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What changed in HIGHWOODS PROPERTIES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HIGHWOODS PROPERTIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+228 added−242 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in HIGHWOODS PROPERTIES, INC.'s 2023 10-K

228 paragraphs added · 242 removed · 187 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

36 edited+3 added−7 removed35 unchanged
Biggest changeThe amount of funds available to be earned under the plan depends upon the timing and cash yields of a qualifying development project and is included in the pro forma budget for the project. Payouts under the plan have generally ranged from $1,000 to $10,000 but could be higher under certain circumstances.
Biggest changeWe have a development cash incentive plan pursuant to which all employees, excluding executive officers, can receive a cash payout from a development incentive pool. The amount of funds available to be earned under the plan depends upon the timing and cash yields of a qualifying development project and is included in the pro forma budget for the project.
Since the beginning of 2019, we have acquired (on a wholly-owned or joint venture basis) 4.0 million square feet of trophy office assets for a total gross investment of $1.9 billion, placed in service 2.1 million square feet of highly pre-leased new office development for a total gross investment of $762.0 million and sold 7.1 million square feet of non-core assets for $1.1 billion.
Since the beginning of 2019, we have acquired (on a wholly-owned or joint venture basis) 4.0 million square feet of trophy office assets for a total gross investment of $1.9 billion, placed in service 2.1 million square feet of highly pre-leased new office development for a total gross investment of $762.0 million and sold 7.5 million square feet of non-core assets for $1.2 billion.
We believe being a fully-integrated REIT is in the best long-term interests of our stockholders for a number of reasons: • in-house services generally allow us to better anticipate and respond to the many real-time demands of our existing and potential customer base; • we are able to provide our customers with more cost-effective services such as build-to-suit construction and space modification, including tenant improvements and expansions; • the depth and breadth of our capabilities and resources provide us with market information not generally available; • operating efficiencies achieved through our fully-integrated organization provide a competitive advantage in servicing our properties, retaining existing customers and attracting new customers; • we can ensure the consistent deployment of a comprehensive preventative maintenance program; • our established detailed service request process creates chain of custody for a customer request and tracks status and response time, which enables proactive identification of any underperforming equipment and vital reconnaissance for process improvement and leverage when specifying all aspects of any new construction; and • our first-hand relationships with our customers lead to better customer service and often result in customers seeking renewals and additional space.
We believe being a fully-integrated REIT is in the best long-term interests of our stockholders for a number of reasons: • in-house services generally allow us to better anticipate and respond to the many real-time demands of our existing and potential customer base; • we are able to provide our customers with more cost-effective services such as build-to-suit construction and space modification, including tenant improvements and expansions; • the depth and breadth of our capabilities and resources provide us with market information not generally available; • operating efficiencies achieved through our fully-integrated organization provide a competitive advantage in servicing our properties, retaining existing customers and attracting new customers; • we can ensure the consistent deployment of a comprehensive preventative maintenance program; • our established detailed service request process creates chain of custody for a customer request and tracks status and response time, which enables proactive identification of any underperforming equipment and vital reconnaissance for process improvement and leverage when specifying all aspects of any new construction; and • our first-hand relationships with our customers lead to better experiences for our customers and their teammates and often result in customers seeking renewals and additional space.
We believe a resilient portfolio starts with having resilient employees. Our well-being initiatives focus on the “whole person,” as we are concerned not only for the on-the-job health and safety of our employees, but also for their ability to lead healthy and productive personal lives.
Employee Well-being. We believe a resilient portfolio starts with having resilient employees. Our well-being initiatives focus on the “whole person,” as we are concerned not only for the on-the-job health and safety of our employees, but also for their ability to lead healthy and productive personal lives.
Above all, being a fully-integrated REIT across these diverse functional areas gives us the benefit of engaging and responding to our customers’ needs as an owner versus a vendor. We believe this distinction, a core component of our value proposition, translates into improved customer service and higher customer retention.
Above all, being a fully-integrated REIT across these diverse functional areas gives us the benefit of engaging and responding to our customers’ needs as an owner versus a vendor. We believe this distinction, a core component of our value proposition, translates into improved customer experience and higher customer retention.
Our primary business is the operation, acquisition and development of office properties. There are no material inter-segment transactions. See Note 15 to our Consolidated Financial Statements for a summary of the rental and other revenues, net operating income and assets for each reportable segment. Our website is www.highwoods.com.
Our primary business is the operation, acquisition and development of office properties. There are no material inter-segment transactions. See Note 14 to our Consolidated Financial Statements for a summary of the rental and other revenues, net operating income and assets for each reportable segment. Our website is www.highwoods.com.
During 2022, the Company filed unqualified Section 303A certifications with the NYSE. The Company and the Operating Partnership have also filed the CEO and CFO certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as exhibits to this Annual Report. Our Strategy We are in the work-placemaking business.
During 2023, the Company filed unqualified Section 303A certifications with the NYSE. The Company and the Operating Partnership have also filed the CEO and CFO certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as exhibits to this Annual Report. Our Strategy We are in the work-placemaking business.
To that end, we have established wellness committees in each of our divisions and have a “HIW Well-being” program to promote holistic well-being. Our health benefit plans are designed to improve the overall health of our employees by decreasing costs and improving access to quality healthcare. Employee Empowerment.
To that end, we have established wellness committees in each of our locations and have a “HIW Well-being” program to promote holistic well-being. Our health benefit plans are designed to improve the overall health of our employees by decreasing costs and improving access to quality healthcare. Employee Empowerment.
Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock.
Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of the unitholder for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock.
Approximately 69% of our employees work in one of our division offices, most of which are directly involved in the management and maintenance of our portfolio. These include property managers, maintenance engineers and technicians, HVAC technicians and project managers.
Approximately 70% of our employees work in one of our division offices, most of which are directly involved in the management and maintenance of our portfolio. These include property managers, maintenance engineers and technicians, HVAC technicians and project managers.
This right-sizing of our employee base has created, and will continue to create, opportunities for individual career growth. The Company has long demonstrated a commitment to individual career growth. For example, nearly one-third of our current employees have had significant career advancement during their tenure with us.
This right-sizing of our employee base has created, and will continue to create, opportunities for individual career growth. The Company has long demonstrated a commitment to individual career growth. For example, nearly half of our current employees have had significant career advancement during their tenure with us.
We believe that in creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stockholders.
We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders.
One of our most significant human capital risks, which has been identified by many employers in our markets and throughout the country, concerns an increasing shortage of trade professionals in the future, as there are fewer younger trade professionals entering the workforce to replace retiring workers.
One of our most significant human capital risks, which has been identified by many employers in our markets and throughout the country, is an expected shortage of trade professionals in the future, as there are fewer younger trade professionals entering the workforce to replace retiring workers.
These include, among other benefits: • Comprehensive health insurance coverage; 7 Table of Contents • Attractive paid time off, including up to 25 vacation days (depending on tenure), two personal holidays, nine company-wide holidays, one volunteer day, sick leave and parental leave for all new caregivers; • Competitive match on contributions to our 401(k) retirement savings plan, in which over 95% of our employees participate; and • 15% discount on purchasing Common Stock through our employee stock purchase plan, in which nearly 35% of our employees participate.
These include, among other benefits: • Comprehensive health insurance coverage; • Attractive paid time off, including up to 25 vacation days (depending on tenure), two personal holidays, nine company-wide holidays, one volunteer day, sick leave and parental leave for all new caregivers; • Competitive match on contributions to our 401(k) retirement savings plan, in which over 97% of our employees participate; and • 15% discount on purchasing Common Stock through our employee stock purchase plan, in which nearly 29% of our employees participate.
Among other things, we routinely conduct: • regulatory-required training of affected employees regarding OSHA compliance; • training on fire and life safety systems affecting our buildings and building systems; • training on emergency response procedures affecting our people, our buildings and our customers; • simulations and table-top exercises to ensure our crisis management and business continuity plans are effective; and • training on pandemic safety affecting our people, our buildings and our customers. 8 Table of Contents Employee Well-being.
Among other things, we routinely conduct: • regulatory-required training of affected employees regarding OSHA compliance; • training on fire and life safety systems affecting our buildings and building systems; • training on emergency response procedures affecting our people, our buildings and our customers; • simulations and table-top exercises to ensure our crisis management and business continuity plans are effective; and • training on pandemic safety affecting our people, our buildings and our customers.
In 2022, the total cost of our workforce, including salaries, commissions, bonuses, equity and non-equity incentive compensation and employee benefits was approximately $61 million. We continually conduct risk assessments of our human capital needs.
In 2023, the total cost of our workforce, including salaries, commissions, bonuses, equity and non-equity incentive compensation and employee benefits, was approximately $59 million. We continually conduct risk assessments of our human capital needs.
Moreover, through our efforts in 6 Table of Contents providing internship and cooperative education opportunities for future real estate professionals, we have identified a pool of talented professionals capable of filling future hiring needs. As of December 31, 2022, the average tenure of our employees was 10 years and the average age was 49 years.
Through our efforts in providing internship and cooperative education opportunities for future real estate professionals, we have also identified a pool of talented professionals capable of filling future hiring needs. As of December 31, 2023, the average tenure of our employees was 10 years and the average age was 49 years.
While we own and operate a collection of high-quality office assets, we believe our team of dedicated real estate professionals is also critically important to our success. Over the past five years, by simplifying and streamlining our operations, we have reduced our overall headcount by nearly 100.
While we own and operate a collection of high-quality office assets, we believe our team of dedicated real estate professionals is also critically important to our success. Since the beginning of 2018, by simplifying and streamlining our operations, we have reduced our overall headcount by nearly 100.
Our Common Stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “HIW.” As of December 31, 2022, the Company owned all of the Preferred Units and 104.8 million, or 97.8%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.4 million Common Units.
Our Common Stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “HIW.” As of December 31, 2023, the Company owned all of the Preferred Units and 105.3 million, or 98.0%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.2 million Common Units.
Approximately 33% of our employees are highly specialized and skilled trade professionals, such as maintenance engineers and technicians and HVAC technicians. The average age of our trade professionals is 51 years, which is approximately four years older than the average age of the remainder of our employee base.
Approximately 34% of our employees are highly specialized and skilled trade professionals, such as maintenance engineers and technicians and HVAC technicians. The average 6 Table of Contents age of our trade professionals is 53 years, which is approximately five years older than the average age of the remainder of our employee base.
As of December 31, 2022, only Bank of America (3.8%) and Asurion (3.6%) accounted for more than 3% of our annualized GAAP revenues. Health and Safety.
As of December 31, 2023, only Bank of America (4.0%) and Asurion (3.5%) accounted for more than 3% of our annualized GAAP revenues. Health and Safety.
We are committed to maintaining a conservative and flexible balance sheet with access to ample liquidity, multiple sources of debt and equity capital and sufficient availability under our revolving credit facility to fund our short and long-term liquidity requirements.
We do not believe that our operations are significantly dependent upon any particular geographic market. Conservative and Flexible Balance Sheet . We are committed to maintaining a conservative and flexible balance sheet with access to ample liquidity, multiple sources of debt and equity capital and sufficient availability under our revolving credit facility to fund our short and long-term liquidity requirements.
We had 345 full-time employees as of December 31, 2022, three fewer than we had as of December 31, 2021. Over the past three years, our average annual turnover rate was 14%, substantially lower than the average national industry turnover rate of 24.3% as reported by the Bureau of Labor Statistics.
We had 349 full-time employees as of December 31, 2023, four more than we had as of December 31, 2022. Over the past three years, our average annual turnover rate was 17%, substantially lower than the average national industry turnover rate of 26% as reported by the Bureau of Labor Statistics.
Over the long-term, we plan to open division offices in Charlotte and Dallas. Shared corporate services, such as accounting, technology, development, asset management, marketing, human resources, legal and tax, are primarily based in Raleigh. Our senior leadership team, led by our CEO, is based in Raleigh and oversees all of the Company’s operations. Fully-Integrated.
Shared corporate services, such as accounting, technology, development, portfolio operations, marketing, human resources, legal and tax, are primarily based in Raleigh. Our senior leadership team, led by our CEO, is based in Raleigh and oversees all of the Company’s operations. Fully-Integrated.
Information on our website is not considered part of this Annual Report. Government Regulation We are subject to laws, rules and regulations of the United States and the states and local municipalities in which we operate, including laws and regulations relating to environmental protection and human health and safety.
Government Regulation We are subject to laws, rules and regulations of the United States and the states and local municipalities in which we operate, including laws and regulations relating to environmental protection and human health and safety.
More information regarding our sustainability strategy and progress towards reaching our target goals is available in the Company’s Proxy Statement filed in connection with our annual meeting of stockholders and in our annual corporate resiliency report that can be found under the “Service Not Space/Sustainability” section of our website.
More information regarding our sustainability strategy and progress towards reaching our target goals is available in our annual corporate resiliency report that can be found under the “Service Not Space/Resiliency” section of our website. Information on our website is not considered part of this Annual Report.
Time-based restricted stock vests ratably on an annual basis, generally over a four-year term, and if an employee receiving such stock leaves, unvested shares are immediately forfeited except in the event of death, disability or as otherwise provided in our retirement plan.
Time-based restricted stock vests ratably on an annual basis, generally over a four-year term, and if an employee receiving such stock leaves, unvested shares are immediately forfeited except in the event of death, disability or as otherwise provided in our retirement plan. 7 Table of Contents Other than as described below, we have no compensation policies or programs that reward employees solely on a transaction-specific basis.
