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What changed in HIGHWOODS PROPERTIES, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HIGHWOODS PROPERTIES, INC.'s 2023 and 2024 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 2024 report.

+207 added−215 removedSource: 10-K (2025-02-11) vs 10-K (2023-12-31)

Top changes in HIGHWOODS PROPERTIES, INC.'s 2024 10-K

207 paragraphs added · 215 removed · 169 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

31 edited+5 added−7 removed36 unchanged
Biggest changeWe do so in a culture built on the foundations of collegiality, teamwork, hard work, humility, creativity, humor, respect, acceptance, expertise and dedication to each other, our stockholders and our customers. Our total rewards program, which includes compensation and comprehensive benefits, is crafted to provide fair and competitive pay, insurance plans and other programs to facilitate an overall work-life balance.
Biggest changeOur total rewards program, which includes compensation and comprehensive benefits, is crafted to provide fair and competitive pay, insurance plans and other programs to facilitate an overall work-life balance. The program is designed to incentivize and reward employees and emphasize our commitment to exemplary work.
Our investment strategy is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets.
Our investment thesis is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets.
All employees are paid a base salary. Nearly 50% of employees are eligible to receive an annual bonus, which usually ranges from 5% to 30% of the employee’s base salary. All employees are also eligible to receive a discretionary bonus from time to time to incentivize and reward excellent performance.
All employees are paid a base salary. Nearly 50% of employees are eligible to receive an annual bonus, which usually ranges from 5% to 20% of the employee’s base salary. All employees are also eligible to receive a discretionary bonus from time to time to incentivize and reward excellent performance.
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.
Approximately 71% 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.
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.
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, six days of sick leave and parental leave for all new caregivers; • Competitive match on contributions to our 401(k) retirement savings plan, in which over 94% of our employees participate; and • 15% discount on purchasing Common Stock through our employee stock purchase plan, in which nearly 30% of our employees participate.
Through periodic career conversations that are held at least once a year with our employees, we create an environment that fosters and encourages an “ownership” mentality throughout our company and empowers our employees to continuously seek new and better ways of doing business.
Through periodic career conversations and goal-setting exercises that are held at least once a year with our employees, we create an environment that fosters and encourages an “ownership” mentality throughout our company and empowers our employees to continuously seek new and better ways of doing business.
Approximately 15% to 30% of employees typically receive a discretionary bonus each year, which usually ranges from $500 to $2,000. Approximately 8% of our employees, including officers, are also eligible to receive long-term equity incentive compensation. Equity incentive awards provide such employees with an ownership interest in our company and a direct and demonstrable stake in our success.
Approximately 20% to 40% of employees typically receive a discretionary bonus each year, which usually ranges from $500 to $2,000. Approximately 8% of our employees, including officers, are also eligible to receive long-term equity incentive compensation. Equity incentive awards provide such employees with an ownership interest in our company and a direct and demonstrable stake in our success.
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.
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, rental property and other expenses, net operating income and assets for each reportable segment. Our website is www.highwoods.com.
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.
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. Over the long-term, we plan to open division offices in Charlotte and Dallas.
Unlike some other REITs, which outsource the leasing, management, maintenance and/or customer service of their properties entirely to third parties, we are a fully-integrated REIT that generally staffs the leasing, management, maintenance and customer service of our own portfolio.
Unlike REITs that outsource the leasing, management, maintenance and/or customer service of their properties entirely to third parties, we are a fully-integrated REIT that generally staffs the leasing, management, maintenance and customer service of our own portfolio.
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.
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, 2024, the average tenure of our employees was ten years and the average age was 49 years.
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.
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 “Resiliency” section of our website. Information on our website is not considered part of this Annual Report.
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.
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 52 years, which is approximately five years older than the average age of the remainder of our employee 6 Table of Contents base.
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.
Our Common Stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “HIW.” As of December 31, 2024, the Company owned all of the Preferred Units and 107.2 million, or 98.0%, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.2 million Common Units.
A core component of this strategy is to continuously strengthen the financial and operational performance, resiliency and long-term growth prospects of our existing in-service portfolio and recycle out of those properties that no longer meet our criteria.
A core component of this strategy is to continuously strengthen the financial and operational performance, resiliency and long-term growth prospects of our existing in-service portfolio and recycle out of those properties that no longer meet our criteria. 4 Table of Contents Geographic Diversification .
Likewise, the payment of leasing commissions does not create an inappropriate risk because amounts payable are derived from net effective cash rents (which deducts leasing capital expenditures and operating expenses) and leases must be executed by an officer of our company, none of whom are eligible to receive such commissions.
Likewise, the payment of leasing commissions does not create an inappropriate risk because amounts payable are derived from net effective cash rents (which deducts leasing capital expenditures and operating expenses) and leases must be executed by an officer of our company who is ineligible to receive such commissions.
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.
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 two of the last three years. Diversity and Inclusion. Diversity and inclusion is a core value for our company.
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.
Shared corporate services, such as 5 Table of Contents accounting, technology, development, engineering, customer experience, 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.
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.
In 2024, the total cost of our workforce, including salaries, commissions, bonuses, equity and non-equity incentive compensation and employee benefits, was approximately $61 million. We regularly conduct risk assessments of our human capital needs.
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.
In 2024, 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. Core Values. Our core values serve as our foundation.
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.
As of December 31, 2024, only Bank of America (3.8%) and Asurion (3.5%) accounted for more than 3% of our annualized GAAP revenues. Health and Safety.
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.
During 2024, 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.
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 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 have a robust diversity and inclusion program, called the “Heart of Highwoods,” with the overall goal of creating opportunities for all people in the commercial real estate industry, in the local communities in which we operate and among our own teammates at the Company.
Of the new employees hired during 2024, 57% were female and 39% were persons of color. 8 Table of Contents We have a robust diversity and inclusion program, called the “Heart of Highwoods,” with the overall goal of creating opportunities for all people in the commercial real estate industry, in the local communities in which we operate and among our own teammates at the Company.
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.
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.
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.
As of both December 31, 2024 and December 31, 2023, we had approximately 350 full-time employees. Over the past three years, our average annual turnover rate was 16%, substantially lower than the average national industry turnover rate of 25% as reported by the Bureau of Labor Statistics. Our turnover rate was 14% for 2024.
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. 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.
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. Payouts under the plan have generally ranged from $1,000 to $10,000 but could be higher under certain circumstances.
