HIGHWOODS PROPERTIES, INC. 10-K

ITEM 9A. CONTROLS AND PROCEDURES General The purpose of this section is to discuss our controls and procedures. The statements in this section represent the conclusions of Theodore J. Klinck, the Company’s President and Chief Executive Officer (“CEO”), and Mark F. Mulhern, the Company’s Executive Vice President and Chief Financial Officer (“CFO”). The CEO and CFO evaluations of our controls and procedures include a review of the controls’ objectives and design, the controls’ implementation by us and the effect of the controls on the information generated for use in this Annual Report. We seek to identify data errors, control problems or acts of fraud and confirm that appropriate corrective action, including process improvements, is undertaken. Our controls and procedures are also evaluated on an ongoing basis by or through the following: • activities undertaken and reports issued by employees responsible for testing our internal control over financial reporting; • quarterly sub-certifications by representatives from appropriate business and accounting functions to support the CEO’s and CFO’s evaluations of our controls and procedures; • other personnel in our finance and accounting organization; • members of our internal disclosure committee; and • members of the audit committee of the Company’s Board of Directors. We do not expect that our controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of controls and procedures must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Management’s Annual Report on the Company’s Internal Control Over Financial Reporting The Company’s management is required to establish and maintain internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect transactions and dispositions of assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements. Under the supervision of the Company’s CEO and CFO, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting at December 31, 2020 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 49 Table of Contents We have concluded that, at December 31, 2020, the Company’s internal control over financial reporting was effective. Deloitte & Touche LLP, our independent registered public accounting firm, has issued their attestation report, which is included below, on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. Management’s Annual Report on the Operating Partnership’s Internal Control Over Financial Reporting The Operating Partnership is also required to establish and maintain internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Under the supervision of the Company’s CEO and CFO, we conducted an evaluation of the effectiveness of the Operating Partnership’s internal control over financial reporting at December 31, 2020 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have concluded that, as of December 31, 2020, the Operating Partnership’s internal control over financial reporting was effective. SEC rules do not require us to obtain an attestation report of Deloitte & Touche LLP on the effectiveness of the Operating Partnership’s internal control over financial reporting. 50 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Highwoods Properties, Inc.: Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Highwoods Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020 of the Company and our report dated February 9, 2021 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on the Company’s Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Raleigh, North Carolina February 9, 2021 51 Table of Contents Changes in Internal Control Over Financial Reporting There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There were also no changes in the Operating Partnership’s internal control over financial reporting during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting. Disclosure Controls and Procedures SEC rules require us to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our annual and periodic reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As defined in Rule 13a-15(e) under the Exchange Act, disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management, including the Company’s CEO and CFO, to allow for timely decisions regarding required disclosure. The Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective at the end of the period covered by this Annual Report. The Company’s CEO and CFO also concluded that the Operating Partnership’s disclosure controls and procedures were effective at the end of the period covered by this Annual Report. ITEM 9B. OTHER INFORMATION None. 52 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information about the Company’s executive officers and directors, the code of ethics that applies to the Company’s chief executive officer and senior financial officers, which is posted on our website, and certain corporate governance 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 11, 2021. No changes have been made to the procedures by which stockholders may recommend nominees to the Company’s board of directors since the 2020 annual meeting, which was held on May 12, 2020. See Item X in Part I of this Annual Report for biographical information regarding the Company’s executive officers. The Company is the sole general partner of the Operating Partnership. ITEM 11. EXECUTIVE COMPENSATION Information about the compensation of the Company’s directors and executive officers 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 11, 2021. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information about the beneficial ownership of Common Stock and the Company’s equity compensation plans 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 11, 2021. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information about certain relationships and related transactions, if any, and the independence of the Company’s directors 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 11, 2021. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information about fees paid to and services provided by our independent registered public accounting firm 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 11, 2021. 53 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Reference is made to the Index to Consolidated Financial Statements on page 56 for a list of the Consolidated Financial Statements of Highwoods Properties, Inc. and Highwoods Realty Limited Partnership included in this report. Exhibits Exhibit Number Description 1 Form of Equity Distribution Agreement, dated February 5, 2020, among Highwoods Properties, Inc., Highwoods Realty Limited Partnership and each of the firms named therein (filed as part of the Company’s Current Report on Form 8-K dated February 5, 2020) 3.1 Amended and Restated Charter of the Company (filed as part of the Company’s Current Report on Form 8-K dated May 15, 2008) 3.2 Amended and Restated Bylaws of the Company (filed as part of the Company’s Current Report on Form 8-K dated May 15, 2008) 4.1 Indenture among the Operating Partnership, the Company and U.S. Bank National Association (as successor in interest to Wachovia Bank, N.A.) dated as of December 1, 1996 (filed as part of the Operating Partnership’s Current Report on Form 8-K dated December 2, 1996) 4.2 Form of 3.875% Notes due March 1, 2027 (filed as part of the Company’s Current Report on Form 8-K dated February 23, 2017) 4.3 Officers’ Certificate Establishing the Terms of the 3.875% Notes, dated February 23, 2017 (filed as part of the Company’s Current Report on Form 8-K dated February 23, 2017) 4.4 Form of 3.625% Notes due January 15, 2023 (filed as part of the Company ’ s Current Report on Form 8-K dated December 18, 2012) 4.5 Officers ’ Certificate Establishing the Terms of the 3.625% Notes, dated as of December 18, 2012 (filed as part of the Company ’ s Current Report on Form 8-K dated December 18, 2012) 4.6 Form of 3.20% Notes due June 15, 2021 (filed as part of the Company ’ s Current Report on Form 8-K dated May 27, 2014) 4.7 Officers ’ Certificate Establishing the Terms of the 3.20% Notes, dated as of May 27, 2014 (filed as part of the Company ’ s Current Report on Form 8-K dated May 27, 2014) 4.8 Form of 4.125% Notes due March 15, 2028 (filed as part of the Company ’ s Current Report on Form 8-K dated March 5, 2018) 4.9 Officers ’ Certificate Establishing the Terms of the 4.125% Notes, dated March 5, 2018 (filed as part of the Company ’ s Current Report on Form 8-K dated March 5, 2018) 4.10 Form of 4.20% Notes due April 15, 2029 (filed as part of the Company ’ s Current Report on Form 8-K dated March 7, 2019) 4.11 Officers ’ Certificate Establishing the Terms of the 4.20% Notes, dated March 7, 2019 (filed as part of the Company ’ s Current Report on Form 8-K dated March 7, 2019) 4.12 Form of 3.050% Notes due February 15, 2030 (filed as part of the Company ’ s Current Report on Form 8-K dated September 13, 2019) 4.13 Officers ’ Certificate Establishing the Terms of the 3.050% Notes, dated September 13, 2019 (filed as part of the Company ’ s Current Report on Form 8-K dated September 13, 2019) 4.14 Form of 2.600% Notes due February 1, 2031 (filed as part of the Company ’ s Current Report on Form 8-K dated August 13 , 2020) 4.15 Officers ’ Certificate Establishing the Terms of the 2.600% Notes, dated August 13, 2020 (filed as part of the Company ’ s Current Report on Form 8-K dated August 13, 2020) 4.16 Description of Registered Securities (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019) 10.1 Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the Operating Partnership (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004) 10.2 Amendment No. 1, dated as of July 22, 2004, to the Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the Operating Partnership (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004) 54 Table of Contents Exhibit Number Description 10.3 Amendment No. 2, dated as of July 19, 2018, to the Second Restated Agreement of Limited Partnership, dated as of January 1, 2000, of the Operating Partnership (filed as part of the Company ’ s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018) 10.4 * 2015 Long-Term Equity Incentive Plan (filed as part of the Company’s Current Report on Form 8-K dated May 13, 2015) 10.5 Form of warrants to purchase Common Stock of the Company (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 1997) 10.6 * Highwoods Properties, Inc. Retirement Plan, effective as of March 1, 2006 (filed as part of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007) 10.7 * Highwoods Properties, Inc. 2020 Employee Stock Purchase Plan (filed as part of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020) 10.8 * Executive Supplemental Employment Agreement, dated as of September 1, 2015 between the Company and Theodore J. Klinck (filed as part of the Company’s Current Report on Form 8-K dated September 1, 2015) 10.9 * Executive Supplemental Employment Agreement, dated as of September 29, 2014 between the Company and Mark F. Mulhern (filed as part of the Company ’ s Current Report on Form 8-K dated October 1, 2014) 10.10 * Amended and Restated Executive Supplemental Employment Agreement, dated as of February 12, 2013, between the Company and Jeffrey D. Miller (filed as part of the Company ’ s Annual Report on Form 10-K for the year ended December 31, 2012) 10.11 * Executive Supplemental Employment Agreement, dated as of July 19, 2019, between the Company and Brendan C. Maiorana (filed as part of the Company ’ s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019) 10.12 * Executive Supplemental Employment Agreement, dated as of July 19, 2019, between the Company and Brian M. Leary (filed as part of the Company ’ s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019) 10.13 Fifth Amended and Restated Credit Agreement, dated as of October 18, 2017, by and among the Company, the Operating Partnership, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association and PNC Bank, National Association, as Co-Syndication Agents, and the Other Lenders named therein (filed as part of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017) 21 Schedule of Subsidiaries (filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019) 23.1 Consent of Deloitte & Touche LLP for the Company 23.2 Consent of Deloitte & Touche LLP for the Operating Partnership 31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company 31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Company 31.3 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership 31.4 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act for the Operating Partnership 32.1 Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company 32.2 Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Company 32.3 Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership 32.4 Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act for the Operating Partnership 101.INS Inline XBRL Instance Document (the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) __________ * Represents management contract or compensatory plan. 55 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Highwoods Properties, Inc. Report of Independent Registered Public Accounting Firm 57 Consolidated Financial Statements: Consolidated Balance Sheets at December 31, 2020 and 2019 59 Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018 60 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018 61 Consolidated Statements of Equity for the Years Ended December 31, 2020, 2019 and 2018 62 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 64 Highwoods Realty Limited Partnership: Report of Independent Registered Public Accounting Firm 66 Consolidated Financial Statements: Consolidated Balance Sheets at December 31, 2020 and 2019 68 Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018 69 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018 70 Consolidated Statements of Capital for the Years Ended December 31, 2020, 2019 and 2018 71 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 72 Notes to Consolidated Financial Statements 74 Schedule III 109 __________ All other schedules are omitted because they are not applicable or because the required information is included in our Consolidated Financial Statements or notes thereto. 56 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Highwoods Properties, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Highwoods Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment of Real Estate Assets - Refer to Notes 1 and 3 to the financial statements Critical Audit Matter Description The Company performs an impairment analysis of properties which begins with an evaluation of events or changes in circumstances that may indicate that the carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, a change in the designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost. The Company makes judgments that determine whether specific real estate assets possess indicators of impairment. Changes in those judgments could have a material impact on the real estate assets that are identified for further analysis. Given the Company’s evaluation of possible indications of impairment of real estate assets requires management to make judgments, performing audit procedures to evaluate whether management appropriately identified events or changes in circumstances indicating that the carrying amounts of real estate assets may not be recoverable required a high degree of auditor judgment. 