During 2021, we surveyed all of our employees with respect to diversity and inclusion and many of our employees with respect to work environment satisfaction. During 2022, we conducted an engagement survey. Diversity and Inclusion. Diversity and inclusion is a core value for our company. We strive to create a diverse and inclusive environment in an authentic and meaningful way.
During 2021, we surveyed all of our employees with respect to diversity and inclusion and many of our employees with respect to work environment satisfaction. We conducted an engagement survey in each of the last two years. 8 Table of Contents Diversity and Inclusion. Diversity and inclusion is a core value for our company.
We are an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status. As of December 31, 2022, 36% of our employees were female and 26% of our employees were persons of color.
We strive to create a diverse and inclusive environment in an authentic and meaningful way. We are an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status.
Human Capital Resources We focus our real estate activities in markets where we have extensive local knowledge and own a significant amount of assets. As a result, we operate division offices in Atlanta, Nashville, Orlando, Raleigh, Richmond and Tampa, which are led by seasoned real estate professionals with significant commercial real estate experience managing across multiple economic cycles.
As a result, we operate division offices in Atlanta, Nashville, Orlando, Raleigh, Richmond and Tampa, which are led by seasoned real estate professionals with significant commercial real estate experience managing across multiple economic 5 Table of Contents cycles. Over the long-term, we plan to open division offices in Charlotte and Dallas.
Our turnover rate was 21% for 2022 largely due to the continued volatility in the job markets in the aftermath of the COVID-19 pandemic. However, this was lower than the average national industry turnover rate of 25.8% and we have generally backfilled most of these positions.
Our turnover rate was 13% for 2023, significantly lower than the turnover rate we experienced in 2021 and 2022 largely due to the volatility in the job markets in the aftermath of the COVID-19 pandemic.
We also pay our in-house leasing professionals commissions for signed leases. We believe such commissions, which are paid in cash, are comparable to what we would pay in commission fees to outside brokers. We do not believe that we have compensation policies or practices that create risks that are reasonably likely to have a material adverse effect on our company.
We do not believe that we have compensation policies or practices that create risks that are reasonably likely to have a material adverse effect on our company.
Of the new employees hired during 2022, 39% were female and 39% were persons of color.
As of December 31, 2023, 37% of our employees were female and 28% of our employees were persons of color. Of the new employees hired during 2023, 45% were female and 41% were persons of color.
As of December 31, 2022, our wholly-owned and joint venture development pipeline consisted of in-process developments with a total anticipated gross investment of $928.6 million. During this timeframe, we have completed our exit from Greensboro and Memphis, announced our plan to exit Pittsburgh and entered Charlotte and Dallas, two higher-growth markets. 4 Table of Contents Geographic Diversification .
During this timeframe, we have completed our exit from Greensboro and Memphis, announced our plan to exit Pittsburgh and entered Charlotte and Dallas, two higher-growth markets. 4 Table of Contents Geographic Diversification . Our core portfolio consists primarily of office properties in Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa.
Third, we have a diversity and inclusion group, called the “DIG,” made up of employees who advocate for diversity and inclusion throughout our company. In 2022, the DIG focused on creating relationships with local schools that support disadvantaged and minority students, creating clear Company-wide communication, encouraging personal career growth and continuing to expand and diversify our vendor base.
Third, we have a diversity and inclusion group, called the “DIG,” made up of employees who advocate for diversity and inclusion throughout our company.
Risk Factors - Risks Related to our Operations - Costs of complying with governmental laws and regulations may adversely affect our results of operations.” Information Security We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology networks and related systems.
Risk Factors - Risks Related to our Operations - Costs of complying with governmental laws and regulations may adversely affect our results of operations.” Human Capital Resources We focus our real estate activities in markets where we have extensive local knowledge and own a significant amount of assets.
Removed
Our core portfolio consists primarily of office properties in Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa. We do not believe that our operations are significantly dependent upon any particular geographic market. Conservative and Flexible Balance Sheet .
Added
As of December 31, 2023, our wholly-owned and joint venture development pipeline consisted of in-process and recently completed but not yet stabilized developments with a total anticipated gross investment of $928.6 million.
Removed
The audit committee of the Company’s Board of Directors is responsible for overseeing management’s risk assessment and risk management processes designed to 5 Table of Contents monitor and control information security risk. Management, including the Company’s chief information officer, regularly briefs the audit committee on information security matters.
Added
Payouts under the plan have generally ranged from $1,000 to $10,000 but could be higher under certain circumstances. We also pay our in-house leasing professionals commissions for signed leases. We believe such commissions, which are paid in cash, are comparable to what we would pay in commission fees to outside brokers.
Removed
These briefings occur as often as needed, but in no event less than once a year. The Company’s chief information officer also regularly briefs management’s information technology steering committee, which includes the CEO and CFO.
Added
In 2023, the DIG focused its efforts on fostering Company-wide communication and inclusion, supporting our partnerships with local schools and programs that support students with limited economic resources and continuing to expand and diversify our vendor base.
Removed
We have adopted and implemented an approach to identify and mitigate information security risks that we believe is commercially reasonable for real estate companies, including some of the best practices of the National Institute of Standards and Technology cyber security framework. Since January 1, 2018, we have not experienced any information security breaches that resulted in any financial loss.
Removed
We have a cyber risk insurance policy designed to help us mitigate risk exposure by offsetting costs involved with recovery and remediation after an information security breach or similar event. We regularly engage independent third parties to test our information security processes and systems as part of our overall enterprise risk management.
Removed
We regularly conduct information security training to ensure all employees are aware of information security risks and to enable them to take steps to mitigate such risks. As part of this program, we also take reasonable steps to ensure any employee who may come into possession of confidential financial or health information has received appropriate information security awareness training.
Removed
Other than as described below, we have no compensation policies or programs that reward employees solely on a transaction-specific basis. We have a development cash incentive plan pursuant to which all employees, excluding executive officers, can receive a cash payout from a development incentive pool.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAccordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. 12 Table of Contents A security breach or other significant disruption involving our IT networks and related systems could: • disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our customers; • result in misstated financial reports, violations of loan covenants, missed reporting deadlines and/or missed permitting deadlines; • result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes; • result in our inability to maintain the building systems relied upon by our customers for the efficient use of their leased space; • require significant management attention and resources to remedy any damages that result; • subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or • damage our reputation among our customers and investors generally.
Biggest changeA cybersecurity incident involving IT networks and related systems owned or used by us could: • disrupt the proper functioning of our networks and systems and therefore our operations and/or our customers' operations; • result in misstated financial reports, violations of loan covenants, missed reporting deadlines and/or missed permitting deadlines; 12 Table of Contents • result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; • result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes; • result in our inability to maintain the building systems relied upon by our customers for the efficient use of their leased space; • require significant management attention and resources to remedy any damages that result; • subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or • damage our reputation among our customers and investors generally.
Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and are not generally recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
These factors include: • the level of institutional interest in us; 17 Table of Contents • the perceived attractiveness of investment in us, in comparison to other REITs; • the attractiveness of securities of REITs, and office REITs in particular, in comparison to other asset classes; • our financial condition and performance; • the market’s perception of our growth prospects and potential future cash dividends; • government action or regulation, including changes in tax laws; • increases in market interest rates, which may lead investors to expect a higher annual yield from our distributions in relation to the price of our Common Stock; • changes in our credit ratings; • the issuance of additional shares of Common Stock, or the perception that such issuances might occur, including under our equity distribution agreements; and • any negative change in the level or stability of our dividend.
These factors include: • the level of institutional interest in us; • the perceived attractiveness of investment in us, in comparison to other REITs; • the attractiveness of securities of REITs, and office REITs in particular, in comparison to other asset classes; • our financial condition and performance; 17 Table of Contents • the market’s perception of our business and growth prospects and potential future cash dividends; • government action or regulation, including changes in tax laws; • increases in market interest rates, which may lead investors to expect a higher annual yield from our distributions in relation to the price of our Common Stock; • changes in our credit ratings; • the issuance of additional shares of Common Stock, or the perception that such issuances might occur, including under our equity distribution agreements; and • any negative change in the level or stability of our dividend.
Most countries, including the United States, reacted to the pandemic by restricting many business and travel activities, mandating the partial or complete closures of certain business and schools and taking other actions to mitigate the spread of the virus, most of which had a disruptive effect on economic activity, including the use of and demand for office space.
Most countries, including the United States, reacted to the pandemic by restricting many business and travel activities, mandating the partial or complete closures of certain businesses and schools and taking other actions to mitigate the spread of the virus, most of which had a disruptive effect on economic activity, including the use of and demand for office space.
Our participation in joint ventures is subject to the risks that: • we could become engaged in a dispute with any of our joint venture partners that might affect our ability to develop or operate a property; • some of our joint ventures are subject to debt and the refinancing of such debt may require equity capital calls; • our joint venture partners may default on their obligations necessitating that we fulfill their obligation ourselves; • our joint ventures may be unable to repay any amounts that we may loan to them; • we may need our joint venture partner’s approval to take certain actions and, therefore, we may be unable to cause a joint venture to implement decisions that we consider advisable; • our joint venture partners may have different objectives than we have regarding the appropriate timing and terms of any renovation, sale or refinancing of properties; • with respect to certain joint ventures, our joint venture partner has a right to sell its interest to us under certain circumstances for fair market value (less estimated costs to sell) at various dates in the future; • with respect to certain joint ventures, our joint venture partner has a right to receive additional consideration from us or the joint venture under certain circumstances if and to the extent the internal rate of return on the applicable development project exceeds certain thresholds; 14 Table of Contents • our joint venture partners may be structured differently than us for tax purposes, which could create conflicts of interest; and • we or our joint venture partners may have competing interests in our markets that could create conflicts of interest.
Our participation in joint ventures is subject to the risks that: • we could become engaged in a dispute with any of our joint venture partners that might affect our ability to develop or operate a property; • some of our joint ventures are subject to debt and the refinancing of such debt may require equity capital calls; • our joint venture partners may default on their obligations necessitating that we fulfill their obligation ourselves; • our joint ventures may be unable to repay any amounts that we may loan to them; • we may need our joint venture partner’s approval to take certain actions and, therefore, we may be unable to cause a joint venture to implement decisions that we consider advisable; • our joint venture partners may have different objectives than we have regarding the appropriate timing and terms of any renovation, sale or refinancing of properties; • with respect to certain joint ventures, our joint venture partner has a right to sell its interest to us under certain circumstances for fair market value (less estimated costs to sell) at various dates in the future; • with respect to certain joint ventures, our joint venture partner has a right to receive additional consideration from us or the joint venture under certain circumstances if and to the extent the internal rate of return on the applicable development project exceeds certain thresholds; • our joint venture partners may be structured differently than us for tax purposes, which could create conflicts of interest; and • we or our joint venture partners may have competing interests in our markets that could create conflicts of interest.
Our efforts to manage these exposures may not be successful. Our use of interest rate hedge contracts to manage risk associated with interest rate volatility may expose us to additional risks, including a risk that a counterparty to a hedge contract may fail to honor its obligations.
Our efforts to manage these exposures may not be successful. Our use of interest rate hedge contracts to manage risk associated with interest rate volatility may expose us to additional risks, including the risk that a counterparty to a hedge contract may fail to honor its obligations.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our customers.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain customers of ours.
However, these policies may be for amounts less than the current or future values of our properties, particularly for land parcels on which we subsequently construct a building. In such event, if there is a title defect relating to any of our properties, we could lose some of the capital invested in and anticipated profits from such properties.
However, these policies may be for amounts less than the current or future value of our properties, particularly for land parcels on which we subsequently construct a building. In such event, if there is a title defect relating to any of our properties, we could lose some of the capital invested in and anticipated profits from such properties.
While we receive additional rent from our customers that is based on recovering a portion of operating expenses, increased operating expenses will negatively impact our results of operations. Our revenues, including cost recovery income, are subject to longer-term leases and may not be quickly increased sufficient to recover an increase in operating costs and expenses.
While we receive additional rent from our customers that is based on recovering a portion of operating expenses, increased operating expenses will negatively impact our results of operations. Our revenues, including cost recovery income, are subject to longer-term leases and may not be quickly increased enough to recover an increase in operating costs and expenses.
The impact of climate change or the occurrence of natural disasters can delay new development projects, increase investment costs to repair or replace damaged properties, increase operating costs, create additional investment costs to make improvements to existing properties to comply with climate change regulations or otherwise reduce the carbon footprint of our portfolio, increase future property insurance costs and negatively impact the demand for office space.
The impact of climate change or the occurrence of natural disasters can delay new development projects, increase investment costs to repair or replace damaged properties, increase operating costs, necessitate additional investment costs to make improvements to existing properties to comply with climate change regulations or otherwise reduce the carbon footprint of our portfolio, increase future property insurance costs and negatively impact the demand for office space.
Making these loans subjects us to the following risks, each of which could have a material adverse effect on our cash flow, results of operations and/or financial condition: • the third party may be unable to make full and timely payments of interest and principal on the loan when due; • if the buyer to whom we provide seller financing does not manage the property well, or the property otherwise fails to meet financial projections, performs poorly or declines in value, then the buyer may not have the funds or ability to raise new debt with which to make required payments of interest and principal to us; • if we loan funds to a joint venture, and the joint venture is unable to make required payments of interest or principal, or both, or there are disagreements with respect to the repayment of the loan or other matters, then we could have a resulting dispute with our partner, and such a dispute could harm our relationship with our partner and cause delays in developing or selling the property or the failure to properly manage the property; and • if we loan funds to a joint venture and the joint venture is unable to make required payments of interest and principal, or both, then we may exercise remedies available to us in the joint venture agreement that could allow us to increase our ownership interest or our control over major decisions, or both, which could result in an unconsolidated joint venture becoming consolidated with our financial statements; doing so could require us to reallocate the purchase price among the various asset and liability components and this could result in material changes to our reported results of operations and financial condition.