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, 2024, 37% of our employees were female and 29% of our employees were persons of color.
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 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 our compensation policies or practices create risks that are reasonably likely to have a material adverse effect on our company.
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.
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. 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 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.
We are in the work-placemaking business and believe that by creating exceptional environments and experiences, we can deliver greater value to our customers, their teammates and, in turn, our shareholders. By creating and operating commute-worthy places, we support the growth and success of our customers and contribute to the vitality of our communities.
Removed
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.
Added
Our Vision, Mission and Strategy Our vision is to be a leader in the evolution of commercial real estate for the benefit of our customers, our communities and those who invest with us. Our mission is to create environments and experiences that inspire our teammates and our customers to achieve more together.
Removed
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.
Added
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 .
Removed
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.
Added
Other than as described below, we have no compensation policies or programs that reward employees solely on a transaction-specific basis. 7 Table of Contents 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.
Removed
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.
Added
We believe our culture makes the difference in this highly competitive, ever-changing commercial real estate industry. Owning and shaping our culture is the job of each teammate. Culture is not defined by words on a page. Rather, it is the collection of our behaviors, attitudes and actions.
Removed
The program is designed to incentivize and reward employees and emphasize our commitment to exemplary work.
Added
Our employees bring their personal values, skills, experiences and knowledge to life through the lens of our core values. Together, we use our mission and values to create a thriving workplace to support success for everyone and drive our culture and business forward.
Removed
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
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

37 edited+7 added−4 removed144 unchanged
Biggest changeThe 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.
Biggest changeThe 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. 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 .
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.
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 16 Table of Contents among the various asset and liability components and this could result in material changes to our reported results of operations and financial condition.
If our lenders default under their obligations under the revolving credit facility or we become unable to borrow additional funds under the facility for any reason, we would be required to seek alternative equity or debt capital, which could be more costly and adversely impact our financial condition.
If our lenders default on their obligations under the revolving credit facility or we become unable to borrow additional funds under the facility for any reason, we would be required to seek alternative equity or debt capital, which could be more costly and adversely impact our financial condition.
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.
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; • 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.
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 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; 14 Table of Contents • 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 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.
Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes. We are, however, subject to federal, state and local taxes in certain instances. In the normal course of business, certain entities through which we own real estate have undergone tax audits.
We face possible tax audits. Because we are organized and qualify as a REIT, we are generally not subject to federal income taxes. We are, however, subject to federal, state and local taxes in certain instances. In the normal course of business, certain entities through which we own real estate have undergone tax audits.
A 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.
A 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; • 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, which hackers 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.
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.
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. Natural disasters and climate change could have an adverse impact on our cash flow and operating results.
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.
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.
Moreover, owners of office properties may be reluctant to sell, resulting in fewer acquisition opportunities. As a result of such increased competition and limited opportunities, we may be unable to acquire additional properties or the purchase price of such properties may be significantly elevated, which would reduce our expected return from making any such acquisitions.
Moreover, owners of office properties 13 Table of Contents may be reluctant to sell, resulting in fewer acquisition opportunities. As a result of such increased competition and limited opportunities, we may be unable to acquire additional properties or the purchase price of such properties may be significantly elevated, which would reduce our expected return from making any such acquisitions.
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.
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.
Difficulties or delays in renewing leases with large customers or re-leasing space vacated by large customers could materially impact our results of operations. Our 20 largest customers account for a meaningful portion of our revenues. See “Item 2. Properties - Customers” and “Item 2.
Difficulties or delays in renewing leases with large customers or re-leasing space vacated by large customers could materially impact our results of operations. Our 20 largest customers account for a meaningful portion of our revenues. See 10 Table of Contents “Item 2. Properties - Customers” and “Item 2.
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
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.
The Company’s charter contains a provision exempting the Company from the Maryland business combination statute. However, we cannot assure you that this charter provision will not be amended or repealed at any point in the future. • Control share acquisitions.
The Company’s charter contains a provision exempting the Company from the Maryland business combination statute. However, we cannot assure you that this charter provision will not be amended or repealed at any point in the future. 19 Table of Contents • Control share acquisitions.
Further, changes in space utilization by our customers due to technology, economic conditions, business culture and/or a need for less space due to the increasing prevalence of work-from-home arrangements by certain employers also affect the occupancy of our properties. As a result, customers may seek to downsize by leasing less space from us upon any renewal.
Further, changes in space utilization by our customers due to technology, economic conditions, business culture and/or the prevalence of work-from-home arrangements also affect the occupancy of our properties. As a result, customers may seek to downsize by leasing less space from us upon any renewal.
If 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.
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, 2024, we had $454.0 million of variable rate debt outstanding not protected by interest rate hedge contracts.
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.
As of December 31, 2024, we owned 1.2 million square feet of office space located on various land parcels that we lease on a long-term basis.
We generally do not intend to reserve funds to retire existing debt upon maturity. We may not be able to repay, refinance or extend any or all of our debt at maturity or upon any acceleration. If any refinancing is done at higher interest rates, the increased interest expense would 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 would adversely affect our cash flow and ability to pay distributions.
The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock. We face possible tax audits.
The more favorable rates applicable to regular 17 Table of Contents corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.
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.
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. Impairment charges adversely affect our results of operations.
To the extent that our customers exercise early termination rights, our results of operations will be adversely affected, and we can provide no assurances that we will be able to generate an equivalent amount of net effective rent by leasing the vacated space to others.
To the extent that our customers exercise early termination rights, our results of operations will be adversely affected, and we can provide no assurances that we will be able to generate an equivalent amount of net effective rent by leasing the vacated space to others. As part of ongoing efforts to reduce waste, the U.S.
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.
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.
In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and that may subject us to liability in the form of fines or damages for noncompliance. Any expenditures, fines or damages we must pay would adversely affect our results of operations.
In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and that may subject us to liability in the form of fines or damages for noncompliance.
In addition, certain of our unsecured debt agreements contain cross-default provisions giving the unsecured lenders the right to declare a default if we are in default under more than $35.0 million with respect to other loans in some circumstances. Unwaived defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.
In addition, certain of our unsecured debt agreements contain cross-default provisions giving the unsecured lenders the right to declare a default if we are in default under more than $35.0 million with respect to other loans in some circumstances.