57 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the evaluation of real estate assets for possible indications of impairment included the following, among others: • We tested the effectiveness of controls over management’s identification of possible circumstances that may indicate that the carrying amounts of real estate assets are no longer recoverable, including controls over management’s designation of an asset as core or non-core, occupancy and management’s estimates of fair values. • We evaluated management’s identification of impairment indicators by developing an independent determination if properties exhibit an indicator of impairment by: ◦ Inquiring of management and reading investment committee and board minutes to identify properties that should be evaluated as non-core and therefore may impact the anticipated holding period. ◦ Testing real estate assets for possible indications of impairment, including searching for adverse asset-specific circumstances and/or market conditions by circulating a questionnaire to regional property managers and using reputable market surveys. ◦ With the assistance of our fair value specialists, developing an independent expectation of impairment indicators and comparing such expectation to management’s analysis. /s/ Deloitte & Touche LLP Raleigh, North Carolina February 9, 2021 We have served as the Company’s auditor since 2006. 58 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2020 2019 Assets: Real estate assets, at cost: Land $ 466,872 $ 515,095 Buildings and tenant improvements 4,981,637 5,128,150 Development in-process 259,681 172,706 Land held for development 131,474 99,163 5,839,664 5,915,114 Less-accumulated depreciation ( 1,418,379 ) ( 1,388,566 ) Net real estate assets 4,421,285 4,526,548 Real estate and other assets, net, held for sale 11,360 20,790 Cash and cash equivalents 109,322 9,505 Restricted cash 79,922 5,237 Accounts receivable 27,488 23,370 Mortgages and notes receivable 1,341 1,501 Accrued straight-line rents receivable 259,381 234,652 Investments in and advances to unconsolidated affiliates 27,104 26,298 Deferred leasing costs, net of accumulated amortization of $ 151,698 and $ 146,125 , respectively 209,329 231,347 Prepaid expenses and other assets, net of accumulated depreciation of $ 21,154 and $ 20,017 , respectively 62,885 58,996 Total Assets $ 5,209,417 $ 5,138,244 Liabilities, Noncontrolling Interests in the Operating Partnership and Equity: Mortgages and notes payable, net $ 2,470,021 $ 2,543,710 Accounts payable, accrued expenses and other liabilities 268,727 286,911 Total Liabilities 2,738,748 2,830,621 Commitments and contingencies Noncontrolling interests in the Operating Partnership 112,499 133,216 Equity: Preferred Stock, $ 0.01 par value, 50,000,000 authorized shares; 8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $ 1,000 per share), 28,826 and 28,859 shares issued and outstanding, respectively 28,826 28,859 Common Stock, $ 0.01 par value, 200,000,000 authorized shares; 103,921,546 and 103,756,046 shares issued and outstanding, respectively 1,039 1,038 Additional paid-in capital 2,993,946 2,954,779 Distributions in excess of net income available for common stockholders ( 686,225 ) ( 831,808 ) Accumulated other comprehensive loss ( 1,462 ) ( 471 ) Total Stockholders’ Equity 2,336,124 2,152,397 Noncontrolling interests in consolidated affiliates 22,046 22,010 Total Equity 2,358,170 2,174,407 Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity $ 5,209,417 $ 5,138,244 See accompanying notes to consolidated financial statements. 59 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Income (in thousands, except per share amounts) Year Ended December 31, 2020 2019 2018 Rental and other revenues $ 736,900 $ 735,979 $ 720,035 Operating expenses: Rental property and other expenses 231,825 248,511 242,415 Depreciation and amortization 241,585 254,504 229,955 Impairments of real estate assets 1,778 5,849 423 General and administrative 41,031 44,067 40,006 Total operating expenses 516,219 552,931 512,799 Interest expense 80,962 81,648 71,422 Other income/(loss) ( 1,707 ) ( 2,510 ) 1,940 Gains on disposition of property 215,897 39,517 37,638 Equity in earnings of unconsolidated affiliates 4,005 3,276 2,238 Net income 357,914 141,683 177,630 Net (income) attributable to noncontrolling interests in the Operating Partnership ( 9,338 ) ( 3,551 ) ( 4,588 ) Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,174 ) ( 1,214 ) ( 1,207 ) Dividends on Preferred Stock ( 2,488 ) ( 2,488 ) ( 2,492 ) Net income available for common stockholders $ 344,914 $ 134,430 $ 169,343 Earnings per Common Share – basic: Net income available for common stockholders $ 3.32 $ 1.30 $ 1.64 Weighted average Common Shares outstanding – basic 103,876 103,692 103,439 Earnings per Common Share – diluted: Net income available for common stockholders $ 3.32 $ 1.30 $ 1.64 Weighted average Common Shares outstanding – diluted 106,714 106,445 106,268 See accompanying notes to consolidated financial statements. 