Making these loans subjects us to the following risks, each of which could have a material adverse effect on our cash flow, results of operations and/or financial condition: • the third party may be unable to make full and timely payments of interest and principal on the loan when due; • if a buyer to whom we provide seller financing does not manage the property well, or the property otherwise fails to meet financial projections, performs poorly or declines in value, then the buyer may not have the funds or ability to raise new debt with which to make required payments of interest and principal to us and, if the seller financing is non-recourse, our only remedy in the event of a default would be to foreclose on the asset; • if we loan funds to a joint venture, and the joint venture is unable to make required payments of interest or principal, or both, or there are disagreements with respect to the repayment of the loan or other matters, then we could have a resulting dispute with our partner, and such a dispute could harm our relationship with our partner and cause delays in developing or selling the property or the failure to properly manage the property; and • if we loan funds to a joint venture and the joint venture is unable to make required payments of interest and principal, or both, then we may exercise remedies available to us in the joint venture agreement that could allow us to increase our ownership interest or our control over major decisions, or both, which could result in an unconsolidated joint venture becoming consolidated with our financial statements; doing so could require us to reallocate the purchase price among the various asset and liability components and this could result in material changes to our reported results of operations and financial condition.
As a result, our claim for unpaid rent would likely not be paid in full and we may be required to write-off deferred leasing costs and recognize credit losses on accrued straight-line rents receivable. These events could adversely impact our financial condition and results of operations.
As a result, our claim for unpaid rent would likely not be paid in full and we may be required to write-off deferred leasing costs and recognize credit 10 Table of Contents losses on accrued straight-line rents receivable. These events could adversely impact our financial condition and results of operations.
A default by a significant customer on its lease payments would cause us to lose the revenue and any other amounts due under such lease. In the event of a customer default or 10 Table of Contents bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs re-leasing the property.
A default by a significant customer on its lease payments would cause us to lose the revenue and any other amounts due under such lease. In the event of a customer default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs re-leasing the property.
Our operating and financial policies, including our policies with respect to acquisitions of real estate, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by the Company’s Board of Directors. Accordingly, our stockholders do not control these policies. Limits on changes in control may discourage takeover attempts beneficial to stockholders.
Our operating and financial policies, including our policies with respect to acquisitions of real estate, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by the Company’s Board of Directors. Accordingly, our stockholders do not control these policies. 18 Table of Contents Limits on changes in control may discourage takeover attempts beneficial to stockholders.
If the Company fails to qualify as a REIT, it would (a) not be allowed a deduction 16 Table of Contents for dividends paid to stockholders in computing its taxable income, (b) be subject to federal income tax at regular corporate rates (and state and local taxes) and (c) unless entitled to relief under the tax laws, not be able to re-elect REIT status until the fifth calendar year after it failed to qualify as a REIT.
If the Company fails to qualify as a REIT, it would (a) not be allowed a deduction for dividends paid to stockholders in computing its taxable income, (b) be subject to federal income tax at regular corporate rates (and state and local taxes) and (c) unless entitled to relief under the tax laws, not be able to re-elect REIT status until the fifth calendar year after it failed to qualify as a REIT.
Our ability to 18 Table of Contents execute our business strategy depends on our access to an appropriate blend of: non-core asset sales; debt financing, including unsecured lines of credit and other forms of secured and unsecured debt; and equity financing, including common equity. We may change our policies without obtaining the approval of our stockholders .
Our ability to execute our business strategy depends on our access to an appropriate blend of: non-core asset sales; debt financing, including unsecured lines of credit and other forms of secured and unsecured debt; and equity financing, including common equity. We may change our policies without obtaining the approval of our stockholders .
As of December 31, 2022, we owned 2.8 million square feet of office space located on various land parcels that we lease on a long-term basis.
As of December 31, 2023, we owned 2.8 million square feet of office space located on various land parcels that we lease on a long-term basis.
We face risks associated with the development of mixed-use commercial properties. We operate, are currently developing and may in the future develop properties either alone or through joint ventures with other persons that are known as “mixed-use” developments.
We face risks associated with the development of mixed-use commercial properties. We operate, are currently developing and may in the future develop properties either alone or through joint ventures with other persons that are known as 14 Table of Contents “mixed-use” developments.
Upon a change in control of the Company, the partnership agreement of the Operating Partnership requires certain acquirers to maintain an umbrella partnership real 19 Table of Contents estate investment trust structure with terms at least as favorable to the limited partners as are currently in place.
Upon a change in control of the Company, the partnership agreement of the Operating Partnership requires certain acquirers to maintain an umbrella partnership real estate investment trust structure with terms at least as favorable to the limited partners as are currently in place.
Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Although we make efforts to maintain the security and integrity of these types of IT networks and related systems and have implemented various measures to manage the risk of a cybersecurity incident, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
These provisions may make a change of control transaction involving the Company more complicated and therefore might decrease the likelihood of such a transaction occurring, even if such a transaction would be in the best interest of the Company’s stockholders.
These provisions may make a change of control transaction involving the Company more complicated and therefore might decrease the likelihood of such a transaction occurring, even if such a transaction would be in the best interest of the Company’s stockholders. 19 Table of Contents
We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, ransomware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems.
We face risks associated with security breaches through cyber attacks or cyber intrusions over the Internet, malware, ransomware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of IT networks and related systems owned or used by us.
If such alternative capital were unavailable, we may not be able to make new investments and could have difficulty repaying other debt. Increases in interest rates would increase our interest expense. As of December 31, 2022, we had $936.0 million of variable rate debt outstanding not protected by interest rate hedge contracts.
If such alternative capital were unavailable, we may not be able to make new investments and could have difficulty repaying other debt. 15 Table of Contents Increases in interest rates would increase our interest expense. As of December 31, 2023, we had $370.0 million of variable rate debt outstanding not protected by interest rate hedge contracts.
Increases in same 11 Table of Contents property operating expenses would adversely affect our results of operations unless offset by higher rental rates, higher cost recovery income, the impact of any newly acquired or developed properties, lower general and administrative expenses and/or lower interest expense.
Increases in same property operating expenses would adversely affect our results of operations unless offset by higher rental rates, higher cost recovery income, the impact of any newly acquired or developed properties, lower general and administrative expenses and/or lower interest expense. 11 Table of Contents Natural disasters and climate change could have an adverse impact on our cash flow and operating results.
Average occupancy in future periods will be lower, perhaps significantly lower, if potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, result in reduced future demand for office space over the long-term.
Average occupancy in future periods will be lower, perhaps significantly, if potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, result in reduced future demand for office space over the long-term. For additional information regarding our average occupancy and rental rate trends over the past five years, see “Item 2.
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.
Any such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions. If we do not meet our mortgage financing obligations, any properties securing such indebtedness could be foreclosed on.
Further, we hold and expect to continue to acquire non-income producing land for future development. See “Item 2. Properties - Land Held for Development.” No assurances can be provided as to when, if ever, we will commence development projects on such land or if any such development projects would be on favorable terms.
Properties - Land Held for Development.” No assurances can be provided as to when, if ever, we will commence development projects on such land or if any such development projects would be on favorable terms.
Many of our buildings are located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, earthquakes, droughts, snow storms, floods and fires.
Climate change may add to the unpredictability and frequency of natural disasters and severe weather conditions and create additional uncertainty as to future trends and exposures. Many of our buildings are located in areas that are subject to natural disasters and severe weather conditions such as hurricanes, earthquakes, droughts, snow storms, floods and fires.
Risks associated with development and re-development activities include: • the unavailability of favorable financing; • construction costs exceeding original estimates; • construction and lease-up delays resulting in increased debt service expense and construction costs; and • lower than anticipated occupancy rates and rents causing a property to be unprofitable or less profitable than originally estimated. 13 Table of Contents Development and re-development activities are also subject to risks relating to our ability to obtain, or delays in obtaining, any necessary zoning, land-use, building, occupancy and other required governmental and utility company authorizations.
Risks associated with development and re-development activities include: • the unavailability of favorable financing; • construction costs exceeding original estimates; • construction and lease-up delays resulting in increased debt service expense and construction costs; and • lower than anticipated occupancy rates and rents causing a property to be unprofitable or less profitable than originally estimated.
Risks Related to our Operations 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 .
Risks Related to our Operations 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 . The COVID-19 pandemic had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets.
The fixed costs of acquiring and owning development land, such as the ongoing payment of property taxes, adversely affects our results of operations until such land is either placed in service or sold.
The fixed costs of acquiring and owning development land, such as the ongoing payment of property taxes, adversely affects our results of operations until such land is either placed in service or sold. 13 Table of Contents Illiquidity of real estate investments and the tax effect of dispositions could significantly impede our ability to sell assets or respond to favorable or adverse changes in the performance of our properties.
Even if we remain qualified as a REIT, we may face other tax liabilities that adversely affect our financial condition and results of operations.
As a result of these factors, the Company’s failure to qualify as a REIT could impair our ability to expand our business and adversely affect the price of our Common Stock. 16 Table of Contents Even if we remain qualified as a REIT, we may face other tax liabilities that adversely affect our financial condition and results of operations.
Average occupancy generally declines during times of slower or negative economic growth, when new vacancies tend to outpace our ability to lease space. In addition, the timing of changes in occupancy levels tends to lag the timing of changes in overall economic activity and employment levels.
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.
Our ability to borrow under the revolving credit facility also allows us to quickly capitalize on opportunities at short-term interest rates.
We depend on our revolving credit facility for working capital purposes and for the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt upon maturity. Our ability to borrow under the revolving credit facility also allows us to quickly capitalize on opportunities at short-term interest rates.
Potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements prompted initially by the pandemic, could materially and negatively impact the future demand for office space over the long-term. 9 Table of Contents Adverse economic conditions in our markets that negatively impact the demand for office space, such as high unemployment, may result in lower occupancy and rental rates for our portfolio, which would adversely affect our results of operations .
The continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements initially prompted by the pandemic could materially and negatively impact future demand for office space over the long-term.
Occupancy in our office portfolio decreased from 91.2% as of December 31, 2021 to 91.0% as of December 31, 2022.
In addition, the timing of changes in occupancy levels tends to lag the timing of changes in overall economic activity and employment levels. Occupancy in our office portfolio decreased from 91.0% as of December 31, 2022 to 88.8% as of December 31, 2023.
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.
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.
Removed
The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets.
Added
Adverse economic conditions in our markets that negatively impact the demand for office space, such as high unemployment, may result in lower occupancy and rental rates for our portfolio, which would adversely affect our results of operations . Our operating results heavily depend on successfully leasing and operating the office space in our portfolio.
Removed
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.
Added
In addition, prolonged market uncertainty and sustained economic downturns increase the likelihood that we will have to recognize a non-cash impairment in the value of our properties.
Removed
For additional information regarding our average occupancy and rental rate trends over the past five years, see “Item 2.
Added
Impairment charges adversely affect our results of operations. 9 Table of Contents We record impairments of our real estate assets classified as held for use when the carrying amount of the asset exceeds the sum of its undiscounted future operating and residual cash flows at the difference between estimated fair value of the asset and the carrying amount.
Removed
Natural disasters and climate change could have an adverse impact on our cash flow and operating results. Climate change may add to the unpredictability and frequency of natural disasters and severe weather conditions and create additional uncertainty as to future trends and exposures.
Added
With respect to assets classified as held for use, we perform an impairment analysis if our evaluation of events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, change in our designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost.
Removed
Illiquidity of real estate investments and the tax effect of dispositions could significantly impede our ability to sell assets or respond to favorable or adverse changes in the performance of our properties.
Added
This analysis consists of determining whether the asset’s carrying amount will be recovered from its undiscounted estimated future operating and residual cash flows.
Removed
If we do not meet our mortgage financing obligations, any properties securing such indebtedness could be foreclosed on. 15 Table of Contents We depend on our revolving credit facility for working capital purposes and for the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt upon maturity.
Added
These cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers, changes in market rental rates, costs to operate each property and estimated hold periods.
Removed
Additionally, the Company would no longer be required to make distributions. As a result of these factors, the Company’s failure to qualify as a REIT could impair our ability to expand our business and adversely affect the price of our Common Stock.
Added
Changes in any of these inputs, such as decreases in projected cash flows, increases in estimated capitalization rates or shortened hold periods for any reason such as positive or negative shifts in the commercial real estate sales market or anticipated changes in use, would increase the likelihood of an impairment being recorded with respect to any particular asset.
Added
Accordingly, we may be unable to anticipate these techniques or implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate cybersecurity risks.
Added
Development and re-development activities are also subject to risks relating to our ability to obtain, or delays in obtaining, any necessary zoning, land-use, building, occupancy and other required governmental and utility company authorizations. Further, we hold and expect to continue to acquire non-income producing land for future development. See “Item 2.
Added
Additionally, the Company would no longer be required to make distributions.

Item 2. Properties

Properties — owned and leased real estate

9 edited+2 added−2 removed2 unchanged
Biggest changeMorgan Chase & Co. 180,424 5,482 0.68 5.4 The CapFinancial Group, LLC 120,847 5,395 0.67 10.6 PNC Bank 162,223 5,384 0.67 4.9 Total 6,535,078 $ 228,012 28.47 % 8.1 __________ (1) Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December 2022 multiplied by 12. 22 Table of Contents Lease Expirations The following table sets forth scheduled lease expirations for existing leases in our portfolio as of December 31, 2022: Lease Expiring (1) Number of Leases Expiring Rentable Square Feet Subject to Expiring Leases Percentage of Leased Square Footage Represented by Expiring Leases Annualized GAAP Rental Revenue Under Expiring Leases (2) Average Annual GAAP Rental Rate Per Square Foot for Expirations Percent of Annualized GAAP Rental Revenue Represented by Expiring Leases (2) (in thousands) 2023 (3) 386 2,172,820 8.7 % $ 64,732 $ 29.79 8.4 % 2024 331 2,735,421 10.9 85,534 31.27 11.2 2025 416 3,407,048 13.6 105,196 30.88 13.7 2026 267 2,278,837 9.1 69,180 30.36 9.0 2027 261 2,400,708 9.6 71,064 29.60 9.3 2028 151 2,236,063 8.9 66,430 29.71 8.7 2029 100 1,362,925 5.4 38,568 28.30 5.0 2030 138 1,850,762 7.3 47,536 25.68 6.2 2031 56 2,126,352 8.5 66,191 31.13 8.6 2032 47 714,103 2.8 24,680 34.56 3.2 Thereafter 114 3,831,091 15.2 127,127 33.18 16.7 2,267 25,116,130 100.0 % $ 766,238 $ 30.51 100.0 % __________ (1) Expirations that have been renewed are reflected above based on the renewal expiration date.
Biggest changeMorgan Chase & Co. 183,864 6,492 0.82 4.4 Novelis 168,949 5,863 0.74 0.7 Lifepoint Corporate Services 202,991 5,759 0.73 5.2 State of Georgia 288,443 5,622 0.71 1.3 Regus 169,833 5,498 0.69 4.8 CapFinancial Group 120,847 5,447 0.69 9.6 Delta Community Credit Union 128,589 5,250 0.66 8.8 The Cigna Group 180,728 5,080 0.64 4.0 Total 6,335,733 $ 225,534 28.48 % 7.6 __________ (1) Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December 2023 multiplied by 12. 22 Table of Contents Lease Expirations The following table sets forth scheduled lease expirations for existing leases in our portfolio as of December 31, 2023: Lease Expiring (1) Number of Leases Expiring Rentable Square Feet Subject to Expiring Leases Percentage of Leased Square Footage Represented by Expiring Leases Annualized GAAP Rental Revenue Under Expiring Leases (2) Average Annual GAAP Rental Rate Per Square Foot for Expirations Percent of Annualized GAAP Rental Revenue Represented by Expiring Leases (2) (in thousands) 2024 (3) 446 2,381,298 9.9 % $ 71,281 $ 29.93 9.0 % 2025 432 3,390,298 14.0 100,995 29.79 12.7 2026 327 2,439,609 10.1 74,552 30.56 9.4 2027 278 2,416,406 10.0 74,053 30.65 9.3 2028 228 2,469,053 10.2 79,941 32.38 10.1 2029 158 1,671,077 6.9 50,873 30.44 6.4 2030 161 1,939,855 8.0 60,274 31.07 7.6 2031 81 2,415,349 10.0 79,928 33.09 10.1 2032 56 868,526 3.6 32,537 37.46 4.1 2033 48 1,108,657 4.6 40,423 36.46 5.1 Thereafter 100 3,061,210 12.7 127,349 41.60 16.2 2,315 24,161,338 100.0 % $ 792,206 $ 32.79 100.0 % __________ (1) Expirations that have been renewed are reflected above based on the renewal expiration date.
Expirations include leases related to completed not stabilized development properties but exclude leases related to developments in-process. (2) Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December 2022 multiplied by 12.
Expirations include leases related to completed not stabilized development properties but exclude leases related to developments in-process. (2) Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December 2023 multiplied by 12.
The following table sets forth the net changes in rentable square footage of our portfolio: Year Ended December 31, 2022 2021 2020 (in thousands) Acquisitions 367 2,266 — Developments Placed In-Service 263 897 — Remeasurements/Other (11) (3) (40) Dispositions (437) (1,661) (4,489) Net Change in Rentable Square Footage 182 1,499 (4,529) The following table sets forth operating information about our portfolio: Average Occupancy Annualized GAAP Rent Per Square Foot (1) Annualized Cash Rent Per Square Foot (2) 2018 91.7 % $ 24.68 $ 24.06 2019 91.4 % $ 26.46 $ 25.06 2020 90.7 % $ 29.23 $ 28.21 2021 90.0 % $ 30.75 $ 29.63 2022 90.8 % $ 31.89 $ 30.51 __________ (1) Annualized GAAP Rent Per Square Foot is rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December of the respective year multiplied by 12, divided by total occupied rentable square footage.
The following table sets forth the net changes in rentable square footage of our portfolio: Year Ended December 31, 2023 2022 2021 (in thousands) Acquisitions — 367 2,266 Developments Placed In-Service — 263 897 Remeasurements/Other 5 (11) (3) Dispositions (383) (437) (1,661) Net Change in Rentable Square Footage (378) 182 1,499 The following table sets forth operating information about our portfolio: Average Occupancy Annualized GAAP Rent Per Square Foot (1) Annualized Cash Rent Per Square Foot (2) 2019 91.4 % $ 26.46 $ 25.06 2020 90.7 % $ 29.23 $ 28.21 2021 90.0 % $ 30.75 $ 29.63 2022 90.8 % $ 31.89 $ 30.51 2023 89.2 % $ 32.79 $ 32.18 __________ (1) Annualized GAAP Rent Per Square Foot is rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December of the respective year multiplied by 12, divided by total occupied rentable square footage.
PROPERTIES Properties The following table sets forth information about our portfolio by geographic location as of December 31, 2022: Market Rentable Square Feet Occupancy Percentage of Annualized GAAP Rental Revenue (1) Raleigh 6,335,000 92.0 % 22.3 % Nashville 5,230,000 95.0 21.6 Atlanta 4,926,000 88.3 16.8 Tampa 3,340,000 87.1 11.7 Charlotte 1,970,000 94.3 10.1 Orlando 1,790,000 88.9 6.0 Richmond 1,844,000 89.9 4.6 Other 2,155,000 90.9 6.9 Total 27,590,000 91.0 % 100.0 % __________ (1) Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) from our office properties for the month of December 2022 multiplied by 12.
PROPERTIES Properties The following table sets forth information about our portfolio by geographic location as of December 31, 2023: Market Rentable Square Feet Occupancy Percentage of Annualized GAAP Rental Revenue (1) Raleigh 6,197,000 90.2 % 22.2 % Nashville 5,099,000 89.9 20.7 Atlanta 4,931,000 86.2 16.5 Tampa 3,224,000 87.4 12.3 Charlotte 1,973,000 95.6 10.8 Orlando 1,790,000 93.5 6.5 Richmond 1,843,000 81.7 4.2 Other 2,155,000 86.1 6.8 Total 27,212,000 88.8 % 100.0 % __________ (1) Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) from our office properties for the month of December 2023 multiplied by 12.
Joint Venture Investments The following table sets forth information about our in-service joint venture investments by geographic location as of December 31, 2022: Rentable Square Feet Weighted Average Ownership Interest (1) Occupancy Market Dallas 542,000 50.0 % 95.6 % Kansas City (2) 292,000 50.0 85.1 Richmond (3) 345,000 50.0 94.9 Tampa (3) 152,000 80.0 88.2 Total 1,331,000 53.4 % 92.2 % __________ (1) Weighted Average Ownership Interest is calculated using Rentable Square Feet.
Joint Venture Investments The following table sets forth information about our in-service joint venture investments by geographic location as of December 31, 2023: Rentable Square Feet Weighted Average Ownership Interest (1) Occupancy Market Dallas 542,000 50.0 % 98.2 % Kansas City (2) 292,000 50.0 94.3 Richmond (3) 351,000 50.0 93.7 Tampa (4) 152,000 80.0 99.8 Total 1,337,000 53.4 % 96.4 % __________ (1) Weighted Average Ownership Interest is calculated using Rentable Square Feet.
(3) Recorded on our Consolidated Balance Sheet as land held for development, not development in-process. 23 Table of Contents Land Held for Development As of December 31, 2022, we estimate that we can develop approximately 4.9 million rentable square feet of office space on the wholly-owned development land that we consider core assets for our future development needs.
(2) Investment includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheet. 23 Table of Contents Land Held for Development As of December 31, 2023, we estimate that we can develop approximately 4.9 million rentable square feet of office space on the wholly-owned development land that we consider core assets for our future development needs.
(2) Annualized Cash Rent Per Square Foot is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December of the respective year multiplied by 12, divided by total occupied rentable square footage. 21 Table of Contents Customers The following table sets forth information concerning the 20 largest customers in our portfolio as of December 31, 2022: Customer Rentable Square Feet Annualized GAAP Rental Revenue (1) Percent of Total Annualized GAAP Rental Revenue (1) Weighted Average Remaining Lease Term in Years (in thousands) Bank of America 652,313 $ 30,317 3.79 % 10.9 Asurion 543,794 28,955 3.62 13.8 Federal Government 867,006 23,907 2.99 4.4 Bridgestone Americas 506,128 20,277 2.53 14.7 Metropolitan Life Insurance 667,228 19,777 2.47 8.1 PPG Industries 370,927 11,177 1.4 8.5 Mars Petcare 223,700 9,979 1.25 8.4 Vanderbilt University 294,389 8,986 1.12 3.4 EQT 317,052 7,848 0.98 1.8 Bass, Berry & Sims 213,951 7,420 0.93 2.1 Albemarle Corporation 162,368 6,972 0.87 11.1 Deloitte & Touche 158,914 6,763 0.84 7.1 Tivity 263,598 6,753 0.84 0.2 Novelis 168,949 5,953 0.74 1.7 Lifepoint Corporate Services 202,991 5,579 0.7 6.3 State of Georgia 288,443 5,560 0.69 2.0 Regus 169,833 5,528 0.69 5.8 J.P.
(2) Annualized Cash Rent Per Square Foot is cash rental revenue (base rent plus cost recovery income, excluding straight-line rent) for the month of December of the respective year multiplied by 12, divided by total occupied rentable square footage. 21 Table of Contents Customers The following table sets forth information concerning the 20 largest customers in our portfolio as of December 31, 2023: Customer Rentable Square Feet Annualized GAAP Rental Revenue (1) Percent of Total Annualized GAAP Rental Revenue (1) Weighted Average Remaining Lease Term in Years (in thousands) Bank of America 648,440 $ 31,544 3.98 % 10.0 Asurion 543,794 27,473 3.47 12.8 Federal Government 784,598 22,177 2.80 4.7 Metropolitan Life Insurance 667,228 20,280 2.56 7.2 Bridgestone Americas 506,128 19,934 2.52 13.7 PPG Industries 370,927 10,732 1.35 7.5 Mars Petcare 223,700 9,820 1.24 7.4 Vanderbilt University 294,389 9,109 1.15 2.4 EQT 317,052 7,905 1.00 0.8 Bass, Berry & Sims 213,951 7,649 0.97 1.1 Albemarle Corporation 162,368 7,270 0.92 10.1 Deloitte & Touche 158,914 6,630 0.84 6.1 J.P.
(3) Includes 39,000 rentable square feet of leases that are on a month-to-month basis, which represent 0.2% of total annualized GAAP rental revenue. In-Process Development As of December 31, 2022, we were developing 1.6 million rentable square feet of office properties.
(3) Includes 59,000 rentable square feet of leases that are on a month-to-month basis, which represent 0.2% of total annualized GAAP rental revenue.
The following table summarizes these announced and in-process office developments: Property Market Own % Consolidated (Y/N) Rentable Square Feet Anticipated Total Investment Investment as of December 31, 2022 ) Pre Leased % Estimated Completion Estimated Stabilization ($ in thousands) 23Springs (1) Dallas 50.0 % N 642,000 $ 460,000 $ 80,047 17.1 % 1Q 25 1Q 28 Granite Park Six (1) Dallas 50.0 % N 422,000 200,000 98,068 12.4 4Q 23 1Q 26 GlenLake III Office & Retail (2) Raleigh 100.0 % Y 218,250 94,600 47,177 14.6 3Q 23 1Q 26 Midtown East Tampa 50.0 % N 143,000 83,000 11,949 2.1 1Q 25 2Q 26 2827 Peachtree Atlanta 50.0 % N 135,300 79,000 32,447 75.3 3Q 23 1Q 25 Four Morrocroft (2)(3) Charlotte 100.0 % Y 18,000 12,000 713 100.0 2Q 24 2Q 24 1,578,550 $ 928,600 $ 270,401 20.1 % __________ (1) Investment includes capitalized interest only on the construction loan portion of the project.
In-Process Development The following table summarizes our in-process office development activity as of December 31, 2023: Property Market Own % Consolidated (Y/N) Rentable Square Feet Anticipated Total Investment (1) Investment as of December 31, 2023 Pre Leased % Estimated Completion Estimated Stabilization ($ in thousands) 23Springs Dallas 50.0 % N 642,000 $ 460,000 $ 150,421 33.4 % 1Q 25 1Q 28 Midtown East Tampa 50.0 % N 143,000 83,000 28,817 16.1 1Q 25 2Q 26 Four Morrocroft (2) Charlotte 100.0 % Y 18,000 12,000 9,392 100.0 2Q 24 2Q 24 803,000 $ 555,000 $ 188,630 31.8 % __________ (1) Includes estimated lease up costs for tenant improvements and lease commissions until the property has reached stabilization.
