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Item 7. Management’s Discussion and Analysis

2025-02-06 compared with 2024-02-07 · 169 added, 134 removed, 292 unchanged (51% of the section changed)

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We utilize our strong local operating platforms within each of our major markets to implement this strategy.

During 2023, we completed two financial transactions.

In April 2023, we entered into a floating-to-fixed interest rate swap on $200 million of our $400 million Term Loan with an original maturity of March 2025, fixing the underlying daily Secured Overnight Financing Rate ("SOFR") at 4.298% through maturity.

In May 2023, we refinanced the mortgage loan for our Medical Offices at Emory Hospital property in Atlanta, which is owned in a 50-50 joint venture with Emory University.

The new $83 million mortgage loan matures in June 2032 and has a fixed interest rate of 4.80%.

The proceeds were used to pay off the existing $62 million mortgage that matured on June 1, 2023.

We were able to complete the above financing transactions in a challenging debt market.

As the Federal Reserve has continued to work toward managing inflation, in part by raising short-term interest rates, we have been subject to increasing costs for a portion of our borrowed capital.

This is mitigated by our strategy of maintaining a relatively low-levered balance sheet;

however, the impact of potential higher inflation and interest rates, if any, is uncertain.

In September 2023, we sold a 10.4 acre land parcel outside of Atlanta for a gross sales price of $4.25 million and recorded a gain of $507,000.

During 2024, we completed two strategic acquisitions of operating properties and entered into one joint venture that acquired an operating property.

We acquired Vantage South End, a 639,000 square foot lifestyle office property in South End Charlotte, for a purchase price of $328.5 million and Sail Tower, a 804,000 square foot lifestyle office property in Downtown Austin, for a purchase price of $521.8 million.

We also acquired a 20% interest in a joint venture for $16.7 million that acquired Proscenium, a 525,000 square foot office property in Midtown Atlanta for a purchase price of $83.3 million.

Finally, we acquired multiple investments in real estate debt during the year including two mezzanine real estate loans for $27.2 million, which are subordinated to the first priority mortgage loans and secured by pledges of equity interests, and one mortgage loan at par for $138.0 million, which was secured by the Saint Ann Court office property in Dallas.

During 2024, we completed several financing and equity market activities to fund the previously mentioned acquisitions, pay off maturing debt, and maintain a strategic mix of floating and fixed rate debt.

We completed offerings of the 2032 Notes and the 2034 Notes, generating net proceeds of $397.9 million and $498.5 million, respectively, each after an original issue discount;

issued 6,000,000 shares of common stock at $31.01 per share, and 9,500,000 shares of common stock at $29.765 per share, generating proceeds of $186.1 million and $282.8 million, net of underwriting discounts, respectively;

repaid in full the $70.9 million remaining balance on the mortgage secured by our Domain 10 property in Austin;

and entered into a floating-to-fixed interest rate swap on the remaining $200 million of the $400 million Term Loan maturing March 2025, fixing the underlying SOFR rate at 4.6675%.

During 2024, we leased or renewed 2.0 million square feet of office space.

Our operating portfolio was 90.9% percent leased as of December 31, 2023 and the weighted average economic occupancy during the fourth quarter of 2023 was 87.6%.

Our office operating portfolio was 91.6% percent leased as of December 31, 2024 and the weighted average economic occupancy during the fourth quarter of 2024 was 89.2%.

The weighted average net effective rent per square foot, representing base rent excluding operating expense reimbursements and leasing costs, for new or renewed non-amenity leases with terms greater than one year signed in 2024, was $28.17 per square foot.

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Our same property net operating income for the year increased 5.1% on a straight-line basis and increased 4.8% on a cash-basis.

Even amidst economic headwinds, we believe the Sun Belt, and in particular the seven Sun Belt markets in which we own properties, will continue to outperform the broader office sector evidenced by a clear bifurcation between Sun Belt and Gateway market fundamentals.

We believe the Sun Belt, and in particular the seven Sun Belt markets in which we own properties, will continue to outperform the broader office sector evidenced by a clear bifurcation between Sun Belt and Gateway market fundamentals.

In addition, as the flight to quality trend accelerates among office users, we believe our trophy portfolio is well positioned to benefit from, and ultimately outperform in, the current real estate environment.

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• Economic life of the leasehold improvements is such that a significant residual value of the assets is expected to accrue to the benefit of the landlord at the end of the lease term.

If we determine the improvements are our assets, we capitalize the cost of the improvements and recognize depreciation expense associated with such improvements over the shorter of the estimated useful life or the term of the lease.

Any portion of our asset funded by a tenant is recorded as deferred revenue to be recognized in rental over the term of the lease on a straight-line basis.

If we determine the improvements are our assets, we capitalize the cost of the improvements and recognize depreciation expense associated with such improvements generally over the shorter of the estimated useful life or the term of the lease.

Any portion of our asset funded by a tenant is recorded as deferred revenue to be recognized in rental revenue over the term of the lease on a straight-line basis.

If the improvements are tenant assets, we defer the cost of improvements funded by us as a lease incentive asset and amortize it as a reduction of rental revenue over the term of the lease.

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The carrying values of our real estate assets are subject to several processes that involve a significant use of judgments and estimates.

Those processes primarily include (i) purchase price allocations for acquired assets, (ii) depreciation and amortization, and (iii) impairment.

Those processes primarily include (i) purchase price allocations for acquired assets, (ii) depreciation and

amortization, and (iii) impairment.