60 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Comprehensive Income (in thousands) Year Ended December 31, 2020 2019 2018 Comprehensive income: Net income $ 357,914 $ 141,683 $ 177,630 Other comprehensive income/(loss): Unrealized gains/(losses) on cash flow hedges ( 1,238 ) ( 9,134 ) 4,161 Amortization of cash flow hedges 247 ( 1,250 ) ( 2,086 ) Total other comprehensive income/(loss) ( 991 ) ( 10,384 ) 2,075 Total comprehensive income 356,923 131,299 179,705 Less-comprehensive (income) attributable to noncontrolling interests ( 10,512 ) ( 4,765 ) ( 5,795 ) Comprehensive income attributable to common stockholders $ 346,411 $ 126,534 $ 173,910 See accompanying notes to consolidated financial statements. 61 Table of Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Equity (in thousands, except share amounts) Number of Common Shares Common Stock Series A Cumulative Redeemable Preferred Shares Additional Paid-In Capital Accumulated Other Compre-hensive Income/(Loss) Non-controlling Interests in Consolidated Affiliates Distributions in Excess of Net Income Available for Common Stockholders Total Balance at December 31, 2017 103,266,875 $ 1,033 $ 28,892 $ 2,929,399 $ 7,838 $ 17,416 $ ( 747,344 ) $ 2,237,234 Issuances of Common Stock, net of issuance costs and tax withholdings 33,652 — — 1,865 — — — 1,865 Conversions of Common Units to Common Stock 90,001 — — 4,043 — — — 4,043 Dividends on Common Stock ($ 1.85 per share) — — — — — ( 191,302 ) ( 191,302 ) Dividends on Preferred Stock ($ 86.25 per share) — — — — — ( 2,492 ) ( 2,492 ) Adjustment of noncontrolling interests in the Operating Partnership to fair value — — 33,427 — — — 33,427 Distributions to noncontrolling interests in consolidated affiliates — — — — ( 1,047 ) — ( 1,047 ) Issuances of restricted stock 172,440 — — — — — — — Redemptions/repurchases of Preferred Stock — ( 15 ) — — — — ( 15 ) Share-based compensation expense, net of forfeitures ( 5,903 ) 3 — 7,463 — — — 7,466 Net (income) attributable to noncontrolling interests in the Operating Partnership — — — — — ( 4,588 ) ( 4,588 ) Net (income) attributable to noncontrolling interests in consolidated affiliates — — — — 1,207 ( 1,207 ) — Comprehensive income: Net income — — — — — 177,630 177,630 Other comprehensive income — — — 2,075 — — 2,075 Total comprehensive income 179,705 Balance at December 31, 2018 103,557,065 1,036 28,877 2,976,197 9,913 17,576 ( 769,303 ) 2,264,296 Issuances of Common Stock, net of issuance costs and tax withholdings ( 143 ) — — 298 — — — 298 Conversions of Common Units to Common Stock 15,000 — — 663 — — — 663 Dividends on Common Stock ($ 1.90 per share) — — — — — ( 196,935 ) ( 196,935 ) Dividends on Preferred Stock ($ 86.25 per share) — — — — — ( 2,488 ) ( 2,488 ) Adjustment of noncontrolling interests in the Operating Partnership to fair value — — ( 29,557 ) — — — ( 29,557 ) Distributions to noncontrolling interests in consolidated affiliates — — — — ( 1,767 ) — ( 1,767 ) Contributions from noncontrolling interests in consolidated affiliates — — — — 4,987 — 4,987 Issuances of restricted stock 190,934 — — — — — — — Redemptions/repurchases of Preferred Stock — ( 18 ) — — — — ( 18 ) Share-based compensation expense, net of forfeitures ( 6,810 ) 2 — 7,178 — — — 7,180 Net (income) attributable to noncontrolling interests in the Operating Partnership — — — — — ( 3,551 ) ( 3,551 ) Net (income) attributable to noncontrolling interests in consolidated affiliates — — — — 1,214 ( 1,214 ) — Comprehensive income: Net income — — — — — 141,683 141,683 Other comprehensive loss — — — ( 10,384 ) — — ( 10,384 ) Total comprehensive income 131,299 Balance at December 31, 2019 103,756,046 $ 1,038 $ 28,859 $ 2,954,779 $ (471) $ 22,010 $ (831,808) $ 2,174,407 62 Table of Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Equity - Continued (in thousands, except share amounts) Number of Common Shares Common Stock Series A Cumulative Redeemable Preferred Shares Additional Paid-In Capital Accumulated Other Compre-hensive Income/(Loss) Non-controlling Interests in Consolidated Affiliates Distributions in Excess of Net Income Available for Common Stockholders Total Balance at December 31, 2019 103,756,046 $ 1,038 $ 28,859 $ 2,954,779 $ ( 471 ) $ 22,010 $ ( 831,808 ) $ 2,174,407 Issuances of Common Stock, net of issuance costs and tax withholdings 19,377 — — 2,196 — — — 2,196 Conversions of Common Units to Common Stock 3,570 — — 145 — — — 145 Dividends on Common Stock ($ 1.92 per share) — — — — — ( 199,331 ) ( 199,331 ) Dividends on Preferred Stock ($ 86.25 per share) — — — — — ( 2,488 ) ( 2,488 ) Adjustment of noncontrolling interests in the Operating Partnership to fair value — — 30,617 — — — 30,617 Distributions to noncontrolling interests in consolidated affiliates — — — — ( 1,138 ) — ( 1,138 ) Issuances of restricted stock 149,304 — — — — — — — Redemptions/repurchases of Preferred Stock — ( 33 ) — — — — ( 33 ) Share-based compensation expense, net of forfeitures ( 6,751 ) 1 — 6,209 — — — 6,210 Net (income) attributable to noncontrolling interests in the Operating Partnership — — — — — ( 9,338 ) ( 9,338 ) Net (income) attributable to noncontrolling interests in consolidated affiliates — — — — 1,174 ( 1,174 ) — Comprehensive income: Net income — — — — — 357,914 357,914 Other comprehensive loss — — — ( 991 ) — — ( 991 ) Total comprehensive income 356,923 Balance at December 31, 2020 103,921,546 $ 1,039 $ 28,826 $ 2,993,946 $ ( 1,462 ) $ 22,046 $ ( 686,225 ) $ 2,358,170 See accompanying notes to consolidated financial statements. 