Discovery of previously undetected environmentally hazardous conditions may adversely affect our financial condition and results of operations . Under various federal, state and local environmental laws and regulations, a current or previous property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on such property. These costs could be significant.
Under various federal, state and local environmental laws and regulations, a current or previous property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on such property. These costs could be significant.
We cannot assure you that our credit ratings will not be downgraded. If our credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and fees on outstanding borrowings under our revolving credit facility and bank term loans.
If our credit ratings are downgraded or other negative action is taken, we could be required, among other things, to pay additional interest and fees on outstanding borrowings under our revolving credit facility and bank term loans. We generally do not intend to reserve funds to retire existing debt upon maturity.
Further, we obtain credit ratings from Moody’s Investors Service and Standard and Poor’s Rating Services based on their evaluation of our creditworthiness. These agencies’ ratings are based on a number of factors, some of which are not within our control. In addition to factors specific to our financial strength and performance, the rating agencies also consider conditions affecting REITs generally.
These agencies’ ratings are based on a number of factors, some of which are not within our control. In addition to factors specific to our financial strength and performance, the rating agencies also consider conditions affecting REITs generally. We cannot assure you that our credit ratings will not be downgraded.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and Distributions.” Changes in our future dividend payout level could have a material effect on the market price of our Common Stock.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends and Distributions.” Changes in our future dividend payout level could have a material effect on the market price of our Common Stock. 18 Table of Contents Cash distributions reduce the amount of cash that would otherwise be available for other business purposes, including paying off debt, reinvesting in our existing portfolio or funding future growth initiatives.
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.
We face risks associated with the development of mixed-use commercial properties. We operate, are currently developing and may in the future develop properties that are known as “mixed-use” developments. This means that in addition to the development of office space, the project may also include space for residential, retail, hotel or other commercial purposes.
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.
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.
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.
Even if we remain qualified as a REIT, we may face other tax liabilities that adversely affect our financial condition and results of operations.
Our failure to comply with these laws could subject us to fines and penalties, cause us to be in default of our leases and other contracts with the Federal government and bar us from entering into future leases and other contracts with the Federal government.
Our failure to comply with these laws could subject us to fines and penalties, cause us to be in default of our leases and other contracts with the Federal government and bar us from entering into future leases and other contracts with the Federal government. 12 Table of Contents We face risks associated with security breaches through cyber attacks, cyber intrusions, ransomware or otherwise, as well as other significant disruptions of our information technology (“IT”) networks and related systems.
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.
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.
Cash distributions reduce the amount of cash that would otherwise be available for other business purposes, including paying off debt, reinvesting in our existing portfolio or funding future growth initiatives. For the Company to maintain its qualification as a REIT, it must annually distribute to its stockholders at least 90% of REIT taxable income, excluding net capital gains.
For the Company to maintain its qualification as a REIT, it must annually distribute to its stockholders at least 90% of REIT taxable income, excluding net capital gains.
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.
Our operating results heavily depend 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.
This means that in addition to the development of office space, the project may also include space for residential, retail, hotel or other commercial purposes. We have less experience in developing and managing non-office real estate than we do with office real estate.
We have less experience in developing and managing non-office real estate than we do with office real estate.
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.
Occupancy in our office portfolio decreased from 88.9% as of December 31, 2023 to 87.1% as of December 31, 2024. For additional information regarding our average occupancy and rental rate trends over the past five years, see “Item 2.
Removed
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.
Added
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.
Removed
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.
Added
Department of Government Efficiency (“DOGE”) and the U.S. General Services Administration (“GSA”) are reaching out to all tenant agencies with non-firm term leases to see if there are opportunities to reduce space usage. We currently have 30 leases with 23 different agencies of the Federal government across five different markets, which encompass an aggregate of 737,000 square feet.
Removed
We face risks associated with security breaches through cyber attacks, cyber intrusions, ransomware or otherwise, as well as other significant disruptions of our information technology (“IT”) networks and related systems.
Added
See “Item 2. Properties – Customers.” While most are firm term leases that do not permit the Federal government to terminate the lease prior to the stated lease expiration date, we can provide no assurances that the Federal government will not seek to terminate any of these leases.
Removed
Additionally, the Company would no longer be required to make distributions.
Added
Any expenditures, fines or damages we must pay would adversely affect our results of operations. 11 Table of Contents Discovery of previously undetected environmentally hazardous conditions may adversely affect our financial condition and results of operations .
Added
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
Unwaived defaults under our debt agreements could materially and adversely affect our financial condition and results of operations. 15 Table of Contents Further, we obtain credit ratings from Moody’s Investors Service and Standard and Poor’s Rating Services based on their evaluation of our creditworthiness.
Added
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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+0 added−0 removed14 unchanged
Biggest changeFor example, we are in the process of adopting and implementing many of the voluntary practices recommended under the National Institute of Standards and Technology cybersecurity framework, which we believe is a best practice for U.S.-based real estate companies.
Biggest changeFor example, we have adopted and implemented, or are in the process of adopting and implementing, many of the voluntary practices recommended under the National Institute of Standards and Technology cybersecurity framework 2.0, which we believe is a best practice for U.S.-based real estate companies.
In the event we experience a cybersecurity incident that could materially affect us, including our business strategy, results of operations or financial condition, the Company’s chief information officer and other members of management’s steering committee (which include executive officers who are also part of our disclosure committee) would review the incident with the audit committee to consider whether and to what extent disclosure is required under Item 1.05 of Form 8-K. 20 Table of Contents
In the event we experience a cybersecurity incident that could materially affect us, including our business strategy, results of operations or financial condition, the Company’s chief information officer and other members of management’s steering committee (which include executive officers who are also part of our disclosure committee) would review the incident with the audit committee to consider whether and to what extent disclosure is required under Item 1.05 of Form 8-K. 21 Table of Contents
We partner with a third party service provider to assist us on a real-time basis with detecting advanced threats, streamline and collaborate on investigations and recommend actions to further strengthen our systems and, if and when necessary, respond to incidents.
We partner with a 20 Table of Contents third party service provider to assist us on a real-time basis with detecting advanced threats, streamline and collaborate on investigations and recommend actions to further strengthen our systems and, if and when necessary, respond to incidents.

Item 2. Properties

Properties — owned and leased real estate

10 edited+1 added−0 removed3 unchanged
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.
Biggest changeMorgan Chase & Co. 183,864 6,508 0.81 3.4 State of Georgia 302,443 6,144 0.77 1.6 Deloitte 132,328 6,027 0.75 5.9 Lifepoint Corporate Services 202,991 5,814 0.73 4.2 Delta Community Credit Union 128,589 5,531 0.69 7.8 CapFinancial Group 120,847 5,495 0.69 8.6 Regus 169,833 5,368 0.67 5.6 Fisher Asset Management 179,184 5,255 0.66 5.3 The Cigna Group 180,728 5,187 0.65 3.0 Global Payments 168,051 5,055 0.63 8.2 Total 6,136,446 $ 220,917 27.64 % 7.3 __________ (1) Annualized GAAP Rental Revenue is GAAP rental revenue (base rent plus cost recovery income, including straight-line rent) for the month of December 2024 multiplied by 12. 23 Table of Contents Lease Expirations The following table sets forth scheduled lease expirations for existing leases in our portfolio as of December 31, 2024: 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) 2025 (3) 523 2,699,719 11.4 % $ 80,251 $ 29.73 10.0 % 2026 348 2,218,130 9.4 72,868 32.85 9.1 2027 349 2,668,478 11.3 85,833 32.17 10.7 2028 258 2,411,216 10.2 80,393 33.34 10.1 2029 228 1,864,565 7.9 58,353 31.30 7.3 2030 217 2,951,965 12.4 90,918 30.80 11.4 2031 107 2,537,503 10.7 83,703 32.99 10.5 2032 74 1,089,158 4.6 44,056 40.45 5.5 2033 62 1,219,071 5.1 44,773 36.73 5.6 2034 49 1,502,307 6.3 61,645 41.03 7.7 Thereafter 106 2,531,399 10.7 96,339 38.06 12.1 2,321 23,693,511 100.0 % $ 799,132 $ 33.73 100.0 % __________ (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 2023 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 2024 multiplied by 12.
(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.
(3) Includes 47,000 rentable square feet of leases that are on a month-to-month basis, which represent 0.2% of total annualized GAAP rental revenue.
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.
Joint Venture Investments The following table sets forth information about our in-service joint venture investments by geographic location as of December 31, 2024: Rentable Square Feet Weighted Average Ownership Interest (1) Occupancy Market Dallas 542,000 50.0 % 99.4 % Kansas City (2) 292,000 50.0 89.4 Richmond 354,000 50.0 100.0 Tampa (3) 152,000 80.0 100.0 Total 1,340,000 53.4 % 97.5 % __________ (1) Weighted Average Ownership Interest is calculated using Rentable Square Feet.
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.
PROPERTIES Properties The following table sets forth information about our portfolio by geographic location as of December 31, 2024: Market Rentable Square Feet Occupancy Percentage of Annualized GAAP Rental Revenue (1) Nashville 5,098,000 89.0 % 20.3 % Raleigh 5,592,000 88.6 20.2 Atlanta 4,935,000 83.7 16.5 Tampa 3,196,000 87.8 12.3 Charlotte 1,991,000 96.3 10.3 Orlando 1,789,000 88.3 6.5 Richmond 1,845,000 85.4 4.6 Other 2,754,000 79.5 9.3 Total 27,200,000 87.1 % 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 2024 multiplied by 12.
(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.
(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. 22 Table of Contents Customers The following table sets forth information concerning the 20 largest customers in our portfolio as of December 31, 2024: 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 $ 30,168 3.78 % 9.2 Asurion 543,794 28,042 3.51 11.8 Metropolitan Life Insurance 667,228 21,228 2.66 6.2 Federal Government 736,663 21,120 2.64 4.0 Bridgestone Americas 506,128 19,684 2.46 12.7 PPG Industries 370,927 11,284 1.41 6.5 Vanderbilt University 294,389 9,672 1.21 4.9 Mars Petcare 223,700 9,194 1.15 6.4 Albemarle Corporation 162,368 7,154 0.90 9.1 Bass, Berry & Sims 213,951 6,987 0.87 0.1 J.P.
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.
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) 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 2024 88.0 % $ 33.73 $ 33.18 __________ (1) Annualized GAAP Rent Per Square Foot is GAAP 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.
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.
In-Process Development The following table summarizes our in-process office development activity as of December 31, 2024: Property Market Own % Consolidated (Y/N) Rentable Square Feet Anticipated Total Investment (1) Investment as of December 31, 2024 Pre Leased % Estimated Completion Estimated Stabilization ($ in thousands) 23Springs Dallas 50.0 % N 642,000 $ 460,000 $ 299,422 61.6 % 1Q 25 1Q 28 Midtown East Tampa 50.0 % N 143,000 83,000 53,510 34.5 1Q 25 2Q 26 GlenLake Two Retail (2) Raleigh 100.0 % Y 8,600 8,100 1,241 100.0 1Q 26 1Q 26 793,600 $ 551,100 $ 354,173 57.1 % __________ (1) Includes estimated lease up costs for tenant improvements and lease commissions until the property has reached stabilization.
(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) Will be recorded in development-in-process on our Consolidated Balance Sheets once we begin construction on the project. 24 Table of Contents Land Held for Development As of December 31, 2024, we estimate that we can develop approximately 4.6 million rentable square feet of office space on the wholly-owned development land that we consider core assets for our future development needs.
(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.
(2) Excludes our 26.5% unconsolidated ownership interest in a real estate brokerage services company. (3) The Midtown West joint venture in Tampa is consolidated.
Added
The following table sets forth the net changes in rentable square footage of our portfolio: Year Ended December 31, 2024 2023 2022 (in thousands) Acquisitions — — 367 Developments Placed In-Service 18 — 263 Remeasurements/Other (1) 575 5 (11) Dispositions (605) (383) (437) Net Change in Rentable Square Footage (12) (378) 182 __________ (1) Increase in square footage during 2024 is due to the inclusion of in-service properties owned by consolidated and unconsolidated joint ventures (at our share).

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

5 edited+0 added−0 removed4 unchanged
Biggest changeITEM 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.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 25 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 59 Director, President and Chief Executive Officer. Mr.
Prior 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.
Prior to that, Mr. Maiorana worked four years at Ernst & Young LLP. Jeffrey D. Miller 54 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.
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.
Brian M. Leary 50 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.
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.
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 49 Executive Vice President and Chief Financial Officer. 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. 26 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−3 removed3 unchanged
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.
Biggest changeFor the Period from December 31, 2019 to December 31, Index 2020 2021 2022 2023 2024 Highwoods Properties, Inc. 85.24 100.26 66.60 59.85 85.65 S&P 500 Index 118.40 152.39 124.79 157.59 197.02 FTSE NAREIT Equity Office Index 81.56 99.51 62.07 63.34 76.95 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. 27 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.
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.
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 Equity Office Index.
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.
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, 2024, the Company had 571 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 14, 2024. 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 13, 2025. 28 Table of Contents
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.
On December 31, 2024, the Operating Partnership had 100 holders of record of Common Units (other than the Company). As of December 31, 2024, there were 107.6 million shares of Common Stock outstanding and 2.2 million Common Units outstanding not owned by the Company.
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 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 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.
The total return performance graph assumes an investment of $100 in our Common Stock and the two indices on December 31, 2019, and further assumes the reinvestment of all dividends. The FTSE NAREIT Equity Office Index consists of the REITs in the FTSE NAREIT All Equity REITs Index that principally operate in the office sector .
Removed
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
Total return performance is not necessarily indicative of future results.
Removed
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.
Removed
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

72 edited+24 added−32 removed76 unchanged
Biggest changeRental 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
Biggest changeThe change in our same property portfolio was due to the addition of six joint venture properties encompassing 0.7 million rentable square feet, one property acquired during 2022 encompassing 0.4 million rentable square feet and one newly developed property placed in service during 2022 encompassing 0.1 million rentable square feet, offset by the removal of 10 properties that were sold during 2024 encompassing 0.6 million rentable square feet. 43 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, 2024 2023 Net income $ 104,254 $ 151,330 Equity in earnings of unconsolidated affiliates (4,158) (1,107) Gain on deconsolidation of affiliate — (11,778) Gains on disposition of property (46,817) (47,773) Other income (12,337) (4,435) Interest expense 147,198 136,710 General and administrative expenses 41,903 42,857 Impairments of real estate assets 24,600 — Depreciation and amortization 299,046 299,411 Net operating income 553,689 565,215 Our share of unconsolidated joint venture same property net operating income 18,686 18,436 Partner's share of consolidated joint venture same property net operating income (1,110) (1,009) Non same property and other net operating (income)/loss (3,242) (10,536) Same property net operating income $ 568,023 $ 572,106 Same property net operating income $ 568,023 $ 572,106 Lease termination fees, straight-line rent and other non-cash adjustments (13,961) (25,782) Same property cash net operating income $ 554,062 $ 546,324 44 Table of Contents
We use our revolving credit facility for working capital purposes and for the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt. Continued ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.
We use our revolving credit facility for working capital purposes, the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt. The continued ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.
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).
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).
As of December 31, 2023, our same property portfolio consisted of 154 wholly owned in-service properties encompassing 26.6 million rentable square feet that were owned during the entirety of the periods presented (from January 1, 2022 to December 31, 2023).
When considering such forward-looking statements, you should keep in mind important factors that could cause our actual results to differ materially from those contained in any forward-looking statement, including the following: • the financial condition of our customers could deteriorate; • our assumptions regarding potential losses related to customer financial difficulties could prove incorrect; • counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity; • we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases; • we may not be able to lease newly constructed buildings as quickly or on as favorable terms as originally anticipated; • we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects as quickly or on as favorable terms as anticipated; • development activity in our existing markets could result in an excessive supply relative to customer demand; • our markets may suffer declines in economic and/or office employment growth; • unanticipated increases in interest rates could increase our debt service costs; • unanticipated increases in operating expenses could negatively impact our operating results; • natural disasters and climate change could have an adverse impact on our cash flow and operating results; • we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and • the Company could lose key executive officers.
When considering such forward-looking statements, you should keep in mind important factors that could cause our actual results to differ materially from those contained in any forward-looking statement, including the following: • the financial condition of our customers could deteriorate; • our assumptions regarding potential losses related to customer financial difficulties could prove incorrect; • counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity; • we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases; • we may not be able to lease newly constructed buildings as quickly or on as favorable terms as originally anticipated; • we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects as quickly or on as favorable terms as anticipated; • development activity in our existing markets could result in an excessive supply relative to customer demand; • our markets may suffer declines in economic and/or office employment growth; • increases in interest rates could increase our debt service costs; • increases in operating expenses could negatively impact our operating results; • natural disasters and climate change could have an adverse impact on our cash flow and operating results; • we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and • the Company could lose key executive officers.
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.
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; 39 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.
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.
Because 41 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.
(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.
(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 2025.
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.
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, 2024, we have not experienced significant credit losses based on management’s evaluation of collectability of our lease receivables.
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.
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 40 Table of Contents estimates made in determining their impact in our Consolidated Financial Statements.
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.
While our methodology for purchase price allocation did not change during the year ended December 31, 2024, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of acquisition.
For a discussion regarding dividends and distributions, see “Liquidity and Capital Resources - Dividends and Distributions.” 30 Table of Contents Liquidity and Capital Resources We continue to maintain a conservative and flexible balance sheet and believe we have ample liquidity to fund our operations and growth prospects.
For a discussion regarding dividends and distributions, see “Liquidity and Capital Resources - Dividends and Distributions.” 31 Table of Contents Liquidity and Capital Resources We continue to maintain a conservative and flexible balance sheet and believe we have ample liquidity to fund our operations and growth prospects.
Our investment strategy is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets.
Our investment thesis is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets.
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.
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” and “Item 1A. Risk Factors – Risks Related to our Operations.
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.
Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher cost recoveries and higher parking income, partially offset by a decrease in average occupancy.
Asset acquisitions, dispositions and new developments placed in service directly impact our rental revenues and could impact our average occupancy, depending upon the occupancy rate of the properties that are acquired, sold or placed in service. A further indicator of the predictability of future revenues is the expected lease expirations of our portfolio.
Asset acquisitions, dispositions and new developments placed in service directly impact our rental revenues and could impact our average occupancy, depending upon the occupancy rate of the properties that are acquired, sold or placed in service. Another indicator of the predictability of future revenues is the expected lease expirations of our portfolio.
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.
Properties - In-Process Development.” Financing Activity During 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.
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.
Additionally, given the length of construction cycles, development 32 Table of Contents projects are not placed in service until several years after commencement in some cases.
Our simple strategy is to own and operate high-quality workplaces in the BBDs within our footprint, maintain a strong balance sheet to be opportunistic throughout economic cycles, employ a talented and dedicated team and 28 Table of Contents communicate transparently with all stakeholders. We focus on owning and managing buildings in the most dynamic and vibrant BBDs.
Our simple strategy is to own and operate high-quality workplaces in the BBDs within our footprint, maintain a strong balance sheet to be opportunistic throughout economic cycles, employ a talented and dedicated team and communicate transparently with all stakeholders. We focus on owning and managing buildings in the most dynamic and vibrant BBDs.
Depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year, unless we buy, place in service or sell assets, since our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed lives.
Depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year, unless we buy, develop or sell assets, since our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed lives.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in our 2023 Annual Report on Form 10-K. 34 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.
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.
Assuming the net effect of our acquisition, disposition and development activity in 2025 results in an increase to our assets, we would expect outstanding debt and/or Common Stock balances to increase. Comparison of 2023 to 2022 For a comparison of 2023 to 2022, see “Item 7.
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.
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 $22.4 million of cash and cash equivalents as of December 31, 2024.
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.
The interest rate on our revolving credit facility is SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 85 basis points, based on current credit ratings. The annual facility fee is 20 basis points.
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.
The secured indebtedness was collateralized by real estate assets with an undepreciated book value of $1,245.0 million. As of December 31, 2024, $454.0 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.
Building improvements are capital costs to maintain or enhance existing buildings not typically related to a specific customer. Tenant improvements are the costs required to customize space for the specific needs of customers.
Building improvements are capital costs to maintain or enhance existing buildings not typically related to a specific customer. Tenant improvements are the costs required to customize space for our customers' specific needs.
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.
We expect average occupancy in our office portfolio to range from 85.0% to 86.5% for 2025. 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.
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.
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 recently completed development projects exceeds the lost NOI from property dispositions.
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 NOI to be lower in 2025 as compared to 2024 due to lost NOI from property dispositions and an anticipated decrease in same property NOI, partially offset by recently completed development projects. Cash Flows In calculating net cash related to operating activities, depreciation and amortization, which are non-cash expenses, are added back to net income.
As 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.
As of December 31, 2024, 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 $ 299,134 3.875 % 4.038 % Notes due March 2028 $ 350,000 $ 348,690 4.125 % 4.271 % Notes due April 2029 $ 350,000 $ 349,583 4.200 % 4.234 % Notes due February 2030 $ 400,000 $ 399,498 3.050 % 3.079 % Notes due February 2031 $ 400,000 $ 399,048 2.600 % 2.645 % Notes due February 2034 $ 350,000 $ 345,862 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.
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 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, 2024 for the variable rate debt. The weighted average interest rate on our fixed and variable rate debt was 4.31% and 5.33%, respectively, as of December 31, 2024.
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 have an internal guideline whereby customers that account for more than 3% of our revenues are periodically reviewed with the Company's Board of Directors. As of December 31, 2024, only Bank of America (3.8%) and Asurion (3.5%) accounted for more than 3% of our annualized GAAP revenues. See “Item 2.
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.
As of December 31, 2024, 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 42.1%, and there were 109.8 million diluted shares of Common Stock outstanding. Rental and other revenues are our principal source of funds to meet our short-term liquidity requirements.
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 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. 42 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, 2024 2023 2022 Funds from operations: Net income $ 104,254 $ 151,330 $ 163,958 Net (income)/loss attributable to noncontrolling interests in consolidated affiliates 34 549 (1,230) Depreciation and amortization of real estate assets 296,277 296,705 284,723 Impairments of depreciable properties 24,600 — 35,000 (Gains) on disposition of depreciable properties (46,467) (33,288) (47,807) (Gain) on deconsolidation of affiliate — (11,778) — Unconsolidated affiliates: Depreciation and amortization of real estate assets 15,001 12,223 1,160 Funds from operations 393,699 415,741 435,804 Dividends on Preferred Stock (2,485) (2,485) (2,486) Funds from operations available for common stockholders $ 391,214 $ 413,256 $ 433,318 Funds from operations available for common stockholders per share $ 3.61 $ 3.83 $ 4.03 Weighted average shares outstanding (1) 108,319 107,785 107,567 __________ (1) Includes assumed conversion of all potentially dilutive Common Stock equivalents.
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.
On January 29, 2025, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 11, 2025 to stockholders of record as of February 18, 2025. The Company declared and paid a cash dividend of $0.50 per share of Common Stock in each quarter of 2024.
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.
Annual combined GAAP rents for new and renewal leases signed in the fourth quarter were $33.32 per rentable square foot, 12.2% higher compared to previous leases in the same office spaces. 30 Table of Contents We strive to maintain a diverse, stable and creditworthy customer base.
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).
As of January 31, 2025, we had approximately $34 million of existing cash and $119.0 million drawn on our $750 million revolving credit facility, which is scheduled to mature in January 2028 (but can be extended for two additional six-month periods at our option).
We undertake no obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the occurrence of unanticipated events. Executive Summary We are in the work-placemaking business.
We undertake no obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the occurrence of unanticipated events.
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%.
See also “Executive Summary - Liquidity and Capital Resources.” Our mortgages and notes payable as of December 31, 2024 consisted of $712.2 million of secured indebtedness with a weighted average interest rate of 4.43% and $2,595.8 million of unsecured indebtedness with a weighted average interest rate of 4.45%.
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.
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 88.9% as of December 31, 2023 to 87.1% as of December 31, 2024.
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.
We expect interest expense to be lower in 2025 as compared to 2024 due to lower average interest rates and lower average debt balances, partially offset by lower capitalized interest.
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).
Our $750.0 million unsecured revolving credit facility was modified during the first quarter of 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).
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.
We expect general and administrative expenses to be lower in 2025 as compared to 2024 due to lower predevelopment cost write-offs, partially offset by higher salaries and benefits. Interest Expense Interest expense was $10.5 million, or 7.7%, higher in 2024 as compared to 2023 primarily due to higher average interest rates and higher average debt balances.
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.
We expect rental and other revenues to be lower in 2025 as compared to 2024 due to lower anticipated average occupancy and lost revenue from property dispositions, partially offset by recently completed development projects in Raleigh and Charlotte.
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.
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 fourth quarter of 2024, we acquired fee simple title to the land underneath our Century Center assets in Atlanta for a purchase price, including capitalized acquisition costs, of $50.8 million.
As of December 31, 2022, our same property portfolio consisted of 148 in-service properties encompassing 24.4 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2021 to December 31, 2022).
As of December 31, 2024, our same property portfolio consisted of 152 wholly owned and joint venture in-service properties encompassing 27.2 million rentable square feet that were owned during the entirety of the periods presented (from January 1, 2023 to December 31, 2024).
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.
These changes were partially offset by lower investments in building improvements and development in process. We expect uses of cash for investing activities in 2025 to be primarily driven by whether or not we acquire and commence development of additional office buildings in the BBDs of our markets.
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.
The unused capacity of our revolving credit facility as of December 31, 2024 and January 31, 2025, respectively, was $645.9 million and $630.9 million.
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.
The following table sets forth the changes in the Company’s cash flows (in thousands): Year Ended December 31, 2024 2023 2022 2024-2023 Change 2023-2022 Change Net Cash Provided By Operating Activities $ 403,584 $ 386,962 $ 421,779 $ 16,622 $ (34,817) Net Cash Used In Investing Activities (302,435) (169,686) (614,799) (132,749) 445,113 Net Cash Provided By/(Used In) Financing Activities (99,041) (205,426) 187,927 106,385 (393,353) Total Cash Flows $ 2,108 $ 11,850 $ (5,093) $ (9,742) $ 16,943 Comparison of 2024 to 2023 The change in net cash provided by operating activities in 2024 as compared to 2023 was primarily due to net cash from the operations of consolidated same properties, recently completed development projects in Raleigh and Charlotte and changes in operating assets and liabilities, partially offset by property dispositions and higher interest expense.
Subject to written consent of the lenders, we may elect to amend the newly modified revolving credit facility no later than May 15, 2024 to provide that the interest rate may be adjusted upward or downward by up to 2.5 basis points subject to satisfaction of certain to-be-determined sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.
During the second quarter of 2024, we modified the revolving credit facility to provide that the interest rate may be adjusted upward or downward by 2.5 basis points depending upon whether or not we achieve certain pre-determined sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.
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.
The following table sets forth information regarding second generation office leases signed during the fourth quarter of 2024 (we define second generation office leases as leases with new customers and renewals of existing customers in both consolidated and unconsolidated office space that has been previously occupied and leases with respect to vacant space in acquired buildings): New Renewal All Office Leased space (in rentable square feet) 348,797 919,011 1,267,808 Average term (in years - rentable square foot weighted) 7.4 6.2 6.6 Base rents (per rentable square foot) (1) $ 35.75 $ 34.64 $ 34.94 Rent concessions (per rentable square foot) (1) (2.01) (1.47) (1.62) GAAP rents (per rentable square foot) (1) $ 33.74 $ 33.17 $ 33.32 Tenant improvements (per rentable square foot) (1) $ 5.13 $ 3.78 $ 4.15 Leasing commissions (per rentable square foot) (1) $ 1.32 $ 1.00 $ 1.09 __________ (1) Weighted average per rentable square foot on an annual basis over the lease term.
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 expect net cash related to operating activities to be lower in 2025 as compared to 2024 due to lower anticipated occupancy and property dispositions, partially offset by net cash from recently completed development projects in Raleigh and Charlotte.
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.
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.
Gains on Disposition of Property Gains on disposition of property were $15.8 million lower in 2023 as compared to 2022. Gain on Deconsolidation of Affiliate We recognized a gain on deconsolidation of $11.8 million in 2023 related to adjusting our retained interest in Markel to fair value.
Gain on Deconsolidation of Affiliate We recognized a gain on deconsolidation of $11.8 million in 2023 related to adjusting our retained interest in the Markel joint venture to fair value. We recorded no such gain on deconsolidation in 2024.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in our 2023 Annual Report on Form 10-K. 35 Table of Contents Capitalization The following table sets forth the Company’s capitalization (in thousands, except per share amounts): December 31, 2024 2023 Mortgages and notes payable, net, at recorded book value $ 3,293,559 $ 3,213,206 Preferred Stock, at liquidation value $ 28,811 $ 28,811 Common Stock outstanding 107,624 105,710 Common Units outstanding (not owned by the Company) 2,151 2,157 Per share stock price at year end $ 30.58 $ 22.96 Market value of Common Stock and Common Units $ 3,356,920 $ 2,476,626 Total capitalization $ 6,679,290 $ 5,718,643 As of December 31, 2024, our mortgages and notes payable and outstanding preferred stock represented 49.7% of our total capitalization and 42.1% of the undepreciated book value of our assets.
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.
There was $104.0 million and $119.0 million outstanding under our revolving credit facility as of December 31, 2024 and 37 Table of Contents January 31, 2025, respectively. As of both December 31, 2024 and January 31, 2025, we had $0.1 million of outstanding letters of credit, which reduce the availability on our revolving credit facility.
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.
Earnings Per Common Share - Diluted Diluted earnings per common share was $0.45 lower in 2024 as compared to 2023 due to a decrease in net income for the reasons discussed above. Comparison of 2023 to 2022 For a comparison of 2023 to 2022, see “Item 7.
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.
Same property operating expenses were higher primarily due to higher contract services, property insurance, repairs and maintenance and utilities, partially offset by lower taxes. We expect operating expenses to be lower in 2025 as compared to 2024 primarily due to property dispositions.
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.
Consolidated same property NOI was $4.3 million, or 0.8%, lower in 2024 as compared to 2023 due to an increase of $8.3 million in same property expenses offset by an increase of $4.0 million in same property revenues. We expect same property NOI to be lower in 2025 as compared to 2024 primarily due to lower anticipated average occupancy.
The financial and other covenants under our newly modified facility are substantially similar to our previous credit facility. We expect to incur $7.9 million of debt issuance costs, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility.
We incurred $7.7 million of debt issuance costs during the first quarter of 2024, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility and recorded $0.2 million of loss on debt extinguishment.
Any such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions. 37 Table of Contents Contractual Obligations The following table sets forth a summary regarding our known 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.
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. 38 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, 2024 (in thousands): Amounts due during the years ending December 31, Total 2025 2026 2027 2028 2029 Thereafter Mortgages and Notes Payable: Principal payments (1) $ 3,305,089 $ 7,268 $ 207,035 $ 458,755 $ 802,765 $ 517,210 $ 1,312,056 Interest payments 718,889 147,295 139,851 120,915 90,155 63,604 157,069 Purchase Obligations: Lease and contractual commitments and contingent consideration (2) 232,597 180,832 45,448 3,660 325 1,513 819 Other Commitments: Advances to unconsolidated affiliates (3) 35,514 28,762 6,659 93 — — — Operating and Finance Lease Obligations: Ground leases 81,894 2,071 2,121 2,172 2,226 2,067 71,237 Total $ 4,373,983 $ 366,228 $ 401,114 $ 585,595 $ 895,471 $ 584,394 $ 1,541,181 __________ (1) Excludes amortization of premiums, discounts, debt issuance costs and/or purchase accounting adjustments.
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 fourth quarter of 2024, we sold a building in Raleigh for a sales price of $21.4 million and recorded a gain on disposition of property of $4.2 million.
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.
EQT Plaza is a 616,000 square foot non-core office building located in Pittsburgh’s CBD. We recorded no such impairment in 2023. General and administrative expenses were $1.0 million, or 2.2%, lower in 2024 as compared to 2023, primarily due to lower predevelopment cost write-offs, partially offset by higher incentive compensation.
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.
As a result, the unused capacity of our revolving credit facility as of December 31, 2024 and January 31, 2025 was $645.9 million and $630.9 million, respectively. 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 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.
The change in net cash used in investing activities in 2024 as compared to 2023 was primarily due to the redemption of our short-term preferred equity investment in the McKinney and Olive joint venture in 2023, contributions to the McKinney and Olive joint venture in 2024 to pay off a mortgage loan, contributions to the Granite Park Six joint venture in 2024 to pay down a construction loan, the acquisition of fee simple title to land underneath our Century Center assets in Atlanta in 2024 and higher investments in tenant improvements and deferred leasing costs in 2024.
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.
Results of Operations Comparison of 2024 to 2023 Rental and Other Revenues Rental and other revenues were $8.1 million, or 1.0%, lower in 2024 as compared to 2023 primarily due to lost revenue from property dispositions in Raleigh, which decreased rental and other revenues by $14.4 million.
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.
We expect these uses of cash for investing activities will be partially offset by proceeds from property dispositions in 2025. The change in net cash used in financing activities in 2024 as compared to 2023 was primarily due to higher net debt borrowings and proceeds from issuance of common stock in 2024.
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.
NOI was $11.5 million, or 2.0%, lower in 2024 as compared to 2023 primarily due to lost NOI from property dispositions and lower consolidated same property NOI, partially offset by NOI from recently completed development projects in Raleigh and Charlotte.
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.
We are in the work-placemaking business and believe that by creating exceptional environments and experiences, we can deliver greater value to our customers, their teammates and, in turn, our shareholders. By creating and 29 Table of Contents operating commute-worthy places, we support the growth and success of our customers and contribute to the vitality of our communities.
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.
Operating Expenses Rental property and other expenses were $3.4 million, or 1.3%, higher in 2024 as compared to 2023 primarily due to $8.3 million of higher consolidated same property operating expenses, partially offset by a $4.6 million decrease in operating expenses from property dispositions in Raleigh.
Equity in Earnings of Unconsolidated Affiliates Equity in earnings of unconsolidated affiliates was $0.4 million lower in 2023 as compared to 2022 primarily due to expenses on Granite Park Six, which was completed in the third quarter of 2023 but is not yet stabilized.
Equity in Earnings of Unconsolidated Affiliates Equity in earnings of unconsolidated affiliates was $3.1 million higher in 2024 as compared to 2023 primarily due to lower interest expense from our McKinney and Olive joint venture due to the payoff of a mortgage loan in the third quarter of 2024, higher income from our 2827 Peachtree joint venture, which was completed in the third quarter of 2023, and predevelopment cost write-offs on our Markel joint venture in 2023.
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.
Depreciation and amortization expense was $0.4 million, or 0.1%, lower in 2024 as compared to 2023 primarily due to property dispositions in Raleigh and fully amortized acquisition-related intangible assets.
Removed
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.
Added
Executive Summary Our vision is to be a leader in the evolution of commercial real estate for the benefit of our customers, our communities and those who invest with us. Our mission is to create environments and experiences that inspire our teammates and our customers to achieve more together.
Removed
We expect same property rental property and other expenses to be higher due to anticipated increases to contract services, property taxes and property insurance.
Added
This decrease was partially offset by higher consolidated same property revenues and recently completed development projects in Raleigh and Charlotte, which increased rental and other revenues by $4.0 million and $3.1 million, respectively.
Removed
Results of Operations Deconsolidation of Markel Markel is a joint venture in which we own a 50.0% interest that was consolidated as of December 31, 2022 because we controlled the major operating and financial policies of the entity.
Added
These decreases were partially offset by accelerated depreciation and amortization of tenant improvements and deferred leasing costs associated with the cancellation of a lease with a backfill customer for 110,000 square feet in the former Tivity building in Nashville that was originally scheduled to commence in the third quarter of 2024 and recently completed development projects in Raleigh and Charlotte.
Removed
Effective January 1, 2023, the agreement governing the joint venture was modified to require the consent of both partners for major operating and financial policies of the entity. As a result, Markel was deconsolidated effective January 1, 2023, and this joint venture is now accounted for using the equity method of accounting.
Added
We expect depreciation and amortization to be lower in 2025 as compared to 2024 due to property dispositions, fully amortized acquisition-related intangible assets and the accelerated costs relating to the Nashville lease cancellation in 2024. In 2024, we recorded an impairment charge of $24.6 million to lower the carrying amount of EQT Plaza in Pittsburgh to its estimated fair value.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed4 unchanged
Biggest changeAs 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.
Biggest changeAs of December 31, 2024, we had $454.0 million of variable rate debt outstanding not protected by interest rate hedge contracts, an $84.0 million increase as compared to December 31, 2023.
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.
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, 2024 would increase or decrease by $4.5 million.
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 interest rates had been 100 basis points higher, the aggregate fair market value of our fixed rate debt would have been $117.3 million lower. If interest rates had been 100 basis points lower, the aggregate fair market value of our fixed rate debt would have been $124.7 million higher.
As 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.
As of December 31, 2024, we had $2,854.0 million principal amount of fixed rate debt outstanding, a $6.9 million decrease as compared to December 31, 2023. The estimated aggregate fair market value of this debt was $2,659.4 million.

Other HIW 10-K year-over-year comparisons