—

—

(1,233
)
Total comprehensive income

229,063

Balance at June 30, 2020
103,896,936

$
1,039

$
28,843

$
2,996,442

$
(1,704
)

$
21,755

$
(708,903
)

$
2,337,472

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Equity - Continued

(Unaudited and in thousands, except share amounts)


																						Three Months Ended June 30, 2020
	Three Months Ended June 30, 2019																					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
Balance at March 31, 2020																					Balance at March 31, 2020	103,885,918	$	1,039	$	28,856	$	3,000,614	$	(1,676)	$	22,097	$	(696,070)	$	2,354,860
Issuances of Common Stock, net of issuance costs and tax withholdings																					Issuances of Common Stock, net of issuance costs and tax withholdings	11,018	—		—		362		—		—		—		362
	Number of Common Shares		Common Stock		Series A Cumulative Redeemable Preferred Shares		Additional Paid-In Capital		Accumulated Other Compre-hensive Income			Non-controlling Interests in Consolidated Affiliates			Distributions in Excess of Net Income Available for Common Stockholders			Total
Balance at March 31, 2019	103,690,619		$	1,037	$	28,859	$	2,956,517	$	7,494		$	17,584		$	(811,223	)	$	2,200,268
Issuances of Common Stock, net of issuance costs and tax withholdings	9,672		—		—		397		—			—			—			397
Conversions of Common Units to Common Stock	5,000		—		—		222		—			—			—			222
Dividends on Common Stock ($0.475 per share)			—		—		—		—			—			(49,250		)	(49,250		)
Dividends on Common Stock ($0.48 per share)																					Dividends on Common Stock ($0.48 per share)		—		—		—		—		—		(49,861)		(49,861)
Dividends on Preferred Stock ($21.5625 per share)			—		—		—		—			—			(622		)	(622		)	Dividends on Preferred Stock ($21.5625 per share)		—		—		—		—		—		(622)		(622)
Adjustment of noncontrolling interests in the Operating Partnership to fair value			—		—		14,722		—			—			—			14,722			Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		(5,776)		—		—		—		(5,776)
Distributions to noncontrolling interests in consolidated affiliates			—		—		—		—			(476		)	—			(476		)	Distributions to noncontrolling interests in consolidated affiliates		—		—		—		—		(631)		—		(631)
Contributions from noncontrolling interests in consolidated affiliates			—		—		—		—			4,987			—			4,987

Redemptions/repurchases of Preferred Stock																					Redemptions/repurchases of Preferred Stock		—		(13)		—		—		—		—		(13)
Share-based compensation expense, net of forfeitures	(688	)	—		—		940		—			—			—			940			Share-based compensation expense, net of forfeitures	0	0		—		1,242		—		—		—		1,242
Net (income) attributable to noncontrolling interests in the Operating Partnership			—		—		—		—			—			(1,044		)	(1,044		)	Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(1,017)		(1,017)
Net (income) attributable to noncontrolling interests in consolidated affiliates			—		—		—		—			306			(306		)	—			Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		289		(289)		0
Comprehensive income:																					Comprehensive income:
Net income			—		—		—		—			—			41,394			41,394			Net income		—		—		—		—		—		38,956		38,956
Other comprehensive loss			—		—		—		(1,006		)	—			—			(1,006		)	Other comprehensive loss		—		—		—		(28)		—		—		(28)
Total comprehensive income																		40,388			Total comprehensive income														38,928
Balance at June 30, 2019	103,704,603		$	1,037	$	28,859	$	2,972,798	$	6,488		$	22,401		$	(821,051	)	$	2,210,532
Balance at June 30, 2020																					Balance at June 30, 2020	103,896,936	$	1,039	$	28,843	$	2,996,442	$	(1,704)	$	21,755	$	(708,903)	$	2,337,472

Six Months Ended June 30, 2019

Number of Common Shares

Common Stock

Series A Cumulative Redeemable Preferred Shares

Additional Paid-In Capital

Accumulated Other Compre-hensive Income

Non-controlling Interests in Consolidated Affiliates

Distributions in Excess of Net Income Available for Common Stockholders

Total
Balance at December 31, 2018
103,557,065

$
1,036

$
28,877

$
2,976,197

$
9,913

$
17,576

$
(769,303
)

$
2,264,296

Issuances of Common Stock, net of issuance costs and tax withholdings
(23,705
)

—

—

(731
)

—

—

—

(731
)
Conversions of Common Units to Common Stock
8,000

—

—

353

—

—

—

353

Dividends on Common Stock ($0.95 per share)

—

—

—

—

—

(98,425
)

(98,425
)
Dividends on Preferred Stock ($43.125 per share)

—

—

—

—

—

(1,244
)

(1,244
)
Adjustment of noncontrolling interests in the Operating Partnership to fair value

—

—

(8,532
)

—

—

—

(8,532
)
Distributions to noncontrolling interests in consolidated affiliates

—

—

—

—

(784
)

—

(784
)
Contributions from noncontrolling interests in consolidated affiliates

—

—

—

—

4,987

—

4,987

Issuances of restricted stock
164,190

—

—

—

—

—

—

—

Redemptions/repurchases of Preferred Stock

—

(18
)

—

—

—

—

(18
)
Share-based compensation expense, net of forfeitures
(947
)

1

—

5,511

—

—

—

5,512

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

—

—

—

—

—

(1,237
)

(1,237
)
Net (income) attributable to noncontrolling interests in consolidated affiliates

—

—

—

—

622

(622
)

—

Comprehensive income:

Net income

—

—

—

—

—

49,780

49,780

Other comprehensive loss

—

—

—

(3,425
)

—

—

(3,425
)
Total comprehensive income

46,355

Balance at June 30, 2019
103,704,603

$
1,037

$
28,859

$
2,972,798

$
6,488

$
22,401

$
(821,051
)

$
2,210,532


	Six Months Ended June 30, 2020
	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
Balance at December 31, 2019	103,756,046	$	1,038	$	28,859	$	2,954,779	$	(471)	$	22,010	$	(831,808)	$	2,174,407
Issuances of Common Stock, net of issuance costs and tax withholdings	(2,248)	0		—		1,401		—		—		—		1,401

Dividends on Common Stock ($0.96 per share)		—		—		—		—		—		(99,596)		(99,596)
Dividends on Preferred Stock ($43.125 per share)		—		—		—		—		—		(1,244)		(1,244)
Adjustment of noncontrolling interests in the Operating Partnership to fair value		—		—		36,525		—		—		—		36,525
Distributions to noncontrolling interests in consolidated affiliates		—		—		—		—		(829)		—		(829)

Issuances of restricted stock	149,304	—		—		—		—		—		—		0
Redemptions/repurchases of Preferred Stock		—		(16)		—		—		—		—		(16)
Share-based compensation expense, net of forfeitures	(6,166)	1		—		3,737		—		—		—		3,738
Net (income) attributable to noncontrolling interests in the Operating Partnership		—		—		—		—		—		(5,977)		(5,977)
Net (income) attributable to noncontrolling interests in consolidated affiliates		—		—		—		—		574		(574)		0
Comprehensive income:
Net income		—		—		—		—		—		230,296		230,296
Other comprehensive loss		—		—		—		(1,233)		—		—		(1,233)
Total comprehensive income														229,063
Balance at June 30, 2020	103,896,936	$	1,039	$	28,843	$	2,996,442	$	(1,704)	$	21,755	$	(708,903)	$	2,337,472

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Cash Flows

(Unaudited and in thousands)


	Six Months Ended June 30,
	2021		2020
Operating activities:
Net income	$	118,699	$	230,296
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	122,876		120,611
Amortization of lease incentives and acquisition-related intangible assets and liabilities	(1,439)		(1,278)
Share-based compensation expense	4,855		3,738

Net credit losses/(reversals) on operating lease receivables	(489)		2,333

Accrued interest on mortgages and notes receivable	(54)		(61)
Amortization of debt issuance costs	1,661		1,533
Amortization of cash flow hedges	248		3
Amortization of mortgages and notes payable fair value adjustments	776		852
Impairments of real estate assets	0		1,778

Losses on debt extinguishment	134		0
Net gains on disposition of property	(41,799)		(153,385)



Equity in earnings of unconsolidated affiliates	(1,068)		(2,142)

Distributions of earnings from unconsolidated affiliates	1,402		407

Changes in operating assets and liabilities:
Accounts receivable	6,694		(1,031)
Prepaid expenses and other assets	(5,642)		(8,320)
Accrued straight-line rents receivable	(7,638)		(21,522)
Accounts payable, accrued expenses and other liabilities	(1,801)		6,403
Net cash provided by operating activities	197,415		180,215
Investing activities:
Investments in acquired real estate and related intangible assets, net of cash acquired	(120)		(2,363)
Investments in development in-process	(54,365)		(83,071)
Investments in tenant improvements and deferred leasing costs	(44,827)		(85,544)
Investments in building improvements	(24,109)		(30,312)
Investment in acquired controlling interest in unconsolidated affiliate	(127,339)		0
Net proceeds from disposition of real estate assets	71,501		334,366


Distributions of capital from unconsolidated affiliates	0		72
Investments in mortgages and notes receivable	(23)		(32)
Repayments of mortgages and notes receivable	154		154



Payments of earnest money deposits	(55,000)		0
Changes in other investing activities	5,711		(3,541)
Net cash provided by/(used in) investing activities	(228,417)		129,729
Financing activities:
Dividends on Common Stock	(99,778)		(99,596)

Redemptions/repurchases of Preferred Stock	(5)		(16)

Dividends on Preferred Stock	(1,243)		(1,244)
Distributions to noncontrolling interests in the Operating Partnership	(2,726)		(2,728)

Distributions to noncontrolling interests in consolidated affiliates	(782)		(829)
Proceeds from the issuance of Common Stock	7,763		2,753
Costs paid for the issuance of Common Stock	(185)		(228)
Repurchase of shares related to tax withholdings	(1,681)		(1,124)
Borrowings on revolving credit facility	230,000		129,000
Repayments of revolving credit facility	(75,000)		(336,000)

Repayments of mortgages and notes payable	(151,006)		(967)



Changes in debt issuance costs and other financing activities	(5,166)		0
Net cash used in financing activities	(99,809)		(310,979)
Net decrease in cash and cash equivalents and restricted cash	$	(130,811)	$	(1,035)

Six Months Ended
June 30,

2020

2019
Operating activities:

Net income
$
230,296

$
49,780

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
120,611

128,664

Amortization of lease incentives and acquisition-related intangible assets and liabilities
(1,278
)

868

Share-based compensation expense
3,738

5,512

Credit losses on operating lease receivables
2,333

8,144

Write-off of mortgages and notes receivable
—

4,087

Accrued interest on mortgages and notes receivable
(61
)

(118
)
Amortization of debt issuance costs
1,533

1,455

Amortization of cash flow hedges
3

(875
)
Amortization of mortgages and notes payable fair value adjustments
852

787

Impairments of real estate assets
1,778

531

Losses on debt extinguishment
—

375

Net gains on disposition of property
(153,385
)

(6,703
)
Equity in earnings of unconsolidated affiliates
(2,142
)

(1,429
)
Distributions of earnings from unconsolidated affiliates
407

669

Settlement of cash flow hedges
—

(5,144
)
Changes in operating assets and liabilities:

Accounts receivable
(1,031
)

(5,507
)
Prepaid expenses and other assets
(8,320
)

(3,305
)
Accrued straight-line rents receivable
(21,522
)

(14,273
)
Accounts payable, accrued expenses and other liabilities
6,403

9,771

Net cash provided by operating activities
180,215

173,289

Investing activities:

Investments in acquired real estate and related intangible assets, net of cash acquired
(2,363
)

(12,795
)
Investments in development in-process
(83,071
)

(50,884
)
Investments in tenant improvements and deferred leasing costs
(85,544
)

(78,449
)
Investments in building improvements
(30,312
)

(24,113
)
Net proceeds from disposition of real estate assets
334,366

31,510

Distributions of capital from unconsolidated affiliates
72

29

Investments in mortgages and notes receivable
(32
)

—

Repayments of mortgages and notes receivable
154

147

Changes in other investing activities
(3,541
)

(4,272
)
Net cash provided by/(used in) investing activities
129,729

(138,827
)
Financing activities:

Dividends on Common Stock
(99,596
)

(98,425
)
Redemptions/repurchases of Preferred Stock
(16
)

(18
)
Dividends on Preferred Stock
(1,244
)

(1,244
)
Distributions to noncontrolling interests in the Operating Partnership
(2,728
)

(2,598
)
Distributions to noncontrolling interests in consolidated affiliates
(829
)

(784
)
Proceeds from the issuance of Common Stock
2,753

1,049

Costs paid for the issuance of Common Stock
(228
)

—

Repurchase of shares related to tax withholdings
(1,124
)

(1,780
)
Borrowings on revolving credit facility
129,000

169,400

Repayments of revolving credit facility
(336,000
)

(215,400
)
Borrowings on mortgages and notes payable
—

349,010

Repayments of mortgages and notes payable
(967
)

(225,929
)
Changes in debt issuance costs and other financing activities
—

(4,379
)
Net cash used in financing activities
(310,979
)

(31,098
)
Net increase/(decrease) in cash and cash equivalents and restricted cash
$
(1,035
)

$
3,364

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS PROPERTIES, INC.

Consolidated Statements of Cash Flows –– Continued

(Unaudited and in thousands)


	Six Months Ended June 30,
	2021		2020
Net decrease in cash and cash equivalents and restricted cash	$	(130,811)	$	(1,035)
Cash and cash equivalents and restricted cash at beginning of the period	189,244		14,742
Cash and cash equivalents and restricted cash at end of the period	$	58,433	$	13,707

Six Months Ended
June 30,

2020

2019
Net increase/(decrease) in cash and cash equivalents and restricted cash
$
(1,035
)

$
3,364

Cash and cash equivalents and restricted cash at beginning of the period
14,742

10,143

Cash and cash equivalents and restricted cash at end of the period
$
13,707

$
13,507

Reconciliation of cash and cash equivalents and restricted cash:


	Six Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2021		2020
Cash and cash equivalents at end of the period	$	4,752	$	4,530	Cash and cash equivalents at end of the period	$	6,535	$	4,752
Restricted cash at end of the period	8,955		8,977		Restricted cash at end of the period	51,898		8,955
Cash and cash equivalents and restricted cash at end of the period	$	13,707	$	13,507	Cash and cash equivalents and restricted cash at end of the period	$	58,433	$	13,707

Supplemental disclosure of cash flow information:

Six Months Ended
June 30,

2020

2019
Cash paid for interest, net of amounts capitalized
$
38,424

$
33,378


	Six Months Ended June 30,
	2021		2020
Cash paid for interest, net of amounts capitalized	$	36,071	$	38,424

Supplemental disclosure of non-cash investing and financing activities:


	Six Months Ended June 30,
	2021		2020
Unrealized losses on cash flow hedges	$	(11)	$	(1,236)
Conversions of Common Units to Common Stock	44		0
Changes in accrued capital expenditures (1)	(23,599)		(18,819)
Write-off of fully depreciated real estate assets	36,798		22,630
Write-off of fully amortized leasing costs	28,575		10,564
Write-off of fully amortized debt issuance costs	4,158		0

Adjustment of noncontrolling interests in the Operating Partnership to fair value	15,334		(36,525)




Issuances of Common Units to acquire real estate assets	0		6,163



Contingent consideration in connection with the acquisition of land	0		1,500

Future consideration in connection with the acquisition of land	16,000		0

__________

(1)

Six Months Ended
June 30,

2020

2019
Unrealized losses on cash flow hedges
$
(1,236
)

$
(2,550
)
Conversions of Common Units to Common Stock
—

353

Changes in accrued capital expenditures (1)
(18,819
)

2,027

Write-off of fully depreciated real estate assets
22,630

36,188

Write-off of fully amortized leasing costs
10,564

19,900

Write-off of fully amortized debt issuance costs
—

828

Adjustment of noncontrolling interests in the Operating Partnership to fair value
(36,525
)

8,532

Contributions from noncontrolling interests in consolidated affiliates
—

4,987

Issuances of Common Units to acquire real estate assets
6,163

—

Contingent consideration in connection with the acquisition of land
1,500

—

Initial recognition of lease liabilities related to right of use assets
—

35,349

~~__________~~Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at June 30, 2021 and 2020 were $42.3 million and $49.1 million, respectively.


~~(1)~~	~~Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at~~ ~~June 30, 2020~~ ~~and~~ ~~2019~~ ~~were~~ ~~$49.1 million~~ ~~and~~ ~~$64.3 million, respectively.~~

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Balance Sheets

(Unaudited and in thousands, except unit and per unit data)


	June 30, 2021		December 31, 2020
Assets:
Real estate assets, at cost:
Land	$	489,894	$	466,872
Buildings and tenant improvements	5,139,518		4,981,637
Development in-process	250,338		259,681
Land held for development	147,386		131,474
	6,027,136		5,839,664
Less-accumulated depreciation	(1,478,227)		(1,418,379)
Net real estate assets	4,548,909		4,421,285
Real estate and other assets, net, held for sale	0		11,360
Cash and cash equivalents	6,535		109,322
Restricted cash	51,898		79,922
Accounts receivable	15,927		27,488
Mortgages and notes receivable	1,264		1,341
Accrued straight-line rents receivable	267,603		259,381
Investments in and advances to unconsolidated affiliates	714		27,104
Deferred leasing costs, net of accumulated amortization of $140,257 and $151,698, respectively	216,318		209,329
Prepaid expenses and other assets, net of accumulated depreciation of $19,717 and $21,154, respectively	127,853		62,885
Total Assets	$	5,237,021	$	5,209,417
Liabilities, Redeemable Operating Partnership Units and Capital:
Mortgages and notes payable, net	$	2,475,902	$	2,470,021
Accounts payable, accrued expenses and other liabilities	265,296		268,727


Total Liabilities	2,741,198		2,738,748
Commitments and contingencies	0		0
Redeemable Operating Partnership Units:
Common Units, 2,837,725 and 2,838,725 outstanding, respectively	128,180		112,499
Series A Preferred Units (liquidation preference $1,000 per unit), 28,821 and 28,826 units issued and outstanding, respectively	28,821		28,826
Total Redeemable Operating Partnership Units	157,001		141,325
Capital:
Common Units:
General partner Common Units, 1,066,384 and 1,063,515 outstanding, respectively	23,182		23,087
Limited partner Common Units, 102,734,320 and 102,449,222 outstanding, respectively	2,295,026		2,285,673
Accumulated other comprehensive loss	(1,225)		(1,462)
Noncontrolling interests in consolidated affiliates	21,839		22,046
Total Capital	2,338,822		2,329,344
Total Liabilities, Redeemable Operating Partnership Units and Capital	$	5,237,021	$	5,209,417

June 30,
2020

December 31,
2019
Assets:

Real estate assets, at cost:

Land
$
485,501

$
515,095

Buildings and tenant improvements
5,010,086

5,128,150

Development in-process
195,166

172,706

Land held for development
131,522

99,163

5,822,275

5,915,114

Less-accumulated depreciation
(1,376,817
)

(1,388,566
)
Net real estate assets
4,445,458

4,526,548

Real estate and other assets, net, held for sale
—

20,790

Cash and cash equivalents
4,752

9,505

Restricted cash
8,955

5,237

Accounts receivable
29,876

23,370

Mortgages and notes receivable
1,440

1,501

Accrued straight-line rents receivable
249,722

234,652

Investments in and advances to unconsolidated affiliates
26,775

26,298

Deferred leasing costs, net of accumulated amortization of $151,170 and $146,125, respectively
221,905

231,347

Prepaid expenses and other assets, net of accumulated depreciation of $20,532 and $20,017, respectively
67,905

58,996

Total Assets
$
5,056,788

$
5,138,244

Liabilities, Redeemable Operating Partnership Units and Capital:

Mortgages and notes payable, net
$
2,337,662

$
2,543,710

Accounts payable, accrued expenses and other liabilities
275,551

286,911

Total Liabilities
2,613,213

2,830,621

Commitments and contingencies

Redeemable Operating Partnership Units:

Common Units, 2,842,295 and 2,723,703 outstanding, respectively
106,103

133,216

Series A Preferred Units (liquidation preference $1,000 per unit), 28,843 and 28,859 units issued and outstanding, respectively
28,843

28,859

Total Redeemable Operating Partnership Units
134,946

162,075

Capital:

Common Units:

General partner Common Units, 1,063,304 and 1,060,709 outstanding, respectively
22,886

21,240

Limited partner Common Units, 102,424,823 and 102,286,528 outstanding, respectively
2,265,692

2,102,769

Accumulated other comprehensive loss
(1,704
)

(471
)
Noncontrolling interests in consolidated affiliates
21,755

22,010

Total Capital
2,308,629

2,145,548

Total Liabilities, Redeemable Operating Partnership Units and Capital
$
5,056,788

$
5,138,244

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Income

(Unaudited and in thousands, except per unit amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Rental and other revenues	$	185,502	$	183,153	$	369,307	$	375,953
Operating expenses:
Rental property and other expenses	56,226		55,119		112,415		117,321
Depreciation and amortization	61,949		59,461		122,876		120,611
Impairments of real estate assets	0		1,778		0		1,778
General and administrative	10,107		10,084		20,059		21,014
Total operating expenses	128,282		126,442		255,350		260,724




Interest expense	19,001		19,840		38,769		41,117



Other income	332		588		644		657

Gains on disposition of property	22,862		318		41,799		153,385



Equity in earnings of unconsolidated affiliates	431		1,179		1,068		2,142






Net income	61,844		38,956		118,699		230,296
Net (income) attributable to noncontrolling interests in consolidated affiliates	(294)		(289)		(575)		(574)
Distributions on Preferred Units	(621)		(622)		(1,243)		(1,244)

Net income available for common unitholders	$	60,929	$	38,045	$	116,881	$	228,478
Earnings per Common Unit – basic:


Net income available for common unitholders	$	0.57	$	0.36	$	1.10	$	2.15
Weighted average Common Units outstanding – basic	106,535		106,319		106,464		106,259
Earnings per Common Unit – diluted:


Net income available for common unitholders	$	0.57	$	0.36	$	1.10	$	2.15
Weighted average Common Units outstanding – diluted	106,555		106,321		106,478		106,272

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Rental and other revenues
$
183,153

$
184,070

$
375,953

$
356,433

Operating expenses:

Rental property and other expenses
55,119

60,558

117,321

121,109

Depreciation and amortization
59,461

59,460

120,611

128,664

Impairments of real estate assets
1,778

531

1,778

531

General and administrative
10,084

9,560

21,014

21,941

Total operating expenses
126,442

130,109

260,724

272,245

Interest expense
19,840

20,356

41,117

39,095

Other income/(loss)
588

321

657

(3,445
)
Gains on disposition of property
318

6,703

153,385

6,703

Equity in earnings of unconsolidated affiliates
1,179

765

2,142

1,429

Net income
38,956

41,394

230,296

49,780

Net (income) attributable to noncontrolling interests in consolidated affiliates
(289
)

(306
)

(574
)

(622
)
Distributions on Preferred Units
(622
)

(622
)

(1,244
)

(1,244
)
Net income available for common unitholders
$
38,045

$
40,466

$
228,478

$
47,914

Earnings per Common Unit – basic:

Net income available for common unitholders
$
0.36

$
0.38

$
2.15

$
0.45

Weighted average Common Units outstanding – basic
106,319

106,017

106,259

105,973

Earnings per Common Unit – diluted:

Net income available for common unitholders
$
0.36

$
0.38

$
2.15

$
0.45

Weighted average Common Units outstanding – diluted
106,321

106,036

106,272

105,993

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Comprehensive Income

(Unaudited and in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Comprehensive income:
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Other comprehensive income/(loss):

Unrealized losses on cash flow hedges	(11)		(103)		(11)		(1,236)
Amortization of cash flow hedges	126		75		248		3
Total other comprehensive income/(loss)	115		(28)		237		(1,233)
Total comprehensive income	61,959		38,928		118,936		229,063
Less-comprehensive (income) attributable to noncontrolling interests	(294)		(289)		(575)		(574)
Comprehensive income attributable to common unitholders	$	61,665	$	38,639	$	118,361	$	228,489

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Comprehensive income:

Net income
$
38,956

$
41,394

$
230,296

$
49,780

Other comprehensive loss:

Unrealized losses on cash flow hedges
(103
)

(646
)

(1,236
)

(2,550
)
Amortization of cash flow hedges
75

(360
)

3

(875
)
Total other comprehensive loss
(28
)

(1,006
)

(1,233
)

(3,425
)
Total comprehensive income
38,928

40,388

229,063

46,355

Less-comprehensive (income) attributable to noncontrolling interests
(289
)

(306
)

(574
)

(622
)
Comprehensive income attributable to common unitholders
$
38,639

$
40,082

$
228,489

$
45,733

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Capital

(Unaudited and in thousands)


																	Three Months Ended June 30, 2021
	Three Months Ended June 30, 2020																Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
	Common Units						Accumulated Other Comprehensive Loss			Noncontrolling Interests in Consolidated Affiliates			Total				General Partners’ Capital		Limited Partners’ Capital
Balance at March 31, 2021																Balance at March 31, 2021	$	23,059	$	2,282,831	$	(1,340)	$	21,545	$	2,326,095
Issuances of Common Units, net of issuance costs and tax withholdings																Issuances of Common Units, net of issuance costs and tax withholdings	71		7,024		—		—		7,095
	General Partners’ Capital			Limited Partners’ Capital			Accumulated Other Comprehensive Loss			Noncontrolling Interests in Consolidated Affiliates			Total
Balance at March 31, 2020	$	23,055		$	2,282,528
Issuances of Common Units, net of issuance costs and tax withholdings	4			358			—			—			362
Distributions on Common Units ($0.48 per unit)	(510		)	(50,518		)	—			—			(51,028		)	Distributions on Common Units ($0.48 per unit)	(511)		(50,587)		—		—		(51,098)
Distributions on Preferred Units ($21.5625 per unit)	(6		)	(616		)	—			—			(622		)	Distributions on Preferred Units ($21.5625 per unit)	(6)		(615)		—		—		(621)
Share-based compensation expense, net of forfeitures	12			1,230			—			—			1,242			Share-based compensation expense, net of forfeitures	19		1,854		—		—		1,873
Distributions to noncontrolling interests in consolidated affiliates	—			—			—			(631		)	(631		)

Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(56		)	(5,570		)	—			—			(5,626		)	Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(65)		(6,416)		—		—		(6,481)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(3		)	(286		)	—			289			—			Net (income) attributable to noncontrolling interests in consolidated affiliates	(3)		(291)		—		294		0
Comprehensive income:																Comprehensive income:
Net income	390			38,566			—			—			38,956			Net income	618		61,226		—		—		61,844
Other comprehensive loss	—			—			(28		)	—			(28		)
Other comprehensive income																Other comprehensive income	—		—		115		—		115
Total comprehensive income													38,928			Total comprehensive income									61,959
Balance at June 30, 2020	$	22,886		$	2,265,692		$	(1,704	)	$	21,755		$	2,308,629
Balance at June 30, 2021																Balance at June 30, 2021	$	23,182	$	2,295,026	$	(1,225)	$	21,839	$	2,338,822


																	Six Months Ended June 30, 2021
	Six Months Ended June 30, 2020																Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
	Common Units						Accumulated Other Comprehensive Loss			Noncontrolling Interests in Consolidated Affiliates			Total				General Partners’ Capital		Limited Partners’ Capital
Balance at December 31, 2020																Balance at December 31, 2020	$	23,087	$	2,285,673	$	(1,462)	$	22,046	$	2,329,344
Issuances of Common Units, net of issuance costs and tax withholdings																Issuances of Common Units, net of issuance costs and tax withholdings	59		5,838		—		—		5,897
	General Partners’ Capital			Limited Partners’ Capital			Accumulated Other Comprehensive Loss			Noncontrolling Interests in Consolidated Affiliates			Total
Balance at December 31, 2019	$	21,240		$	2,102,769
Issuances of Common Units, net of issuance costs and tax withholdings	76			7,488			—			—			7,564
Distributions on Common Units ($0.96 per unit)	(1,019		)	(100,912		)	—			—			(101,931		)	Distributions on Common Units ($0.96 per unit)	(1,021)		(101,091)		—		—		(102,112)
Distributions on Preferred Units ($43.125 per unit)	(12		)	(1,232		)	—			—			(1,244		)	Distributions on Preferred Units ($43.125 per unit)	(12)		(1,231)		—		—		(1,243)
Share-based compensation expense, net of forfeitures	37			3,701			—			—			3,738			Share-based compensation expense, net of forfeitures	49		4,806		—		—		4,855
Distributions to noncontrolling interests in consolidated affiliates	—			—			—			(829		)	(829		)	Distributions to noncontrolling interests in consolidated affiliates	—		—		—		(782)		(782)

Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	267			26,453			—			—			26,720			Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(161)		(15,912)		—		—		(16,073)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(6		)	(568		)	—			574			—			Net (income) attributable to noncontrolling interests in consolidated affiliates	(6)		(569)				575		0
Comprehensive income:																Comprehensive income:
Net income	2,303			227,993			—			—			230,296			Net income	1,187		117,512		—		—		118,699
Other comprehensive loss	—			—			(1,233		)	—			(1,233		)
Other comprehensive income																Other comprehensive income	—		—		237		—		237
Total comprehensive income													229,063			Total comprehensive income									118,936
Balance at June 30, 2020	$	22,886		$	2,265,692		$	(1,704	)	$	21,755		$	2,308,629
Balance at June 30, 2021																Balance at June 30, 2021	$	23,182	$	2,295,026	$	(1,225)	$	21,839	$	2,338,822

See accompanying notes to consolidated financial statements.

Table of Contents

HIGHWOODS REALTY LIMITED PARTNERSHIP

Consolidated Statements of Capital - Continued

(Unaudited and in thousands)


																	Three Months Ended June 30, 2020
	Three Months Ended June 30, 2019																Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
	Common Units						Accumulated Other Comprehensive Income			Noncontrolling Interests in Consolidated Affiliates			Total				General Partners’ Capital		Limited Partners’ Capital
Balance at March 31, 2020																Balance at March 31, 2020	$	23,055	$	2,282,528	$	(1,676)	$	22,097	$	2,326,004
Issuances of Common Units, net of issuance costs and tax withholdings																Issuances of Common Units, net of issuance costs and tax withholdings	4		358		—		—		362
	General Partners’ Capital			Limited Partners’ Capital			Accumulated Other Comprehensive Income			Noncontrolling Interests in Consolidated Affiliates			Total
Balance at March 31, 2019	$	21,463		$	2,124,868
Issuances of Common Units, net of issuance costs and tax withholdings	4			393			—			—			397
Distributions on Common Units ($0.475 per unit)	(503		)	(49,850		)	—			—			(50,353		)
Distributions on Common Units ($0.48 per unit)																Distributions on Common Units ($0.48 per unit)	(510)		(50,518)		—		—		(51,028)
Distributions on Preferred Units ($21.5625 per unit)	(6		)	(616		)	—			—			(622		)	Distributions on Preferred Units ($21.5625 per unit)	(6)		(616)		—		—		(622)
Share-based compensation expense, net of forfeitures	9			931			—			—			940			Share-based compensation expense, net of forfeitures	12		1,230		—		—		1,242
Distributions to noncontrolling interests in consolidated affiliates	—			—			—			(476		)	(476		)	Distributions to noncontrolling interests in consolidated affiliates	—		—		—		(631)		(631)
Contributions from noncontrolling interests in consolidated affiliates	—			—			—			4,987			4,987

Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	150			14,853			—			—			15,003			Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(56)		(5,570)		—		—		(5,626)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(3		)	(303		)	—			306			—			Net (income) attributable to noncontrolling interests in consolidated affiliates	(3)		(286)		—		289		0
Comprehensive income:																Comprehensive income:
Net income	414			40,980			—			—			41,394			Net income	390		38,566		—		—		38,956
Other comprehensive loss	—			—			(1,006		)	—			(1,006		)	Other comprehensive loss	—		—		(28)		—		(28)
Total comprehensive income													40,388			Total comprehensive income									38,928
Balance at June 30, 2019	$	21,528		$	2,131,256		$	6,488		$	22,401		$	2,181,673
Balance at June 30, 2020																Balance at June 30, 2020	$	22,886	$	2,265,692	$	(1,704)	$	21,755	$	2,308,629


																	Six Months Ended June 30, 2020
	Six Months Ended June 30, 2019																Common Units				Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total
	Common Units						Accumulated Other Comprehensive Income			Noncontrolling Interests in Consolidated Affiliates			Total				General Partners’ Capital		Limited Partners’ Capital
Balance at December 31, 2019																Balance at December 31, 2019	$	21,240	$	2,102,769	$	(471)	$	22,010	$	2,145,548
Issuances of Common Units, net of issuance costs and tax withholdings																Issuances of Common Units, net of issuance costs and tax withholdings	76		7,488		—		—		7,564
	General Partners’ Capital			Limited Partners’ Capital			Accumulated Other Comprehensive Income			Noncontrolling Interests in Consolidated Affiliates			Total
Balance at December 31, 2018	$	22,078		$	2,185,852
Issuances of Common Units, net of issuance costs and tax withholdings	(7		)	(724		)	—			—			(731		)
Distributions on Common Units ($0.95 per unit)	(1,006		)	(99,628		)	—			—			(100,634		)
Distributions on Common Units ($0.96 per unit)																Distributions on Common Units ($0.96 per unit)	(1,019)		(100,912)		—		—		(101,931)
Distributions on Preferred Units ($43.125 per unit)	(12		)	(1,232		)	—			—			(1,244		)	Distributions on Preferred Units ($43.125 per unit)	(12)		(1,232)		—		—		(1,244)
Share-based compensation expense, net of forfeitures	55			5,457			—			—			5,512			Share-based compensation expense, net of forfeitures	37		3,701		—		—		3,738
Distributions to noncontrolling interests in consolidated affiliates	—			—			—			(784		)	(784		)	Distributions to noncontrolling interests in consolidated affiliates	—		—		—		(829)		(829)
Contributions from noncontrolling interests in consolidated affiliates	—			—			—			4,987			4,987

Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	(72		)	(7,135		)	—			—			(7,207		)	Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner	267		26,453		—		—		26,720
Net (income) attributable to noncontrolling interests in consolidated affiliates	(6		)	(616		)	—			622			—			Net (income) attributable to noncontrolling interests in consolidated affiliates	(6)		(568)		—		574		0
Comprehensive income:																Comprehensive income:
Net income	498			49,282			—			—			49,780			Net income	2,303		227,993		—		—		230,296
Other comprehensive loss	—			—			(3,425		)	—			(3,425		)	Other comprehensive loss	—		—		(1,233)		—		(1,233)
Total comprehensive income													46,355			Total comprehensive income									229,063
Balance at June 30, 2019	$	21,528		$	2,131,256		$	6,488		$	22,401		$	2,181,673
Balance at June 30, 2020																Balance at June 30, 2020	$	22,886	$	2,265,692	$	(1,704)	$	21,755	$	2,308,629

Table of Contents

HIGHWOODS PROPERTIES, INC.

HIGHWOODS REALTY LIMITED PARTNERSHIP

~~CONDENSED~~ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2020~~2021

(tabular dollar amounts in thousands, except per share and per unit data)

(Unaudited)

1. Description of Business and Significant Accounting Policies

Description of Business

Highwoods Properties, Inc. (the ~~“Company”~~“Company”) is a fully integrated real estate investment trust ~~(“REIT”~~(“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”~~“Operating Partnership”). At June 30, ~~2020~~,2021, we owned or had an interest in ~~28.1~~27.3 million rentable square feet of in-service properties, ~~1.2~~0.8 million rentable square feet of office properties under development and approximately ~~225~~250 acres of development land.

Capital Structure

The Company is the sole general partner of the Operating Partnership. At June 30, ~~2020~~,2021, the Company owned all of the Preferred Units and ~~103.5~~103.8 million,, or 97.3%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.8 million Common Units. During the six months endedJune 30, 2021, the Company redeemed 1,000 Common Units for a like number of shares of Common Stock.

During 2020,, we entered into separate equity distribution agreements in which the Company may offer and sell up to $300.0 million in aggregate gross sales price of shares of Common Stock. During the six months ended June 30, 2021, the Company issued ~~118,592~~149,100 shares of Common ~~Units to acquire real estate assets.~~Stock under its equity distribution agreements at an average gross sales price of $46.11 per share and received net proceeds, after sales commissions, of $6.8 million.

Basis of Presentation

Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America ~~(“GAAP”~~(“GAAP”).

The ~~Company’s~~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~~Partnership’s Consolidated Financial Statements include wholly owned subsidiaries and those entities in which the Operating Partnership has the controlling interest. We consolidate joint venture investments, such as interests in partnerships and limited liability companies, when we control the major operating and financial policies of the investment through majority ownership, in our capacity as a general partner or managing member or through some other contractual right. We also consolidate those entities deemed to be variable interest entities in which we are determined to be the primary beneficiary. At June 30, ~~2020~~,2021, we have involvement with, and are the primary beneficiary in, an entity that we concluded to be a variable interest entity (see Note 3). All intercompany transactions and accounts have been eliminated.

The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in the opinion of management, contain all adjustments (including normal recurring accruals) necessary for a fair presentation of our financial position, results of operations and cash flows. We have condensed or omitted certain notes and other information from the interim Consolidated Financial Statements presented in this Quarterly Report as permitted by SEC rules and regulations. These Consolidated Financial Statements should be read in conjunction with our ~~2019~~2020 Annual Report on Form 10-K.

Use of Estimates

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

Table of Contents

Insurance

We are primarily self-insured for health care claims for participating employees. We have stop-loss coverage to limit our exposure to significant claims on a per claim and annual aggregate basis. We determine our liabilities for claims, including incurred but not reported losses, based on all relevant information, including actuarial estimates of claim liabilities. At June 30, ~~2020~~,2021, a reserve of ~~$0.5~~$0.4 million was recorded to cover estimated reported and unreported claims.

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Planned Investment Activities

During the second quarter of 2021, we agreed to acquire a portfolio of office assets from Preferred Apartment Communities, Inc. (NYSE:APTS) (“PAC”). The core portfolio to be acquired consists of the following 4 Class A office assets in Charlotte and Raleigh, which encompass 1,630,000 square feet in total, and 1 mixed-use redevelopment site in Atlanta: 150 Fayetteville, Raleigh (CBD); CAPTRUST Tower, Raleigh (North Hills); Capitol Towers, Charlotte (SouthPark); Morrocroft Centre, Charlotte (SouthPark); and Galleria 75, Atlanta (Cumberland/Galleria). We have also agreed to acquire 2 non-core assets: a mezzanine loan related to a recently constructed office building in Atlanta; and Armour Yards, a multi-building creative office project in Atlanta. Our total investment, including the estimated value of the non-core assets, is expected to be $769 million, which includes $28 million of near-term building improvements and $5 million of transaction costs. The transaction is expected to include, among other things, the assumption of 4 secured loans collateralized by the core office buildings estimated to be recorded at fair value of $403 million in the aggregate, with a weighted average effective interest rate of 3.7% and a weighted average maturity of 10.8 years. The value of the non-core assets represents less than 12% of the anticipated total investment. The acquisition, which is subject to customary closing conditions, is scheduled to close within 30 days of the filing of this Quarterly Report. As of July 20, 2021, we have posted $60.0 million of earnest money deposits (of which $55.0 million were recorded in prepaid expenses and other assets at June 30, 2021) that are non-refundable except in limited circumstances. As part of the transaction, PAC will separately market Armour Yards for sale to a third party. If PAC chooses not to sell Armour Yards to a third party, we will close on the acquisition of the creative office project no later than the first quarter of 2022.

Recently Issued Accounting Standards

The Financial Accounting Standards Board ~~(“FASB”~~(“FASB”) issued an accounting standards update ~~(“ASU”~~(“ASU”) ~~that changes certain disclosure requirements for fair value measurements. We adopted the ASU as of January 1, 2020 with no material effect on our Notes to Consolidated Financial Statements.~~

~~The FASB issued an ASU~~ that provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate ~~(“SOFR”~~(“SOFR”). Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance in this ASU ~~can~~is optional and may be ~~applied from March 12, 2020~~elected now through December 31, ~~2022.~~2022 as reference rate reform activities occur. We ~~are in~~will continue to evaluate the ~~process~~impact of ~~evaluating~~ this ASU; however, we currently expect to avail ourselves of such optional expedients and exceptions should our modified contracts meet the required criteria.

Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, lessors may provide rent deferrals and other lease concessions to lessees. In April 2020, the FASB staff issued a question and answer document (the ~~“Lease~~“Lease Modification Q~~&A”~~&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, we would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A&A allows us, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. We have elected the practical expedient and will not apply lease modification accounting on a lease by lease basis where applicable. As a result, ~~$5.0~~$1.6 million of deferred rent is included in accounts receivable on our Consolidated Balance Sheets at June 30, ~~2020~~.2021.

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2. 2. Leases	~~Leases~~

We generally lease our office properties to lessees in exchange for fixed monthly payments that cover rent, property taxes, insurance and certain cost recoveries, primarily common area maintenance. Office properties owned by us that are under lease are primarily located in Atlanta, Charlotte, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa and are leased to a wide variety of lessees across many industries. Our leases are operating leases and mostly range from three to 10 years. We recognized rental and other revenues related to operating lease payments of ~~$181.1~~$182.4 million and ~~$180.7~~$181.1 million during the three months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively, and ~~$370.7~~$362.4 million and ~~$350.1~~$370.7 million during the six months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively. Included in these amounts are variable lease payments of ~~$13.4~~$14.5 million and ~~$16.4~~$13.4 million during the three months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively, and ~~$29.8~~$29.0 million and ~~$31.9~~$29.8 million during the six months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively.

3. Consolidated Variable Interest Entity

WeIn 2019, we and The Bromley Companies formed a joint venture (the ~~“Midtown~~“Midtown One joint ~~venture”~~venture”) to construct Midtown ~~One,~~West, a 150,000 square foot, multi-customer office building located in the mixed-use Midtown Tampa project in ~~Tampa’s~~Tampa’s Westshore submarket. Midtown ~~One~~West has an anticipated total investment of ~~$71.3 million~~.$71.3 million. Construction of Midtown ~~One~~West began in the third quarter of 2019 with a ~~scheduled~~ completion date in the second quarter of 2021. At closing, we agreed to contribute cash of ~~$20.0~~$20.0 million,, which has been fully funded, in exchange for an 80.0% interest in the Midtown One joint venture and The Bromley Companies contributed land valued at ~~$5.0~~$5.0 million in exchange for the remaining 20.0% interest. We also committed to provide a ~~$46.3~~$46.3 million interest-only secured construction loan to the Midtown One joint venture that is scheduled to mature on the second anniversary of completion. The loan bears interest at LIBOR plus 250 basis ~~points~~.points. As of June 30, ~~2020~~, ~~$6.7~~2021, $23.7 million under the loan has been funded.

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We determined that we have a variable interest in the Midtown One joint venture primarily because the entity was designed to pass along interest rate risk, equity price risk and operation risk to us as both a debt and an equity holder and The Bromley Companies as an equity holder. The Midtown One joint venture was further determined to be a variable interest entity as it requires additional subordinated financial support in the form of a loan because the initial equity investment provided by us and The Bromley Companies is not sufficient to finance its planned investments and operations. We, as majority owner and managing member and through our control rights as set forth in the joint ~~venture’s~~venture’s governance documents, were determined to be the primary beneficiary as we have both the power to direct the activities that most significantly affect the entity (primarily lease rates, property operations and capital expenditures) and significant economic exposure through our equity investment and loan commitment. As such, the Midtown One joint venture is consolidated and all intercompany transactions and accounts are eliminated. The following table sets forth the assets and liabilities of the Midtown One joint venture included on our Consolidated Balance Sheets:


	June 30, 2021


Net real estate assets	$	51,533
Cash and cash equivalents	$	101
Deferred leasing costs	$	260
Prepaid expenses and other assets, net of accumulated depreciation	$	126
Accounts payable, accrued expenses and other liabilities	$	1,798

June 30,
2020
Development in-process
$
34,462

Accounts payable, accrued expenses and other liabilities
$
2,377

The assets of the Midtown One joint venture can be used only to settle obligations of the joint venture and its creditors have no recourse to our wholly owned assets.

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4. Real Estate Assets

Acquisitions

~~Acquisitions~~

During the second quarter of ~~2020, we acquired development land in Raleigh for a purchase price, including capitalized acquisition costs, of~~ ~~$2.3 million~~.

~~During the first quarter of 2020,~~2021, we acquired development land in Nashville for a purchase price, including capitalized acquisition costs, of ~~$6.2~~$16.1 million,, which ~~consisted of the issuance of~~ ~~118,592~~ ~~Common Units and capitalized acquisition costs.~~is expected to be paid within two years.

~~Dispositions~~During the first quarter of 2021, we acquired our joint venture partner’s 75.0% interest in our Highwoods DLF Forum, LLC joint venture (the “Forum”), which owned 5 buildings in Raleigh encompassing 636,000 rentable square feet, for a purchase price of $131.3 million. We previously accounted for our 25.0% interest in this joint venture using the equity method of accounting. The assets and liabilities of the joint venture are now wholly owned and we have determined the acquisition constitutes an asset purchase. As such, because the Forum is not a variable interest entity, we allocated our previously held equity interest at historical cost along with the consideration paid and acquisition costs to the assets acquired and liabilities assumed. The assets acquired and liabilities assumed were recorded at relative fair value as determined by management, with the assistance of third party specialists, based on information available at the acquisition date and on current assumptions as to future operations.

Dispositions

During the second quarter of ~~2020,~~2021, we sold ~~land~~a building in Tampa for a sale price of $43.0 million (before closing credits to buyer of $0.9 million) and recorded a gain on disposition of property of $22.9 million.

During the first quarter of 2021, we sold a building in Atlanta for a sale price of ~~$2.8~~$30.7 million and recorded a ~~loss~~gain on disposition of property of ~~$0.1 million. During the second quarter of 2020, we also recognized~~ ~~$0.4 million~~ ~~of gain related to the satisfaction of a performance obligation as part of a 2016 land sale.~~ $18.9 million.

~~During the first quarter of 2020, we sold~~ 41 ~~buildings and land in Greensboro and Memphis for an aggregate sale price of~~ ~~$338.4 million~~ ~~(before closing credits to buyer of~~ ~~$3.8 million) and recorded aggregate gains on disposition of property of~~ ~~$153.1 million~~.

~~Impairments~~

~~During the second quarter of 2020, we recorded an impairment of real estate assets of~~ ~~$1.8 million, which resulted from a change in market-based inputs and our assumptions about the use of the assets.~~

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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:


	June 30, 2021		December 31, 2020
Assets:
Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)	$	356,575	$	361,027
Less accumulated amortization	(140,257)		(151,698)
	$	216,318	$	209,329
Liabilities (in accounts payable, accrued expenses and other liabilities):
Acquisition-related below market lease liabilities	$	55,581	$	63,748
Less accumulated amortization	(31,159)		(37,838)
	$	24,422	$	25,910

June 30,
2020

December 31,
2019
Assets:

Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets)
$
373,075

$
377,472

Less accumulated amortization
(151,170
)

(146,125
)

$
221,905

$
231,347

Liabilities (in accounts payable, accrued expenses and other liabilities):

Acquisition-related below market lease liabilities
$
65,039

$
65,971

Less accumulated amortization
(36,164
)

(34,014
)

$
28,875

$
31,957

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

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
$
8,566

$
8,759

$
17,364

$
19,074

Amortization of lease incentives (in rental and other revenues)
$
429

$
460

$
919

$
3,308

Amortization of acquisition-related intangible assets (in rental and other revenues)
$
321

$
343

$
609

$
700

Amortization of acquisition-related intangible assets (in rental property and other expenses)
$
138

$
139

$
277

$
276

Amortization of acquisition-related below market lease liabilities (in rental and other revenues)
$
(1,517
)

$
(1,763
)

$
(3,083
)

$
(3,416
)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)	$	8,626	$	8,566	$	17,197	$	17,364
Amortization of lease incentives (in rental and other revenues)	$	445	$	429	$	893	$	919
Amortization of acquisition-related intangible assets (in rental and other revenues)	$	241	$	321	$	518	$	609
Amortization of acquisition-related intangible assets (in rental property and other expenses)	$	0	$	138	$	0	$	277
Amortization of acquisition-related below market lease liabilities (in rental and other revenues)	$	(1,421)	$	(1,517)	$	(2,850)	$	(3,083)

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

Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization)

Amortization of Lease Incentives (in Rental and Other Revenues)

Amortization of Acquisition-Related Intangible Assets (in Rental and Other Revenues)

Amortization of Acquisition-Related Intangible Assets (in Rental Property and Other Expenses)

Amortization of Acquisition-Related Below Market Lease Liabilities (in Rental and Other Revenues)
July 1 through December 31, 2020

$
18,951

$
831

$
529

$
233

$
(2,874
)
2021

33,989

1,415

767

—

(5,013
)
2022

29,787

1,204

601

—

(3,982
)
2023

26,329

1,121

447

—

(3,607
)
2024

23,306

975

373

—

(2,939
)
Thereafter

74,561

4,325

2,161

—

(10,460
)

$
206,923

$
9,871

$
4,878

$
233

$
(28,875
)
Weighted average remaining amortization periods as of June 30, 2020 (in years)

8.4

9.1

9.5

0.5

8.7


	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 Below Market Lease Liabilities (in Rental and Other Revenues)
July 1 through December 31, 2021	$	18,331	$	791	$	484	$	(2,336)
2022	33,657		1,493		910		(4,214)
2023	29,975		1,421		754		(3,838)
2024	26,604		1,273		664		(3,171)
2025	21,634		1,195		546		(1,813)
Thereafter	69,158		4,975		2,453		(9,050)
	$	199,359	$	11,148	$	5,811	$	(24,422)
Weighted average remaining amortization periods as of June 30, 2021 (in years)	8.0		9.2		8.8		8.4

The following table sets forth the intangible assets acquired and below market lease liabilities assumed as a result of 2021 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	$	2,036	$	13,168	$	(1,361)
Weighted average remaining amortization periods as of June 30, 2021 (in years)	7.2		5.8		5.7

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6. Mortgages and Notes Payable

The following table sets forth our mortgages and notes payable:

June 30,
2020

December 31,
2019
Secured indebtedness
$
94,336

$
95,303

Unsecured indebtedness
2,255,277

2,461,425

Less-unamortized debt issuance costs
(11,951
)

(13,018
)
Total mortgages and notes payable, net
$
2,337,662

$
2,543,710


	June 30, 2021		December 31, 2020
Secured indebtedness	$	92,345	$	93,350
Unsecured indebtedness	2,396,466		2,390,652
Less-unamortized debt issuance costs	(12,909)		(13,981)
Total mortgages and notes payable, net	$	2,475,902	$	2,470,021

At June 30, ~~2020~~,2021, our secured mortgage loan was collateralized by real estate assets with an undepreciated book value of $$147.9 million.

~~147.4 million~~.

~~Our $600.0~~During the first quarter of 2021, we entered into a new $750.0 million unsecured revolving credit facility, ~~is scheduled to mature in~~ ~~January 2022~~which replaced our previously existing $600.0 million revolving credit facility and includes an accordion feature that allows for an additional ~~$400.0~~$550.0 million of borrowing capacity subject to additional lender commitments. Our new revolving credit facility is scheduled to mature in March 2025. Assuming no defaults have occurred, we have an option to extend the maturity for 2 additional six-month periods. The current interest rate on the new facility at our ~~current~~existing credit ratings is LIBOR plus ~~100~~90 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. The financial and other covenants under the new facility are substantially similar to our previous credit facility. We incurred $4.8 million of debt issuance costs, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility. We recorded $0.1 million of loss on debt extinguishment. There was ~~$14.0~~$155.0 million outstanding under our new revolving credit facility at both June 30, ~~2020. There were no amounts outstanding under our revolving credit facility at~~ 2021 and July ~~21, 2020~~.20, 2021. At both June 30, ~~2020~~2021 and July ~~21, 2020~~,20, 2021, we had $~~0.1~~$0.1 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at both June 30, ~~2020~~2021 and July ~~21, 2020~~20, 2021 was $~~585.9 million~~ ~~and~~ ~~$599.9 million, respectively.~~$594.9 million.

During the second quarter of 2021, we prepaid without penalty the remaining $150.0 million principal amount of 3.20% unsecured notes that was scheduled to mature in June 2021. We recorded $0.1 million of loss on debt extinguishment related to this prepayment.

We are currently in compliance with financial covenants with respect to our consolidated debt.

We have considered our short-term liquidity needs ~~within one year from July 28, 2020 (the date of issuance of the quarterly financial statements)~~ and the adequacy of our estimated cash flows from operating activities and other available financing sources to meet these needs. ~~In particular, we have considered our scheduled debt maturities during such one-year period, including the~~ ~~$300.0 million~~ ~~principal amount of unsecured notes due June 15, 2021.~~ We ~~have concluded it is probable we will~~intend to meet these short-term liquidity requirements through a combination of the following:


•	~~available cash and cash equivalents;~~


•	~~cash flows from operating activities;~~


•	~~issuance of debt securities by the Operating Partnership;~~


•	~~issuance of secured debt;~~


•	~~bank term loans;~~


•	~~borrowings under our revolving credit facility;~~


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


•	~~the disposition of non-core assets.~~

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7.•available cash and cash equivalents;	~~Derivative Financial Instruments~~

•cash flows from operating activities;

•issuance of debt securities by the Operating Partnership;

•issuance of secured debt;

•bank term loans;

•borrowings under our revolving credit facility;

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

•the disposition of non-core assets.

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7. Derivative Financial Instruments

The counterparties under our swaps are major financial institutions. The swap agreements contain a provision whereby if we default on certain of our indebtedness 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.

Our interest rate swaps have been designated as and are being accounted for as cash flow hedges with changes in fair value recorded in other comprehensive income/(loss) each reporting period. We have no collateral requirements related to our interest rate swaps.

Amounts reported in accumulated other comprehensive income/(loss) related to derivatives will be reclassified to interest expense as interest payments are made on our debt. During the period from July 1, ~~2020~~2021 through June 30, ~~2021~~,2022, we estimate that ~~$0.5~~$0.2 million will be reclassified as a net increase to interest expense.

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

June 30,
2020

December 31,
2019
Derivatives:

Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:

Interest rate swaps
$
1,237

$
154


	June 30, 2021		December 31, 2020
Derivatives:


Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities:
Interest rate swaps	$	461	$	846

The following table sets forth the effect of our cash flow hedges on accumulated other comprehensive ~~income/(loss)~~loss and interest expense:

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Derivatives Designated as Cash Flow Hedges:

Amount of unrealized losses recognized in accumulated other comprehensive income/(loss) on derivatives:

Interest rate swaps
$
(103
)

$
(646
)

$
(1,236
)

$
(2,550
)
Amount of (gains)/losses reclassified out of accumulated other comprehensive income/(loss) into interest expense:

Interest rate swaps
$
75

$
(360
)

$
3

$
(875
)

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	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Derivatives Designated as Cash Flow Hedges:
Amount of unrealized losses recognized in accumulated other comprehensive loss on derivatives:
Interest rate swaps	$	(11)	$	(103)	$	(11)	$	(1,236)
Amount of losses reclassified out of accumulated other comprehensive loss into interest expense:
Interest rate swaps	$	126	$	75	$	248	$	3


8.	~~Noncontrolling Interests~~

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8. Noncontrolling Interests

Noncontrolling Interests in Consolidated Affiliates

At June 30, ~~2020~~,2021, our noncontrolling interests in consolidated affiliates relate to our joint venture ~~partners’~~ partners’ 50.0% interest in office properties in Richmond and 20.0% interest in ~~an office development property in Tampa.~~the Midtown One joint venture. See Note 3. Our joint venture partners are unrelated third parties.

Noncontrolling Interests in the Operating Partnership

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

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Beginning noncontrolling interests in the Operating Partnership
$
100,674

$
127,976

$
133,216

$
105,960

Adjustment of noncontrolling interests in the Operating Partnership to fair value
5,776

(14,722
)

(36,525
)

8,532

Issuances of Common Units
—

—

6,163

—

Conversions of Common Units to Common Stock
—

(222
)

—

(353
)
Net income attributable to noncontrolling interests in the Operating Partnership
1,017

1,044

5,977

1,237

Distributions to noncontrolling interests in the Operating Partnership
(1,364
)

(1,298
)

(2,728
)

(2,598
)
Total noncontrolling interests in the Operating Partnership
$
106,103

$
112,778

$
106,103

$
112,778


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Beginning noncontrolling interests in the Operating Partnership	$	121,895	$	100,674	$	112,499	$	133,216
Adjustment of noncontrolling interests in the Operating Partnership to fair value	6,068		5,776		15,334		(36,525)
Issuances of Common Units	0		0		0		6,163
Conversions of Common Units to Common Stock	(44)		0		(44)		0

Net income attributable to noncontrolling interests in the Operating Partnership	1,624		1,017		3,117		5,977
Distributions to noncontrolling interests in the Operating Partnership	(1,363)		(1,364)		(2,726)		(2,728)
Total noncontrolling interests in the Operating Partnership	$	128,180	$	106,103	$	128,180	$	106,103

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

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Net income available for common stockholders
$
37,028

$
39,422

$
222,501

$
46,677

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

222

—

353

Issuances of Common Units
—

—

(6,163
)

—

Change from net income available for common stockholders and transfers from noncontrolling interests
$
37,028

$
39,644

$
216,338

$
47,030

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	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income available for common stockholders	$	59,305	$	37,028	$	113,764	$	222,501
Increase in additional paid in capital from conversions of Common Units to Common Stock	44		0		44		0
Issuances of Common Units	0		0		0		(6,163)
Change from net income available for common stockholders and transfers from noncontrolling interests	$	59,349	$	37,028	$	113,808	$	216,338

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9.	~~Disclosure About Fair Value of Financial Instruments~~

9. Disclosure About Fair Value of Financial Instruments

The following summarizes the 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~~Company’s Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company.

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

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

The fair value of mortgages and notes receivable and mortgages and notes payable is estimated by the income approach utilizing contractual cash flows and market-based interest rates to approximate the price that would be paid in an orderly transaction between market participants. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments of interest rate swaps are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments are considered in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our Level 3 assets include any real estate assets recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis, which are valued using unobservable local and national industry market data such as comparable sales, appraisals, ~~brokers’~~brokers’ opinions of value and/or the terms of definitive sales contracts. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement.

Table of Contents

The following table sets forth our assets and liabilities and the ~~Company’s~~Company’s noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy:

Level 1

Level 2

Level 3

Total

Quoted Prices
in Active
Markets for Identical Assets or Liabilities

Significant Observable Inputs

Significant Unobservable Inputs
Fair Value at June 30, 2020:

Assets:

Mortgages and notes receivable, at fair value (1)

$
1,440

$
—

$
1,440

$
—

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

2,111

2,111

—

—

Impaired real estate assets

2,053

—

—

2,053

Total Assets

$
5,604

$
2,111

$
1,440

$
2,053

Noncontrolling Interests in the Operating Partnership

$
106,103

$
106,103

$
—

$
—

Liabilities:

Mortgages and notes payable, net, at fair value (1)

$
2,421,024

$
—

$
2,421,024

$
—

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

1,237

—

1,237

—

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

2,111

2,111

—

—

Total Liabilities

$
2,424,372

$
2,111

$
2,422,261

$
—

Fair Value at December 31, 2019:

Assets:

Mortgages and notes receivable, at fair value (1)

$
1,501

$
—

$
1,501

$
—

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

2,345

2,345

—

—

Total Assets

$
3,846

$
2,345

$
1,501

$
—

Noncontrolling Interests in the Operating Partnership

$
133,216

$
133,216

$
—

$
—

Liabilities:

Mortgages and notes payable, net, at fair value (1)

$
2,615,776

$
—

$
2,615,776

$
—

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

154

—

154

—

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

2,345

2,345

—

—

Total Liabilities

$
2,618,275

$
2,345

$
2,615,930

$
—

~~__________~~


			Level 1		Level 2
	Total		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Observable Inputs
Fair Value at June 30, 2021:
Assets:
Mortgages and notes receivable, at fair value (1)	$	1,264	$	0	$	1,264

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,829		2,829		0



Total Assets	$	4,093	$	2,829	$	1,264
Noncontrolling Interests in the Operating Partnership	$	128,180	$	128,180	$	0
Liabilities:
Mortgages and notes payable, net, at fair value (1)	$	2,619,464	$	0	$	2,619,464
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)	461		0		461
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,829		2,829		0


Total Liabilities	$	2,622,754	$	2,829	$	2,619,925


Fair Value at December 31, 2020:
Assets:
Mortgages and notes receivable, at fair value (1)	$	1,341	$	0	$	1,341

Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,573		2,573		0


Total Assets	$	3,914	$	2,573	$	1,341
Noncontrolling Interests in the Operating Partnership	$	112,499	$	112,499	$	0
Liabilities:
Mortgages and notes payable, net, at fair value (1)	$	2,639,163	$	0	$	2,639,163
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)	846		0		846
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,573		2,573		0


Total Liabilities	$	2,642,582	$	2,573	$	2,640,009

__________

(1) Amounts are not recorded at fair value on our Consolidated Balance Sheets at June 30, ~~2020~~2021 and December 31, ~~2019~~2020.

~~The Level 3 impaired real estate assets measured at a fair value of~~ ~~$2.1 million~~ ~~in the second quarter of~~ ~~2020~~ include a non-core office building. The impairment resulted from a change in our assumptions about the use of the assets and was calculated using brokers’ opinions of value, letters of intent and comparable sales as observable inputs were not available.

Table of Contents

10. Share-Based Payments


~~10.~~	~~Share-Based Payments~~

During the six months endedJune 30, ~~2020~~,2021, the Company granted ~~83,116~~103,120 shares of time-based restricted stock and ~~66,188~~81,464 shares of total return-based restricted stock with weighted average grant date fair values per share of $~~44.88~~$39.99 and $~~38.31~~,$36.41, respectively. We recorded share-based compensation expense of ~~$1.2~~$1.9 million and ~~$0.9~~$1.2 million during the three months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively, and ~~$3.7~~$4.9 million and ~~$5.5~~$3.7 million during the six months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively. At June 30, ~~2020~~,2021, there was ~~$7.7~~$7.2 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of ~~2.2~~2.0 years.


~~11.~~ 11. Accumulated Other Comprehensive Loss	~~Accumulated Other Comprehensive Income/(Loss)~~

The following table sets forth the components of accumulated other comprehensive ~~income/(loss):~~loss:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cash flow hedges:
Beginning balance	$	(1,340)	$	(1,676)	$	(1,462)	$	(471)
Unrealized losses on cash flow hedges	(11)		(103)		(11)		(1,236)
Amortization of cash flow hedges (1)	126		75		248		3
Total accumulated other comprehensive loss	$	(1,225)	$	(1,704)	$	(1,225)	$	(1,704)

__________

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Cash flow hedges:

Beginning balance
$
(1,676
)

$
7,494

$
(471
)

$
9,913

Unrealized losses on cash flow hedges
(103
)

(646
)

(1,236
)

(2,550
)
Amortization of cash flow hedges (1)
75

(360
)

3

(875
)
Total accumulated other comprehensive income/(loss)
$
(1,704
)

$
6,488

$
(1,704
)

$
6,488

~~__________~~

(1) Amounts reclassified out of accumulated other comprehensive ~~income/(loss)~~loss into interest expense.


~~12.~~ 12. Real Estate and Other Assets Held For Sale	~~Real Estate and Other Assets Held For Sale~~

The following table sets forth the assets held for sale at June 30, ~~2020~~2021 and December 31, ~~2019~~,2020, which are considered non-core:

June 30,
2020

December 31,
2019
Assets:

Land
$
—

$
4,815

Buildings and tenant improvements
—

29,581

Less-accumulated depreciation
—

(16,775
)
Net real estate assets
—

17,621

Accrued straight-line rents receivable
—

2,073

Deferred leasing costs, net
—

1,096

Real estate and other assets, net, held for sale
$
—

$
20,790

~~Table of Contents~~


~~13.~~	~~Earnings Per Share and Per Unit~~


	June 30, 2021		December 31, 2020
Assets:
Land	$	0	$	2,612
Buildings and tenant improvements	0		12,238


Less-accumulated depreciation	0		(3,577)
Net real estate assets	0		11,273

Deferred leasing costs, net	0		87

Real estate and other assets, net, held for sale	$	0	$	11,360

Table of Contents

13. Earnings Per Share and Per Unit

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

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Earnings per Common Share - basic:

Numerator:

Net income
$
38,956

$
41,394

$
230,296

$
49,780

Net (income) attributable to noncontrolling interests in the Operating Partnership
(1,017
)

(1,044
)

(5,977
)

(1,237
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
(289
)

(306
)

(574
)

(622
)
Dividends on Preferred Stock
(622
)

(622
)

(1,244
)

(1,244
)
Net income available for common stockholders
$
37,028

$
39,422

$
222,501

$
46,677

Denominator:

Denominator for basic earnings per Common Share – weighted average shares (1)
103,886

103,693

103,849

103,647

Net income available for common stockholders
$
0.36

$
0.38

$
2.14

$
0.45

Earnings per Common Share - diluted:

Numerator:

Net income
$
38,956

$
41,394

$
230,296

$
49,780

Net (income) attributable to noncontrolling interests in consolidated affiliates
(289
)

(306
)

(574
)

(622
)
Dividends on Preferred Stock
(622
)

(622
)

(1,244
)

(1,244
)
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership
$
38,045

$
40,466

$
228,478

$
47,914

Denominator:

Denominator for basic earnings per Common Share – weighted average shares (1)
103,886

103,693

103,849

103,647

Add:

Stock options using the treasury method
2

19

13

20

Noncontrolling interests Common Units
2,842

2,733

2,819

2,735

Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions
106,730

106,445

106,681

106,402

Net income available for common stockholders
$
0.36

$
0.38

$
2.14

$
0.45

~~__________~~


~~(1)~~	~~Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.~~

~~Table of Contents~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Earnings per Common Share - basic:
Numerator:
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Net (income) attributable to noncontrolling interests in the Operating Partnership	(1,624)		(1,017)		(3,117)		(5,977)
Net (income) attributable to noncontrolling interests in consolidated affiliates	(294)		(289)		(575)		(574)
Dividends on Preferred Stock	(621)		(622)		(1,243)		(1,244)
Net income available for common stockholders	$	59,305	$	37,028	$	113,764	$	222,501
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)	104,106		103,886		104,035		103,849
Net income available for common stockholders	$	0.57	$	0.36	$	1.09	$	2.14
Earnings per Common Share - diluted:
Numerator:
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Net (income) attributable to noncontrolling interests in consolidated affiliates	(294)		(289)		(575)		(574)
Dividends on Preferred Stock	(621)		(622)		(1,243)		(1,244)
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership	$	60,929	$	38,045	$	116,881	$	228,478
Denominator:
Denominator for basic earnings per Common Share – weighted average shares (1)	104,106		103,886		104,035		103,849
Add:
Stock options using the treasury method	20		2		14		13
Noncontrolling interests Common Units	2,838		2,842		2,838		2,819
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions	106,964		106,730		106,887		106,681
Net income available for common stockholders	$	0.57	$	0.36	$	1.09	$	2.14

__________

(1)Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable.

Table of Contents

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Earnings per Common Unit - basic:
Numerator:
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Net (income) attributable to noncontrolling interests in consolidated affiliates	(294)		(289)		(575)		(574)
Distributions on Preferred Units	(621)		(622)		(1,243)		(1,244)



Net income available for common unitholders	$	60,929	$	38,045	$	116,881	$	228,478
Denominator:
Denominator for basic earnings per Common Unit – weighted average units (1)	106,535		106,319		106,464		106,259



Net income available for common unitholders	$	0.57	$	0.36	$	1.10	$	2.15
Earnings per Common Unit - diluted:
Numerator:
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Net (income) attributable to noncontrolling interests in consolidated affiliates	(294)		(289)		(575)		(574)
Distributions on Preferred Units	(621)		(622)		(1,243)		(1,244)



Net income available for common unitholders	$	60,929	$	38,045	$	116,881	$	228,478
Denominator:
Denominator for basic earnings per Common Unit – weighted average units (1)	106,535		106,319		106,464		106,259
Add:
Stock options using the treasury method	20		2		14		13
Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions	106,555		106,321		106,478		106,272



Net income available for common unitholders	$	0.57	$	0.36	$	1.10	$	2.15

__________

(1)Includes all unvested restricted stock where distributions on such restricted stock are non-forfeitable.

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Earnings per Common Unit - basic:

Numerator:

Net income
$
38,956

$
41,394

$
230,296

$
49,780

Net (income) attributable to noncontrolling interests in consolidated affiliates
(289
)

(306
)

(574
)

(622
)
Distributions on Preferred Units
(622
)

(622
)

(1,244
)

(1,244
)
Net income available for common unitholders
$
38,045

$
40,466

$
228,478

$
47,914

Denominator:

Denominator for basic earnings per Common Unit – weighted average units (1)
106,319

106,017

106,259

105,973

Net income available for common unitholders
$
0.36

$
0.38

$
2.15

$
0.45

Earnings per Common Unit - diluted:

Numerator:

Net income
$
38,956

$
41,394

$
230,296

$
49,780

Net (income) attributable to noncontrolling interests in consolidated affiliates
(289
)

(306
)

(574
)

(622
)
Distributions on Preferred Units
(622
)

(622
)

(1,244
)

(1,244
)
Net income available for common unitholders
$
38,045

$
40,466

$
228,478

$
47,914

Denominator:

Denominator for basic earnings per Common Unit – weighted average units (1)
106,319

106,017

106,259

105,973

Add:

Stock options using the treasury method
2

19

13

20

Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions
106,321

106,036

106,272

105,993

Net income available for common unitholders
$
0.36

$
0.38

$
2.15

$
0.45

~~__________~~


~~(1)~~	~~Includes all unvested restricted stock where distributions on such restricted stock are non-forfeitable.~~

Table of Contents

14. Segment Information


~~14.~~	~~Segment Information~~

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 and 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 three and six months ended June 30, 2019 has been retrospectively revised from previously reported amounts to reflect a change in our reportable segments as a result of recent dispositions.

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Rental and Other Revenues:

Office:

Atlanta
$
36,537

$
37,692

$
74,496

$
73,995

Charlotte
9,010

—

17,943

—

Nashville
34,622

33,109

69,119

64,508

Orlando
12,304

12,995

25,326

26,927

Pittsburgh
14,676

14,994

29,624

30,309

Raleigh
31,202

30,673

63,755

59,770

Richmond
11,834

12,341

24,094

24,627

Tampa
25,358

23,497

50,602

39,068

Total Office Segment
175,543

165,301

354,959

319,204

Other
7,610

18,769

20,994

37,229

Total Rental and Other Revenues
$
183,153

$
184,070

$
375,953

$
356,433

Net Operating Income:

Office:

Atlanta
$
23,901

$
24,819

$
49,084

$
48,242

Charlotte
7,123

—

14,325

—

Nashville
25,132

24,208

49,885

46,526

Orlando
7,750

8,007

15,755

16,563

Pittsburgh
9,350

8,895

18,020

18,029

Raleigh
23,997

22,438

47,633

43,297

Richmond
8,508

8,610

17,199

17,162

Tampa
17,663

14,291

34,196

21,376

Total Office Segment
123,424

111,268

246,097

211,195

Other
4,610

12,244

12,535

24,129

Total Net Operating Income
128,034

123,512

258,632

235,324

Reconciliation to net income:

Depreciation and amortization
(59,461
)

(59,460
)

(120,611
)

(128,664
)
Impairments of real estate assets
(1,778
)

(531
)

(1,778
)

(531
)
General and administrative expenses
(10,084
)

(9,560
)

(21,014
)

(21,941
)
Interest expense
(19,840
)

(20,356
)

(41,117
)

(39,095
)
Other income/(loss)
588

321

657

(3,445
)
Gains on disposition of property
318

6,703

153,385

6,703

Equity in earnings of unconsolidated affiliates
1,179

765

2,142

1,429

Net income
$
38,956

$
41,394

$
230,296

$
49,780

~~Table of Contents~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Rental and Other Revenues:
Office:
Atlanta	$	35,738	$	36,537	$	71,713	$	74,496
Charlotte	8,917		9,010		18,051		17,943
Nashville	35,578		34,622		70,737		69,119
Orlando	12,730		12,304		25,289		25,326
Pittsburgh	13,949		14,676		28,567		29,624
Raleigh	37,655		31,202		74,697		63,755
Richmond	11,751		11,834		23,213		24,094
Tampa	25,886		25,358		50,310		50,602
Total Office Segment	182,204		175,543		362,577		354,959
Other	3,298		7,610		6,730		20,994
Total Rental and Other Revenues	$	185,502	$	183,153	$	369,307	$	375,953

~~15.~~


Net Operating Income:
Office:
Atlanta	$	23,622	$	23,901	$	47,622	$	49,084
Charlotte	7,035		7,123		14,287		14,325
Nashville	25,824		25,132		50,817		49,885
Orlando	7,782		7,750		15,494		15,755
Pittsburgh	8,411		9,350		17,300		18,020
Raleigh	28,444		23,997		56,580		47,633
Richmond	8,234		8,508		16,287		17,199
Tampa	17,857		17,663		34,497		34,196
Total Office Segment	127,209		123,424		252,884		246,097
Other	2,067		4,610		4,008		12,535
Total Net Operating Income	129,276		128,034		256,892		258,632
Reconciliation to net income:
Depreciation and amortization	(61,949)		(59,461)		(122,876)		(120,611)
Impairments of real estate assets	0		(1,778)		0		(1,778)
General and administrative expenses	(10,107)		(10,084)		(20,059)		(21,014)
Interest expense	(19,001)		(19,840)		(38,769)		(41,117)
Other income	332		588		644		657
Gains on disposition of property	22,862		318		41,799		153,385
Equity in earnings of unconsolidated affiliates	431		1,179		1,068		2,142
Net income	$	61,844	$	38,956	$	118,699	$	230,296

~~Contingencies~~

Table of Contents

15. Contingencies

Since early March 2020, efforts to slow the spread of the COVID-19 virus have had a significant impact on the U.S. economy. We continue to follow the policies described in Notes 1 and 2 to our Consolidated Financial Statements contained in our ~~2019~~2020 Annual Report on Form 10-K, including those related to impairments of real estate assets and investments in unconsolidated affiliates, leases and estimates of credit losses on operating lease receivables. While the results of our current analyses did not result in any material adjustments to amounts as of ~~June 30, 2020~~and during the three and six months endedJune 30, ~~2020~~,2021, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and credit losses in future periods.


~~16.~~	16. Subsequent Events

~~On July 1, 2020, we sold~~ 2 ~~buildings in Memphis for an aggregate sale price of~~ ~~$23.3 million~~ ~~and expect to record aggregate gains on disposition of property of~~ ~~$9.3 million~~.

On July ~~28, 2020,~~27, 2021, the Company declared a cash dividend of ~~$0.48~~$0.50 per share of Common Stock, which is payable on September ~~9, 2020~~8, 2021 to stockholders of record as of August ~~17, 2020.~~16, 2021.

See also Note 15 for information regarding the potential impact of the COVID-19 pandemic in future periods. The severity and duration of the COVID-19 pandemic and the resulting economic recession and the future demand for office space over the long-term are difficult to predict and could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.

Table of Contents

ITEM 2. ~~MANAGEMENT’~~MANAGEMENT��S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company is a fully integrated office real estate investment trust ~~(“REIT”~~(“REIT”) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. The Company conducts its activities through the Operating Partnership. The Operating Partnership is managed by the Company, its sole general partner. Additional information about us can be found on our website at www.highwoods.com. Information on our website is not part of this Quarterly Report.

You should read the following discussion and analysis in conjunction with the accompanying Consolidated Financial Statements and related notes contained elsewhere in this Quarterly Report.

Disclosure Regarding Forward-Looking Statements

Some of the information in this Quarterly Report may contain forward-looking statements. Such statements include, in particular, statements about our plans, strategies and prospects under this section. You can identify forward-looking statements by our use of forward-looking terminology such as ~~“may,” “will,” “expect,” “anticipate,” “estimate,” “continue”~~“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 important factors that could cause our actual results to differ materially from those contained in any forward-looking ~~statement. Currently, one~~statement, including the following:

•the closing of the ~~most significant factors that could cause actual outcomes~~planned acquisition of a portfolio of office assets from Preferred Apartment Communities, Inc. (“PAC”) may not occur on the terms described in this report or at all;

•buyers may not be available and pricing may not be adequate with respect to ~~differ materially from our forward-looking statements is the potential adverse effect~~planned dispositions of ~~the COVID-19 pandemic, and federal, state, and/or local regulatory guidelines and private business actions to control it,~~non-core assets;

•comparable sales data on ~~our financial condition, operating results and cash flows, our customers, the real estate market in~~ which we ~~operate,~~based our expectations with respect to the ~~global economy and~~ sales price of non-core assets may not reflect current market trends;

•the ~~financial markets. The~~ extent to which the ongoing COVID-19 pandemic impacts usour financial condition, results of operations and ~~our customers will depend~~cash flows depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its impact on the ~~resulting economic recession~~U.S. economy and potential changes in customer behavior ~~among others. Additional factors, many~~that could adversely affect the use of and demand for office space;

•the financial condition of our customers could deteriorate or further worsen, which ~~may~~could be ~~influenced~~further exacerbated by the COVID-19 ~~pandemic, that could cause actual outcomes or results to differ materially from those indicated in these statements include:~~pandemic;


•	~~the financial condition of our customers could deteriorate or further worsen;~~

•


•	our assumptions regarding potential losses related to customer financial difficulties due to the COVID-19 pandemic could prove incorrect;


•	~~counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity;~~


•	~~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 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 in our existing markets could result in an excessive supply relative to customer demand;~~


•	~~our markets may suffer declines in economic and/or office employment 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.~~

•counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity;

•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 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 in our existing markets could result in an excessive supply relative to customer demand;

•our markets may suffer declines in economic and/or office employment growth;

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

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

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•natural disasters and climate change could have an adverse impact on our cash flow and 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 ~~“Business –~~“Item 1A. Risk ~~Factors”~~Factors” set forth in our ~~2019~~2020 Annual Report on Form ~~10-K and “Item 1A. Risk Factors” contained herein.~~10-K. 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.

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 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/or overall strategic fit; and~~


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

~~COVID-19~~

Highwoods is in the work-placemaking business. We believe that in creating environments and experiences where the best and brightest can achieve together what they cannot apart, Highwoods delivers greater value to our customers, their teammates and, in turn, our stockholders. Our simple strategy is to own and manage high-quality workplaces in the BBDs within our footprint, maintain a strong balance sheet to be opportunistic throughout economic cycles, employ a talented and dedicated team and communicate transparently with all stakeholders. We focus on owning and managing buildings in the most dynamic and vibrant BBDs. BBDs are highly-energized and amenitized workplace locations that enhance our customers’ ability to attract and retain talent. They are both urban and suburban. Providing the most talent-supportive workplace options in these environments is core to the Highwoods work-placemaking strategy.

COVID-19

The ~~unprecedented nationwide efforts to slow the spread of the~~ COVID-19 ~~virus have~~pandemic has obviously had a significant impact on the U.S. ~~economy.~~

economy since March 2020. It is ~~still too early~~very difficult to predict when, if and to what extent economic activity will return to pre-COVID-19 levels. ~~While the~~The COVID-19 pandemic did ~~not~~ have ~~a meaningful~~somewhat of an impact on our second quarter of ~~2020~~2021 financial ~~results, we believe it is likely our~~results. Our financial results for the remainder of ~~2020 will~~2021 and future leasing activity could be adversely ~~impacted~~affected by the COVID-19 pandemic. ~~Given the fluidity of the pandemic and its uncertain impact on economic activity, losses related to customer financial difficulties are difficult to predict.~~

This outlook reflects management’s view of current and future market conditions, including assumptions such as potential losses related to customer financial difficulties and asset usage due to the COVID-19 pandemic, rental rates, occupancy levels, operating and general and administrative expenses, weighted average diluted shares outstanding and interest rates. Factors that could cause actual results to differ materially from our current expectations are set forth under ~~“Disclosure~~“Disclosure Regarding Forward-Looking Statements.””

While all buildings and parking facilities have remained open for business, the usage of our assets ~~in the~~ ~~second~~ ~~quarter of 2020 was~~has continued to remain significantly lower than ~~normal due to the COVID-19 pandemic.~~pre-pandemic levels. As a result, compared to pre-pandemic levels, parking and parking-related revenues ~~were lower than normal during this period. In addition, our~~have continued to be low, largely offsetting reduced operating expenses, net of expense ~~recoveries, were lower during this period due to reduced electricity, janitorial and other variable expenses.~~recoveries. Until usage ~~returns~~increases, which will depend on the duration of the COVID-19 pandemic, which is difficult to ~~normal,~~estimate, we expect that reduced usage will continue to result in reduced parking revenues, which will be ~~only~~ partially offset by reduced operating expenses. ~~Usage of our assets for~~We expect usage will gradually increase throughout the remainder of ~~2020, however, depends on~~2021 as an increasing number of employers believe the ~~duration~~risk of virus spread in the ~~COVID-19 pandemic, which~~workplace is ~~difficult to estimate.~~manageable.

Given the COVID-19 pandemic, we have been experiencing and expect to continue to experience slower than originally anticipated speculative new leasing, which we expect will be partially offset by higher renewal activity. This would reduce our anticipated rental revenues. Because construction activities have generally been classified as essential activities throughout our markets during the COVID-19 pandemic, we do not currently expect meaningful delays in customers taking occupancy under recently-signed leases.Revenues

We assume we will incur losses due to customers that default on their leases, file bankruptcy and/or otherwise experience significant financial difficulty as a result of the COVID-19 pandemic (including ~~$1.2 million~~ ~~recorded in the~~ ~~first six months of~~ 2020), consisting of credit losses of straight-line rent receivables and lower rent payments. Given the fluidity of the pandemic and its uncertain impact on economic activity, we cannot estimate such losses during the remainder of 2020. Generally, in cases where an otherwise viable, creditworthy customer has been able to demonstrate disruption due to the complete or partial shutdown of its business operations, we have agreed and/or may agree to defer, but not abate, the payment of rent for a limited period of time. In other cases, we have agreed and/or may agree to abate rent for a limited period of time as consideration for a lease term extension.

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~~The extent of any losses will depend on whether or not the collectability of future rents from customers experiencing financial difficulty is deemed to be probable under GAAP. Through~~ ~~July 21, 2020, we have collected~~ ~~99%~~ of our contractually required rents for the month of July and are not currently aware of any customer-specific facts or circumstances that indicate a likelihood of any material losses at this point during the third quarter of 2020. To date, we have agreed to grant temporary rent deferrals that represent ~~1.2%~~ ~~of our annualized rental revenues. In most cases, these deferrals represent approximately two months of a customer’s rent and is expected to be repaid to us prior to the end of 2021.~~

~~For a discussion of the impact of the COVID-19 pandemic on our liquidity and balance sheet, see “Liquidity and Capital Resources” below.~~

~~Revenues~~

Our operating results depend heavily on successfully leasing and operating the office space in our portfolio. Economic growth and office employment levels in our core markets are important factors, among others, 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 or negative 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 concentrate our leasing efforts on renewing existing leases prior to expiration. For more information regarding our lease expirations, see ~~“Properties~~“Properties - Lease ~~Expirations”~~Expirations” in our ~~2019~~2020 Annual Report on Form 10-K. Occupancy in our office portfolio decreased from ~~92.0%~~90.3% at December 31, ~~2019~~2020 to ~~91.1%~~89.5% at June 30, ~~2020. Without the fluidity of the COVID-19 pandemic and its uncertain impact on economic activity, we would~~2021. We expect average occupancy for our office portfolio to be approximately 89% to 90% for the remainder of ~~2020.~~2021. However, average occupancy in the remainder of 2021 will be lower, perhaps significantly lower, if the COVID-19 pandemic causes vacancies and move-outs due to customers that default

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on their leases, file bankruptcy ~~and/~~or otherwise experience significant financial difficulty. Potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, could materially and negatively impact the future demand for office space, resulting in slower overall leasing and negatively impacting our revenues.

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 typically less than 15% of our total annual rental revenues. The following table sets forth information regarding second generation office leases signed during the second quarter of ~~2020~~2021 (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)
91,007

730,250

821,257

Average term (in years - rentable square foot weighted)
5.1

8.6

8.2

Base rents (per rentable square foot) (1)
$
30.02

$
29.69

$
29.73

Rent concessions (per rentable square foot) (1)
(1.01
)

(0.87
)

(0.88
)
GAAP rents (per rentable square foot) (1)
$
29.01

$
28.82

$
28.85

Tenant improvements (per rentable square foot) (1)
$
3.32

$
1.25

$
1.48

Leasing commissions (per rentable square foot) (1)
$
0.89

$
0.65

$
0.67

~~__________~~


~~(1)~~	~~Weighted average per rentable square foot on an annual basis over the lease term.~~



	New		Renewal		All Office
Leased space (in rentable square feet)	323,022		575,538		898,560
Average term (in years - rentable square foot weighted)	6.6		4.9		5.5
Base rents (per rentable square foot) (1)	$	31.16	$	31.13	$	31.14
Rent concessions (per rentable square foot) (1)	(2.13)		(1.15)		(1.50)
GAAP rents (per rentable square foot) (1)	$	29.03	$	29.98	$	29.64
Tenant improvements (per rentable square foot) (1)	$	5.37	$	2.70	$	3.66
Leasing commissions (per rentable square foot) (1)	$	1.16	$	0.80	$	0.93

__________

(1) Weighted average per rentable square foot on an annual basis over the lease term.

Annual combined GAAP rents for new and renewal leases signed in the second quarter were ~~$28.85~~$29.64 per rentable square foot, ~~13.6%~~8.9% higher compared to previous leases in the same office spaces.

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 annualized revenues are periodically reviewed with the ~~Company’s~~Company’s Board of Directors. As of June 30, ~~2020~~2021, the Federal Government (4.1%), ~~no customer~~Bank of America (3.9%) and Metropolitan Life Insurance (3.0%) accounted for more than 3% of our ~~cash revenues other than the Federal Government and Bank of America, which accounted for~~ ~~4.9%~~ ~~and~~ ~~3.9%, respectively, of our cash revenues on an annualized basis. Upon stabilization of the MetLife~~

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~~III development project in Raleigh, it is expected that MetLife will account for approximately~~ ~~3.3%~~ ~~of our revenues based on~~ annualized cash ~~revenues for~~ ~~June 2020~~.revenues.

Expenses

~~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 our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed lives. General and administrative expenses consist primarily of management and employee salaries and benefits, corporate overhead and short and long-term incentive compensation.

Net Operating Income

Whether or not we record increasing net operating income ~~(“NOI”~~(“NOI”) in our same property portfolio typically 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 was ~~$3.4~~$0.2 million, or 0.2%, or ~~3.1%~~, ~~higher~~lower in the second quarter of ~~2020~~2021 as compared to ~~2019~~2020 due to ~~a decrease~~an increase of ~~$3.8~~$1.4 million in same property expenses offset by ~~a decrease~~an increase of ~~$0.4~~$1.2 million in same property revenues. ~~Without the fluidity of the COVID-19 pandemic and its uncertain impact on economic activity, we would~~We expect same property NOI to be ~~higher~~lower for the remainder of ~~2020~~2021 as compared to ~~2019~~2020 as an anticipated increase in same property expenses, mostly from the gradual increase in usage of our assets, is expected to more than offset higher ~~rental~~anticipated same property revenues. We expect same property revenues ~~mostly because~~to be higher due to higher average GAAP rents per rentable square foot ~~would be expected to more than~~and higher cost recovery and parking income, partly offset by an anticipated ~~increase~~decrease in ~~same property operating expenses, particularly higher property taxes. However, same~~average occupancy. Same property NOI ~~will~~could be further negatively impacted if the COVID-19 pandemic causes losses related to customer difficulties or slower than originally anticipated speculative new leasing. As a result, we cannot estimate whether same property NOI for the remainder of 2020 will be higher or lower as compared to 2019.difficulties.

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In addition to the effect of same property NOI, whether or not NOI increases typically depends upon whether the NOI from our acquired properties and development properties placed in service exceeds the NOI from property dispositions. NOI was ~~$4.5~~$1.2 million, or 1.0%, or ~~3.7%~~, higher in the second quarter of ~~2020~~2021 as compared to ~~2019~~2020 primarily due to ~~acquisitions, higher same property NOI~~the acquisition of our joint venture partner’s 75.0% interest in our Highwoods DLF Forum, LLC joint venture (the “Forum”) and development properties placed in service, partly offset by NOI lost from property ~~dispositions.~~dispositions and lower same property NOI. We expect NOI to be ~~lower~~higher for the remainder of ~~2020~~2021 as compared to ~~2019 due~~2020 for similar reasons. Similar to ~~NOI lost from property dispositions, partly offset by acquisitions and development properties placed in service. Like with~~ same property NOI, NOI ~~will~~could be ~~further~~ negatively impacted if the COVID-19 pandemic causes losses related to customer ~~difficulties or slower than originally anticipated speculative new leasing.~~difficulties.

Cash Flows

In calculating net cash related to operating activities, depreciation and amortization, which are non-cash expenses, are added back to net income. 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~~“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 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 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. 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.

For a discussion regarding dividends and distributions, see ~~“Liquidity~~“Liquidity and Capital Resources - Dividends and Distributions.””

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Liquidity and Capital Resources

We continue to maintain a conservative and flexible balance ~~sheet. We~~sheet and believe we have ample ~~liquidity.~~liquidity to fund our operations and growth prospects. As of July ~~21, 2020~~,20, 2021, we had ~~approximately~~ $6$155.0 million ~~of existing cash and zero~~ drawn on our ~~$600~~$750.0 million revolving credit facility, which is scheduled to mature in ~~January 2022.~~March 2025. Assuming we are in compliance with our covenants, we have an option to extend the maturity for two additional six-month periods. At June 30, ~~2020~~,2021, our leverage ratio, as measured by the ratio of our mortgages and notes payable and outstanding preferred stock to the undepreciated book value of our assets, was ~~36.8%~~37.3% and there were ~~106.7~~107.1 million diluted shares of Common Stock outstanding.

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 revolving credit ~~facility, which had~~ ~~$599.9 million~~ ~~of availability at~~ ~~July 21, 2020~~.facility. 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 and planned financing activities, including 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. Continued ability to borrow under ~~the~~our revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.

~~Subject to potential losses in the remainder of 2020 related to customer financial difficulties due to the COVID-19 pandemic, we~~We generally believe existing cash and rental and other revenues will continue to be sufficient to fund short-term liquidity needs such as funding operating and general and administrative expenses, paying interest expense, maintaining our existing quarterly dividend and funding existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions. ~~For the full year of~~ ~~2020, such existing portfolio capital expenditures are expected to be approximately~~ ~~$15 million~~ to ~~$25 million~~ ~~lower as compared to~~ ~~2019~~.

Our long-term liquidity uses generally consist of the retirement or refinancing of debt upon maturity, funding of building improvements, new building developments and land infrastructure projects and funding acquisitions of buildings and

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development land. Our expected future capital expenditures for started and/or committed new development projects were approximately ~~$201~~$51 million at June 30, ~~2020~~.2021. Additionally, we may, from time to time, retire outstanding equity and/or 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•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.

During the remainder of 2021, we have no debt scheduled to mature ~~during the remainder of 2020 or 2021 except for $300 million principal amount of 3.20% (3.363% effective rate) notes due June 2021. During the remainder of 2020,~~and we forecast ~~funding approximately~~ ~~$89~~spending an additional $35 million on our development pipeline. As of June 30, 2021, our ~~$503~~$394 million development pipeline ~~which~~ was approximately ~~60%~~ ~~funded as of~~ ~~June 30, 2020~~.85% funded. We generally believe we will be able to satisfy these obligations with existing cash, borrowings under our revolving credit facility, new bank term loans, issuance of other unsecured debt, mortgage debt and/or proceeds from the sale of additional non-core assets.

Investment Activity

~~As noted above, a~~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

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not an asset acquisition or new development results in higher per share net income or funds from operations ~~(“FFO”~~(“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 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~~Planned Investment Activities

During the second quarter of 2021, we agreed to acquire a portfolio of office assets from PAC. The acquisition, which is subject to customary closing conditions, is scheduled to close within 30 days of the filing of this Quarterly Report. We plan to fund the initial $250 million cash portion of the purchase price with a combination of restricted cash currently held in escrow as the result of recent non-core asset sales, borrowings under our current $750 million unsecured revolving credit facility and an expected $200 million, six-month unsecured bridge facility from JPMorgan Chase Bank, N.A. Our plan is to ultimately fund the acquisition primarily by accelerating the sale of $500 to $600 million of existing non-core assets by mid-2022, approximately half of which is planned to close by year-end 2021. Since our announcement on April 19, 2021 to acquire the portfolio of office assets from PAC, we have sold $43.0 million of non-core assets. For more information, see “Liquidity and Capital Resources – Investment Activity.”

Because the acquisition and subsequent dispositions are not expected to close until after the filing of this Quarterly Report, if at all, forward-looking statements about our anticipated revenues, expenses and other items for the remainder of the year included below under “Results of Operations” do not include the impacts of any of these planned investment activities.

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Results of Operations

Three Months Ended June 30, ~~2020~~2021 and 2020

~~2019~~

Rental and Other Revenues

Rental and other revenues were ~~$0.9~~$2.3 million, or 1.3%, or ~~0.5%~~, ~~lower~~higher in the second quarter of ~~2020~~2021 as compared to ~~2019~~2020 primarily due to the acquisition of our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and higher same property revenues, which increased rental and other revenues by $4.3 million, $1.6 million and $1.2 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher cost recovery and parking income and lower credit losses, partly offset by a decrease in average occupancy. These increases were partly offset by lost revenue of $4.9 million from property dispositions. We expect rental and other revenues to be higher for the remainder of 2021 as compared to 2020 due to the acquisition of our joint venture partner’s 75.0% interest in the Forum, higher same property revenues and development properties placed in service, partly offset by lost revenue from property dispositions. Rental and other revenues could be negatively impacted if the COVID-19 pandemic causes losses related to customer difficulties.

Operating Expenses

Rental property and other expenses were $1.1 million, or 2.0%, higher in the second quarter of 2021 as compared to 2020 primarily due to higher same property operating expenses, the acquisition of our joint venture partner’s 75.0% interest in the Forum and development properties placed in service, which increased operating expenses by $1.4 million, $1.0 million and $0.3 million, respectively. Same property operating expenses were higher primarily due to higher property taxes and higher contract services, repairs and maintenance and utilities as a result of increased usage of our assets. These increases were partly offset by a $1.8 million decrease in operating expenses from property dispositions. We expect rental property and other expenses to be higher for the remainder of 2021 as compared to 2020 due to higher same property operating expenses as a result of increased usage of our assets, the acquisition of our joint venture partner’s 75.0% interest in the Forum and development properties placed in service, partly offset by lower operating expenses from property dispositions.

Depreciation and amortization was $2.5 million, or 4.2%, higher in the second quarter of 2021 as compared to 2020 primarily due to the acquisition of our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and higher same property lease related depreciation and amortization, partly offset by fully amortized acquisition-related intangible assets and property dispositions. We expect depreciation and amortization to be higher for the remainder of 2021 as compared to 2020 for similar reasons.

We recorded an impairment of real estate assets of $1.8 million in the second quarter of 2020, which resulted from a change in market-based inputs and our assumptions about the use of the assets. We recorded no such impairment in 2021.

General and administrative expenses were unchanged in the second quarter of 2021 as compared to 2020 due to lower salaries, severance and early retirement costs offset by higher incentive compensation. We experienced lower salaries in 2021 as a result of the reduction in the number of employees throughout 2020 primarily due to our exiting of the Greensboro and Memphis markets and the subsequent closing of those division offices and the resulting synergies garnered from the ongoing simplification of our business. We expect general and administrative expenses to be relatively consistent for the remainder of 2021 as compared to 2020 for similar reasons.

Interest Expense

Interest expense was $0.8 million, or 4.2%, lower in the second quarter of 2021 as compared to 2020 primarily due to lower average interest rates and higher capitalized interest, partly offset by higher average debt balances. We expect interest expense to be lower for the remainder of 2021 as compared to 2020 due to lower average interest rates, partly offset by higher average debt balances and lower capitalized interest.

Other Income

Other income was $0.3 million lower in the second quarter of 2021 as compared to 2020 primarily due to lower gains on deferred compensation plan investments (which is fully offset by a corresponding decrease in general and administrative expenses).

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Gains on Disposition of Property

Gains on disposition of property were $22.5 million higher in the second quarter of 2021 as compared to 2020 due to the net effect of the disposition activity in such periods.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates was $0.7 million, or 63.4%, lower in the second quarter of 2021 as compared to 2020 primarily due to the acquisition of our joint venture partner’s 75.0% interest in the Forum and lower average occupancy. We expect equity in earnings of unconsolidated affiliates to be lower for the remainder of 2021 as compared to 2020 for similar reasons. Equity in earnings of unconsolidated affiliates could be negatively impacted if the COVID-19 pandemic causes losses related to customer difficulties.

Earnings Per Common Share - Diluted

Diluted earnings per common share was $0.21 higher in the second quarter of 2021 as compared to 2020 due to an increase in net income for the reasons discussed above.

Six Months Ended June 30, 2021 and 2020

Rental and Other Revenues

Rental and other revenues were $6.6 million, or 1.8%, lower in the first six months of 2021 as compared to 2020 primarily due to lost revenue from property dispositions and lower same property revenues, which decreased rental and other revenues by ~~$10.7~~$15.1 million and ~~$0.4~~$2.4 million, respectively. Same property rental and other revenues were lower primarily due to a decrease in average occupancy and lower cost recovery ~~income~~ and ~~lower~~ parking income as a result of reduced usage of our assets because of the COVID-19 pandemic, partly offset by higher average GAAP rents per rentable square ~~foot.~~foot and lower credit losses. These decreases were partly offset by ~~acquisitions and~~the acquisition of our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and the recognition of deferred leasing commission income that was received in connection with the acquisition, which increased rental and other revenues by ~~$9.1~~$7.6 million, $2.3 million and ~~$1.6~~$1.5 million, respectively. We expect rental and other revenues to be lower for the remainder of 2020 as compared to 2019 due to lost revenue from property dispositions and lower parking income as a result of reduced usage of our assets because of the COVID-19 pandemic, partly offset by acquisitions, development properties placed in service and higher same property revenues. Rental and other revenues, particularly same property revenues, could be adversely affected, perhaps significantly, in the event customers default on their leases, file bankruptcy and/or otherwise experience significant financial difficulty or slower than originally anticipated speculative new leasing as a result of the COVID-19 pandemic.

Operating Expenses

Rental property and other expenses were ~~$5.4~~$4.9 million, or 4.2%, or ~~9.0%~~, lower in the ~~second~~ ~~quarter~~first six months of ~~2020~~2021 as compared to ~~2019~~2020 primarily due to property dispositions and lower same property operating expenses, ~~and property dispositions,~~ which decreased operating expenses by ~~$3.8~~$5.9 million and ~~$3.5~~$1.2 million, respectively. Same property operating expenses were lower primarily due to lower ~~utilities,~~ repairs and maintenance and contract services as a result of reduced usage of our assets because of the COVID-19 pandemic, partly offset by higher property taxes. These decreases were partly offset by ~~acquisitions~~the acquisition of our joint venture partner’s 75.0% interest in the Forum and development properties placed in service, which increased operating expenses by ~~$1.9~~$1.7 million and $0.4 million, respectively. We expect rental property and other expenses to be lower for the remainder of 2020 as compared to 2019 due to lower operating expenses from property dispositions, partly offset by acquisitions, higher same property operating expenses (net of lower operating expenses as a result of reduced usage of our assets because of the COVID-19 pandemic) and development properties placed in service.

Depreciation and amortization was ~~unchanged~~$2.3 million, or 1.9%, higher in the ~~second~~ ~~quarter~~first six months of ~~2020~~2021 as compared to ~~2019~~2020 primarily due to ~~acquisitions and~~the acquisition of our joint venture partner’s 75.0% interest in the Forum, development properties placed in service ~~offset by~~and higher same property ~~dispositions. We expect~~lease related depreciation and amortization, ~~to be higher for the remainder of 2020 as compared to 2019 for similar reasons.~~partly offset by fully amortized acquisition-related intangible assets and property dispositions.

We recorded ~~impairments~~an impairment of real estate assets of ~~$1.8~~$1.8 million ~~and~~ ~~$0.5 million~~ in the ~~second~~ ~~quarter~~first six months of 2020, ~~and~~ ~~2019, respectively. These impairments~~ which resulted from ~~changes~~a change in market-based inputs and our assumptions about the use of the assets. We recorded no such impairment in 2021.

General and administrative expenses were ~~$0.5~~$1.0 million, or 4.5%, or ~~5.5%~~, ~~higher~~lower in the ~~second~~ ~~quarter~~first six months of ~~2020~~2021 as compared to ~~2019~~2020 primarily due to lower severance and early retirement costs. We also experienced lower salaries and benefits in 2021 as a result of the reduction in the number of employees throughout 2020 primarily due to our exiting of the Greensboro and Memphis markets and the subsequent closing of those division offices and the resulting synergies garnered from the ongoing simplification of our business. These decreases were partly offset in 2021 by higher incentive compensation and gains on deferred compensation plan investments ~~in 2020~~ (which is fully offset by a corresponding increase in ~~deferred compensation that is recorded~~other income).

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Interest Expense

Interest expense was $2.3 million, or 5.7%, lower in ~~other income/(loss)), partly offset by lower salaries and benefits associated with~~ the ~~closure~~first six months of ~~our Greensboro and Memphis offices. We expect general and administrative expenses to be lower for the remainder of 2020~~2021 as compared to ~~2019~~2020 primarily due to lower ~~severance costs, salaries~~average interest rates and ~~benefits associated with the closure of our Greensboro and Memphis offices and lower executive retirement and consulting costs, partly offset by higher long-term equity incentive compensation.~~

~~Interest Expense~~

~~Interest expense was~~ ~~$0.5 million, or~~ ~~2.5%~~, ~~lower~~ ~~in the~~ ~~second~~ ~~quarter of~~ ~~2020~~ ~~as compared to~~ ~~2019~~ ~~primarily due to~~ higher capitalized interest, ~~and lower average interest rates,~~ partly offset by higher average debt balances. ~~We expect interest expense to be lower for~~

Other Income

Other income was unchanged in the ~~remainder~~first six months of ~~2020~~2021 as compared to ~~2019 for similar reasons.~~

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~~Other Income/(Loss)~~

~~Other~~2020 due to losses on debt extinguishment in 2021, lower interest income ~~was~~ ~~$0.3 millionhigher~~ ~~in the~~ ~~second~~ ~~quarter of~~ ~~2020~~ ~~as compared to~~ ~~2019~~ ~~primarily due to~~and late fees, partly offset by gains on deferred compensation plan investments ~~in 2020, which~~(which is fully offset by a corresponding increase in ~~the deferred compensation expense that is recorded in~~ general and administrative ~~expenses.~~expenses).

Gains on Disposition of Property

Gains on disposition of property were ~~$6.4~~$111.6 millionlower in the ~~second~~ ~~quarter~~first six months of ~~2020~~2021 as compared to ~~2019~~ ~~due to the net effect of the disposition activity in such periods.~~

~~Equity in Earnings of Unconsolidated Affiliates~~

~~Equity in earnings of unconsolidated affiliates was~~ ~~$0.4 million, or~~ ~~54.1%~~, ~~higher~~ ~~in the~~ ~~second~~ ~~quarter of~~ 2020 ~~as compared to~~ ~~2019~~ primarily due to higher average occupancy. We generally expect equity in earnings of unconsolidated affiliates to be higher for the remainder of 2020 as compared to 2019 for the same reason. However, equity in earnings of unconsolidated affiliates could be adversely affected, perhaps significantly, in the event customers of our unconsolidated affiliates default on their leases, file bankruptcy and/or otherwise experience significant financial difficulty as a result of the COVID-19 pandemic.

~~Earnings Per Common Share - Diluted~~

~~Diluted earnings per common share was~~ ~~$0.02lower~~ ~~in the~~ ~~second~~ ~~quarter of~~ ~~2020~~ ~~as compared to~~ ~~2019~~ ~~due to a decrease in net income for the reasons discussed above.~~

~~Six Months Ended~~ ~~June 30, 2020~~ ~~and~~ ~~2019~~

~~Laser Spine Institute~~

In the first quarter of 2019, we provided information on Laser Spine Institute, which occupied a 176,000 square-foot, six-story building with structured parking in Tampa’s Westshore submarket, a BBD. The building, developed by us, had been used by Laser Spine Institute for both its company headquarters and an ambulatory surgery center. After the market closed on March 1, 2019, Laser Spine Institute announced it would immediately discontinue its operations. This unexpected announcement affected all of its locations nationwide. As a result of this sudden closure, in the first quarter of 2019, we incurred $5.6 million of credit losses on operating lease receivables and write-offs of $2.3 million of lease incentives, $4.1 million of notes receivable and $11.6 million of tenant improvements and deferred leasing costs.

~~Rental and Other Revenues~~

~~Rental and other revenues were~~ ~~$19.5 million, or~~ ~~5.5%~~, ~~higher~~ ~~in the~~ ~~first six months of2020~~ ~~as compared to~~ ~~2019~~ primarily due to acquisitions, higher same property revenues and development properties placed in service, which increased rental and other revenues by $18.1 million, $12.8 million and $5.9 million, respectively. Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot and no credit losses and write-offs associated with Laser Spine Institute, partly offset by lower cost recovery income and lower parking income as a result of reduced usage of our assets because of the COVID-19 pandemic. These increases were partly offset by lost revenue of $16.7 million from property dispositions.

~~Operating Expenses~~

~~Rental property and other expenses were~~ ~~$3.8 million, or~~ ~~3.1%~~, ~~lower~~ ~~in the~~ ~~first six months of2020~~ ~~as compared to~~ ~~2019~~ primarily due to property dispositions and lower same property operating expenses, which decreased operating expenses by $5.2 million and $2.7 million, respectively. Same property operating expenses were lower primarily due to lower utilities, repairs and maintenance and contract services as a result of reduced usage of our assets because of the COVID-19 pandemic, partly offset by higher property taxes. These decreases were partly offset by acquisitions and development properties placed in service, which increased operating expenses by $3.7 million and $1.3 million, respectively.

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~~Depreciation and amortization was~~ ~~$8.1 million, or~~ ~~6.3%~~, ~~lower~~ ~~in the~~ ~~first six months of2020~~ ~~as compared to~~ ~~2019~~ primarily due to accelerated depreciation and amortization of tenant improvements and deferred leasing costs associated with Laser Spine Institute in 2019 and property dispositions, partly offset by acquisitions and development properties placed in service.

~~We recorded impairments of real estate assets of~~ ~~$1.8 million~~ ~~and~~ ~~$0.5 million~~ ~~in the~~ ~~first six months of2020~~ ~~and~~ ~~2019, respectively. These impairments resulted from changes in market-based inputs and our assumptions about the use of the assets.~~

~~General and administrative expenses were~~ ~~$0.9 million, or~~ ~~4.2%~~, ~~lower~~ ~~in the~~ ~~first six months of2020~~ ~~as compared to~~ ~~2019~~ ~~primarily due to lower long-term equity incentive compensation, partly offset by higher severance costs associated with the closure of our Greensboro and Memphis offices.~~

~~Interest Expense~~

~~Interest expense was~~ ~~$2.0 million, or~~ ~~5.2%~~, ~~higher~~ ~~in the~~ ~~first six months of2020~~ ~~as compared to~~ ~~2019~~ ~~primarily due to higher average debt balances, partly offset by lower average interest rates and higher capitalized interest.~~

~~Other Income/(Loss)~~

~~Other income was~~ ~~$0.7 million~~ ~~in the~~ ~~first six months of2020~~ ~~as compared to a loss of~~ ~~$3.4 million~~ in ~~2019~~ ~~primarily due to the write-off of notes receivable associated with Laser Spine Institute in 2019.~~

~~Gains on Disposition of Property~~

~~Gains on disposition of property were~~ ~~$146.7 millionhigher~~ ~~in the~~ ~~first six months of2020~~ ~~as compared to~~ ~~2019~~ ~~primarily due to the completion of the first phase of~~ our market rotation plan of exiting the Greensboro and Memphis markets in 2020.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates was ~~$0.7~~$1.1 million, or 50.1%, or ~~49.9%~~, ~~higher~~lower in the first six months of~~2020~~ 2021 as compared to ~~2019~~2020 primarily due to ~~higher~~the acquisition of our joint venture partner’s 75.0% interest in the Forum and lower average occupancy.

Earnings Per Common Share - Diluted

Diluted earnings per common share was ~~$1.69higher~~$1.05 lower in the first six months of~~2020~~ 2021 as compared to ~~2019~~2020 due to ~~an increase~~a decrease in net income for the reasons discussed above.

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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~~Company’s cash flows (in thousands):


	Six Months Ended June 30,
	2021		2020		Change
Net Cash Provided By Operating Activities	$	197,415	$	180,215	$	17,200
Net Cash Provided By/(Used In) Investing Activities	(228,417)		129,729		(358,146)
Net Cash Used In Financing Activities	(99,809)		(310,979)		211,170
Total Cash Flows	$	(130,811)	$	(1,035)	$	(129,776)

Six Months Ended
June 30,

2020

2019

Change
Net Cash Provided By Operating Activities
$
180,215

$
173,289

$
6,926

Net Cash Provided by/(Used In) Investing Activities
129,729

(138,827
)

268,556

Net Cash Used In Financing Activities
(310,979
)

(31,098
)

(279,881
)
Total Cash Flows
$
(1,035
)

$
3,364

$
(4,399
)

The ~~increase~~change in net cash provided by operating activities in the first six months of~~2020~~ 2021 as compared to ~~2019~~2020 was primarily due to higher net cash from the operations of ~~acquisitions,~~the acquisition of our joint venture partner’s 75.0% interest in the Forum, same properties and development properties placed in service and ~~same properties and the settlement of cash flow hedges~~changes in ~~2019~~,operating assets, partly offset by property ~~dispositions. Without the fluidity of the COVID-19 pandemic~~dispositions and ~~its uncertain impact on economic activity, we would~~changes in operating liabilities. We expect net cash related to operating activities to be higher for the remainder of ~~2020~~2021 as compared to ~~2019~~2020 due to ~~acquisitions and~~the acquisition of our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and ~~the settlement of cash flow hedges in~~ ~~2019~~,same properties, partly offset by property dispositions. However, net cash related to operating activities will be negatively impacted if the COVID-19 pandemic causes losses related to customer difficulties or slower than originally anticipated speculative new leasing. As a result, we cannot estimate whether net cash related to operating activities for the remainder of ~~2020~~ ~~will be higher or lower as compared to~~ ~~2019~~.

The change in net cash provided by/(used in) investing activities in the first six months of~~2020~~ 2021 as compared to ~~2019~~2020 was primarily due to net proceeds from disposition activity in 2020, the acquisition of our joint venture partner’s 75.0% interest in the Forum in 2021 and ~~higher~~payments of earnest money deposits for the expected acquisition ~~activity~~of a portfolio of office assets from PAC in ~~2019,~~2021, partly offset by higher investments in tenant improvements and development in-process in 2020. We expect uses of cash for investing activities for the remainder of ~~2020~~2021 to be primarily driven by whether or not we acquire ~~and~~and/or commence development of additional office ~~buildings in the BBDs of our markets.~~buildings. Additionally, as of June 30, ~~2020~~,2021, we have approximately ~~$201~~$51 million left to fund of our previously-announced development activity in ~~2020~~2021 and future years. We expect these uses of cash for investing activities will be partly offset by proceeds from property dispositions for the remainder of ~~2020~~.2021.

The ~~increase~~change in net cash used in financing activities in the first six months of~~2020~~ 2021 as compared to ~~2019~~2020 was primarily due to higher net debt ~~borrowings~~repayments in ~~2019.~~2020. Assuming the net effect of our acquisition, disposition and development activity in ~~2020~~2021 results in an increase to our assets, we would expect outstanding debt and/or Common Stock balances to increase.

Capitalization

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


	June 30, 2021		December 31, 2020

Mortgages and notes payable, net, at recorded book value	$	2,475,902	$	2,470,021

Preferred Stock, at liquidation value	$	28,821	$	28,826
Common Stock outstanding	104,210		103,922
Common Units outstanding (not owned by the Company)	2,838		2,839
Per share stock price at period end	$	45.17	$	39.63
Market value of Common Stock and Common Units	$	4,835,358	$	4,230,938
Total capitalization	$	7,340,081	$	6,729,785

June 30,
2020

December 31,
2019
Mortgages and notes payable, net, at recorded book value
$
2,337,662

$
2,543,710

Preferred Stock, at liquidation value
$
28,843

$
28,859

Common Stock outstanding
103,897

103,756

Common Units outstanding (not owned by the Company)
2,842

2,724

Per share stock price at period end
$
37.33

$
48.91

Market value of Common Stock and Common Units
$
3,984,567

$
5,207,937

Total capitalization
$
6,351,072

$
7,780,506

At June 30, ~~2020~~,2021, our mortgages and notes payable and outstanding preferred stock represented ~~37.3%~~34.1% of our total capitalization and ~~36.8%~~37.3% of the undepreciated book value of our assets. See also ~~“Executive~~“Executive Summary - Liquidity and Capital Resources.””

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Our mortgages and notes payable as of June 30, ~~2020~~2021 consisted of ~~$94.3~~$92.3 million of secured indebtedness with an interest rate of 4.0% and ~~$2,255.3~~$2,396.5 million of unsecured indebtedness with a weighted average interest rate of ~~3.45%~~3.26%. The secured

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indebtedness was collateralized by real estate assets with an undepreciated book value of ~~$147.4 million~~.$147.9 million. As of June 30, ~~2020~~, ~~$264.0~~2021, $305.0 million of our debt does not bear interest at fixed rates or is not protected by interest rate hedge contracts.

Investment Activity

~~Investment Activity~~

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~~“Item 1A. Risk Factors - Risks Related to our Capital Recycling Activity - 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”~~estimates” in our ~~2019~~2020 Annual Report on Form 10-K.

During the second quarter of ~~2020,~~2021, we agreed to acquire a portfolio of office assets from PAC. The core portfolio to be acquired ~~development land~~consists of the following four Class A office assets in Charlotte and Raleigh, which encompass 1,630,000 square feet in total, and one mixed-use redevelopment site in Atlanta: 150 Fayetteville, Raleigh (CBD); CAPTRUST Tower, Raleigh (North Hills); Capitol Towers, Charlotte (SouthPark); Morrocroft Centre, Charlotte (SouthPark); and Galleria 75, Atlanta (Cumberland/Galleria). We have also agreed to acquire two non-core assets: a mezzanine loan related to a recently constructed office building in Atlanta; and Armour Yards, a multi-building creative office project in Atlanta. Our total investment, including the estimated value of the non-core assets, is expected to be $769 million, which includes $28 million of near-term building improvements and $5 million of transaction costs. The transaction is expected to include, among other things, the assumption of four secured loans collateralized by the core office buildings estimated to be recorded at fair value of $403 million in the aggregate, with a weighted average effective interest rate of 3.7% and a weighted average maturity of 10.8 years. The value of the non-core assets represents less than 12% of the anticipated total investment. The acquisition, which is subject to customary closing conditions, is scheduled to close within 30 days of the filing of this Quarterly Report. As of July 20, 2021, we have posted $60.0 million of earnest money deposits (of which $55.0 million were recorded in prepaid expenses and other assets at June 30, 2021) that are non-refundable except in limited circumstances. As part of the transaction, PAC will separately market Armour Yards for sale to a third party. If PAC chooses not to sell Armour Yards to a third party, we will close on the acquisition of the creative office project no later than the first quarter of 2022.

We plan to fund the initial $250 million cash portion of the purchase price ~~including capitalized acquisition costs,~~with a combination of ~~$2.3~~restricted cash currently held in escrow as the result of recent non-core asset sales, borrowings under our current $750 million. unsecured revolving credit facility and an expected $200 million, six-month unsecured bridge facility from JPMorgan Chase Bank, N.A. Both facilities bear interest at LIBOR plus 90 basis points. The bridge facility, which is subject to definitive documentation and customary conditions, can be extended at our option for an additional six-month period and will contain financial and other covenants that are similar to the covenants under our revolving credit facility.

~~On July 1, 2020,~~Our plan is to ultimately fund the acquisition primarily by accelerating the sale of $500 to $600 million of existing non-core assets by mid-2022, approximately half of which is planned to close by year-end 2021. Since our announcement on April 19, 2021 to acquire the portfolio of office assets from PAC, we have sold ~~two~~ ~~buildings in Memphis for~~$43.0 million of non-core assets. We can provide no assurances, however, that we will dispose of any assets on favorable terms, or at all, because the dispositions are subject to the negotiation and execution of sale agreements and would then be subject to the buyers’ completion of satisfactory due diligence and other customary closing conditions. Approximately $250 million, or an ~~aggregate sale~~amount equal to the cash portion of the purchase price, of the planned dispositions are expected to qualify for tax-deferred treatment under Section 1031 of the Internal Revenue Code.~~$23.3 million~~ ~~and expect to record aggregate gains on disposition of property of~~ ~~$9.3 million~~.

During the second quarter of ~~2020,~~2021, we acquired development land in Nashville for a purchase price, including capitalized acquisition costs, of $16.1 million, which is expected to be paid within two years.

During the second quarter of 2021, we sold ~~land~~a building in ~~Atlanta~~Tampa for a sale price of ~~$2.8~~$43.0 million (before closing credits to buyer of $0.9 million) and recorded a ~~loss~~gain on disposition of property of ~~$0.1 million. During the second quarter of 2020, we also recognized~~ ~~$0.4 million~~ ~~of gain related to the satisfaction of a performance obligation as part of a 2016 land sale.~~$22.9 million.

~~During the second quarter~~Table of ~~2020, we recorded an impairment of real estate assets of~~ ~~$1.8 million, which resulted from a change in market-based inputs and our assumptions about the use of the assets.~~Contents

~~As of~~ ~~June 30, 2020, we were developing~~ ~~0.9 million~~ ~~rentable square feet of office properties.~~ The following table summarizes ~~these announced and~~our in-process office ~~developments:~~

Property

Market

Rentable Square Feet

Anticipated Total Investment (1)

Investment
As Of
June 30, 2020 (1)

Pre Leased %

Estimated Completion

Estimated Stabilization

($ in thousands)

GlenLake Seven (2)

Raleigh

125,700

$
43,881

$
30,738

100.0
%

1Q 21

1Q 21
Virginia Springs II

Nashville

111,000

37,900

20,059

—

4Q 20

3Q 22
Midtown One (3)

Tampa

150,000

71,300

34,462

—

2Q 21

4Q 22
Asurion

Nashville

552,800

285,000

153,563

98.3

4Q 21

1Q 22

939,500

$
438,081

$
238,822

71.2
%

~~__________~~


~~(1)~~	~~Includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheets.~~


~~(2)~~	~~Recorded on our Consolidated Balance Sheets in land and buildings and tenant improvements, not development in-process.~~


~~(3)~~	~~We own an~~ ~~80.0%~~ ~~interest in this consolidated joint venture.~~

~~Financing Activity~~development as of June 30, 2021:


Property	Market	Rentable Square Feet	Anticipated Total Investment (1)		Investment As Of June 30, 2021 (1)		Pre Leased %		Estimated Completion	Estimated Stabilization
			($ in thousands)

Asurion	Nashville	552,800	$	285,000	$	263,268	98.4	%	4Q 21	4Q 21



		552,800	$	285,000	$	263,268	98.4	%

__________

(1) Includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheets.

Financing Activity

During ~~the first quarter of~~ 2020, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, Capital One Securities, Inc., Fifth Third Securities, Inc., Jefferies LLC, J.P. Morgan Securities LLC, Regions Securities LLC and SunTrust Robinson Humphrey, Inc. Under the terms of the equity distribution agreements, the Company may offer and sell up to $300.0 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’~~brokers’ transactions on the New York Stock Exchange ~~(“NYSE”~~(“NYSE”) 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. The~~firms (which may include block trades). During the second quarter of 2021, the Company ~~did not issue any~~issued 149,100 shares of Common Stock ~~under these agreements~~at an average gross sales price of $46.11 per share and received net proceeds, after sales commissions, of $6.8 million. We paid an aggregate of $0.1 million in sales commissions to Wells Fargo Securities, LLC during the second quarter of ~~2020~~.2021.

~~Table~~During the second quarter of ~~Contents~~

2021, we prepaid without penalty the remaining $150.0 million principal amount of 3.20% unsecured notes that was scheduled to mature in June 2021. We recorded $0.1 million of loss on debt extinguishment related to this prepayment.

~~Our $~~
~~600.0~~

During the first quarter of 2021, we entered into a new $750.0 million unsecured revolving credit facility, ~~is scheduled to mature in~~ ~~January 2022~~which replaced our previously existing $600.0 million revolving credit facility and includes an accordion feature that allows for an additional ~~$400.0~~$550.0 million of borrowing capacity subject to additional lender commitments. Our new revolving credit facility is scheduled to mature in March 2025. Assuming no defaults have occurred, we have an option to extend the maturity for two additional ~~six-month~~six-month periods. The current interest rate on the new facility at our ~~current~~existing credit ratings is LIBOR plus ~~100~~90 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~~Moody’s Investors Service or Standard ~~& Poor’s~~& Poor’s Ratings Services. The financial and other covenants under the new facility are substantially similar to our previous credit facility. We incurred $4.8 million of debt issuance costs, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility. We recorded $0.1 million of loss on debt extinguishment. There was ~~$14.0~~$155.0 million outstanding under our new revolving credit facility at both June 30, ~~2020. There were no amounts outstanding under our revolving credit facility at~~ 2021 and July ~~21, 2020~~.20, 2021. At both June 30, ~~2020~~2021 and July ~~21, 2020~~,20, 2021, we had $~~0.1~~$0.1 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at both June 30, ~~2020~~2021 and July ~~21, 2020~~20, 2021 was $~~585.9 million~~ ~~and~~ ~~$599.9 million, respectively.~~$594.9 million.

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 and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on ~~the~~our revolving credit facility, the lenders having at least 51.0% of the total commitments under ~~the~~our 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. In addition, certain of our unsecured debt agreements contain cross-default provisions giving the unsecured lenders the right to declare a default if we are in default under more than ~~$30.0~~$35.0 million with respect to other loans in some circumstances.

The indenture that governs the Operating ~~Partnership’s~~Partnership’s 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 any series of notes can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.

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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.

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~~Company’s REIT taxable income, as determined by the federal tax laws, does not equal its net income under accounting principles generally accepted in the United States of America ~~(“GAAP”~~(“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, reducing debt or future growth initiatives. The amount of future distributions that will be made is at the discretion of the ~~Company’s~~Company’s Board of Directors. For a discussion of the factors that will affect such cash flows and, accordingly, influence the decisions of the ~~Company’s~~Company’s Board of Directors regarding dividends and distributions, see ~~“Item~~“Item 7. ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and ~~Distributions”~~Distributions” in our ~~2019~~2020 Annual Report on Form 10-K.

During the second quarter of ~~2020~~,2021, the Company declared and paid a cash dividend of ~~$0.48~~$0.48 per share of Common Stock.

Current and Future Cash Needs

We anticipate that our available cash and cash equivalents, cash flows from operating activities and other available financing sources, including the issuance of debt securities by the Operating Partnership, the issuance of secured debt, bank term loans, borrowings under our revolving credit facility and an expected $200 million, six-month unsecured bridge facility from JPMorgan Chase Bank, N.A., the issuance of equity securities by the Company or the Operating Partnership and the disposition of non-core assets, will be adequate to meet our short-term liquidity requirements, including funding the ~~$300.0~~$250 million ~~principal amount~~cash portion of ~~unsecured notes due June 15, 2021.~~the purchase price to acquire a portfolio of assets from PAC. See “Investment Activity.”

~~Table of Contents~~

~~We had~~ ~~$4.8 million~~ ~~of cash and cash equivalents as of~~ ~~June 30, 2020~~. The unused capacity of our revolving credit facility at both June 30, ~~2020~~2021 and July ~~21, 2020~~20, 2021 was ~~$585.9~~$594.9 million, ~~and~~ ~~$599.9 million, respectively,~~ excluding an accordion feature that allows for an additional ~~$400.0~~$550.0 million of borrowing capacity subject to additional lender commitments.

We have a currently effective automatic shelf registration statement on Form S-3 with the SEC pursuant to which, at any time and from time to time, in one or more offerings on an as-needed basis, the Company may sell an indefinite amount of common stock, preferred stock and depositary shares and the Operating Partnership may sell an indefinite amount of debt securities, subject to our ability to effect offerings on satisfactory terms based on prevailing market conditions.

The Company from time to time enters into equity distribution agreements with a variety of firms pursuant to which the Company may offer and sell 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’~~brokers’ transactions on the NYSE 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 (which may include block trades).

~~During~~As noted above under “Investment Activity,” we announced a plan to sell $250 million to $300 million of non-core assets during the remainder of ~~2020~~,2021. Since our announcement, we ~~also~~have sold $43 million of non-core assets and expect to sell an additional ~~$72~~$207 million to ~~$127~~$257 million of properties no longer considered to be core assets due to location, age, quality and/or overall strategic fit. We can make no assurance, however, that we will sell any non-core assets or, if we do, what the timing or terms of any such sale will be.

See also ~~“Executive~~“Executive Summary - Liquidity and Capital Resources.””

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Critical Accounting Estimates

There were no changes made by management to the critical accounting policies in the six months endedJune 30, ~~2020~~.2021. For a description of our critical accounting estimates, see ~~“Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting ~~Estimates”~~Estimates” in our ~~2019~~2020 Annual Report on Form 10-K.

Non-GAAP Information

~~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 market conditions, management believes 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~~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~~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’~~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~~Company’s operating performance.

The ~~Company’s~~Company’s presentation of FFO is consistent with FFO as defined by the National Association of Real Estate Investment Trusts, 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, 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 joint venture investments (to reflect funds from operations on the same basis); and

~~Table of Contents~~


•	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.

•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, 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 joint venture investments (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.

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

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Funds from operations:

Net income
$
38,956

$
41,394

$
230,296

$
49,780

Net (income) attributable to noncontrolling interests in consolidated affiliates
(289
)

(306
)

(574
)

(622
)
Depreciation and amortization of real estate assets
58,764

58,720

119,196

127,202

Impairments of depreciable properties
1,778

—

1,778

—

(Gains) on disposition of depreciable properties
—

(6,703
)

(152,661
)

(6,703
)
Unconsolidated affiliates:

Depreciation and amortization of real estate assets
581

622

1,150

1,202

Funds from operations
99,790

93,727

199,185

170,859

Dividends on Preferred Stock
(622
)

(622
)

(1,244
)

(1,244
)
Funds from operations available for common stockholders
$
99,168

$
93,105

$
197,941

$
169,615

Funds from operations available for common stockholders per share
$
0.93

$
0.87

$
1.86

$
1.59

Weighted average shares outstanding (1)
106,730

106,445

106,681

106,402

~~__________~~


~~(1)~~	~~Includes assumed conversion of all potentially dilutive Common Stock equivalents.~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Funds from operations:
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Net (income) attributable to noncontrolling interests in consolidated affiliates	(294)		(289)		(575)		(574)
Depreciation and amortization of real estate assets	61,293		58,764		121,521		119,196
Impairments of depreciable properties	—		1,778		—		1,778
(Gains) on disposition of depreciable properties	(22,862)		—		(41,799)		(152,661)


Unconsolidated affiliates:
Depreciation and amortization of real estate assets	181		581		399		1,150







Funds from operations	100,162		99,790		198,245		199,185
Dividends on Preferred Stock	(621)		(622)		(1,243)		(1,244)

Funds from operations available for common stockholders	$	99,541	$	99,168	$	197,002	$	197,941��
Funds from operations available for common stockholders per share	$	0.93	$	0.93	$	1.84	$	1.86
Weighted average shares outstanding (1)	106,964		106,730		106,887		106,681

__________

(1)Includes assumed conversion of all potentially dilutive Common Stock equivalents.

In addition, the Company believes NOI and same property NOI are useful supplemental measures of the ~~Company’s~~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 less rental property and other expenses. The Company defines cash NOI as NOI less lease termination fees, straight-line rent, amortization of lease incentives and amortization of acquired above and below market leases. Other REITs may use different methodologies to calculate NOI, same property NOI and cash NOI.

As of June 30, ~~2020~~,2021, our same property portfolio consisted of ~~171~~161 in-service properties encompassing ~~25.3~~25.7 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, ~~2019~~2020 to June 30, ~~2020~~)2021). As of December 31, ~~2019~~,2020, our same property portfolio consisted of ~~207~~159 in-service properties encompassing ~~28.3~~24.4 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, ~~2018~~2019 to December 31, ~~2019~~)2020). The change in our same property portfolio was due to the addition of ~~four~~one property encompassing 0.8 million rentable square feet acquired during 2019 and three newly developed properties encompassing ~~0.4~~0.7 million rentable square feet placed in service during ~~2018~~.2019. These additions were offset by the removal of 40two properties encompassing ~~3.5~~0.2 million rentable square feet that were sold during ~~2020~~.2021.

Rental and other revenues related to properties not in our same property portfolio were ~~$17.5~~$8.4 million and ~~$18.0~~$7.2 million for the three months ended June 30, ~~2020~~2021 and ~~2019~~,2020, respectively, and ~~$40.5~~$15.9 million and ~~$33.8~~$20.1 million for the six months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively. Rental property and other expenses related to properties not in our same property portfolio were ~~$3.7~~$2.0 million and ~~$5.3~~$2.3 million for the three months ended June 30, ~~2020~~2021 and ~~2019~~,2020, respectively, and ~~$9.7~~$3.6 million and ~~$10.9~~$7.3 million for the six months endedJune 30, ~~2020~~2021 and ~~2019~~,2020, respectively.

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The following table sets forth the ~~Company’s~~Company’s NOI, same property NOI and same property cash NOI (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	61,844	$	38,956	$	118,699	$	230,296
Equity in earnings of unconsolidated affiliates	(431)		(1,179)		(1,068)		(2,142)
Gains on disposition of property	(22,862)		(318)		(41,799)		(153,385)
Other income	(332)		(588)		(644)		(657)
Interest expense	19,001		19,840		38,769		41,117
General and administrative expenses	10,107		10,084		20,059		21,014
Impairments of real estate assets	—		1,778		—		1,778
Depreciation and amortization	61,949		59,461		122,876		120,611
Net operating income	129,276		128,034		256,892		258,632
Non same property and other net operating income	(6,378)		(4,930)		(12,282)		(12,839)
Same property net operating income	$	122,898	$	123,104	$	244,610	$	245,793







Same property net operating income	$	122,898	$	123,104	$	244,610	$	245,793
Lease termination fees, straight-line rent and other non-cash adjustments (1)	(3,305)		(15,458)		(6,734)		(26,237)
Same property cash net operating income	$	119,593	$	107,646	$	237,876	$	219,556

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019
Net income
$
38,956

$
41,394

$
230,296

$
49,780

Equity in earnings of unconsolidated affiliates
(1,179
)

(765
)

(2,142
)

(1,429
)
Gains on disposition of property
(318
)

(6,703
)

(153,385
)

(6,703
)
Other (income)/loss
(588
)

(321
)

(657
)

3,445

Interest expense
19,840

20,356

41,117

39,095

General and administrative expenses
10,084

9,560

21,014

21,941

Impairments of real estate assets
1,778

531

1,778

531

Depreciation and amortization
59,461

59,460

120,611

128,664

Net operating income
128,034

123,512

258,632

235,324

Non same property and other net operating income
(13,831
)

(12,698
)

(30,769
)

(22,974
)
Same property net operating income
$
114,203

$
110,814

$
227,863

$
212,350

Same property net operating income
$
114,203

$
110,814

$
227,863

$
212,350

Lease termination fees, straight-line rent and other non-cash adjustments (1)
(12,091
)

(6,704
)

(19,798
)

(6,395
)
Same property cash net operating income
$
102,112

$
104,110

$
208,065

$
205,955

__________

~~__________~~

(1) Includes ~~$4.5~~$0.9 million and $2.1 million of repayments of temporary rent deferrals, net of additional temporary rent deferrals granted by the Company during the three and six months ended June 30, 2021, respectively. Includes $5.0 million of temporary rent deferrals granted by the Company during both the three and six months endedJune 30, ~~2020~~2020.

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ITEM 3. 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”~~“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~~“Item 2. ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital ~~Resources”~~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 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 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 existing and prospective debt instruments. We generally do not hold or issue these derivative contracts for trading or speculative purposes.

At June 30, ~~2020~~,2021, we had ~~$2,035.6~~$2,133.8 million principal amount of fixed rate debt outstanding, a ~~$0.1~~$150.2 milliondecrease as compared to December 31, ~~2019~~,2020, excluding debt with a variable rate that is effectively fixed by related interest rate hedge contracts. The estimated aggregate fair market value of this debt was ~~$2,122.1 million~~.$2,277.3 million. If interest rates had been 100 basis points higher, the aggregate fair market value of our fixed rate debt would have been ~~$119.4~~$141.4 million lower. If interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt would have been $153.3 million higher.

~~$129.5 million~~ ~~higher.~~

At June 30, ~~2020~~,2021, we had ~~$264.0~~$305.0 million of variable rate debt outstanding, a ~~$207.0~~$155.0 million~~decrease~~ increase as compared to December 31, ~~2019~~,2020, not protected by interest rate hedge contracts. If the weighted average interest rate on this variable rate debt had been 100 basis points higher or lower, the annual interest expense at June 30, ~~2020~~2021 would increase or decrease by ~~$2.6 million~~. $3.1 million.

At June 30, ~~2020~~,2021, we had ~~$50.0~~$50.0 million of variable rate debt outstanding with ~~$50.0~~$50.0 million of related floating-to-fixed interest rate swaps. These swaps effectively fix the underlying ~~one-month~~one-month LIBOR rate at a weighted average rate of 1.693%. If the underlying LIBOR interest rates increase or decrease by 100 basis points, the aggregate fair market value of the swaps at June 30, ~~2020~~2021 would increase by ~~$0.7 million~~ or decrease by $0.3 million.

~~$0.8 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.

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ITEM 4. CONTROLS AND PROCEDURES

SEC rules 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~~SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow for timely decisions regarding required disclosure. The ~~Company’s~~Company’s CEO and CFO have concluded that the disclosure controls and procedures of the Company and the Operating Partnership were each effective at the end of the period covered by this Quarterly Report.

SEC rules also require us 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 generally accepted accounting principles. There were no changes in internal control over financial reporting during the three months endedJune 30, ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, the ~~Company’s~~Company’s internal control over financial reporting. There were also no changes in internal control over financial reporting during the three months endedJune 30, ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, the Operating ~~Partnership’s~~Partnership’s internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

ITEM ~~1A. RISK FACTORS~~2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~For~~During the second quarter of 2021, the Company issued an aggregate of 1,000 shares of Common Stock to holders of Common Units in the Operating Partnership upon the redemption of a ~~discussion~~like number of ~~our potential risks and uncertainties, see~~Common Units in private offerings exempt from the ~~information below and~~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 ~~heading “Business - Risk Factors” set forth in our 2019 Annual Report on Form 10-K.~~Securities Act.

~~The COVID-19 pandemic and the resulting economic recession could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.~~ The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets. The spread of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity, including causing a worldwide economic recession, and has contributed to significant volatility and negative pressure in financial markets. The global impact of the pandemic has been rapidly evolving and many countries, including the United States, continue to react by instituting stay-at-home orders, restricting many business and travel activities, mandating the complete closures of certain business and schools and taking other actions to mitigate the spread of the virus, most of which have a negative effect on economic activity. Furthermore, many private businesses, including some of our customers, have recommended certain of their employees to continue to work from home or are rotating employees in and out of the office to encourage social distancing in the workplace.

ITEM 5. OTHER INFORMATION

~~We cannot predict when, if~~The Company has announced that Mark F. Mulhern, 61, will retire as Executive Vice President and Chief Financial Officer effective January 1, 2022. Brendan C. Maiorana, 45, who currently serves as Executive Vice President of Finance and Treasurer, will assume the role of Executive Vice President, Chief Financial Officer and Treasurer upon Mr. Mulhern’s retirement. Mr. Maiorana became Executive Vice President of Finance in July 2019 and assumed the role of Treasurer in January 2021. Prior to ~~what extent these restrictions~~that, he was our Senior Vice President of Finance and ~~other actions will end and when, if and~~Investor Relations since May 2016. Prior to ~~what extent economic activity will return~~joining Highwoods, Mr. Maiorana spent 11 years in equity research at Wells Fargo Securities, starting as an associate equity research analyst. Prior to pre-COVID-19 levels. The COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which we and our customers operate. A number of our customers have requested rent relief during this pandemic. In addition, many of our employees are currently working remotely. An extended period of work-from-home arrangements involving our employees could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. that, he worked four years at Ernst & Young LLP.

The COVID-19 pandemic, or a future pandemic, could also have material and adverse effects on our ability to successfully operate and on our financial condition, results of operations and cash flows due to, among other factors:

ITEM 6. EXHIBITS


•Exhibit Number			Description
10.1			~~a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or customer action;~~


•	the reduced economic activity could severely impact our customers’ businesses, financial condition and liquidity and may cause one or more of our customers to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;


•	~~the reduced economic activity could result in a prolonged and severe recession, which could negatively impact our prospects for leasing additional space and/or renewing leases with existing customers;~~

•

difficulty accessing debt and equity capital on attractive terms, or at all, impacts to our credit ratings, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations, including funding our development pipeline, or address maturing liabilities on a timely basis, and may also affect our customers’ ability to fund their business operations and meet their obligations to us;

•

~~the financial impact~~2021 Long-Term Equity Incentive Plan (filed as part of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our revolving credit facility and other debt agreements and result in a default and potentially an acceleration of indebtedness, which non-compliance could negatively impact our ability to make additional borrowings under our revolving credit facility and pay dividends, among other things;


•	~~weaker economic conditions due to the pandemic could require us to recognize future impairment losses;~~


•	a deterioration in our or our customers’ ability to operate in affected areas or delays in the supply of products or services to us or our customers from vendors that are needed for our or our customers’ operations could adversely affect our operations and those of our customers;


•	potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, could materially and negatively impact the future demand for office space over the long-term; and

~~Table of Contents~~


•	~~the potential negative impact~~Company’s Current Report on ~~the health of our employees, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during this disruption.~~

The extent to which the COVID-19 pandemic impacts our operations and those of our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and the resulting economic recession, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic, social and behavioral effects of the pandemic and containment measures, among others. Financial difficulties experienced by our customers, including the potential for bankruptcies or other early terminations of their leases, could reduce our cash flows, which could impact our ability to continue paying dividends to our stockholders at expected levels or at all.

The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows and performance. Moreover, many risk factors set forth in the 2019 Annual Report should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic.

Form 8-K dated May 11, 2021)

~~ITEM 6. EXHIBITS~~



~~Exhibit~~ ~~Number~~	~~Description~~
1010.2		Purchase and Sale Agreement dated as of April 16, 2021 by and among POP 4208 Six Forks Road, L.P., POP Morrocroft, L.P., POP 150 Fayetteville, LP, POP Capitol Towers, LP, PAC Galleria 75, LLC, POP 8 West Mezzanine Lending, LLC and Highwoods ~~Properties, Inc. 2020 Employee Stock Purchase Plan~~Realty Limited Partnership
10.3		Purchase and Sale Agreement dated as of April 16, 2021 by and among POP Armour Yards, LLC, POP 251 Armour Yards, LLC and Highwoods Realty Limited Partnership (portions of the exhibit have been omitted)
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		~~The~~Inline XBRL Instance Document (the instance document does not appear in the interactive data file because its XBRL tags are embedded within the ~~inline~~Inline XBRL ~~document~~document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Highwoods Properties, Inc.
By:			/s/ Mark F. Mulhern
			Mark F. Mulhern
			Executive Vice President and Chief Financial Officer



Highwoods Realty Limited Partnership
By:			Highwoods Properties, Inc., its sole general partner
By:			/s/ Mark F. Mulhern
			Mark F. Mulhern
			Executive Vice President and Chief Financial Officer

Date: July ~~28, 2020~~27, 2021

4950



	June 30, 2020			December 31, 2019
Assets:
Real estate assets, at cost:
Land	$	485,501		$	515,095
Buildings and tenant improvements	5,010,086			5,128,150
Development in-process	195,166			172,706
Land held for development	131,522			99,163
	5,822,275			5,915,114
Less-accumulated depreciation	(1,376,817		)	(1,388,566		)
Net real estate assets	4,445,458			4,526,548
Real estate and other assets, net, held for sale	—			20,790
Cash and cash equivalents	4,752			9,505
Restricted cash	8,955			5,237
Accounts receivable	29,876			23,370
Mortgages and notes receivable	1,440			1,501
Accrued straight-line rents receivable	249,722			234,652
Investments in and advances to unconsolidated affiliates	26,775			26,298
Deferred leasing costs, net of accumulated amortization of $151,170 and $146,125, respectively	221,905			231,347
Prepaid expenses and other assets, net of accumulated depreciation of $20,532 and $20,017, respectively	67,905			58,996
Total Assets	$	5,056,788		$	5,138,244
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
Mortgages and notes payable, net	$	2,337,662		$	2,543,710
Accounts payable, accrued expenses and other liabilities	275,551			286,911
Total Liabilities	2,613,213			2,830,621
Commitments and contingencies
Noncontrolling interests in the Operating Partnership	106,103			133,216
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), 28,843 and 28,859 shares issued and outstanding, respectively	28,843			28,859
Common Stock, $.01 par value, 200,000,000 authorized shares;
103,896,936 and 103,756,046 shares issued and outstanding, respectively	1,039			1,038
Additional paid-in capital	2,996,442			2,954,779
Distributions in excess of net income available for common stockholders	(708,903		)	(831,808		)
Accumulated other comprehensive loss	(1,704		)	(471		)
Total Stockholders’ Equity	2,315,717			2,152,397
Noncontrolling interests in consolidated affiliates	21,755			22,010
Total Equity	2,337,472			2,174,407
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity	$	5,056,788		$	5,138,244



	June 30, 2020
Development in-process	$	34,462
Accounts payable, accrued expenses and other liabilities	$	2,377



			Level 1		Level 2		Level 3
	Total		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Observable Inputs		Significant Unobservable Inputs
Fair Value at June 30, 2020:
Assets:
Mortgages and notes receivable, at fair value (1)	$	1,440	$	—	$	1,440	$	—
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,111		2,111		—		—
Impaired real estate assets	2,053		—		—		2,053
Total Assets	$	5,604	$	2,111	$	1,440	$	2,053
Noncontrolling Interests in the Operating Partnership	$	106,103	$	106,103	$	—	$	—
Liabilities:
Mortgages and notes payable, net, at fair value (1)	$	2,421,024	$	—	$	2,421,024	$	—
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)	1,237		—		1,237		—
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,111		2,111		—		—
Total Liabilities	$	2,424,372	$	2,111	$	2,422,261	$	—



Fair Value at December 31, 2019:
Assets:
Mortgages and notes receivable, at fair value (1)	$	1,501	$	—	$	1,501	$	—
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,345		2,345		—		—
Total Assets	$	3,846	$	2,345	$	1,501	$	—
Noncontrolling Interests in the Operating Partnership	$	133,216	$	133,216	$	—	$	—
Liabilities:
Mortgages and notes payable, net, at fair value (1)	$	2,615,776	$	—	$	2,615,776	$	—
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)	154		—		154		—
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,345		2,345		—		—
Total Liabilities	$	2,618,275	$	2,345	$	2,615,930	$	—