The judgments and estimates used in each of these processes have a material impact on our financial condition, results of operations, and cash flows.

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We evaluate all real estate acquisitions to determine if the transactions qualify as an acquisition of assets or of a business, including cases in which we acquire a pool of properties of varying property types in different markets.

For purposes of this review, we separate the assets acquired based on their unique and different risk characteristics, which may be by

property type, geographic concentration, or other factors.

For purposes of this review, we separate the assets acquired based on their unique and different risk characteristics, which may be by property type, geographic concentration, or other factors.

If we determine that substantially all of the fair value is concentrated in a single identifiable asset or group of similar assets, generally 90% of total fair value of assets acquired, we account for the acquisition as an acquisition of assets.

If we determine that there is no single or group of assets that make up substantially all of the fair value of assets acquired, we then evaluate whether the acquired set of assets includes an input and substantial process which create an output.

If we determine that an input and substantial process creating an output are present, we account for the acquisition as an acquisition of a business.

If we determine that there is no single asset or group of assets that make up substantially all of the fair value of gross assets acquired, we then evaluate whether the acquired set of assets includes an input and substantial process which create an output.

If we determine that an input and a substantive process that significantly contribute to the ability to create output are present, we account for the acquisition as an acquisition of a business.

We use considerable judgment in determining whether the acquisition of a pool of assets is an acquisition of assets or of a business.

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For acquisitions that are accounted for as an acquisition of an asset, we record the acquired tangible and intangible assets and assumed liabilities based on each asset and liability's relative fair value at the acquisition date to the total purchase price plus capitalized acquisition costs.

For acquisitions that are accounted for as an acquisition of a business, we record the acquired tangible and intangible assets and assumed liabilities based on each asset and liability's relative fair value at the acquisition date to the total purchase price.

For acquisitions that are accounted for as an acquisition of a business, we record the acquired tangible and intangible assets and assumed liabilities based on each asset and liability's fair value at the acquisition date to the total purchase price.

Fair value is based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates as appropriate.

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We identify an asset group based on the lowest level of identifiable cash flows and take into consideration such things as shared expenses and amenities.

This review includes our operating properties, properties under development, and land holdings (including any capitalized predevelopment costs).

includes our operating properties, properties under development, and land holdings (including any capitalized predevelopment costs).

The first step in this process is for us to determine whether an asset is considered to be held-for-investment or held-for-sale.

In order to be considered a real estate asset held-for-sale, we must, among other things, have the authority to commit to a plan to sell the asset in its current condition, have commenced the plan to sell the asset, and have determined that it is probable that the asset will sell within one year.

If we determine that an asset is held-for-sale, we record an impairment if the

fair value less costs to sell is less than the carrying amount.

If we determine that an asset is held-for-sale, we record an impairment if the fair value less costs to sell is less than the carrying amount.

All real estate assets not meeting the held-for-sale criteria are considered to be held-for-investment.

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During the predevelopment period of a probable project and the period in which a project is under construction, we capitalize all direct and indirect costs associated with planning, developing, and constructing the project.

Determination of what costs constitute direct and indirect project costs requires us, in some cases, to exercise judgment.

Determination of

what costs constitute direct and indirect project costs requires us, in some cases, to exercise judgment.

If we determine certain costs to be direct or indirect project costs, amounts recorded in projects under development on the balance sheet and amounts recorded in general and administrative and other expenses on the statements of operations could be materially different than if we determine these costs are not directly or indirectly associated with the project.

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Results of Operations For The Year Ended December 31, 2024

Net income available to common stockholders for the years ended 2023 and 2022 was $83.0 million and $166.8 million, respectively.

Net income available to common stockholders for the years ended December 31, 2024 and 2023 was $46.0 million and $83.0 million, respectively.

The decrease in net income is primarily attributable to increased depreciation expense.

We detail below material changes in the components of net income available to common stockholders for the year ended 2024 compared to 2023.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations" from our 2023 Annual Report on Form 10-K for a comparison of 2023 to 2022 financial results.

Rental Property Revenues and Rental Property Operating Expenses

Rental Property Revenues, Rental Property Operating Expenses, and Net Operating Income

The following results include the performance of our Same Property portfolio.

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Same Property amounts for the 2024 versus 2023 comparison are from properties that were stabilized and owned as of January 1, 2023 through December 31, 2024.

We use Net Operating Income ("NOI"), a non-GAAP financial measure, to assess the operating performance of our properties.

NOI is also widely used by industry analysts and investors to evaluate performance.

NOI, which is rental property revenues (excluding termination fees) less rental property operating expenses, excludes certain components from net income in order to provide results that are more closely related to a property's results of operations.

Certain items, such as interest expense, while included in net income, do not affect the operating performance of a real estate asset and are often incurred at the corporate level as opposed to the property level.

Management evaluates the performance of its property portfolio, in part, based on Net Operating Income ("NOI").

NOI represents rental property revenues, less termination fees, less rental property operating expenses.

NOI is not a measure of cash flows or operating results as measured by GAAP, is not indicative of cash available to fund cash needs, and should not be considered an alternative to cash flows as a measure of liquidity.

All companies may not calculate NOI in the same manner.

We consider NOI to be an appropriate supplemental measure to net income as it helps both management and investors understand the core operations of our operating assets.

NOI excludes corporate general and administrative expenses, interest expense, depreciation and amortization, impairments, gains/losses on sales of real estate, and other non-operating items.

As a result, we use only those income and expense items that are incurred at the property level to evaluate a property's performance.