63 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2020 2019 2018 Operating activities: Net income $ 357,914 $ 141,683 $ 177,630 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 241,585 254,504 229,955 Amortization of lease incentives and acquisition-related intangible assets and liabilities ( 2,537 ) ( 505 ) ( 1,943 ) Share-based compensation expense 6,210 7,180 7,466 Credit losses on operating lease receivables 5,458 9,861 1,212 Write-off of mortgages and notes receivable — 4,087 — Accrued interest on mortgages and notes receivable ( 118 ) ( 184 ) ( 451 ) Amortization of debt issuance costs 3,092 2,970 2,857 Amortization of cash flow hedges 247 ( 1,250 ) ( 2,086 ) Amortization of mortgages and notes payable fair value adjustments 1,681 1,619 1,449 Impairments of real estate assets 1,778 5,849 423 Losses on debt extinguishment 3,674 640 — Net gains on disposition of property ( 215,897 ) ( 39,517 ) ( 37,638 ) Equity in earnings of unconsolidated affiliates ( 4,005 ) ( 3,276 ) ( 2,238 ) Distributions of earnings from unconsolidated affiliates 1,533 1,149 2,104 Settlement of cash flow hedges — ( 11,749 ) 7,216 Changes in operating assets and liabilities: Accounts receivable 437 ( 3,271 ) 1,759 Prepaid expenses and other assets ( 365 ) 1,610 1,217 Accrued straight-line rents receivable ( 36,576 ) ( 29,828 ) ( 23,203 ) Accounts payable, accrued expenses and other liabilities ( 5,951 ) 24,225 ( 7,101 ) Net cash provided by operating activities 358,160 365,797 358,628 Investing activities: Investments in acquired real estate and related intangible assets, net of cash acquired ( 2,363 ) ( 424,222 ) ( 50,649 ) Investments in development in-process ( 160,612 ) ( 116,111 ) ( 150,310 ) Investments in tenant improvements and deferred leasing costs ( 137,997 ) ( 138,754 ) ( 121,534 ) Investments in building improvements ( 62,154 ) ( 53,826 ) ( 68,256 ) Net proceeds from disposition of real estate assets 484,311 133,326 88,813 Distributions of capital from unconsolidated affiliates 72 7,833 105 Investments in mortgages and notes receivable ( 32 ) — — Repayments of mortgages and notes receivable 310 295 1,312 Investments in and advances to unconsolidated affiliates — ( 9,977 ) — Changes in other investing activities ( 10,853 ) ( 5,971 ) ( 6,230 ) Net cash provided by/(used in) investing activities $ 110,682 $ ( 607,407 ) $ ( 306,749 ) 64 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Cash Flows – Continued (in thousands) Year Ended December 31, 2020 2019 2018 Financing activities: Dividends on Common Stock $ ( 199,331 ) $ ( 196,935 ) $ ( 191,302 ) Redemptions/repurchases of Preferred Stock ( 33 ) ( 18 ) ( 15 ) Dividends on Preferred Stock ( 2,488 ) ( 2,488 ) ( 2,492 ) Distributions to noncontrolling interests in the Operating Partnership ( 5,456 ) ( 5,189 ) ( 5,167 ) Distributions to noncontrolling interests in consolidated affiliates ( 1,138 ) ( 1,767 ) ( 1,047 ) Proceeds from the issuance of Common Stock 3,571 2,086 3,637 Costs paid for the issuance of Common Stock ( 215 ) — ( 95 ) Repurchase of shares related to tax withholdings ( 1,160 ) ( 1,788 ) ( 1,677 ) Borrowings on revolving credit facility 129,000 604,600 438,900 Repayments of revolving credit facility ( 350,000 ) ( 565,600 ) ( 501,900 ) Borrowings on mortgages and notes payable 398,364 747,990 345,863 Repayments of mortgages and notes payable ( 251,952 ) ( 326,876 ) ( 211,803 ) Payments of debt extinguishment costs ( 3,193 ) — — Changes in debt issuance costs and other financing activities ( 10,309 ) ( 7,806 ) ( 2,971 ) Net cash provided by/(used in) financing activities ( 294,340 ) 246,209 ( 130,069 ) Net increase/(decrease) in cash and cash equivalents and restricted cash 174,502 4,599 ( 78,190 ) Cash and cash equivalents and restricted cash at beginning of the period 14,742 10,143 88,333 Cash and cash equivalents and restricted cash at end of the period $ 189,244 $ 14,742 $ 10,143 Reconciliation of cash and cash equivalents and restricted cash: Year Ended December 31, 2020 2019 2018 Cash and cash equivalents at end of the period $ 109,322 $ 9,505 $ 3,769 Restricted cash at end of the period 79,922 5,237 6,374 Cash and cash equivalents and restricted cash at end of the period $ 189,244 $ 14,742 $ 10,143 Supplemental disclosure of cash flow information: Year Ended December 31, 2020 2019 2018 Cash paid for interest, net of amounts capitalized $ 72,350 $ 72,014 $ 67,235 Supplemental disclosure of non-cash investing and financing activities: Year Ended December 31, 2020 2019 2018 Unrealized gains/(losses) on cash flow hedges $ ( 1,238 ) $ ( 9,134 ) $ 4,161 Conversions of Common Units to Common Stock 145 663 4,043 Changes in accrued capital expenditures (1) ( 1,913 ) 5,625 ( 165 ) Write-off of fully depreciated real estate assets 46,656 85,727 76,558 Write-off of fully amortized leasing costs 25,618 45,042 34,191 Write-off of fully amortized debt issuance costs 1,438 1,791 2,733 Adjustment of noncontrolling interests in the Operating Partnership to fair value ( 30,617 ) 29,557 ( 33,427 ) Issuances of Common Units to acquire real estate assets 6,163 — — Contingent consideration in connection with the acquisition of land — 1,200 — Contributions from noncontrolling interests in consolidated affiliates — 4,987 — Initial recognition of lease liabilities related to right of use assets — 35,349 — __________ (1) Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at December 31, 2020, 2019 and 2018 were $ 66.0 million, $ 67.9 million and $ 62.2 million, respectively. See accompanying notes to consolidated financial statements. 