Removed
(2) Investment includes deferred lease commissions which are classified in deferred leasing costs on our Consolidated Balance Sheet.
Added
(2) Excludes our 26.5% ownership interest in a real estate brokerage services company. (3) The joint venture in Richmond was deconsolidated effective January 1, 2023 and is now accounted for using the equity method of accounting. (4) The joint venture in Tampa is consolidated.
Removed
(2) Excluding our 26.5% ownership interest in a real estate brokerage services company. (3) This joint venture is consolidated. In addition, we own 50.0% interests in 2827 Peachtree, Granite Park Six, 23Springs and Midtown East, four unconsolidated joint ventures. See “Item 2. Properties - In-Process Development.”
Added
In addition, we own 50.0% interests in 2827 Peachtree (Atlanta), Granite Park Six (Dallas), 23Springs (Dallas) and Midtown East (Tampa), four unconsolidated joint ventures that are currently developing projects that have not yet been placed in service.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are from time to time a party to a variety of legal proceedings, claims and assessments arising in the ordinary course of our business. We regularly assess the liabilities and contingencies in connection with these matters based on the latest information available.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are a party to a variety of legal proceedings, claims and assessments arising in the ordinary course of our business. We regularly assess the liabilities and contingencies in connection with these matters based on the latest information available.
For those matters where it is probable that we have incurred or will incur a loss and the loss or range of loss can be reasonably estimated, the estimated loss is accrued and charged to income in our Consolidated Financial Statements.
For matters where it is probable that we have incurred or will incur a loss and the loss or range of loss can be reasonably estimated, the estimated loss is accrued and charged to income in our Consolidated Financial Statements.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeMaiorana spent 11 years in equity research at Wells Fargo Securities, starting as an associate equity research analyst. Prior to that, Mr. Maiorana worked four years at Ernst & Young LLP. Jeffrey D. Miller 52 Executive Vice President, General Counsel and Secretary. Prior to joining us in March 2007, Mr.
Biggest changePrior to that, Mr. Maiorana worked four years at Ernst & Young LLP. Jeffrey D. Miller 53 Executive Vice President, General Counsel and Secretary. Prior to joining us in March 2007, Mr. Miller was a partner with DLA Piper US, LLP, where he practiced since 2005. Previously, Mr. Miller had been a partner with Alston & Bird LLP. Mr.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 24 Table of Contents ITEM X. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The Company is the sole general partner of the Operating Partnership. The following table sets forth information with respect to the Company’s executive officers: Name Age Position and Background Theodore J. Klinck 57 Director, President and Chief Executive Officer. Mr.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 24 Table of Contents ITEM X. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The Company is the sole general partner of the Operating Partnership. The following table sets forth information with respect to the Company’s executive officers: Name Age Position and Background Theodore J. Klinck 58 Director, President and Chief Executive Officer. Mr.
Leary held senior management positions with Jacoby Development, Inc., Atlanta Beltline, Inc., AIG Global Real Estate, Atlantic Station, LLC and Central Atlanta Progress. Brendan C. Maiorana 47 Executive Vice President and Chief Financial Officer. Mr.
Leary held senior management positions with Jacoby Development, Inc., Atlanta Beltline, Inc., AIG Global Real Estate, Atlantic Station, LLC and Central Atlanta Progress. Brendan C. Maiorana 48 Executive Vice President and Chief Financial Officer. Mr.
Before joining us, Mr. Klinck served as principal and chief investment officer with Goddard Investment Group, a privately owned real estate investment firm. Previously, Mr. Klinck had been a managing director at Morgan Stanley Real Estate. Mr. Klinck is a member of NAREIT's Advisory Board, Raleigh Chamber Board and Chair of the First Tee of the Triangle. Brian M.
Before joining us, Mr. Klinck served as principal and chief investment officer with Goddard Investment Group, a privately owned real estate investment firm. Previously, Mr. Klinck had been a managing director at Morgan Stanley Real Estate. Mr. Klinck is a member of NAREIT's Executive Board and the Raleigh Chamber Board and is chair of the First Tee of the Triangle.
Leary 48 Executive Vice President and Chief Operating Officer. Mr. Leary became chief operating officer in July 2019. Previously, Mr. Leary served as president of the commercial and mixed-use business unit of Crescent Communities since 2014. Prior to joining Crescent, Mr.
Brian M. Leary 49 Executive Vice President and Chief Operating Officer. Mr. Leary became chief operating officer in July 2019. Previously, Mr. Leary served as president of the commercial and mixed-use business unit of Crescent Communities since 2014. Prior to joining Crescent, Mr.
Maiorana became executive vice president of finance in July 2019 and assumed the roles of treasurer in January 2021 and chief financial officer in January 2022. Prior to that, Mr. Maiorana was our senior vice president of finance and investor relations since May 2016. Prior to joining Highwoods, Mr.
Maiorana became executive vice president of finance in July 2019 and assumed the roles of treasurer in January 2021 and chief financial officer in January 2022. Prior to that, Mr. Maiorana was our senior vice president of finance and investor relations since May 2016. Prior to joining Highwoods, Mr. Maiorana spent 11 years in equity research at Wells Fargo Securities.
(NYSE:NLY) in July 2016. Mr. Miller is a trustee of Ravenscroft School and a member of the Wake Forest School of Law Board of Visitors. 25 Table of Contents PART II
Miller is a trustee of Ravenscroft School and a member of the Wake Forest School of Law Board of Visitors. 25 Table of Contents PART II
Miller was a partner with DLA Piper US, LLP, where he practiced since 2005. Previously, Mr. Miller had been a partner with Alston & Bird LLP. Mr. Miller is admitted to practice in North Carolina. Mr. Miller served as lead independent director of Hatteras Financial Corp., a publicly-traded mortgage REIT (NYSE:HTS), prior to its merger with Annaly Capital Management, Inc.
Miller is admitted to practice in North Carolina. Mr. Miller served as lead independent director of Hatteras Financial Corp., a publicly-traded mortgage REIT (NYSE:HTS), prior to its merger with Annaly Capital Management, Inc. (NYSE:NLY) in July 2016. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor the Period from December 31, 2017 to December 31, Index 2018 2019 2020 2021 2022 Highwoods Properties, Inc. 79.16 104.36 88.95 104.63 69.50 S&P 500 Index 95.62 125.72 148.85 191.58 156.88 FTSE NAREIT All Equity REITs Index 95.96 123.46 117.14 165.51 124.22 The performance graph above is being furnished as part of this Annual Report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish the Company’s stockholders with such information and, therefore, is not deemed to be filed, or incorporated by reference in any filing, by the Company or the Operating Partnership under the Securities Act of 1933 or the Securities Exchange Act of 1934. 26 Table of Contents The Company has a Dividend Reinvestment and Stock Purchase Plan (“DRIP”) under which holders of Common Stock may elect to automatically reinvest their dividends in additional shares of Common Stock and make optional cash payments for additional shares of Common Stock.
Biggest changeFor the Period from December 31, 2018 to December 31, Index 2019 2020 2021 2022 2023 Highwoods Properties, Inc. 131.82 112.36 132.17 87.79 78.89 S&P 500 Index 131.49 155.68 200.37 164.08 207.21 FTSE NAREIT All Equity REITs Index 128.66 122.07 172.49 129.45 144.16 FTSE NAREIT Equity Office Index 131.42 107.19 130.77 81.58 83.23 26 Table of Contents The performance graph above is being furnished as part of this Annual Report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish the Company’s stockholders with such information and, therefore, is not deemed to be filed, or incorporated by reference in any filing, by the Company or the Operating Partnership under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and Distributions.” The following total return performance graph compares the performance of our Common Stock to the S&P 500 Index and the FTSE NAREIT All Equity REITs Index.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and Distributions.” The following total return performance graph compares the performance of our Common Stock to the S&P 500 Index, the FTSE NAREIT All Equity REITs Index and the FTSE NAREIT Equity Office Index.
The total return performance graph assumes an investment of $100 in our Common Stock and the two indices on December 31, 2017 and further assumes the reinvestment of all dividends. The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs.
The total return performance graph assumes an investment of $100 in our Common Stock and the three indices on December 31, 2018, and further assumes the reinvestment of all dividends. The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock is traded on the NYSE under the symbol “HIW.” On December 31, 2022, the Company had 623 common stockholders of record. There is no public trading market for the Common Units.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock is traded on the NYSE under the symbol “HIW.” On December 31, 2023, the Company had 602 common stockholders of record. There is no public trading market for the Common Units.
Information about the Company’s equity compensation plans and other related stockholder matters is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 16, 2023. 27 Table of Contents
Information about the Company’s equity compensation plans and other related stockholder matters is incorporated herein by reference to the Company’s Proxy Statement to be filed in connection with its annual meeting of stockholders to be held on May 14, 2024. 27 Table of Contents
On December 31, 2022, the Operating Partnership had 100 holders of record of Common Units (other than the Company). As of December 31, 2022, there were 105.2 million shares of Common Stock outstanding and 2.4 million Common Units outstanding not owned by the Company.
On December 31, 2023, the Operating Partnership had 97 holders of record of Common Units (other than the Company). As of December 31, 2023, there were 105.7 million shares of Common Stock outstanding and 2.2 million Common Units outstanding not owned by the Company.
The Company satisfies its DRIP obligations by instructing the DRIP administrator to purchase Common Stock in the open market. The Company has an Employee Stock Purchase Plan (“ESPP”) pursuant to which employees may contribute up to 25% of their cash compensation for the purchase of Common Stock.
The Company has an Employee Stock Purchase Plan (“ESPP”) pursuant to which employees may contribute up to 25% of their cash compensation for the purchase of Common Stock.
Removed
Constituents of the Index include all tax-qualified REITs with more than 50% of total assets in qualifying real estate assets other than mortgages secured by real property. Total return performance is not necessarily indicative of future results.
Added
The FTSE NAREIT Equity Office Index consists of those REITs in the FTSE NAREIT All Equity REITs Index that principally operate in the office sector.
Added
In future years, we plan to discontinue inclusion of the FTSE NAREIT All Equity REITs Index because management believes a comparison of our performance to the performance of the FTSE NAREIT Equity Office Index would provide a more relevant comparison and therefore be more useful to investors. Total return performance is not necessarily indicative of future results.
Added
The Company has a Dividend Reinvestment and Stock Purchase Plan (“DRIP”) under which holders of Common Stock may elect to automatically reinvest their dividends in additional shares of Common Stock and make optional cash payments for additional shares of Common Stock. The Company satisfies its DRIP obligations by instructing the DRIP administrator to purchase Common Stock in the open market.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

83 edited+23 added−37 removed74 unchanged
Biggest changeFor additional information, see “— Investment Activity – Joint Venture Investments.” Contractual Obligations The following table sets forth a summary regarding our known material contractual obligations on a cash basis, including required interest payments for those items that are interest bearing, as of December 31, 2022 (in thousands): Amounts due during the years ending December 31, Total 2023 2024 2025 2026 2027 Thereafter Mortgages and Notes Payable: Principal payments (1) $ 3,205,872 $ 6,726 $ 207,021 $ 392,833 $ 206,568 $ 458,253 $ 1,934,471 Interest payments 673,834 131,886 129,336 104,651 92,984 74,396 140,581 Purchase Obligations: Lease and contractual commitments and contingent consideration (2) 300,601 226,970 48,270 5,074 17,286 671 2,330 Other Commitments: Advances to unconsolidated affiliates (3) 97,870 37,982 32,457 16,723 9,708 1,000 — Operating and Finance Lease Obligations: Ground leases 94,341 2,213 2,258 2,306 2,355 2,407 82,802 Total $ 4,372,518 $ 405,777 $ 419,342 $ 521,587 $ 328,901 $ 536,727 $ 2,160,184 __________ (1) Excludes amortization of premiums, discounts, debt issuance costs and/or purchase accounting adjustments.
Biggest changeAny such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions. 37 Table of Contents Contractual Obligations The following table sets forth a summary regarding our known material contractual obligations on a cash basis, including required interest payments for those items that are interest bearing, as of December 31, 2023 (in thousands): Amounts due during the years ending December 31, Total 2024 2025 2026 2027 2028 Thereafter Mortgages and Notes Payable: Principal payments (1) $ 3,228,145 $ 7,056 $ 27,268 $ 207,035 $ 458,755 $ 698,765 $ 1,829,266 Interest payments 855,469 146,905 145,602 136,558 115,955 89,776 220,673 Purchase Obligations: Lease and contractual commitments and contingent consideration (2) 204,317 177,057 18,622 5,555 862 1,392 829 Other Commitments: Advances to unconsolidated affiliates (3) 58,199 30,768 16,723 9,708 1,000 — — Operating and Finance Lease Obligations: Ground leases 92,128 2,258 2,306 2,355 2,407 2,461 80,341 Total $ 4,438,258 $ 364,044 $ 210,521 $ 361,211 $ 578,979 $ 792,394 $ 2,131,109 __________ (1) Excludes amortization of premiums, discounts, debt issuance costs and/or purchase accounting adjustments.
The following factors will affect such cash flows and, accordingly, influence the decisions of the Company’s Board of Directors regarding dividends and distributions: • projections with respect to future REIT taxable income expected to be generated by the Company; 38 Table of Contents • debt service requirements after taking into account debt covenants and the repayment and restructuring of certain indebtedness and the availability of alternative sources of debt and equity capital and their impact on our ability to refinance existing debt and grow our business; • scheduled increases in base rents of existing leases; • changes in rents attributable to the renewal of existing leases or replacement leases; • changes in occupancy rates at existing properties and execution of leases for newly acquired or developed properties; • changes in operating expenses; • anticipated leasing capital expenditures attributable to the renewal of existing leases or new leases; • anticipated building improvements; and • expected cash flows from financing and investing activities, including from the sales of assets generating taxable gains to the extent such assets are not sold in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction.
The following factors will affect such cash flows and, accordingly, influence the decisions of the Company’s Board of Directors regarding dividends and distributions: • projections with respect to future REIT taxable income expected to be generated by the Company; • debt service requirements after taking into account debt covenants and the repayment and restructuring of certain indebtedness and the availability of alternative sources of debt and equity capital and their impact on our ability to refinance existing debt and grow our business; • scheduled increases in base rents of existing leases; 38 Table of Contents • changes in rents attributable to the renewal of existing leases or replacement leases; • changes in occupancy rates at existing properties and execution of leases for newly acquired or developed properties; • changes in operating expenses; • anticipated leasing capital expenditures attributable to the renewal of existing leases or new leases; • anticipated building improvements; and • expected cash flows from financing and investing activities, including from the sales of assets generating taxable gains to the extent such assets are not sold in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction.
Sales of the shares, if any, may be made by means of ordinary 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).
Sales of the shares, if any, may be made by means of ordinary 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).
The Company’s presentation of FFO is consistent with FFO as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), which is calculated as follows: • Net income/(loss) computed in accordance with GAAP; • Less net income attributable to noncontrolling interests in consolidated affiliates; • Plus depreciation and amortization of depreciable operating properties; • Less gains, or plus losses, from sales of depreciable operating properties, 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.
The Company’s presentation of FFO is consistent with FFO as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), which is calculated as follows: • Net income/(loss) computed in accordance with GAAP; • Less net income, or plus net loss, 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 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.
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 lost NOI from property dispositions.
EQT Corporation’s lease of 317,000 square feet at EQT Plaza is scheduled to expire in September 2024. There are no assurances that EQT Corporation will renew all or any of its space upon expiration of its current lease. We recorded no such impairment in 2021.
EQT Corporation’s lease of 317,000 square feet at EQT Plaza is scheduled to expire in September 2024. There are no assurances that EQT Corporation will renew all or any of its space upon expiration of its current lease. We recorded no such impairment in 2023.
We expect uses of cash for investing activities in 2023 to be primarily driven by whether or not we acquire and commence development of additional office buildings in the BBDs of our markets. We expect these uses of cash for investing activities will be partially offset by proceeds from property dispositions in 2023.
We expect uses of cash for investing activities in 2024 to be primarily driven by whether or not we acquire and commence development of additional office buildings in the BBDs of our markets. We expect these uses of cash for investing activities will be partially offset by proceeds from property dispositions in 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in our 2021 Annual Report on Form 10-K. 33 Table of Contents Liquidity and Capital Resources Statements of Cash Flows We report and analyze our cash flows based on operating activities, investing activities and financing activities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in our 2022 Annual Report on Form 10-K. 33 Table of Contents Liquidity and Capital Resources Statements of Cash Flows We report and analyze our cash flows based on operating activities, investing activities and financing activities.
While our methodology for purchase price allocation did not change during the year ended December 31, 2022, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of acquisition.
While our methodology for purchase price allocation did not change during the year ended December 31, 2023, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of acquisition.
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.
Because 40 Table of Contents 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.
See also “Executive Summary - Liquidity and Capital Resources.” 39 Table of Contents Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period.
See also “Executive Summary - Liquidity and Capital Resources.” Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period.
Whether or 31 Table of Contents not an asset acquisition or new development results in higher per share net income or funds from operations (“FFO”) in any given period depends upon a number of factors, including whether the NOI for any such period exceeds the actual cost of capital used to finance the acquisition or development.
Whether or not an asset acquisition or new development results in higher per share net income or funds from operations (“FFO”) in any given period depends upon a number of factors, including whether the NOI for any such period exceeds the actual cost of capital used to finance the acquisition or development.
Actual results could differ from our estimates. The policies used in the preparation of our Consolidated Financial Statements are described in Note 1 to our Consolidated Financial Statements. However, certain of our significant accounting policies contain an increased level of assumptions used or estimates made in determining their impact in our Consolidated Financial Statements.
Actual results could differ from our estimates. The policies used in the preparation of our Consolidated Financial Statements are described in Note 1 to our Consolidated Financial Statements. However, certain of our significant accounting policies contain an increased level of assumptions used or 39 Table of Contents estimates made in determining their impact in our Consolidated Financial Statements.
During 2023, we expect to sell up to $400 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 additional non-core assets or, if we do, what the timing or terms of any such sale will be.
During 2024, we expect to sell up to $200 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 additional non-core assets or, if we do, what the timing or terms of any such sale will be.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in our 2021 Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in our 2022 Annual Report on Form 10-K.
We believe that in creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stockholders.
We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders.
Assuming the net effect of our acquisition, disposition and development activity in 2023 results in an increase to our assets, we would expect outstanding debt and/or Common Stock balances to increase. Comparison of 2021 to 2020 For a comparison of 2021 to 2020, see “Item 7.
Assuming the net effect of our acquisition, disposition and development activity in 2024 results in an increase to our assets, we would expect outstanding debt and/or Common Stock balances to increase. Comparison of 2022 to 2021 For a comparison of 2022 to 2021, see “Item 7.
The change in net cash provided by/(used in) financing activities in 2022 as compared to 2021 was primarily due to net debt borrowings to fund our investment activity in 2022.
The change in net cash provided by/(used in) financing activities in 2023 as compared to 2022 was primarily due to higher net debt borrowings in 2022 to fund our investment activity.
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 “Item 2. Properties - Lease Expirations.” See also “Item 1A.
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 “Item 2. Properties - Lease Expirations.” See also “Item 1A. Risk Factors – Risks Related to our Operations.
Additionally, given the length of construction cycles, development projects are not placed in service until several years after commencement in some cases.
Additionally, given the length of construction cycles, development 31 Table of Contents projects are not placed in service until several years after commencement in some cases.
We generally believe existing cash and rental and other revenues will continue to be sufficient to fund operating and general and administrative expenses, interest expense, our existing quarterly dividend and existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions. We had $21.4 million of cash and cash equivalents as of December 31, 2022.
We generally believe existing cash and rental and other revenues will continue to be sufficient to fund operating and general and administrative expenses, interest expense, our existing quarterly dividend and existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions. We had $25.1 million of cash and cash equivalents as of December 31, 2023.
As of December 31, 2022, 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 42.0% and there were 107.6 million diluted shares of Common Stock outstanding. Rental and other revenues are our principal source of funds to meet our short-term liquidity requirements.
As of December 31, 2023, 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 41.9% and there were 107.9 million diluted shares of Common Stock outstanding. Rental and other revenues are our principal source of funds to meet our short-term liquidity requirements.
We have an internal guideline whereby customers that account for more than 3% of our revenues are periodically reviewed with the Company's Board of Directors. As of 29 Table of Contents December 31, 2022, only Bank of America (3.8%) and Asurion (3.6%) accounted for more than 3% of our annualized GAAP revenues. See “Item 2.
We have an internal guideline whereby customers that account for more than 3% of our revenues are periodically reviewed with the Company's Board of Directors. As of 29 Table of Contents December 31, 2023, only Bank of America (4.0%) and Asurion (3.5%) accounted for more than 3% of our annualized GAAP revenues. See “Item 2.
We recorded impairment charges of $36.5 million in 2022 to lower the carrying amounts of EQT Plaza and a land parcel to their estimated fair value less costs to sell. EQT Plaza is a 616,000 square foot office building located in the heart of 32 Table of Contents Pittsburgh’s CBD.
We recorded impairment charges of $36.5 million in 2022 to lower the carrying amount of EQT Plaza and a land parcel to their estimated fair value less cost to sell. EQT Plaza is a 616,000 square foot office building located in the heart of Pittsburgh’s CBD.
The secured indebtedness was collateralized by real estate assets with an undepreciated book value of $747.4 million. As of December 31, 2022, $936.0 million of our debt does not bear interest at fixed rates or is not protected by interest rate hedge contracts. Investment Activity - Acquisitions In the normal course of business, we regularly evaluate potential acquisitions.
The secured indebtedness was collateralized by real estate assets with an undepreciated book value of $1,237.6 million. As of December 31, 2023, $370.0 million of our debt does not bear interest at fixed rates or is not protected by interest rate hedge contracts. Investment Activity - Acquisitions In the normal course of business, we regularly evaluate potential acquisitions.
We expect net cash related to operating activities to be lower in 2023 as compared to 2022 due to higher interest expense and property dispositions, partially offset by net cash from the operations of acquired properties and development properties placed in service.
We expect net cash related to operating activities to be lower in 2024 as compared to 2023 due to higher interest expense and property dispositions, partially offset by net cash from development properties placed in service.
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.
We have no debt scheduled to mature prior to 2026. We generally believe we will be able to satisfy future 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.
The change in our same property portfolio was due to the addition of five properties encompassing 0.6 million rentable square feet, offset by the removal of five properties encompassing 0.4 million rentable square feet that were sold during 2022.
The change in our same property portfolio was due to the addition of seven properties encompassing 1.6 million rentable square feet, offset by the removal of four properties encompassing 0.4 million rentable square feet that were sold during 2023.
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 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.
Annual combined GAAP rents for new and renewal leases signed in the fourth quarter were $31.41 per rentable square foot, 9.0% higher compared to previous leases in the same office spaces. We strive to maintain a diverse, stable and creditworthy customer base.
Annual combined GAAP rents for new and renewal leases signed in the fourth quarter were $32.13 per rentable square foot, 7.4% higher compared to previous leases in the same office spaces. We strive to maintain a diverse, stable and creditworthy customer base.
(2) Consists primarily of commitments under signed leases and contracts for operating properties (excluding tenant-funded tenant improvements), contracts for development/redevelopment projects and unfunded joint venture equity contributions agreed to at formation. Future spend for tenant improvements that can be used at the option of the customer during the remaining lease term has been included in 2023.
(2) Consists primarily of commitments under signed leases and contracts for operating properties (excluding tenant-funded tenant improvements), contracts for development/redevelopment projects and unfunded joint venture equity contributions agreed to at formation. Tenant improvements that can be used at the option of the customer at any time during the remaining lease term have been reflected in 2024.
Other sources of funds for short-term liquidity needs include available working capital and borrowings under our revolving credit facility, which had $357.9 million of availability as of January 27, 2023. 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.
Other sources of funds for short-term liquidity needs include available working capital and borrowings under our revolving credit 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.
As of both December 31, 2022 and January 27, 2023, we had $0.1 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility as of December 31, 2022 and January 27, 2023 was $363.9 million and $357.9 million, respectively.
As of both December 31, 2023 and January 26, 2024, we had $0.9 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 as of December 31, 2023 and January 26, 2024 was $729.1 million and $713.1 million, respectively.
We expect average occupancy for our office portfolio to be approximately 89.0% to 90.0% for 2023. 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.
We expect average occupancy in our office portfolio to range from 87.0% to 89.0% for 2024. 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.
From period to period, cash flow from operations depends primarily upon changes in our net income, as discussed more fully below under “Results of Operations,” changes in receivables and payables and net additions or decreases in our overall portfolio.
We have historically generated a positive amount of cash from operating activities. From period to period, cash flow from operations depends primarily upon changes in our net income, as discussed more fully below under “Results of Operations,” changes in receivables and payables and net additions or decreases in our overall portfolio.
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. 41 Table of Contents The following table sets forth the Company’s FFO, FFO available for common stockholders and FFO available for common stockholders per share (in thousands, except per share amounts): Year Ended December 31, 2022 2021 2020 Funds from operations: Net income $ 163,958 $ 323,310 $ 357,914 Net (income) attributable to noncontrolling interests in consolidated affiliates (1,230) (1,712) (1,174) Depreciation and amortization of real estate assets 284,723 256,488 238,816 Impairments of depreciable properties 35,000 — 1,778 (Gains) on disposition of depreciable properties (47,807) (163,065) (215,173) Unconsolidated affiliates: Depreciation and amortization of real estate assets 1,160 778 2,395 Funds from operations 435,804 415,799 384,556 Dividends on Preferred Stock (2,486) (2,486) (2,488) Funds from operations available for common stockholders $ 433,318 $ 413,313 $ 382,068 Funds from operations available for common stockholders per share $ 4.03 $ 3.86 $ 3.58 Weighted average shares outstanding (1) 107,567 107,061 106,714 __________ (1) Includes assumed conversion of all potentially dilutive Common Stock equivalents.
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. 41 Table of Contents The following table sets forth the Company’s FFO, FFO available for common stockholders and FFO available for common stockholders per share (in thousands, except per share amounts): Year Ended December 31, 2023 2022 2021 Funds from operations: Net income $ 151,330 $ 163,958 $ 323,310 Net (income)/loss attributable to noncontrolling interests in consolidated affiliates 549 (1,230) (1,712) Depreciation and amortization of real estate assets 296,705 284,723 256,488 Impairments of depreciable properties — 35,000 — (Gains) on disposition of depreciable properties (33,288) (47,807) (163,065) (Gain) on deconsolidation of affiliate (11,778) — — Unconsolidated affiliates: Depreciation and amortization of real estate assets 12,223 1,160 778 Funds from operations 415,741 435,804 415,799 Dividends on Preferred Stock (2,485) (2,486) (2,486) Funds from operations available for common stockholders $ 413,256 $ 433,318 $ 413,313 Funds from operations available for common stockholders per share $ 3.83 $ 4.03 $ 3.86 Weighted average shares outstanding (1) 107,785 107,567 107,061 __________ (1) Includes assumed conversion of all potentially dilutive Common Stock equivalents.
The interest payments due on mortgages and notes payable are based on the stated rates for the fixed rate debt and on the rates in effect as of December 31, 2022 for the variable rate debt. The weighted average interest rate on our fixed and variable rate debt was 3.59% and 5.30%, respectively, as of December 31, 2022.
The interest payments due on mortgages and notes payable are based on the stated rates for the fixed rate debt and on the rates in effect as of December 31, 2023 for the variable rate debt. The weighted average interest rate on our fixed and variable rate debt was 4.31% and 6.34%, respectively, as of December 31, 2023.
The Company declared and paid a cash dividend of $0.50 per share of Common Stock in each quarter of 2022. On February 1, 2023, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 14, 2023 to stockholders of record as of February 21, 2023.
The Company declared and paid a cash dividend of $0.50 per share of Common Stock in each quarter of 2023. On January 31, 2024, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 12, 2024 to stockholders of record as of February 20, 2024.
We expect same property NOI to be lower in 2023 as compared to 2022 as an anticipated increase in same property expenses is expected to more than offset higher anticipated same property revenues.
We expect same property NOI to be lower in 2024 as compared to 2023 as an anticipated increase in same property expenses and lower anticipated average occupancy are expected to more than offset higher anticipated same property revenues.
We expect rental property and other expenses to be higher in 2023 as compared to 2022 due to higher same property operating expenses, the acquisition of SIX50 at Legacy Union and development properties placed in service, partially offset by lower operating expenses from property dispositions.
We expect rental property and other expenses to be higher in 2024 as compared to 2023 due to higher same property operating expenses and development properties placed in service, partially offset by lower operating expenses from property dispositions.
We expect interest expense to be higher in 2023 as compared to 2022 due to higher average interest rates and higher average debt balances, partially offset by higher capitalized interest.
We expect interest expense to be higher in 2024 as compared to 2023 due to higher average interest rates, higher average debt balances and lower capitalized interest.
As of December 31, 2021, our same property portfolio consisted of 148 in-service properties encompassing 24.2 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2020 to December 31, 2021).
As of December 31, 2023, our same property portfolio consisted of 154 in-service properties encompassing 26.6 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2022 to December 31, 2023).
We expect depreciation and amortization to be higher in 2023 as compared to 2022 due to the acquisition of SIX50 at Legacy Union, higher same property lease related depreciation and amortization and development properties placed in service, partially offset by property dispositions.
We expect depreciation and amortization to be higher in 2024 as compared to 2023 due to higher same property lease related depreciation and amortization and development properties placed in service, partially offset by property dispositions.
We expect same property revenues to be higher due to higher average GAAP rents per rentable square foot and higher cost recovery and parking income, partially offset by an anticipated decrease in average occupancy.
Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot and higher cost recovery and parking income, partially offset by a decrease in average occupancy.
Rental and other revenues related to properties not in our same property portfolio were $121.8 million and $82.7 million for the years ended December 31, 2022 and 2021, respectively.
Rental and other revenues related to properties not in our same property portfolio were $28.4 million and $29.5 million for the years ended December 31, 2023 and 2022, respectively.
See also “Executive Summary - Liquidity and Capital Resources.” Our mortgages and notes payable as of December 31, 2022 consisted of $484.0 million of secured indebtedness with a weighted average interest rate of 3.62% and $2,729.6 million of unsecured indebtedness with a weighted average interest rate of 4.17%.
See also “Executive Summary - Liquidity and Capital Resources.” Our mortgages and notes payable as of December 31, 2023 consisted of $720.8 million of secured indebtedness with a weighted average interest rate of 4.42% and $2,510.2 million of unsecured indebtedness with a weighted average interest rate of 4.57%.
Capitalization The following table sets forth the Company’s capitalization (in thousands, except per share amounts): December 31, 2022 2021 Mortgages and notes payable, net, at recorded book value $ 3,197,215 $ 2,788,915 Preferred Stock, at liquidation value $ 28,821 $ 28,821 Common Stock outstanding 105,211 104,893 Common Units outstanding (not owned by the Company) 2,358 2,505 Per share stock price at year end $ 27.98 $ 44.59 Market value of Common Stock and Common Units $ 3,009,781 $ 4,788,877 Total capitalization $ 6,235,817 $ 7,606,613 34 Table of Contents As of December 31, 2022, our mortgages and notes payable and outstanding preferred stock represented 51.7% of our total capitalization and 42.0% of the undepreciated book value of our assets.
Capitalization The following table sets forth the Company’s capitalization (in thousands, except per share amounts): December 31, 2023 2022 Mortgages and notes payable, net, at recorded book value $ 3,213,206 $ 3,197,215 Preferred Stock, at liquidation value $ 28,811 $ 28,821 Common Stock outstanding 105,710 105,211 Common Units outstanding (not owned by the Company) 2,157 2,358 Per share stock price at year end $ 22.96 $ 27.98 Market value of Common Stock and Common Units $ 2,476,626 $ 3,009,781 Total capitalization $ 5,718,643 $ 6,235,817 34 Table of Contents As of December 31, 2023, our mortgages and notes payable and outstanding preferred stock represented 56.7% of our total capitalization and 41.9% of the undepreciated book value of our assets.
Properties - In-Process Development.” Financing Activity During 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.
Properties - In-Process Development.” Financing Activity During the first quarter of 2023, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, Jefferies LLC, J.P. Morgan Securities LLC, Regions Securities LLC, TD Securities (USA) LLC and Truist Securities, Inc.
For information regarding our interest hedging activities and other market risks associated with our debt financing activities, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.” Covenant Compliance We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
Quantitative and Qualitative Disclosures About Market Risk.” Covenant Compliance We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
During the year ended December 31, 2022, we have not experienced significant credit losses based on management’s evaluation of collectability of our lease receivables. If management’s assumptions regarding the collectability of lease related receivables prove incorrect, we could experience credit losses in excess of what was recognized in rental and other revenues.
If management’s assumptions regarding the collectability of lease related receivables prove incorrect, we could experience credit losses in excess of what was recognized in rental and other revenues.
The following table sets forth the changes in the Company’s cash flows (in thousands): Year Ended December 31, 2022 2021 2020 2022-2021 Change 2021-2020 Change Net Cash Provided By Operating Activities $ 421,779 $ 414,558 $ 358,160 $ 7,221 $ 56,398 Net Cash Provided By/(Used In) Investing Activities (614,799) (287,678) 110,682 (327,121) (398,360) Net Cash Provided By/(Used In) Financing Activities 187,927 (284,926) (294,340) 472,853 9,414 Total Cash Flows $ (5,093) $ (158,046) $ 174,502 $ 152,953 $ (332,548) Comparison of 2022 to 2021 The change in net cash provided by operating activities in 2022 as compared to 2021 was primarily due to higher net cash from the operations of acquired real estate assets from PAC, the acquisition of SIX50 at Legacy Union, same properties and development properties placed in service, partially offset by property dispositions and higher interest expense.
The following table sets forth the changes in the Company’s cash flows (in thousands): Year Ended December 31, 2023 2022 2021 2023-2022 Change 2022-2021 Change Net Cash Provided By Operating Activities $ 386,962 $ 421,779 $ 414,558 $ (34,817) $ 7,221 Net Cash Used In Investing Activities (169,686) (614,799) (287,678) 445,113 (327,121) Net Cash Provided By/(Used In) Financing Activities (205,426) 187,927 (284,926) (393,353) 472,853 Total Cash Flows $ 11,850 $ (5,093) $ (158,046) $ 16,943 $ 152,953 Comparison of 2023 to 2022 The change in net cash provided by operating activities in 2023 as compared to 2022 was primarily due to higher interest expense, property dispositions and changes in operating assets and liabilities, partially offset by net cash from the operations of properties acquired and development properties placed in service.
Risk Factors – Risks Related to our Operations – 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.” Occupancy in our office portfolio decreased from 91.2% as of December 31, 2021 to 91.0% as of December 31, 2022.
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.” Occupancy in our office portfolio decreased from 91.0% as of December 31, 2022 to 88.8% (88.9% including our share of unconsolidated joint venture properties) as of December 31, 2023.
We expect rental and other revenues to be higher in 2023 as compared to 2022 due to the acquisition of SIX50 at Legacy Union, higher same property revenues and development properties placed in service, partially offset by lost revenue from property dispositions.
We expect rental and other revenues to be lower in 2024 as compared to 2023 due to lower anticipated average occupancy and lost revenue from property dispositions, partially offset by development properties placed in service.
The following table sets forth information regarding second generation office leases signed during the fourth quarter of 2022 (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) 337,475 586,457 923,932 Average term (in years - rentable square foot weighted) 4.3 6.2 5.5 Base rents (per rentable square foot) (1) $ 33.69 $ 32.98 $ 33.24 Rent concessions (per rentable square foot) (1) (1.86) (1.82) (1.83) GAAP rents (per rentable square foot) (1) $ 31.83 $ 31.16 $ 31.41 Tenant improvements (per rentable square foot) (1) $ 3.44 $ 3.47 $ 3.46 Leasing commissions (per rentable square foot) (1) $ 1.10 $ 0.97 $ 1.02 __________ (1) Weighted average per rentable square foot on an annual basis over the lease term.
The following table sets forth information regarding second generation office leases signed during the fourth quarter of 2023 (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) 266,697 431,532 698,229 Average term (in years - rentable square foot weighted) 8.5 5.2 6.4 Base rents (per rentable square foot) (1) $ 37.39 $ 32.75 $ 34.52 Rent concessions (per rentable square foot) (1) (3.27) (1.84) (2.39) GAAP rents (per rentable square foot) (1) $ 34.12 $ 30.91 $ 32.13 Tenant improvements (per rentable square foot) (1) $ 7.60 $ 2.36 $ 4.36 Leasing commissions (per rentable square foot) (1) $ 1.28 $ 0.79 $ 0.97 __________ (1) Weighted average per rentable square foot on an annual basis over the lease term.
Results of Operations Comparison of 2022 to 2021 Rental and Other Revenues Rental and other revenues were $60.9 million, or 7.9%, higher in 2022 as compared to 2021 primarily due to the acquisitions of real estate assets from PAC and SIX50 at Legacy Union, development properties placed in service and higher same property revenues, which increased rental and other revenues by $42.8 million, $25.8 million and $21.8 million, respectively.
Comparison of 2023 to 2022 Rental and Other Revenues Rental and other revenues were $5.1 million, or 0.6%, higher in 2023 as compared to 2022 primarily due to the acquisition of SIX50 at Legacy Union, higher same property revenues and development properties placed in service, which increased rental and other revenues by $8.7 million, $6.2 million and $5.2 million, respectively.
Operating Expenses Rental property and other expenses were $23.4 million, or 9.9%, higher in 2022 as compared to 2021 primarily due to higher same property operating expenses, the acquisitions of real estate assets from PAC and SIX50 at Legacy Union and development properties placed in service, which increased operating expenses by $17.8 million, $11.7 million and $3.9 million, respectively.
Operating Expenses Rental property and other expenses were $9.0 million, or 3.5%, higher in 2023 as compared to 2022 primarily due to higher same property operating expenses, the acquisition of SIX50 at Legacy Union, carry costs for acquired land parcels and development properties placed in service, which increased operating expenses by $12.7 million, $1.9 million, $1.0 million and $0.8 million, respectively.
The change in net cash used in investing activities in 2022 as compared to 2021 was primarily due to investments in the 2827 Peachtree, Granite Park Six, 23Springs and McKinney & Olive joint ventures in 2022, lower net proceeds from disposition activity in 2022 and higher investments in tenant and building improvements in 2022, partially offset by lower acquisition activity and investments in development in-process in 2022.
The change in net cash used in investing activities in 2023 as compared to 2022 was primarily due to lower investments in acquired real estate, joint ventures, tenant and building improvements, development in process and the redemption of our short-term preferred equity investment in the McKinney and Olive joint venture, partially offset by lower net proceeds from disposition activity.
If any refinancing is done at higher interest rates, the increased interest expense could adversely affect our cash flow and ability to pay distributions.
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.
Same property operating expenses were higher primarily due to higher contract services, utilities, property taxes, property insurance and repairs and maintenance. These increases were partially offset by a $11.3 million decrease in operating expenses from property dispositions.
Same property operating expenses were higher primarily due to higher contract services, utilities, property insurance, property taxes and repairs and maintenance. These increases were partially offset by decreases in operating expenses from property dispositions and the deconsolidation of our Markel joint venture, which decreased operating expenses by $2.8 million and $2.2 million, respectively.
Management’s evaluation of collectability requires the exercise of considerable judgement in assessing the current credit quality of our customers using payment history and other available information about the financial 40 Table of Contents condition of the customers.
Management’s evaluation of collectability requires the exercise of considerable judgement in assessing the current credit quality of our customers using payment history and other available information about the financial condition of the customers. During the year ended December 31, 2023, we have not experienced significant credit losses based on management’s evaluation of collectability of our lease receivables.
Depreciation and amortization was $28.4 million, or 10.9%, higher in 2022 as compared to 2021 primarily due to the acquisitions of real estate assets from PAC and SIX50 at Legacy Union, development properties placed in service and higher same property lease related depreciation and amortization, partially offset by fully amortized acquisition-related intangible assets and property dispositions.
Depreciation and amortization was $11.8 million, or 4.1%, higher in 2023 as compared to 2022 primarily due to higher same property depreciation and amortization, the acquisition of SIX50 at Legacy Union and development properties placed in service, partially offset by property dispositions and the deconsolidation of our Markel joint venture.
Risk Factors – Risks Related to our Investment 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.” During the third quarter of 2022, we acquired SIX50 at Legacy Union, a 367,000 square foot trophy office building in Charlotte’s Uptown CBD submarket, for a net purchase price of $198.0 million.
Risk Factors – Risks Related to our Investment 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.” During the second quarter of 2023, we acquired land in Raleigh for a purchase price, including capitalized acquisition costs, of $2.7 million.
Other Income Other income was $0.1 million higher in 2022 as compared to 2021 primarily due to higher dividend and interest income and losses on debt extinguishment in 2021, partially offset by losses on deferred compensation plan investments (which is fully offset by a corresponding decrease in general and administrative expenses).
General and administrative expenses were $0.6 million, or 1.4%, higher in 2023 as compared to 2022 primarily due to predevelopment cost write-offs and gains on deferred compensation plan investments (which is fully offset by a corresponding increase in other income), partially offset by lower incentive compensation and office rent.
As of January 27, 2023, we had approximately $25 million of existing cash and $392.0 million drawn on our $750 million revolving credit facility, which is scheduled to mature in March 2026, assuming we exercise our option to extend the maturity date for two additional six-month periods.
As of January 26, 2024, we had approximately $15 million of existing cash and $36.0 million drawn on our $750 million revolving credit facility, which was modified in January 2024 and is now scheduled to mature in January 2028 (but which can be extended for two additional six-month periods at our option).
Properties – In-Process Development.” During the fourth quarter of 2022, we expanded our Dallas market presence by acquiring McKinney & Olive, a 542,000 square foot trophy mixed-use asset in Uptown Dallas, through the formation of another joint venture with Granite in which we own a 50.0% interest.
The cash received at closing is recorded as a nonrefundable deposit in accounts payable, accrued expenses and other liabilities on our Consolidated Balance Sheets as of December 31, 2023. - Joint Venture Investments During 2022, we expanded our Dallas market presence by acquiring McKinney & Olive, a 542,000 square foot trophy mixed-use asset in Uptown Dallas, through the formation of a joint venture with Granite Properties in which we own a 50.0% interest.
Same property NOI was $4.0 million, or 0.9%, higher in 2022 as compared to 2021 due to an increase of $21.8 million in same property revenues offset by an increase of $17.8 million in same property expenses.
Same property NOI was $6.5 million, or 1.2%, lower in 2023 as compared to 2022 due to an increase of $12.7 million in same property expenses offset by an increase of $6.2 million in same property revenues.
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. We may not be able to repay, refinance or extend any or all of our debt at maturity or upon any acceleration.
The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0% in principal amount of any series of notes can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.
Rental property and other expenses related to properties not in our same property portfolio were $31.1 million and $25.5 million for the years ended December 31, 2022 and 2021, respectively. 42 Table of Contents The following table sets forth the Company’s NOI, same property NOI and same property cash NOI (in thousands): Year Ended December 31, 2022 2021 Net income $ 163,958 $ 323,310 Equity in earnings of unconsolidated affiliates (1,535) (1,947) Gains on disposition of property (63,546) (174,059) Other loss (1,530) (1,394) Interest expense 105,385 85,853 General and administrative expenses 42,266 40,553 Impairments of real estate assets 36,515 — Depreciation and amortization 287,610 259,255 Net operating income 569,123 531,571 Non same property and other net operating income (90,675) (57,155) Same property net operating income $ 478,448 $ 474,416 Same property net operating income $ 478,448 $ 474,416 Lease termination fees, straight-line rent and other non-cash adjustments (1) (16,159) (13,851) Same property cash net operating income $ 462,289 $ 460,565 __________ (1) Includes $0.1 million and $3.0 million of repayments of temporary rent deferrals, net of additional temporary rent deferrals granted by the Company during the years ended December 31, 2022 and 2021, respectively. 43 Table of Contents
Rental property and other expenses related to properties not in our same property portfolio were $8.6 million and $12.3 million for the years ended December 31, 2023 and 2022, respectively. 42 Table of Contents The following table sets forth the Company’s NOI, same property NOI and same property cash NOI (in thousands): Year Ended December 31, 2023 2022 Net income $ 151,330 $ 163,958 Equity in earnings of unconsolidated affiliates (1,107) (1,535) Gain on deconsolidation of affiliate (11,778) — Gains on disposition of property (47,773) (63,546) Other income (4,435) (1,530) Interest expense 136,710 105,385 General and administrative expenses 42,857 42,266 Impairments of real estate assets — 36,515 Depreciation and amortization 299,411 287,610 Net operating income 565,215 569,123 Non same property and other net operating income (19,813) (17,227) Same property net operating income $ 545,402 $ 551,896 Same property net operating income $ 545,402 $ 551,896 Lease termination fees, straight-line rent and other non-cash adjustments (15,232) (24,523) Same property cash net operating income $ 530,170 $ 527,373 43 Table of Contents
As of December 31, 2022, the Operating Partnership had the following unsecured notes outstanding ($ in thousands): Face Amount Carrying Amount Stated Interest Rate Effective Interest Rate Notes due March 2027 $ 300,000 $ 298,334 3.875 % 4.038 % Notes due March 2028 $ 350,000 $ 347,863 4.125 % 4.271 % Notes due April 2029 $ 350,000 $ 349,386 4.200 % 4.234 % Notes due February 2030 $ 400,000 $ 399,302 3.050 % 3.079 % Notes due February 2031 $ 400,000 $ 398,735 2.600 % 2.645 % The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios.
As of December 31, 2023, the Operating Partnership had the following unsecured notes outstanding ($ in thousands): Face Amount Carrying Amount Stated Interest Rate Effective Interest Rate (1) Notes due March 2027 $ 300,000 $ 298,734 3.875 % 4.038 % Notes due March 2028 $ 350,000 $ 348,276 4.125 % 4.271 % Notes due April 2029 $ 350,000 $ 349,484 4.200 % 4.234 % Notes due February 2030 $ 400,000 $ 399,400 3.050 % 3.079 % Notes due February 2031 $ 400,000 $ 398,892 2.600 % 2.645 % Notes due February 2034 $ 350,000 $ 345,407 7.650 % 7.836 % __________ (1) The effective rate included in the table above excludes the amortized impact of unrealized losses or gains associated with the termination of related forward-starting swaps, if any, and underwriting fees and other expenses.
Earnings Per Common Share - Diluted Diluted earnings per common share was $1.49 lower in 2022 as compared to 2021 due to a decrease in net income for the reasons discussed above. Comparison of 2021 to 2020 For a comparison of 2021 to 2020, see “Item 7.
This decrease was partially offset by the deconsolidation of our Markel joint venture and the acquisition of McKinney and Olive. Earnings Per Common Share - Diluted Diluted earnings per common share was $0.10 lower in 2023 as compared to 2022 due to a decrease in net income for the reasons discussed above.
We regularly evaluate the financial condition of the financial institutions that participate in our credit facilities and as counterparties under any interest rate swap agreements using publicly available information. Based on this review, we currently expect these financial institutions to perform their obligations under our existing facilities and any swap agreements.
We incurred $1.3 million of debt issuance costs, which will be amortized over the term of the loan. 36 Table of Contents We regularly evaluate the financial condition of the financial institutions that participate in our credit facilities and as counterparties under any interest rate swap agreements using publicly available information.
The remainder of the purchase price was funded with $80.0 million of short-term preferred equity contributed by us and $86.4 million of common equity contributed by each of Granite and us. The preferred equity contributed by us will be entitled to receive monthly distributions initially at a minimum rate of SOFR plus 350 basis points.
At closing, a portion of the purchase price paid by the joint venture was funded with $80.0 million of short-term preferred equity contributed by us and $86.4 million of common equity contributed by each of Granite and us. During the second quarter of 2023, we and Granite each contributed an additional $40.0 million of common equity to the joint venture.
During the second quarter of 2022, we sold office buildings and land in Atlanta, Greensboro and Tampa for an aggregate sales price of $100.7 million (before closing credits to buyers of $1.1 million) and recorded aggregate gains on disposition of property of $50.0 million.
During the second quarter of 2023, we sold three buildings in Tampa and Raleigh for an aggregate sales price of $51.3 million and recorded aggregate gains on disposition of property of $19.4 million. - Seller Financed Transaction During 2023, we sold a land parcel in Tampa for an aggregate sales price of $21.0 million.
During the second quarter of 2022, we acquired land in Charlotte for an aggregate purchase price, including capitalized acquisition costs, of $27.0 million. - Dispositions During the third quarter of 2022, we sold land in Richmond for a sales price of $23.3 million and recorded a gain on disposition of property of $9.4 million.
During 2021, we acquired development land in Nashville for a purchase price, including capitalized acq uisition costs, of $16.0 million, which was fully paid in or prior to t he second quarter of 2023. - Dispositions During the fourth quarter of 2023, we sold a building and land in Nashville and Tampa for an aggregate sales price of $52.5 million and recorded aggregate gains on disposition of property of $28.4 million.
During the second quarter of 2022, in connection with the modification of our $200.0 million term loan as discussed below, the interest rate on our revolving credit facility was converted from LIBOR plus 90 basis points to SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 85 basis points, based on current credit ratings.
The interest rate on our newly modified revolving credit facility remains SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 85 basis points, based on current credit ratings, and the annual facility fee remains 20 basis points.
We expect 2023 NOI to be similar to 2022 as increases from development properties placed in service and the acquisition of SIX50 at Legacy Union are expected to be offset by NOI lost from property dispositions and an anticipated decrease in same property NOI.
NOI was $3.9 million, or 0.7%, lower in 2023 as compared to 2022 primarily due to lower same property NOI, lost NOI from property dispositions and the deconsolidation of our Highwoods-Markel Associates, LLC joint venture (“Markel”), partially offset by the acquisition of SIX50 at Legacy Union and development properties placed in service.
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.
We expect NOI to be lower in 2024 as compared to 2023 due to lost NOI from property dispositions and an anticipated decrease in same property NOI, partially offset by development properties placed in service. 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 expect general and administrative expenses to be lower in 2023 as compared to 2022 due to lower incentive compensation and office rent, partially offset by higher salaries and benefits.
We expect general and administrative expenses to be lower in 2024 as compared to 2023 due to lower predevelopment cost write-offs, partially offset by higher salaries. 32 Table of Contents Interest Expense Interest expense was $31.3 million, or 29.7%, higher in 2023 as compared to 2022 primarily due to higher average interest rates and higher average debt balances, partially offset by higher capitalized interest.
The unused capacity of our revolving credit facility as of December 31, 2022 and January 27, 2023, respectively, was $363.9 million and $357.9 million, excluding an accordion feature that allows for an additional $200.0 million of borrowing capacity subject to additional lender commitments.
The unused capacity of our revolving credit facility as of December 31, 2023 and January 26, 2024, respectively, was $729.1 million and $713.1 million.
Our $750.0 million unsecured revolving credit facility is scheduled to mature in March 2025 and includes an accordion feature that currently allows for an additional $200.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods.
During 2023, there were no shares of common stock issued under these agreements. Our $750.0 million unsecured revolving credit facility was modified in January 2024 and is now scheduled to mature in January 2028 (but can be extended for two additional six-month periods at our option assuming no defaults have occurred).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−1 removed3 unchanged
Biggest changeIf interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt would have been $114.7 million higher. As of December 31, 2022, we had $936.0 million of variable rate debt outstanding not protected by interest rate hedge contracts, a $716.0 million increase as compared to December 31, 2021.
Biggest changeAs of December 31, 2023, we had $2,860.9 million principal amount of fixed rate debt outstanding, a $583.3 million increase as compared to December 31, 2022. The estimated aggregate fair market value of this debt was $2,575.7 million.
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.
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 generally limit the impact of interest rate changes on earnings and cash flows and lower our overall borrowing costs.
The estimated aggregate fair market value of this debt was $1,913.4 million. If interest rates had been 100 basis points higher, the aggregate fair market value of our fixed rate debt would have been $106.7 million lower.
If interest rates had been 100 basis points higher, the aggregate fair market value of our fixed rate debt would have been $131.9 million lower. If interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt would have been $141.2 million higher.
If the weighted average interest rate on this variable rate debt had been 100 basis points higher or lower, the annual interest expense as of December 31, 2022 would increase or decrease by $9.4 million. As of December 31, 2021, we had $50.0 million of variable rate debt outstanding with $50.0 million of related floating-to-fixed interest rate swaps.
If the weighted average interest rate on this variable rate debt had been 100 basis points higher or lower, the annual interest expense as of December 31, 2023 would increase or decrease by $3.7 million.
As of December 31, 2022, we had $2,277.6 million principal amount of fixed rate debt outstanding, a $256.5 million decrease as compared to December 31, 2021 (excluding $50.0 million of variable rate debt outstanding as of December 31, 2021 that had been effectively fixed by related interest rate hedge contracts).
As of December 31, 2023, we had $370.0 million of variable rate debt outstanding not protected by interest rate hedge contracts, a $566.0 million decrease as compared to December 31, 2022.
Removed
These swaps effectively fixed the underlying one-month LIBOR rate at a weighted average rate of 1.693%. We had no outstanding interest rate hedge contracts as of December 31, 2022.

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