Depreciation, amortization, gains or losses on sales of depreciated investment assets, and impairment are also excluded from NOI.

Same Property NOI allows analysts, investors, and management to analyze continuing operations and evaluate the growth trend of our portfolio.

The following table reconciles net income to consolidated NOI for each of periods presented ($ in thousands):

Year Ended December 31,

Net Income $ 46,581 $ 83,816

Fee income (1,761) (1,373)

Termination fee income (3,405) (7,343)

Other income (7,224) (2,454)

General and administrative expenses 36,566 32,331

Interest expense 122,476 105,463

Depreciation and amortization 365,045 314,897

Reimbursed expenses 634 608

Other expenses 2,097 2,128

Loss (income) from unconsolidated joint ventures 2,796 (2,299)

Gain on investment property transactions (98) (504)

Net Operating Income $ 563,707 $ 525,270

Consolidated rental property revenues, rental property operating expenses, and NOI changed between the 2024 and 2023 periods as follows ($ in thousands):

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Total NOI $ 563,707 $ 525,270 $ 38,437 7.3 %

Same Property Revenues increased $25.5 million, or 3.6%, between 2023 and 2022 primarily due to an increase in economic occupancy at our Domain and Buckhead Plaza office properties and related increases in revenues recognized from tenant-funded improvements owned by us.

Our tenants are increasingly funding capital improvements at our buildings in

excess of their tenant improvement allowances as they trend toward highly amenitized and creative office spaces to attract employees back into the office.

Same Property Operating Expenses increased $2.1 million, or 0.8%, between 2023 and 2022 primarily due to an increase in economic occupancy at our Domain and Buckhead Plaza office properties and increased operating expenses at our 3350 Peachtree office property as we completed a partial redevelopment of the property in 2023.

Non-Same Property Revenues and operating expenses increased between 2023 and 2022 primarily due to operations at our 100 Mill and Heights Union operating properties as they reached stabilization in 2022 and commencement of operations following a full building redevelopment project at our Promenade Central operating property in November 2022.

These increases are partially offset by a decrease in revenues related to the write-down of net assets associated with SVB Financial Group's ("SVB Financial") bankruptcy and the impact of the rejection in bankruptcy of SVB Financial's lease at our Hayden Ferry 1 operating property.

For more information related to this write-down, see note 13 to the consolidated financial statements in this Form 10-K.

Hayden Ferry 1 was moved to Non-Same Property during 2023 due to the removal of the property from operations for a full building redevelopment in the fourth quarter of 2023.

Termination Fee Income increased $4.9 million, or 198.0%, between 2023 and 2022 and is recorded based on the timing of termination notices or negotiated agreements and expected move outs.

The increase in termination fee income is driven by an increase in negotiated early terminations that were largely contemporaneous with the timing of leases executed with replacement tenants for the same leased space.

Fee income decreased $4.7 million, or 77.6%, between 2023 and 2022 primarily due to the completion of the Norfolk Southern transactions during the third quarter of 2022.

The Norfolk Southern transactions are described in further detail in note 13 to the consolidated financial statements in this Form 10-K.

Same Property NOI represents Net Operating Income for those office properties that were stabilized and owned by us for the entirety of the 2023 and 2024 reporting periods presented.

Same Property NOI allows analysts, investors, and management to analyze continuing operations and evaluate the growth trend of the Company's portfolio.

Same Property Rental Property Revenues and NOI increased between 2024 and 2023 primarily due to an increase in economic occupancy at our BriarLake Plaza, San Jacinto Center, and Promenade Tower office properties and increases in revenues recognized from tenant funded improvements owned by us.

In addition, parking revenue from our Same Property portfolio increased between 2024 and 2023.

Non-Same Property Rental Property Revenues, Rental Property Operating Expenses, and NOI increased between 2024 and 2023 primarily due to the commencement of operations at our Domain 9 building in the first quarter of 2024, increased economic occupancy at our recently redeveloped Promenade Central operating property, and the acquisitions of Vantage South End and Sail Tower in December 2024.

This increase is partially offset by a full building redevelopment at our Hayden Ferry 1 building, which began in the fourth quarter of 2023.

The following table details NOI from properties aggregated by market:

Year Ended December 31,

$ Change % Change

Atlanta $ 194,837 $ 188,451 $ 6,386 3.4 %

Austin 191,758 170,103 21,655 12.7 %

Tampa 49,383 46,933 2,450 5.2 %

Phoenix 44,597 44,177 420 1.0 %

Charlotte 42,164 43,124 (960) (2.2) %

Dallas 13,937 13,074 863 6.6 %

Other (1) 22,363 14,666 7,697 52.5 %

Office NOI 559,039 520,528 38,511 7.4 %

Other Non-Office (2) 4,668 4,742 (74)

Total NOI $ 563,707 $ 525,270 $ 38,437

(1) Represents a non-core office property in Houston.

(2) Includes operations at land sites held for future development as well as a parking garage in Charlotte.

NOI for the Austin market increased $21.7 million, or 12.7%, between 2024 and 2023 primarily due to the commencement of operations at our Domain 9 building in the first quarter of 2024 as well as an increase in revenues recognized from tenant funded improvements owned by us.

NOI from Other markets increased $7.7 million, or 52.5%, between 2024 and 2023 primarily due to the an increase in economic occupancy at our BriarLake Plaza office property in Houston.

Other income increased $4.8 million, or 194.4%, between 2024 and 2023 primarily due to the interest income from the two mezzanine loans and the Saint Ann Court mortgage loan acquired in 2024.