65 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of the General Partner of Highwoods Realty Limited Partnership: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Highwoods Realty Limited Partnership and subsidiaries (the “Operating Partnership”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, capital, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Operating Partnership as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on the Operating Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Operating Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Operating Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment of Real Estate Assets - Refer to Notes 1 and 3 to the financial statements Critical Audit Matter Description The Operating Partnership performs an impairment analysis of properties which begins with an evaluation of events or changes in circumstances that may indicate that the carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, a change in the designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost. The Operating Partnership makes judgments that determine whether specific real estate assets possess indicators of impairment. Changes in those judgments could have a material impact on the real estate assets that are identified for further analysis. Given the Operating Partnership’s evaluation of possible indications of impairment of real estate assets requires management to make judgments, performing audit procedures to evaluate whether management appropriately identified events or changes in 66 circumstances indicating that the carrying amounts of real estate assets may not be recoverable required a high degree of auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the evaluation of real estate assets for possible indications of impairment included the following, among others: • We tested the effectiveness of controls over management’s identification of possible circumstances that may indicate that the carrying amounts of real estate assets are no longer recoverable, including controls over management’s designation of an asset as core or non-core, occupancy and management’s estimates of fair values. • We evaluated management’s identification of impairment indicators by developing an independent determination if properties exhibit an indicator of impairment by: ◦ Inquiring of management and reading investment committee and board minutes to identify properties that should be evaluated as non-core and therefore may impact the anticipated holding period. ◦ Testing real estate assets for possible indications of impairment, including searching for adverse asset-specific circumstances and/or market conditions by circulating a questionnaire to regional property managers and using reputable market surveys. ◦ With the assistance of our fair value specialists, developing an independent expectation of impairment indicators and comparing such expectation to management’s analysis. /s/ Deloitte & Touche LLP Raleigh, North Carolina February 9, 2021 We have served as the Operating Partnership’s auditor since 2006. 67 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Balance Sheets (in thousands, except unit and per unit data) December 31, 2020 2019 Assets: Real estate assets, at cost: Land $ 466,872 $ 515,095 Buildings and tenant improvements 4,981,637 5,128,150 Development in-process 259,681 172,706 Land held for development 131,474 99,163 5,839,664 5,915,114 Less-accumulated depreciation ( 1,418,379 ) ( 1,388,566 ) Net real estate assets 4,421,285 4,526,548 Real estate and other assets, net, held for sale 11,360 20,790 Cash and cash equivalents 109,322 9,505 Restricted cash 79,922 5,237 Accounts receivable 27,488 23,370 Mortgages and notes receivable 1,341 1,501 Accrued straight-line rents receivable 259,381 234,652 Investments in and advances to unconsolidated affiliates 27,104 26,298 Deferred leasing costs, net of accumulated amortization of $ 151,698 and $ 146,125 , respectively 209,329 231,347 Prepaid expenses and other assets, net of accumulated depreciation of $ 21,154 and $ 20,017 , respectively 62,885 58,996 Total Assets $ 5,209,417 $ 5,138,244 Liabilities, Redeemable Operating Partnership Units and Capital: Mortgages and notes payable, net $ 2,470,021 $ 2,543,710 Accounts payable, accrued expenses and other liabilities 268,727 286,911 Total Liabilities 2,738,748 2,830,621 Commitments and contingencies Redeemable Operating Partnership Units: Common Units, 2,838,725 and 2,723,703 outstanding, respectively 112,499 133,216 Series A Preferred Units (liquidation preference $ 1,000 per unit), 28,826 and 28,859 units issued and outstanding, respectively 28,826 28,859 Total Redeemable Operating Partnership Units 141,325 162,075 Capital: Common Units: General partner Common Units, 1,063,515 and 1,060,709 outstanding, respectively 23,087 21,240 Limited partner Common Units, 102,449,222 and 102,286,528 outstanding, respectively 2,285,673 2,102,769 Accumulated other comprehensive loss ( 1,462 ) ( 471 ) Noncontrolling interests in consolidated affiliates 22,046 22,010 Total Capital 2,329,344 2,145,548 Total Liabilities, Redeemable Operating Partnership Units and Capital $ 5,209,417 $ 5,138,244 See accompanying notes to consolidated financial statements. 68 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Income (in thousands, except per unit amounts) Year Ended December 31, 2020 2019 2018 Rental and other revenues $ 736,900 $ 735,979 $ 720,035 Operating expenses: Rental property and other expenses 231,825 248,511 242,415 Depreciation and amortization 241,585 254,504 229,955 Impairments of real estate assets 1,778 5,849 423 General and administrative 41,031 44,067 40,006 Total operating expenses 516,219 552,931 512,799 Interest expense 80,962 81,648 71,422 Other income/(loss) ( 1,707 ) ( 2,510 ) 1,940 Gains on disposition of property 215,897 39,517 37,638 Equity in earnings of unconsolidated affiliates 4,005 3,276 2,238 Net income 357,914 141,683 177,630 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,174 ) ( 1,214 ) ( 1,207 ) Distributions on Preferred Units ( 2,488 ) ( 2,488 ) ( 2,492 ) Net income available for common unitholders $ 354,252 $ 137,981 $ 173,931 Earnings per Common Unit – basic: Net income available for common unitholders $ 3.33 $ 1.30 $ 1.64 Weighted average Common Units outstanding – basic 106,297 106,014 105,826 Earnings per Common Unit – diluted: Net income available for common unitholders $ 3.33 $ 1.30 $ 1.64 Weighted average Common Units outstanding – diluted 106,305 106,036 105,859 See accompanying notes to consolidated financial statements. 69 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Comprehensive Income (in thousands) Year Ended December 31, 2020 2019 2018 Comprehensive income: Net income $ 357,914 $ 141,683 $ 177,630 Other comprehensive income/(loss): Unrealized gains/(losses) on cash flow hedges ( 1,238 ) ( 9,134 ) 4,161 Amortization of cash flow hedges 247 ( 1,250 ) ( 2,086 ) Total other comprehensive income/(loss) ( 991 ) ( 10,384 ) 2,075 Total comprehensive income 356,923 131,299 179,705 Less-comprehensive (income) attributable to noncontrolling interests ( 1,174 ) ( 1,214 ) ( 1,207 ) Comprehensive income attributable to common unitholders $ 355,749 $ 130,085 $ 178,498 See accompanying notes to consolidated financial statements. 70 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Capital (in thousands) Common Units Accumulated Other Comprehensive Income/(Loss) Noncontrolling Interests in Consolidated Affiliates Total General Partners’ Capital Limited Partners’ Capital Balance at December 31, 2017 $ 21,830 $ 2,161,258 $ 7,838 $ 17,416 $ 2,208,342 Issuances of Common Units, net of issuance costs and tax withholdings 19 1,846 — — 1,865 Distributions on Common Units ($ 1.85 per unit) ( 1,957 ) ( 193,755 ) — — ( 195,712 ) Distributions on Preferred Units ($ 86.25 per unit) ( 25 ) ( 2,467 ) — — ( 2,492 ) Share-based compensation expense, net of forfeitures 75 7,391 — — 7,466 Distributions to noncontrolling interests in consolidated affiliates — — — ( 1,047 ) ( 1,047 ) Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner 372 36,920 — — 37,292 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 12 ) ( 1,195 ) — 1,207 — Comprehensive income: Net income 1,776 175,854 — — 177,630 Other comprehensive income — — 2,075 — 2,075 Total comprehensive income 179,705 Balance at December 31, 2018 22,078 2,185,852 9,913 17,576 2,235,419 Issuances of Common Units, net of issuance costs and tax withholdings 3 295 — — 298 Distributions on Common Units ($ 1.90 per unit) ( 2,013 ) ( 199,334 ) — — ( 201,347 ) Distributions on Preferred Units ($ 86.25 per unit) ( 25 ) ( 2,463 ) — — ( 2,488 ) Share-based compensation expense, net of forfeitures 72 7,108 — — 7,180 Distributions to noncontrolling interests in consolidated affiliates — — — ( 1,767 ) ( 1,767 ) Contributions from noncontrolling interests in consolidated affiliates — — — 4,987 4,987 Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner ( 280 ) ( 27,753 ) — — ( 28,033 ) Net (income) attributable to noncontrolling interests in consolidated affiliates ( 12 ) ( 1,202 ) — 1,214 — Comprehensive income: Net income 1,417 140,266 — — 141,683 Other comprehensive loss — — ( 10,384 ) — ( 10,384 ) Total comprehensive income 131,299 Balance at December 31, 2019 21,240 2,102,769 ( 471 ) 22,010 2,145,548 Issuances of Common Units, net of issuance costs and tax withholdings 84 8,275 — — 8,359 Distributions on Common Units ($ 1.92 per unit) ( 2,040 ) ( 201,962 ) — — ( 204,002 ) Distributions on Preferred Units ($ 86.25 per unit) ( 25 ) ( 2,463 ) — — ( 2,488 ) Share-based compensation expense, net of forfeitures 62 6,148 — — 6,210 Distributions to noncontrolling interests in consolidated affiliates — — — ( 1,138 ) ( 1,138 ) