hiw1q11.htm




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________

FORM 10-Q

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

For the quarterly period ended March 31, 2011
______________


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

 
Maryland
001-13100
56-1871668
 
 
(State or other jurisdiction
of incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)
 

HIGHWOODS REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

 
North Carolina
000-21731
56-1869557
 
 
(State or other jurisdiction
of incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)
 

3100 Smoketree Court, Suite 600
Raleigh, NC 27604
(Address of principal executive offices) (Zip Code)
 
919-872-4924
(Registrants’ telephone number, including area code)
______________

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  S    No £            Highwoods Realty Limited Partnership  Yes  S    No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Highwoods Properties, Inc.  Yes  S    No £            Highwoods Realty Limited Partnership  Yes  £    No £

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

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

The Company had 72,122,602 shares of Common Stock outstanding as of April 25, 2011.





 
 

 


HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP

QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2011

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
 
   
   
HIGHWOODS PROPERTIES, INC.:
 
   
   
   
   
   
   
HIGHWOODS REALTY LIMITED PARTNERSHIP:
 
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
PART II – OTHER INFORMATION
 
   
   

 
1




PART I - FINANCIAL INFORMATION

 
ITEM 1.  FINANCIAL STATEMENTS

We refer to Highwoods Properties, Inc. as the “Company,” Highwoods Realty Limited Partnership as the “Operating Partnership,” the Company’s common stock as “Common Stock” or “Common Shares,” the Company’s preferred stock as “Preferred Stock” or “Preferred Shares,” the Operating Partnership’s common partnership interests as “Common Units,” the Operating Partnership’s preferred partnership interests as “Preferred Units” and in-service properties (excluding rental residential units) to which the Company and/or the Operating Partnership have title and 100.0% ownership rights as the “Wholly Owned Properties.” References to “we” and “our” mean the Company and the Operating Partnership, collectively, unless the context indicates otherwise.

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 April 25, 2011, the latest practicable date prior to the filing of this Quarterly Report.

 
2



HIGHWOODS PROPERTIES, INC.
 
Consolidated Balance Sheets
 
(Unaudited and in thousands, except share and per share amounts)
 
   
March 31,
2011
 
December 31,
2010
 
Assets:
           
Real estate assets, at cost:
             
Land
 
$
347,876
 
$
347,876
 
Buildings and tenant improvements
   
2,897,791
   
2,895,779
 
Development in process
   
6,882
   
4,524
 
Land held for development
   
107,837
   
108,067
 
     
3,360,386
   
3,356,246
 
Less-accumulated depreciation
   
(854,423
)
 
(835,165
)
Net real estate assets
   
2,505,963
   
2,521,081
 
For-sale residential condominiums
   
7,753
   
8,225
 
Real estate and other assets, net, held for sale
   
1,863
   
1,852
 
Cash and cash equivalents
   
30,810
   
14,206
 
Restricted cash
   
6,509
   
4,399
 
Accounts receivable, net of allowance of $3,274 and $3,595, respectively
   
21,862
   
20,716
 
Mortgages and notes receivable, net of allowance of $497 and $868, respectively
   
18,911
   
19,044
 
Accrued straight-line rents receivable, net of allowance of $1,397 and $2,209, respectively
   
96,927
   
93,435
 
Investment in unconsolidated affiliates
   
63,983
   
63,607
 
Deferred financing and leasing costs, net of accumulated amortization of $61,015 and $59,383, respectively
   
86,040
   
85,059
 
Prepaid expenses and other assets
   
36,608
   
40,211
 
Total Assets
 
$
2,877,229
 
$
2,871,835
 
               
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
             
Mortgages and notes payable
 
$
1,552,577
 
$
1,522,945
 
Accounts payable, accrued expenses and other liabilities
   
93,775
   
106,716
 
Financing obligations
   
33,040
   
33,114
 
Total Liabilities
   
1,679,392
   
1,662,775
 
Commitments and contingencies
             
Noncontrolling interests in the Operating Partnership
   
132,630
   
120,838
 
Equity:
             
Preferred Stock, $.01 par value, 50,000,000 authorized shares;
             
8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 29,092 shares issued and outstanding
   
29,092
   
29,092
 
8.000% Series B Cumulative Redeemable Preferred Shares (liquidation preference $25 per share), 2,100,000 shares issued and outstanding
   
52,500
   
52,500
 
Common Stock, $.01 par value, 200,000,000 authorized shares;
             
72,130,214 and 71,690,487 shares issued and outstanding, respectively
   
721
   
717
 
Additional paid-in capital
   
1,764,404
   
1,766,886
 
Distributions in excess of net income available for common stockholders
   
(782,060
)
 
(761,785
)
Accumulated other comprehensive loss
   
(3,812
)
 
(3,648
)
Total Stockholders’ Equity
   
1,060,845
   
1,083,762
 
Noncontrolling interests in consolidated affiliates
   
4,362
   
4,460
 
Total Equity
   
1,065,207
   
1,088,222
 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity
 
$
2,877,229
 
$
2,871,835
 

See accompanying notes to consolidated financial statements.

 
3



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

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Rental and other revenues                                                                                                        
 
$
115,592
 
$
115,054
 
Operating expenses:
             
Rental property and other expenses
   
41,379
   
41,715
 
Depreciation and amortization
   
33,812
   
32,729
 
General and administrative
   
7,793
   
8,507
 
Total operating expenses
   
82,984
   
82,951
 
Interest expense:
             
Contractual
   
22,431
   
21,802
 
Amortization of deferred financing costs
   
821
   
835
 
Financing obligations
   
291
   
476
 
     
23,543
   
23,113
 
Other income:
             
Interest and other income
   
1,873
   
1,700
 
     
1,873
   
1,700
 
Income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates
   
10,938
   
10,690
 
Gains on disposition of property
   
   
19
 
Gains on disposition of for-sale residential condominiums
   
38
   
190
 
Equity in earnings of unconsolidated affiliates
   
1,467
   
795
 
Income from continuing operations                                                                                                        
   
12,443
   
11,694
 
Discontinued operations:
             
Income from discontinued operations
   
   
214
 
Net gains on disposition of discontinued operations
   
   
174
 
     
   
388
 
Net income                                                                                                        
   
12,443
   
12,082
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
   
(507
)
 
(520
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
   
(123
)
 
(214
)
Dividends on Preferred Stock
   
(1,677
)
 
(1,677
)
Net income available for common stockholders                                                                                                        
 
$
10,136
 
$
9,671
 
Earnings per common share – basic:
             
Income from continuing operations available for common stockholders
 
$
0.14
 
$
0.13
 
Income from discontinued operations available for common stockholders
   
   
0.01
 
Net income available for common stockholders
 
$
0.14
 
$
0.14
 
Weighted average Common Shares outstanding – basic
   
71,817
   
71,414
 
Earnings per common share – diluted:
             
Income from continuing operations available for common stockholders
 
$
0.14
 
$
0.13
 
Income from discontinued operations available for common stockholders
   
   
0.01
 
Net income available for common stockholders
 
$
0.14
 
$
0.14
 
Weighted average Common Shares outstanding – diluted
   
75,792
   
75,397
 
Net income available for common stockholders:
             
Income from continuing operations available for common stockholders
 
$
10,136
 
$
9,303
 
Income from discontinued operations available for common stockholders
   
   
368
 
Net income available for common stockholders
 
$
10,136
 
$
9,671
 

See accompanying notes to consolidated financial statements.

 
4



HIGHWOODS PROPERTIES, INC.
 
Consolidated Statements of Equity
 
Three Months Ended March 31, 2011 and 2010
 
(Unaudited and in thousands, except share amounts)
 
   
Number of Common
 Shares
 
Common Stock
 
Series A Cumulative Redeemable Preferred Shares
 
Series B Cumulative Redeemable Preferred Shares
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive
Loss
 
Non-Controlling Interests in
Consolidated Affiliates
 
Distributions in Excess of Net Income Available for Common Stockholders
 
Total
 
Balance at December 31, 2010
 
71,690,487
 
$
717
 
$
29,092
 
$
52,500
 
$
1,766,886
 
$
(3,648
)
$
4,460
 
$
(761,785
)
$
1,088,222
 
Issuances of Common Stock, net
 
307,060
   
3
   
   
   
8,388
   
   
   
   
8,391
 
Conversion of Common Units to Common Stock
 
5,641
   
   
   
   
186
   
   
   
   
186
 
Dividends on Common Stock
 
   
   
   
   
   
   
   
(30,411
)
 
(30,411
)
Dividends on Preferred Stock
 
   
   
   
   
   
   
   
(1,677
)
 
(1,677
)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
 
   
   
   
   
(13,081
)
 
   
   
   
(13,081
)
Distributions to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
(221
)
 
   
(221
)
Issuances of restricted stock, net
 
127,026
   
   
   
   
   
   
   
   
 
Share-based compensation expense
 
   
1
   
   
   
2,025
   
   
   
   
2,026
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
 
   
   
   
   
   
   
   
(507
)
 
(507
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
123
   
(123
)
 
 
Comprehensive income:
                                                     
Net income
 
   
   
   
   
   
   
   
12,443
   
12,443
 
Other comprehensive loss
 
   
   
   
   
   
(164
)
 
   
   
(164
)
Total comprehensive income
                                                 
12,279
 
Balance at March 31, 2011
 
72,130,214
 
$
721
 
$
29,092
 
$
52,500
 
$
1,764,404
 
$
(3,812
)
$
4,362
 
$
(782,060
)
$
1,065,207
 
 
   
Number of Common
 Shares
 
Common Stock
 
Series A Cumulative Redeemable Preferred Shares
 
Series B Cumulative Redeemable Preferred Shares
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive
Loss
 
Non-Controlling Interests in
Consolidated Affiliates
 
Distributions in Excess of Net Income Available for Common Stockholders
 
Total
 
Balance at December 31, 2009
 
71,285,303
 
$
713
 
$
29,092
 
$
52,500
 
$
1,751,398
 
$
(3,811
)
$
5,183
 
$
(701,932
)
$
1,133,143
 
Issuances of Common Stock, net
 
68,886
   
1
   
   
   
1,141
   
   
   
   
1,142
 
Conversion of Common Units to Common Stock
 
92,971
   
1
   
   
   
2,924
   
   
   
   
2,925
 
Dividends on Common Stock
 
   
   
   
   
   
   
   
(30,323
)
 
(30,323
)
Dividends on Preferred Stock
 
   
   
   
   
   
   
   
(1,677
)
 
(1,677
)
Adjustment of noncontrolling interests in the Operating Partnership to fair value
 
   
   
   
   
5,235
   
   
   
   
5,235
 
Distributions to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
(204
)
 
   
(204
)
Issuances of restricted stock, net
 
154,897
   
   
   
   
   
   
   
   
 
Share-based compensation expense
 
   
1
   
   
   
2,054
   
   
   
   
2,055
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
 
   
   
   
   
   
   
   
(520
)
 
(520
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
214
   
(214
)
 
 
Comprehensive income:
                                                     
Net income
 
   
   
   
   
   
   
   
12,082
   
12,082
 
Other comprehensive income
 
   
   
   
   
   
458
   
   
   
458
 
Total comprehensive income
                                                 
12,540
 
Balance at March 31, 2010
 
71,602,057
 
$
716
 
$
29,092
 
$
52,500
 
$
1,762,752
 
$
(3,353
)
$
5,193
 
$
(722,584
)
$
1,124,316
 

See accompanying notes to consolidated financial statements.

 
5



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

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Operating activities:
             
Net income
 
$
12,443
 
$
12,082
 
Adjustments to reconcile net income to net cash provided by operating activities:
             
Depreciation and amortization
   
33,812
   
32,912
 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
   
499
   
261
 
Share-based compensation expense
   
2,026
   
2,055
 
Additions to allowance for doubtful accounts
   
298
   
1,331
 
Amortization of deferred financing costs
   
821
   
835
 
Amortization of settled cash-flow hedges
   
(29
)
 
239
 
Net gains on disposition of property
   
   
(193
)
Gains on disposition of for-sale residential condominiums
   
(38
)
 
(190
)
Equity in earnings of unconsolidated affiliates
   
(1,467
)
 
(795
)
Changes in financing obligations
   
(74
)
 
52
 
Distributions of earnings from unconsolidated affiliates
   
1,137
   
681
 
Changes in operating assets and liabilities:
             
Accounts receivable
   
(993
)
 
(3,928
)
Prepaid expenses and other assets
   
(1,446
)
 
(509
)
Accrued straight-line rents receivable
   
(3,214
)
 
(1,407
)
Accounts payable, accrued expenses and other liabilities
   
(15,291
)
 
(3,676
)
Net cash provided by operating activities
   
28,484
   
39,750
 
Investing activities:
             
Additions to real estate assets and deferred leasing costs
   
(16,835
)
 
(16,814
)
Net proceeds from disposition of for-sale residential condominiums
   
510
   
1,943
 
Distributions of capital from unconsolidated affiliates
   
408
   
730
 
Repayments of mortgages and notes receivable
   
133
   
59
 
Contributions to unconsolidated affiliates
   
(422
)
 
(36
)
Changes in restricted cash and other investing activities
   
1,966
   
596
 
Net cash used in investing activities
   
(14,240
)
 
(13,522
)
Financing activities:
             
Dividends on Common Stock
   
(30,411
)
 
(30,323
)
Dividends on Preferred Stock
   
(1,677
)
 
(1,677
)
Distributions to noncontrolling interests in the Operating Partnership
   
(1,610
)
 
(1,614
)
Distributions to noncontrolling interests in consolidated affiliates
   
(221
)
 
(204
)
Net proceeds from the issuance of Common Stock
   
8,391
   
1,142
 
Borrowings on revolving credit facility
   
5,000
   
4,000
 
Repayments of revolving credit facility
   
(35,000
)
 
(4,000
)
Borrowings on mortgages and notes payable
   
200,000
   
 
Repayments of mortgages and notes payable
   
(140,491
)
 
(2,725
)
Additions to deferred financing costs and other financing activities
   
(1,621
)
 
(188
)
Net cash provided by/(used in) financing activities
   
2,360
   
(35,589
)
Net increase/(decrease) in cash and cash equivalents
   
16,604
   
(9,361
)
Cash and cash equivalents at beginning of the period
   
14,206
   
23,699
 
Cash and cash equivalents at end of the period
 
$
30,810
 
$
14,338
 


See accompanying notes to consolidated financial statements.

 
6



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

Supplemental disclosure of cash flow information:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Cash paid for interest, net of amounts capitalized
 
$
23,602
 
$
23,541
 

Supplemental disclosure of non-cash investing and financing activities:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Conversion of Common Units to Common Stock                                                                                                         
 
$
186
 
$
2,925
 
Change in accrued capital expenditures                                                                                                         
 
$
2,641
 
$
(3,456
)
Write-off of fully depreciated real estate assets                                                                                                         
 
$
9,912
 
$
10,194
 
Write-off of fully amortized deferred financing and leasing costs
 
$
4,023
 
$
2,652
 
Unrealized gains on marketable securities of non-qualified deferred compensation plan
 
$
177
 
$
204
 
Settlement of financing obligation
 
$
 
$
4,184
 
Adjustment of noncontrolling interests in the Operating Partnership to fair value
 
$
13,081
 
$
(5,235
)
Unrealized gain/(loss) on tax increment financing bond
 
$
(135
)
$
219
 

See accompanying notes to consolidated financial statements.


 
7


HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements
 
March 31, 2011
 
(tabular dollar amounts in thousands, except per share data)
 
(Unaudited)

1.      Description of Business and Significant Accounting Policies

Description of Business

The Company is a fully-integrated, self-administered and self-managed equity real estate investment trust (“REIT”) that operates in the Southeastern and Midwestern United States. The Company conducts virtually all of its activities through the Operating Partnership. At March 31, 2011, the Company and/or the Operating Partnership wholly owned: 294 in-service office, industrial and retail properties, comprising 27.1 million square feet; 96 rental residential units; 24 for-sale residential condominiums; 610 acres of undeveloped land suitable for future development, of which 523 acres are considered core holdings; and an additional three office properties that are considered completed but not yet stabilized.

The Company is the sole general partner of the Operating Partnership. At March 31, 2011, the Company owned all of the Preferred Units and 71.7 million, or 95.0%, of the Common Units. Limited partners (including one officer and two directors of the Company) own the remaining 3.8 million Common Units. Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock, $.01 par value, based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock. The Common Units owned by the Company are not redeemable. During the three months ended March 31, 2011, the Company redeemed 5,641 Common Units for a like number of shares of Common Stock.

Basis of Presentation

Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Our Consolidated Statements of Income for the three months ended March 31, 2010 were revised from previously reported amounts to reflect in discontinued operations the operations for those properties sold or held for sale subsequent to that date which required discontinued operations presentation.

Our Consolidated Financial Statements include the Operating Partnership, wholly owned subsidiaries and those entities in which we have the controlling financial interest. All significant intercompany transactions and accounts have been eliminated. At March 31, 2011 and December 31, 2010, we were not involved with any entities that were determined to be variable interest entities.

The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in the opinion of management, contain all adjustments (including normal recurring accruals) necessary for a fair presentation of our financial position, results of operations and cash flows. We have omitted certain notes and other information from the interim consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by SEC rules and regulations. These Consolidated Financial Statements should be read in conjunction with our 2010 Annual Report on Form 10-K.

Use of Estimates

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



 
8

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 


2.      Mortgages and Notes Receivable

The following table sets forth our mortgages and notes receivable:

   
March 31,
2011
 
December 31,
2010
 
Seller financing (first mortgages)
 
$
17,180
 
$
17,180
 
Less allowance
   
   
 
     
17,180
   
17,180
 
Promissory notes
   
2,228
   
2,732
 
Less allowance
   
(497
)
 
(868
)
     
1,731
   
1,864
 
Mortgages and notes receivable, net
 
$
18,911
 
$
19,044
 

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

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Beginning notes receivable allowance
 
$
868
 
$
698
 
Bad debt expense
   
22
   
63
 
Write-offs
   
(364
)
 
 
Recoveries/other
   
(29
)
 
(29
)
Total notes receivable allowance
 
$
497
 
$
732
 

Our mortgages and notes receivable consists primarily of seller financing issued in conjunction with two disposition transactions in the second quarter of 2010. As of March 31, 2011, the interest payments on both mortgages receivable were current and there were no indications of impairment on the receivables.


 
9

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



3.      Investment in Unconsolidated Affiliates

We have equity interests ranging from 10.0% to 50.0% in various joint ventures with unrelated third parties. The following table sets forth the combined, summarized income statements for our unconsolidated joint ventures:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Income Statements:
             
Revenues
 
$
25,217
 
$
35,588
 
Expenses:
             
Rental property and other expenses
   
11,997
   
17,167
 
Depreciation and amortization
   
6,616
   
9,600
 
Interest expense
   
6,007
   
8,565
 
Total expenses
   
24,620
   
35,332
 
Net income
 
$
597
 
$
256
 
Our share of:
             
Depreciation and amortization of real estate assets
 
$
2,093
 
$
3,341
 
Interest expense
 
$
2,161
 
$
3,423
 
Net income
 
$
921
 
$
212
 
               
Our share of net income
 
$
921
 
$
212
 
Purchase accounting and management, leasing and other fees adjustments
   
546
   
583
 
Equity in earnings of unconsolidated affiliates
 
$
1,467
 
$
795
 

During the second quarter of 2010, we sold our equity interests in a series of unconsolidated joint ventures relating to properties in Des Moines, IA. For information regarding this sale, see Note 3 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K.


 
10

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



4.      Intangible Assets and Liabilities

The following table sets forth total intangible assets and liabilities, net of accumulated amortization:

   
March 31,
2011
 
December 31,
2010
 
Assets:
             
Deferred financing costs
 
$
17,399
 
$
16,412
 
Less accumulated amortization
   
(7,249
)
 
(7,054
)
     
10,150
   
9,358
 
Deferred leasing costs (including lease incentives and acquisition-related intangible assets)
   
129,656
   
128,030
 
Less accumulated amortization
   
(53,766
)
 
(52,329
)
     
75,890
   
75,701
 
Deferred financing and leasing costs, net
 
$
86,040
 
$
85,059
 
               
Liabilities:
             
Acquisition-related intangible liabilities (in accounts payable, accrued expenses and other liabilities)
 
$
709
 
$
658
 
Less accumulated amortization
   
(201
)
 
(125
)
   
$
508
 
$
533
 

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

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Amortization of deferred financing costs
 
$
821
 
$
835
 
Amortization of acquisition-related intangible assets (in depreciation and amortization)
 
$
4,356
 
$
3,766
 
Amortization of lease incentives (in rental and other revenues)
 
$
338
 
$
261
 
Amortization of acquisition-related intangible assets and liabilities (in rental and other revenues)
 
$
161
 
$
40
 

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

   
Amortization of Deferred Financing Costs
 
Amortization of Acquisition-Related Intangible Assets (in Depreciation and Amortization)
 
Amortization of Lease Incentives (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets and Liabilities (in Rental and Other Revenues)
 
April 1, 2011 through December 31, 2011
 
$
2,546
 
$
12,632
 
$
864
 
$
461
 
2012                                                             
   
3,092
   
14,302
   
1,056
   
533
 
2013                                                             
   
1,484
   
11,475
   
898
   
377
 
2014                                                             
   
1,098
   
8,812
   
739
   
285
 
2015                                                             
   
1,098
   
6,457
   
529
   
182
 
Thereafter                                                             
   
832
   
13,494
   
1,813
   
473
 
   
$
10,150
 
$
67,172
 
$
5,899
 
$
2,311
 


 
11

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



4.      Intangible Assets and Liabilities - Continued

The weighted average remaining amortization periods for deferred financing costs, acquisition-related intangible assets (in depreciation and amortization), lease incentives and acquisition-related intangible assets and liabilities (in rental and other revenues) were 3.5 years, 6.1 years, 7.9 years and 6.5 years, respectively, as of March 31, 2011.

5.      Mortgages and Notes Payable

The following table sets forth our consolidated mortgages and notes payable:

   
March 31,
2011
 
December 31,
2010
 
Secured indebtedness                                                                                                      
 
$
751,501
 
$
754,399
 
Unsecured indebtedness                                                                                                      
   
801,076
   
768,546
 
Total mortgages and notes payable
 
$
1,552,577
 
$
1,522,945
 

At March 31, 2011, our secured mortgage loans were secured by real estate assets with an aggregate undepreciated book value of $1.2 billion.

Our $400.0 million unsecured revolving credit facility is scheduled to mature on February 21, 2013 and includes an accordion feature that allows for an additional $50.0 million of borrowing capacity subject to additional lender commitments. Assuming we continue to have three publicly announced ratings from the credit rating agencies, the interest rate and facility fee under our revolving credit facility are based on the lower of the two highest publicly announced ratings. Based on our current credit ratings, the interest rate is LIBOR plus 290 basis points and the annual facility fee is 60 basis points. There were no amounts and $33.0 million outstanding under our revolving credit facility at March 31, 2011 and April 25, 2011, respectively. At March 31, 2011 and April 25, 2011, we had $0.5 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at March 31, 2011 and April 25, 2011 was $399.5 million and $366.5 million, respectively.

Our $70.0 million secured construction facility, of which $52.1 million was outstanding at March 31, 2011, is scheduled to mature on December 20, 2011. Assuming no defaults have occurred, we have the option to extend the maturity date for an additional one-year period. The interest rate is LIBOR plus 85 basis points. This facility had $17.9 million of availability at both March 31, 2011 and April 25, 2011.

In the first quarter of 2011, we obtained a $200.0 million, five-year unsecured bank term loan bearing interest of LIBOR plus 220 basis points. The proceeds were used to pay off at maturity a $137.5 million unsecured bank term loan bearing interest of LIBOR plus 110 basis points, pay off amounts then outstanding under our revolving credit facility and for general corporate purposes.

We are currently in compliance with the debt covenants and other requirements with respect to our outstanding debt.


 
12

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



6.      Noncontrolling Interests

Noncontrolling Interests in the Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company. The following table sets forth noncontrolling interests in the Operating Partnership:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Beginning noncontrolling interests in the Operating Partnership
 
$
120,838
 
$
129,769
 
Adjustments of noncontrolling interests in the Operating Partnership to fair value
   
13,081
   
(5,235
)
Conversion of Common Units to Common Stock
   
(186
)
 
(2,925
)
Net income attributable to noncontrolling interests in the Operating Partnership
   
507
   
520
 
Distributions to noncontrolling interests in the Operating Partnership
   
(1,610
)
 
(1,614
)
Total noncontrolling interests in the Operating Partnership
 
$
132,630
 
$
120,515
 

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

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Net income available for common stockholders                                                                                                           
 
$
10,136
 
$
9,671
 
Increase in additional paid in capital from conversion of Common Units to Common Stock
   
186
   
2,924
 
Change from net income available for common stockholders and transfers from noncontrolling interests
 
$
10,322
 
$
12,595
 

Noncontrolling Interests in Consolidated Affiliates

At March 31, 2011, noncontrolling interests in consolidated affiliates, a component of equity, relates to our joint venture partner’s 50.0% interest in office properties located in Richmond, VA. Our joint venture partner is an unrelated third party.

7.      Disclosure About Fair Value of Financial Instruments

The following summarizes the three levels of inputs that we use to measure fair value, as well as the assets, noncontrolling interests in the Operating Partnership and liabilities that we recognize at fair value using those levels of inputs.

Level 1.  Quoted prices in active markets for identical assets or liabilities.

Our Level 1 assets are investments in marketable securities which we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company. Our Level 1 liability is our non-qualified deferred compensation obligation.


 
13

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



7.      Disclosure About Fair Value of Financial Instruments - Continued

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.

We had no Level 2 assets or liabilities at March 31, 2011 and December 31, 2010.

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 asset is our tax increment financing bond, which is not routinely traded but whose fair value is determined using an estimate of projected redemption value based on quoted bid/ask prices for similar unrated municipal bonds.

The following tables set forth the assets, noncontrolling interests in the Operating Partnership and liability that we measure at fair value by level within the fair value hierarchy. We determine the level based on the lowest level of substantive input used to determine fair value.

   
March 31,
2011
 
Level 1
 
Level 3
 
Assets:
                   
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
$
4,100
 
$
4,100
 
$
 
Tax increment financing bond (in prepaid expenses and other assets)
   
15,564
   
   
15,564
 
Total Assets
 
$
19,664
 
$
4,100
 
$
15,564
 
                     
Noncontrolling Interests in the Operating Partnership
 
$
132,630
 
$
132,630
 
$
 
                     
Liability:
                   
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
$
4,100
 
$
4,100
 
$
 


   
December 31,
2010
 
Level 1
 
Level 3
 
Assets:
                   
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
$
3,479
 
$
3,479
 
$
 
Tax increment financing bond (in prepaid expenses and other assets)
   
15,699
   
   
15,699
 
Total Assets
 
$
19,178
 
$
3,479
 
$
15,699
 
                     
Noncontrolling Interests in the Operating Partnership
 
$
120,838
 
$
120,838
 
$
 
                     
Liability:
                   
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
$
4,091
 
$
4,091
 
$
 


 
14

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



7.      Disclosure About Fair Value of Financial Instruments – Continued

The following table sets forth our Level 3 asset:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Asset:
             
Tax Increment Financing Bond
             
Beginning balance
 
$
15,699
 
$
16,871
 
Unrealized gain/(loss) (in AOCL)
   
(135
)
 
219
 
Ending balance
 
$
15,564
 
$
17,090
 

We own a tax increment financing bond associated with a property developed by us. This bond amortizes to maturity in 2020. The estimated fair value at March 31, 2011 was $2.7 million below the outstanding principal due on the bond. If the yield-to-maturity used to fair value this bond was 100 basis points higher or lower, the fair value of the bond would have been $0.6 million lower or $0.7 million higher, respectively, as of March 31, 2011. Currently, we intend to hold this bond and have concluded that we will not be required to sell this bond before recovery of the bond principal. Payment of the principal and interest for the bond is guaranteed by us and, therefore, we have recorded no credit losses related to the bond in each of the three months ended March 31, 2011 and 2010. There is no legal right of offset with the liability, which we report as a financing obligation, related to this tax increment financing bond.

The following table sets forth the carrying amounts and fair values of our financial instruments not disclosed elsewhere:

   
Carrying
Amount
 
Fair Value
 
March 31, 2011
             
Mortgages and notes receivable
 
$
18,911
 
$
19,068
 
Mortgages and notes payable
 
$
1,552,577
 
$
1,638,968
 
Financing obligations
 
$
33,040
 
$
21,632
 
               
December 31, 2010
             
Mortgages and notes receivable                                                                                                
 
$
19,044
 
$
19,093
 
Mortgages and notes payable                                                                                                
 
$
1,522,945
 
$
1,581,518
 
Financing obligations                                                                                                
 
$
33,114
 
$
23,880
 

The carrying values of our cash and cash equivalents, restricted cash, accounts receivable, marketable securities of non-qualified deferred compensation plan, tax increment financing bond, non-qualified deferred compensation obligation and noncontrolling interests in the Operating Partnership are equal to or approximate fair value. The fair values of our mortgages and notes receivable, mortgages and notes payable and financing obligations were estimated using the income or market approaches to approximate the price that would be paid in an orderly transaction between market participants on the respective measurement dates.


 
15

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



8.      Share-Based Payments

During the three months ended March 31, 2011, we granted 146,581 stock options with an exercise price equal to the closing market price of a share of our Common Stock on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $6.47. During the three months ended March 31, 2011, we also granted 69,640 shares of time-based restricted stock and 57,386 shares of total return-based restricted stock with weighted average grant date fair values per share of $33.72 and $41.02, respectively. We recorded stock-based compensation expense of $2.0 million and $2.1 million during the three months ended March 31, 2011 and 2010, respectively. At March 31, 2011, there was $9.1 million of total unrecognized stock-based compensation costs, which will be recognized over a weighted average remaining contractual term of 2.9 years.

9.      Comprehensive Income and Accumulated Other Comprehensive Loss

The following table sets forth the components of comprehensive income:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Net income                                                                                                         
 
$
12,443
 
$
12,082
 
Other comprehensive income/(loss):
             
Unrealized gain/(loss) on tax increment financing bond
   
(135
)
 
219
 
Amortization of settled cash-flow hedges
   
(29
)
 
239
 
Total other comprehensive income/(loss)
   
(164
)
 
458
 
Total comprehensive income
 
$
12,279
 
$
12,540
 

The following table sets forth the components of AOCL:

   
March 31,
2011
 
December 31,
2010
 
Tax increment financing bond                                                                                                      
 
$
2,678
 
$
2,543
 
Settled cash-flow hedges                                                                                                      
   
1,134
   
1,105
 
Total accumulated other comprehensive loss
 
$
3,812
 
$
3,648
 



 
16

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



10.   Discontinued Operations

The following table sets forth our operations which required classification as discontinued operations:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Rental and other revenues                                                                                                           
 
$
 
$
779
 
Operating expenses:
   
       
Rental property and other expenses
   
   
382
 
Depreciation and amortization
   
   
183
 
Total operating expenses
   
   
565
 
Income from discontinued operations
   
   
214
 
Net gains on disposition of discontinued operations
   
   
174
 
Total discontinued operations                                                                                                           
 
$
 
$
388
 

The following table sets forth the major classes of assets and liabilities of the properties classified as held for sale:

   
March 31,
2011
 
December 31,
2010
 
Assets:
             
Buildings and tenant improvements
 
$
20
 
$
20
 
Land held for development
   
1,800
   
1,800
 
Net real estate assets
   
1,820
   
1,820
 
Prepaid expenses and other assets
   
43
   
32
 
Real estate and other assets, net, held for sale
 
$
1,863
 
$
1,852
 


 
17

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 


 

11.    Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per Common Share:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Earnings per Common Share – basic:
             
Numerator:
             
Income from continuing operations
 
$
12,443
 
$
11,694
 
Net (income) attributable to noncontrolling  interests in the Operating Partnership from continuing operations
   
(507
)
 
(500
)
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
   
(123
)
 
(214
)
Dividends on Preferred Stock
   
(1,677
)
 
(1,677
)
Income from continuing operations available for common stockholders
   
10,136
   
9,303
 
Income from discontinued operations
   
   
388
 
Net (income) attributable to noncontrolling interests in the Operating Partnership from discontinued operations
   
   
(20
)
Income from discontinued operations available for common stockholders
   
   
368
 
Net income available for common stockholders
 
$
10,136
 
$
9,671
 
Denominator:
             
Denominator for basic earnings per Common Share – weighted average shares (1) (2)
   
71,817
   
71,414
 
Earnings per Common Share – basic:
             
Income from continuing operations available for common stockholders
 
$
0.14
 
$
0.13
 
Income from discontinued operations available for common stockholders
   
   
0.01
 
Net income available for common stockholders
 
$
0.14
 
$
0.14
 
Earnings per Common Share – diluted:
             
Numerator:
             
Income from continuing operations
 
$
12,443
 
$
11,694
 
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
   
(123
)
 
(214
)
Dividends on Preferred Stock
   
(1,677
)
 
(1,677
)
Income from continuing operations available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership
   
10,643
   
9,803
 
Income from discontinued operations available for common stockholders
   
   
388
 
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership
 
$
10,643
 
$
10,191
 
Denominator:
             
Denominator for basic earnings per Common Share –weighted average shares (1) (2)
   
71,817
   
71,414
 
Add:
             
Stock options using the treasury method
   
185
   
164
 
Noncontrolling interests partnership units
   
3,790
   
3,819
 
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions (1)
   
75,792
   
75,397
 
Earnings per Common Share – diluted:
             
Income from continuing operations available for common stockholders
 
$
0.14
 
$
0.13
 
Income from discontinued operations available for common stockholders
   
   
0.01
 
Net income available for common stockholders
 
$
0.14
 
$
0.14
 
__________

 
18

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



11.    Earnings Per Share Continued
 
(1)
Options aggregating approximately 0.3 million shares and options and warrants aggregating approximately 0.7 million shares were outstanding during the three months ended March 31, 2011 and 2010, respectively, but were not included in the computation of diluted earnings per share because the impact of including such shares would be anti-dilutive.
 
(2)
Includes all unvested restricted stock since dividends on such restricted stock are non-forfeitable.

12.    Segment Information

The following table summarizes the rental and other revenues and net operating income, the primary industry property-level performance metric which is defined as rental and other revenues less rental property and other expenses, for each reportable segment:

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Rental and Other Revenues: (1)
             
Office:
             
Atlanta, GA
 
$
11,903
 
$
12,133
 
Greenville, SC
   
3,506
   
3,677
 
Kansas City, MO
   
3,657
   
3,708
 
Memphis, TN
   
10,103
   
7,868
 
Nashville, TN
   
14,617
   
15,114
 
Orlando, FL
   
2,318
   
3,006
 
Piedmont Triad, NC
   
5,973
   
5,945
 
Raleigh, NC
   
19,324
   
18,805
 
Richmond, VA
   
11,380
   
11,794
 
Tampa, FL
   
16,794
   
17,941
 
Total Office Segment
   
99,575
   
99,991
 
Industrial:
             
Atlanta, GA
   
3,935
   
3,975
 
Piedmont Triad, NC
   
2,977
   
3,021
 
Total Industrial Segment
   
6,912
   
6,996
 
Retail:
             
Kansas City, MO
   
8,898
   
7,688
 
Total Retail Segment
   
8,898
   
7,688
 
Residential:
             
Kansas City, MO
   
207
   
379
 
Total Residential Segment
   
207
   
379
 
Total Rental and Other Revenues                                                                                                         
 
$
115,592
 
$
115,054
 


 
19

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 


12.    Segment Information – Continued

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Net Operating Income: (1)
             
Office:
             
Atlanta, GA
 
$
7,495
 
$
7,634
 
Greenville, SC
   
2,075
   
2,281
 
Kansas City, MO
   
2,115
   
2,213
 
Memphis, TN
   
5,761
   
5,278
 
Nashville, TN
   
9,654
   
9,869
 
Orlando, FL
   
1,167
   
1,614
 
Piedmont Triad, NC
   
4,029
   
3,638
 
Raleigh, NC
   
13,207
   
12,629
 
Richmond, VA
   
7,862
   
7,950
 
Tampa, FL
   
10,392
   
10,819
 
Total Office Segment                                                                                       
   
63,757
   
63,925
 
Industrial:
             
Atlanta, GA
   
2,840
   
2,770
 
Piedmont Triad, NC
   
2,224
   
2,048
 
Total Industrial Segment
   
5,064
   
4,818
 
Retail:
             
Kansas City, MO
   
5,288
   
4,359
 
Total Retail Segment
   
5,288
   
4,359
 
Residential:
             
Kansas City, MO
   
104
   
237
 
Total Residential Segment
   
104
   
237
 
Total Net Operating Income                                                                                                         
   
74,213
   
73,339
 
Reconciliation to income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates:
             
Depreciation and amortization
   
(33,812
)
 
(32,729
)
General and administrative expense
   
(7,793
)
 
(8,507
)
Interest expense
   
(23,543
)
 
(23,113
)
Interest and other income
   
1,873
   
1,700
 
Income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates
 
$
10,938
 
$
10,690
 
__________
 
(1)
Net of discontinued operations.


 
20

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



13.    Subsequent Events

On April 1, 2011, we repaid the remaining $10.0 million of a three-year unsecured term loan. We incurred no penalties related to this early repayment.

On April 1, 2011, we provided a one-year $38.3 million interest only secured loan to an unconsolidated joint venture, which was used to repay a secured loan to a third party lender at maturity. The new loan bears interest at LIBOR plus 500 basis points, but may be reduced by up to 50 basis points upon the use of proceeds from the sale of certain assets by the joint venture to repay this loan.

On April 6, 2011, we acquired a 48,000 square foot medical office property in Raleigh, NC for an investment of approximately $9.0 million in cash and incurred $0.1 million of acquisition-related costs.




 
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22


HIGHWOODS REALTY LIMITED PARTNERSHIP
 
Consolidated Balance Sheets
 
(Unaudited and in thousands, except unit and per unit amounts)
 
   
March 31,
2011
 
December 31,
2010
 
Assets:
           
Real estate assets, at cost:
             
Land
 
$
347,876
 
$
347,876
 
Buildings and tenant improvements
   
2,897,791
   
2,895,779
 
Development in process
   
6,882
   
4,524
 
Land held for development
   
107,837
   
108,067
 
     
3,360,386
   
3,356,246
 
Less-accumulated depreciation
   
(854,423
)
 
(835,165
)
Net real estate assets
   
2,505,963
   
2,521,081
 
For-sale residential condominiums
   
7,753
   
8,225
 
Real estate and other assets, net, held for sale
   
1,863
   
1,852
 
Cash and cash equivalents
   
30,792
   
14,198
 
Restricted cash
   
6,509
   
4,399
 
Accounts receivable, net of allowance of $3,274 and $3,595, respectively
   
21,862
   
20,716
 
Mortgages and notes receivable, net of allowance of $497 and $868, respectively
   
18,911
   
19,044
 
Accrued straight-line rents receivable, net of allowance of $1,397 and $2,209, respectively
   
96,927
   
93,435
 
Investment in unconsolidated affiliates
   
62,841
   
62,451
 
Deferred financing and leasing costs, net of accumulated amortization of $61,015 and $59,383, respectively
   
86,040
   
85,059
 
Prepaid expenses and other assets
   
36,456
   
40,211
 
Total Assets
 
$
2,875,917
 
$
2,870,671
 
               
Liabilities, Redeemable Operating Partnership Units and Equity:
             
Mortgages and notes payable
 
$
1,552,577
 
$
1,522,945
 
Accounts payable, accrued expenses and other liabilities
   
93,775
   
106,716
 
Financing obligations
   
33,040
   
33,114
 
Total Liabilities
   
1,679,392
   
1,662,775
 
Commitments and Contingencies
             
Redeemable Operating Partnership Units:
             
Common Units, 3,788,346 and 3,793,987 outstanding, respectively
   
132,630
   
120,838
 
Series A Preferred Units (liquidation preference $1,000 per unit), 29,092 shares issued and outstanding
   
29,092
   
29,092
 
Series B Preferred Units (liquidation preference $25 per unit), 2,100,000 shares issued and outstanding
   
52,500
   
52,500
 
Total Redeemable Operating Partnership Units
   
214,222
   
202,430
 
Equity:
             
Common Units:
             
General partner Common Units, 755,098 and 750,757 outstanding, respectively
   
9,815
   
10,044
 
Limited partner Common Units, 70,966,307 and 70,530,921 outstanding, respectively
   
971,938
   
994,610
 
Accumulated other comprehensive loss
   
(3,812
)
 
(3,648
)
Noncontrolling interests in consolidated affiliates
   
4,362
   
4,460
 
Total Equity
   
982,303
   
1,005,466
 
Total Liabilities, Redeemable Operating Partnership Units and Equity
 
$
2,875,917
 
$
2,870,671
 

See accompanying notes to consolidated financial statements.

 
23



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

   
Three Months Ended
March 31,
 
   
2011
 
2010
 
Rental and other revenues                                                                                                        
 
$
115,592
 
$
115,054
 
Operating expenses:
             
Rental property and other expenses
   
41,528
   
41,395
 
Depreciation and amortization
   
33,812
   
32,729
 
General and administrative
   
7,644
   
8,827
 
Total operating expenses
   
82,984
   
82,951
 
Interest expense:
             
Contractual
   
22,431
   
21,802
 
Amortization of deferred financing costs
   
821
   
835
 
Financing obligations
   
291
   
476
 
     
23,543
   
23,113
 
Other income:
             
Interest and other income
   
1,873
   
1,700
 
     
1,873
   
1,700
 
Income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates
   
10,938
   
10,690
 
Gains on disposition of property
   
   
19
 
Gains on disposition of for-sale residential condominiums
   
38
   
190
 
Equity in earnings of unconsolidated affiliates
   
1,475
   
801
 
Income from continuing operations                                                                                                        
   
12,451
   
11,700
 
Discontinued operations:
             
Income from discontinued operations
   
   
214
 
Net gains on disposition of discontinued operations
   
   
174
 
     
   
388
 
Net income                                                                                                        
   
12,451
   
12,088
 
Net (income) attributable to noncontrolling interests in consolidated affiliates
   
(123
)
 
(214
)
Distributions on Preferred Units
   
(1,677
)
 
(1,677
)
Net income available for common unitholders                                                                                                        
 
$
10,651
 
$
10,197
 
Earnings per Common Unit - basic:
             
Income from continuing operations available for common unitholders
 
$
0.14
 
$
0.13
 
Income from discontinued operations available for common unitholders
   
   
0.01
 
Net income available for common unitholders
 
$
0.14
 
$
0.14
 
Weighted average Common Units outstanding - basic
   
75,198
   
74,824
 
Earnings per Common Unit - diluted:
             
Income from continuing operations available for common unitholders
 
$
0.14
 
$
0.13
 
Income from discontinued operations available for common unitholders
   
   
0.01
 
Net income available for common unitholders
 
$
0.14
 
$
0.14
 
Weighted average Common Units outstanding - diluted
   
75,383
   
74,988
 
Net income available for common unitholders:
             
Income from continuing operations available for common unitholders
 
$
10,651
 
$
9,809
 
Income from discontinued operations available for common unitholders
   
   
388