These transactions are described in further detail in note 5 to the consolidated financial statements in this Form 10-K.

General and Administrative Expenses

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Interest Expense

Interest expense, net of amounts capitalized, increased $32.9 million, or 45.4%, between 2023 and 2022 primarily due to increases in the interest rates on our variable rate debt which rose from a weighted average rate of 5.43% at December 31, 2022 to 6.39% as of December 31, 2023.

In addition, the issuance of the 2022 Term Loan in October 2022, refinancing of the mortgage loans on our Terminus operating properties in December 2022, and a higher average balance on our line of credit in 2023 resulted in increased interest expenses in 2023.

Interest expense, net of amounts capitalized, increased $17.0 million, or 16.1%, between 2024 and 2023.

T his increase is primarily due to the issuances of the $500 million and $400 million public unsecured senior notes in August and December of 2024, respectively, and decreases in capitalized interest as we finished construction on the core building and began operations at our Domain 9 building in the first quarter of 2024.

Depreciation and Amortization

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Total Depreciation and Amortization $ 365,045 $ 314,897 $ 50,148 15.9 %

Same Property depreciation and amortization increased between 2023 and 2022 primarily due to the timing of accelerated depreciation related to the shortening of estimated useful lives of lease-related assets, including tenant improvements, resulting from early termination of leases and an increase in tenant improvements being placed into service.

Non-Same Property depreciation and amortization increased between 2023 and 2022 primarily due to increased depreciation at our 100 Mill and Heights Union operating properties as they reached stabilization in 2022 and at our Promenade Central operating property following a full building redevelopment project completed in November 2022.

Same Property depreciation and amortization increased between 2024 and 2023 primarily due to an increase of assets in service during the current period, primarily from tenant improvements.

Non-Same Property depreciation and amortization increased between 2024 and 2023 primarily due to completion of development at Domain 9 and a full building redevelopment at Promenade Central, the Sail Tower Acquisition and the Vantage Acquisition in December 2024, as well as changes in the estimated useful lives of buildings and improvements at some of our operating properties.

These increases were partially offset by our suspension of depreciation related to our full building redevelopment at our Hayden Ferry 1 building, which began in the fourth quarter of 2023.

Income and Net Operating Income from Unconsolidated Joint Ventures

Income from unconsolidated joint ventures consisted of the following in 2023 and 2022 ($ in thousands):

Income (loss) from unconsolidated joint ventures consisted of the following in 2024 and 2023 ($ in thousands):

Year Ended December 31,

2024 2023 $ Change % Change

Income from unconsolidated joint ventures $ 2,299 $ 7,700 $ (5,401) (70.1) %

Income (loss) from unconsolidated joint ventures $ (2,796) $ 2,299 $ (5,095) (221.6) %

Depreciation and amortization 4,745 1,931 2,814 145.7 %

Gain on sale of undepreciated property — (4,478) 4,478 100.0 %

Gain on sale of depreciated investment property, net — (81) 81 100.0 %

Interest expense 4,484 1,676 2,808 167.5 %

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Net operating income from unconsolidated joint ventures $ 6,617 $ 5,824 $ 793 13.6 %

Income from unconsolidated joint ventures decreased between 2023 and 2022 primarily due to gain on the sale of a land parcel by a joint venture in 2022 and decreases in income and depreciation and amortization as a result of the sale of our interest in the Carolina Square joint venture in September 2022.

Non-Same Property NOI from unconsolidated joint ventures decreased between 2023 and 2022 primarily due to the sale of our interest in the Carolina Square joint venture in September 2022.

Gain on Sales of Investments in Unconsolidated Joint Ventures and Investment Properties

In September 2022, we sold our 50% joint venture interest in Carolina Square Holdings LP ("Carolina Square") for a gross sales price of $105.0 million and recognized a gain of $56.3 million on the sale.

The change in income (loss) from unconsolidated joint ventures was driven by increases in unconsolidated depreciation and amortization as well as unconsolidated interest expense.

Unconsolidated depreciation and amortization expense increased between 2024 and 2023 primarily due to development activities winding down and initial operations beginning at our joint venture's Neuhoff property in the fourth quarter of 2023 and the acquisition of Proscenium in August 2024.

Unconsolidated interest expense increased between 2024 and 2023 primarily due to a reduction in capitalized interest at our Neuhoff joint venture as portions of its development project were completed in 2024 as well as the June 2023 refinance of the mortgage on the property in our Crawford Long joint venture.

Non-Same Property NOI from unconsolidated joint ventures increased between 2024 and 2023 primarily due to the acquisition of Proscenium in August 2024.

Funds from Operations

The table below shows Funds from Operations Available to Common Stockholders (“FFO”), a non-GAAP financial measure, and the related reconciliation from net income available to common stockholders.

We calculate FFO as defined by the National Association of Real Estate Investment Trusts ("Nareit"), which is net income (loss) available to common stockholders (computed in accordance with GAAP), excluding extraordinary items, cumulative effect of change in accounting principle, and gains or losses from sales of depreciable real property, plus depreciation and amortization of real estate assets, impairment on depreciable investment property and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

We calculate FFO as defined by the National Association of Real Estate Investment Trusts ("Nareit"), which is net income (loss) available to common stockholders (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from sales of depreciable property, gains and losses from changes in control and impairment of depreciable real estate, plus depreciation and amortization of real estate assets, impairment on depreciable investment property, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

FFO is used by industry analysts and investors as a supplemental measure of an equity REIT’s operating performance.

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Noncontrolling interest related to unitholders 8 25 — 14 25 —

Potentially dilutive common shares — 2 — — — —

Conversion of unvested restricted stock units — 575 — — 301 —

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Consolidated properties (101) — — 2 — —

Share of unconsolidated joint ventures — — — (81) — —

Investments in unconsolidated joint ventures — — — (56,267) — (0.37)

Funds From Operations $ 414,092 154,015 $ 2.69 $ 398,289 152,040 $ 2.62

Net Operating Income

Company management evaluates the performance of its property portfolio in part based on NOI.

NOI represents rental property revenues (excluding termination fees) less rental property operating expenses.

All companies may not calculate NOI in the same manner.

The Company considers NOI to be an appropriate supplemental measure to net income as it helps both management and investors understand the core operations of the Company's operating assets.

NOI excludes corporate general and administrative expenses, interest expense, depreciation and amortization, impairments, gains/loss on sales of real estate, and other non-operating items.

The following table reconciles net income to NOI for consolidated properties for each period ($ in thousands):

Year Ended December 31,

Net Income $ 83,816 $ 167,445

Fee income (1,373) (6,119)

Termination fee income (7,343) (2,464)

Other income (2,454) (2,660)

General and administrative expenses 32,331 28,319

Interest expense 105,463 72,537

Depreciation and amortization 314,897 295,587

Reimbursed expenses 608 2,024

Other expenses 2,128 2,134

Income from unconsolidated joint ventures (2,299) (7,700)

Gain on sale of investment in unconsolidated joint ventures — (56,267)

Loss (gain) on investment property transactions (504) 9

Gain on extinguishment of debt — (169)

Net Operating Income $ 525,270 $ 492,676

Liquidity and Capital Resources

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Unsecured credit facility $ 112,332 $ — $ 112,332 $ — $ —

Unsecured senior notes 1,000,000 — 250,000 475,000 275,000

Public senior unsecured notes 900,000 — — — 900,000

Privately placed senior unsecured notes 1,000,000 250,000 225,000 525,000 —

Term loans 650,000 — 650,000 — —

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$ 111,764 $ 95,771 $ 15,993 $ — $ —

Unfunded commitments on investments in real estate debt 7,781 7,781 — — —

Total commitments $ 119,545 $ 103,552 $ 15,993 $ — $ —

(1) Amounts presented above assume we exercise all available extension options.

(1) Amounts presented assume we exercise all available extension options.

(2) Interest on variable rate obligations is based on balances and effective rates as of December 31, 2024.

Credit Facility

Our $1 billion Credit Facility matures on April 30, 2027.

The Credit Facility contains financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 1.75x;

On May 2, 2022, we entered into a Fifth Amended and Restated Credit Agreement (the "Credit Facility") under which we may borrow up to $1 billion if certain conditions are satisfied.

The Credit Facility contains financial covenants that require, among other things, the maintenance of unencumbered interest coverage ratio of at least 1.75x;

a fixed charge coverage ratio of at least 1.50x;

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and an overall leverage ratio of no more than 60%.

We are in compliance with all covenants of the Credit Facility.

The interest rate applicable to the Credit Facility varies according to our leverage ratio, and may, at our election, be determined based on either (1) the Daily SOFR or Term SOFR, plus a SOFR adjustment of 0.10% ("Adjusted SOFR") and a spread of between 0.90% and 1.40%, or (2) the greater of (i) Bank of America's prime rate, (ii) the federal funds rate plus 0.50%, (iii) Term SOFR, plus a SOFR adjustment of 0.10%, plus 1.00%, or (iv) 1.00%, plus a spread of between 0.00% and 0.40%, based on leverage.

In addition to the interest rate, the Credit Facility is also subject to a facility fee of 0.15% to 0.30%, depending on leverage, on the entire $1 billion capacity.

We have elected to determine the interest rate based on the Daily SOFR, plus a SOFR adjustment of 0.10% and a spread of between 0.90% and 1.40%.

At December 31, 2023, the Credit Facility's spread over Adjusted SOFR was 0.90%, and the facility fee spread was 0.15%.

The Credit Facility matures on April 30, 2027.

The interest rate applicable to the Credit Facility varies according to our leverage ratio and may, at our election, be determined based on either (1) the Daily SOFR or Term SOFR, plus a SOFR adjustment of 0.10% ("Adjusted SOFR") and a spread of between 0.725% and 1.40%, or (2) the greater of (i) Bank of America's prime rate, (ii) the federal funds rate plus 0.50%, (iii) Term SOFR, plus a SOFR adjustment of 0.10%, and 1.00%, or (iv) 1.00%, plus a spread of between 0.00% and 0.40%, based on leverage.

In addition to the interest rate, the Credit Facility is also subject to an annual facility fee of 0.125% to 0.30%, depending on our credit rating and leverage ratio, on the entire $1 billion capacity.

There can be no assurance that we will maintain any particular rating in the future and if our credit ratings decrease, then we may be subject to higher applicable spreads.

In April 2024, we notified the administrative agent of the Credit Facility of our receipt of corporate investment grade ratings.

These ratings reduced the Credit Facility's Adjusted SOFR spread and facility fee range effective April 17, 2024.

Changes in our investment grade ratings may result in additional adjustments to the applicable spread and facility fee.

Prior to April 17, 2024, the applicable spread was between 0.90% and 1.40% and the facility fee range was 0.15% to 0.30%, depending on leverage.

At December 31, 2024, the Credit Facility's interest rate spread over Adjusted SOFR was 0.775%, and the facility fee spread was 0.15%.

The amount that we may draw under the Credit Facility is a defined calculation based on our unencumbered assets and other factors.

The total available borrowing capacity under the Credit Facility was $887.7 million at December 31, 2024.

The amounts outstanding under the Credit Facility may be accelerated upon the occurrence of any events of default.

On October 3, 2022, we entered into the Delayed Draw Term Loan Agreement (the "2022 Term Loan") and borrowed the full $400 million available under the loan.

The loan matures on March 3, 2025 with four consecutive options to extend the maturity date for an additional six months each.

The interest rate provisions are the same as the 2021 Term Loan, and the covenants are the same as the Credit Facility.

On April 19, 2023, we entered into a floating-to-fixed rate swap with respect to $200 million of the $400 million 2022 Term Loan through the maturity date of March 3, 2025.

This swap fixed the underlying SOFR rate at 4.298% (see note 9 of the Notes to Consolidated Financial Statements within this Form 10-K).

Any amounts outstanding under the Credit Facility may be accelerated upon the occurrence of any events of default.

On October 3, 2022, we entered into a Delayed Draw Term Loan Agreement (the "2022 Term Loan") and borrowed the full $400 million available under the loan.

The loan had an initial maturity of March 3, 2025 with four consecutive options to extend the maturity date for an additional six months each.

In December 2024, we exercised the first of the four six month extension options, extending the maturity date to September 3, 2025.

Under the 2022 Term Loan the interest rate applicable varies according to our credit rating and leverage ratio and may, at our election, be determined based on either (1) the Daily SOFR or Term SOFR, plus a SOFR adjustment of 0.10% ("Adjusted SOFR") and a spread of between 0.80% and 1.60%, or (2) the greater of (i) Bank of America's prime rate, (ii) the federal funds rate plus 0.50%, (iii) Term SOFR, plus a SOFR adjustment of 0.10%, and 1.00%, (iv) or 1.00%, plus a spread of between 0.00% and 0.65%, based on leverage.

There can be no assurance that we will maintain any particular rating in the future and if our credit ratings decrease, then we may be subject to higher applicable spreads.

The covenants under the 2022 Term Loan are the same as the Credit Facility.

At December 31, 2024, the spread over the underlying SOFR rates was 0.85% for the 2022 Term Loan.

On April 19, 2023, we entered into a floating-to-fixed rate swap with respect to $200 million of the $400 million 2022 Term Loan through the initial maturity date of March 3, 2025.

This swap fixed the underlying SOFR rate at 4.298%.

On January 26, 2024, we entered into a floating-to-fixed rate swap with respect to the remaining $200 million of the $400 million 2022 Term Loan through the initial maturity date of March 3, 2025.

This swap fixed the underlying SOFR rate at 4.6675% (see note 10 to the consolidated financial statements).

These two swaps fix the underlying SOFR rate for the full $400 million at a weighted average of 4.483%.

On June 28, 2021, we entered into an Amended and Restated Term Loan Agreement (the "2021 Term Loan") that amended the former term loan agreement.

Under the 2021 Term Loan, we borrowed $350 million that matures on August 30, 2024 with four consecutive options to extend the maturity date for an additional 180 days each.

Under the 2021 Term Loan, we have borrowed $350 million with an initial maturity of August 30, 2024 with four consecutive options to extend the maturity date for an additional 180 days each.

In August 2024, we paid down $100 million of the $350 million outstanding and exercised the first of our four 180 day extension options, extending the maturity date on the remaining $250 million to February 26, 2025.

In December 2024, we exercised the second of our four 180 day extension options, extending the maturity date on the remaining $250 million to August 25, 2025.

On September 19, 2022, we entered into the First Amendment to the 2021 Term Loan.

This amendment aligns covenants and available interest rates, including the addition of SOFR, to that of the Credit Facility.

Under the terms of this First Amendment, the interest rate applicable to the 2021 Term Loan varies according to our leverage ratio and may, at our election, be determined based on either (1) the Daily SOFR or Term SOFR, plus a SOFR adjustment of 0.10% ("Adjusted SOFR") and a spread of between 1.05% and 1.65%, or (2) the greater of (i) Bank of America's prime rate, (ii) the federal funds rate plus 0.50%, (iii) Term SOFR, plus a SOFR adjustment of 0.10%, plus 1.00%, or (iv) 1.00%, plus a spread of between 0.05% and 0.65%, based on leverage.

On September 27, 2022, we entered into a floating-to-fixed interest rate swap with respect to the $350 million 2021 Term Loan through the maturity date of August 30, 2024.

This swap fixed the underlying SOFR rate at 4.234% (see note 9 of the Notes to Consolidated Financial Statements within this Form 10-K).

We have elected to determine the interest rate based on the Daily SOFR, plus a SOFR adjustment of 0.10% and a spread of between 0.90% and 1.40%.

At December 31, 2023, the Term Loans' spread over the underlying Adjusted SOFR rates was 1.05%.

Under the terms of this First Amendment the interest rate applicable to the 2021 Term Loan varies according to our credit rating and leverage ratio and may, at our election, be determined based on either (1) the Daily SOFR or Term SOFR, plus a SOFR adjustment of 0.10% ("Adjusted SOFR") and a spread of between 0.85% and 1.65%, or (2) the greater of (i) Bank of America's prime rate, (ii) the federal funds rate plus 0.50%, (iii) Term SOFR, plus a SOFR adjustment of 0.10%, and 1.00%, (iv) or 1.00%, plus a spread of between 0.00% and 0.65%, based on leverage.

At December 31, 2024, the spread over the underlying SOFR rates was 1.00% for the 2021 Term Loan.

On September 27, 2022, we entered into a floating-to-fixed interest rate swap with respect to the $350 million 2021 Term Loan through the initial maturity date of August 30, 2024.

This swap effectively fixed the underlying SOFR rate at 4.234% (see note 10 to the consolidated financial statements).

This swap has expired, and the loan has reverted to the underlying variable SOFR rate.

In April 2024, we notified the administrative agent of the 2022 Term Loan and 2021 Term Loan of our receipt of corporate investment grade ratings received.

These ratings reduced the Adjusted SOFR spread range, effective April 17, 2024.

Changes in our investment grade ratings may result in additional adjustments to the applicable spread in the future.

Prior to April 17, 2024, the applicable spread was between 1.05% and 1.65% for both the 2022 Term Loan and 2021 Term Loan, depending on leverage.

Unsecured Senior Notes

At December 31, 2023, we had $1 billion in unsecured senior notes outstanding that were issued in five tranches with maturity dates that range from 2025 to 2029.

The weighted average fixed interest rates on these notes is 3.91%.

In December 2024, CPLP issued $400 million in aggregate principal amount of 5.375% senior unsecured notes.

Upon issuance of the 2032 Notes, CPLP received net proceeds of $397.9 million dollars after an original issue discount of $2.1 million resulting in an effective interest rate is 5.464%.

The 2032 Notes are fully and unconditionally guaranteed by us.

The proceeds were used to fund part of the purchase prices for the Sail Tower Acquisition and the Vantage Acquisition in December 2024.

The 2032 Notes had issuance costs of $3.6 million and mature on February 15, 2032.

In August 2024, CPLP issued $500 million in aggregate principal amount of 5.875% senior unsecured notes.

Upon issuance of the 2034 Notes, CPLP received net proceeds of $498.5 million dollars after an original issue discount of $1.5 million resulting in an effective interest rate is 5.912%.

The 2034 Notes are fully and unconditionally guaranteed by us.

The proceeds were used primarily to repay $373.8 million outstanding on the Credit Facility and repay $100 million of the $350 million outstanding on the 2021 Term Loan.

The 2034 Notes had issuance costs of $5.3 million and mature on October 1, 2034.

The 2032 Notes and the 2034 Notes are sometimes referred to herein as the "public senior unsecured notes."

The public senior unsecured notes are subject to certain typical covenants that, subject to certain exceptions, include (a) a limitation on the ability of the Company and CPLP to, among other things, incur additional secured and unsecured indebtedness;

(b) a limitation on the ability of the Company and CPLP to merge, consolidate, sell, lease or otherwise dispose of their properties and assets substantially as an entirety;

and (c) a requirement that the Company maintain a pool of unencumbered assets.

To avoid any such limitations, these covenants require, among other things, maintaining the following financial metrics as defined in the agreement:

unencumbered debt ratio of at least 150%;

an EBITDA to debt service ratio of at least 1.50x;

a secured leverage ratio of no more than 40%;

and an overall leverage ratio of no more than 60%.

At December 31, 2024, we had $1.9 billion aggregate principal amount of unsecured senior notes outstanding, including $1 billion outstanding principal amount of senior unsecured notes issued in a private placement of five tranches.

These unsecured senior notes have maturity dates that range from 2025 to 2034 and the weighted average fixed interest rates on these notes is 4.74%.

The senior unsecured notes issued in the private placement are sometimes referred to herein as the privately placed senior unsecured notes.

The unsecured senior notes contain financial covenants that are consistent with those of our Credit Facility, with the exception of a secured leverage ratio of no more than 40%.

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Secured Mortgage Notes

In December 2022, we refinanced the mortgages on our two Terminus properties in Atlanta with the existing lender.

Under the new non-cross-collateralized mortgages, the maturities were extended from January 2023 to January 2031, the combined principal increased to $221.0 million from $178.9 million.

The interest rate for each mortgage increased to 6.34%,

from a combined weighted average interest rate of 4.67%.

These mortgages are neither cross-collateralized nor cross-defaulted.

In October 2022, we paid off, in full, our Legacy Union One and Promenade Tower mortgages with remaining principal balances of $66.0 million and $86.3 million, respectively.

These mortgages had interest rates of 4.24% and 4.27%, respectively.

As of December 31, 2023, we had $527.0 million outstanding on five non-recourse mortgage notes with a weighted average interest rate of 4.68%.

In November 2024, we repaid, in full, our Domain 10 mortgage with a remaining principal balance of $70.9 million.

This mortgage had an interest rate of 3.75%.

As of December 31, 2024, we had $447.9 million outstanding on four non-recourse mortgage notes with a weighted average interest rate of 4.85%.

All interest rates on the secured mortgage notes are fixed.

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Our existing mortgage debt is solely non-recourse, fixed-rate mortgage notes secured by various real estate assets.

We expect to either refinance our non-recourse mortgage loans at maturity or repay the mortgage loans with other capital sources, includin g ou r credit facility, unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, the issuance of preferred stock, or the issuance of units of CPLP.

We expect to either refinance our non-recourse mortgage loans at maturity or repay the mortgage loans with other capital sources, includin g ou r credit facility, public and private unsecured debt, non-recourse mortgages, construction loans, the sale of assets,

joint venture equity, the issuance of common stock, the issuance of preferred stock, or the issuance of units of CPLP.

Many of our non-recourse mortgages contain covenants which, if not satisfied, could result in acceleration of the maturity of the debt.

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Net cash used in investing activities (1,305,402) (295,735) (1,009,667)

Net cash used in financing activities (71,725) (35,690) (36,035)

Net cash provided by (used in) financing activities 906,471 (71,725) 978,196

The reasons for significant increases and decreases in cash flows between the periods are as follows:

Cash Flows from Operating Activities.

Cash provided by operating activities increased $3.2 million between 2023 and 2022 primarily due to the timing of payments of operating liabilities and receipt of payments from tenants.

Cash provided by operating activities increased $31.9 million between 2024 and 2023 primarily due to increased economic occupancy and the end of rent abatement periods at our 100 Mill, San Jacinto Center, and Tempe Gateway office properties;

the commencement of operations at our Domain 9 office property in 2024;

the timing and amount of interest payments;

and the timing of property tax payments and the timing of receipt of rent payments from tenants;

all partially offset by the suspension of operations related to our full building redevelopment of Hayden Ferry 1 that began in the fourth quarter of 2023.

Cash Flows from Investing Activities.

Cash used in investing activities decreased $38.8 million between 2023 and 2022.

Cash used in investing activities was lower in 2023 primarily due to decreases in capital expenditures driven by the following:

the Domain 9 development project nearing final phases of construction at the end of 2023;

significant redevelopment activities in 2022 being completed in 2023;

decreases in cash paid for building improvements;

offset by increases in expenditures for tenant improvements;

and other leasing costs in 2023.

The net decrease in capital expenditures is in addition to a decrease in contributions to joint ventures as development activities at our Neuhoff project were increasingly funded by the joint venture's construction loan in 2023.

These decreases are partially offset by a decrease in cash provided in 2023 related to the 2022 sale of our interest in Carolina Square.

Cash used in investing activities increased $1.0 billion between 2024 and 2023.

Cash used in investing activities was higher in 2024 primarily due to the Sail Tower Acquisition and the Vantage Acquisition for an aggregate price of $838.0 million in December 2024 and the acquisitions of investments in real estate debt for $167.2 million during 2024.

Cash Flows from Financing Activities.

Cash flows used in financing activities increased $36.0 million between 2023 and 2022.

The increase in cash used is primarily driven by a reduction in proceeds from the 2022 issuance of common stock and issuance of the 2022 Term Loan.

This increase is partially offset by a decrease in cash used in repayments of mortgage notes and a decrease in net repayments on our Credit Facility in 2023.

Cash flows provided by financing activities increased $978.2 million between 2024 and 2023.

The increase in cash provided by financing activities is primarily driven by the proceeds from the 2024 issuances of common stock and public unsecured senior notes.

This increase is partially offset by cash used in repayments of the Domain 10 mortgage note, $100 million of the $350 million 2021 Term Loan, and an increase in net repayments on our Credit Facility in 2024.

Capital Expenditures.

We incur capital expenditures related to our real estate assets that include the acquisition of properties, the development of new properties, the redevelopment of existing or newly purchased properties, and direct leasing costs for new or replacement tenants.

Capital expenditures for assets we develop or acquire and then hold and operate are included in the property acquisition, development, and tenant asset expenditures line item within investing activities on the statements of cash flows.

We incur capital expenditures for the development of new properties, the redevelopment of existing or newly purchased properties, building improvements, direct leasing costs for new or replacement tenants, and capitalized interest and salaries.

Components of expenditures included in this line item for the years ended December 31, 2024 and 2023 are as follows ($ in thousands):

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Capitalized interest and salaries 14,881 20,888

Total property acquisition, development and tenant asset expenditures $ 279,519 $ 342,241

Total capital expenditures $ 252,731 $ 279,519

(1) Includes initial leasing costs.

Capital expenditures decreased $62.7 million between 2023 and 2022 primarily due to decreased development activities at our Domain 9 property as it nears final stages of development and the significant redevelopment projects in 2022 being completed in 2023.

This decrease is partially offset by an increase in our capital expenditures related to leasing costs which include tenant improvements and other leasing costs (primarily contingent commissions) and are a function of the number, size, and timing of occupancy of executed new leases or renewals of existing leases.

Capital expenditures decreased $26.8 million between 2024 and 2023 primarily due to decre ases in projects under development activities and related capitalized interest and salaries due to the Domain 9 development commencing initial operations in the first quarter of 2024.

These decreases are partially offset by the following:

(i) increased spending on operating property redevelopments compared to 2023 with the commencement of a full building redevelopment of Hayden Ferry 1 in the fourth quarter of 2023, partially offset by the renovations at 3350 Peachtree and Promenade Central which were substantially completed in 2023, and (ii) an increased spending on building improvements.

The weighted average leasing costs on a per square foot basis for leases signed during 2024 and 2023 were as follows:

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Expansion leases $13.16 $6.12

Total $10.59 $10.69

All signed leases $11.60 $10.59

The amounts of leasing costs on a per square foot basis vary by lease and by market.

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We funded these dividends with cash provided by operating activities.

We expect to fund our future quarterly common dividends with cash provided by operating activities.

We also expect to fund our future quarterly common dividends with cash provided by operating activities.

Proceeds from investment property sales, distributions from unconsolidated joint ventures, and indebtedness will be used, if necessary.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis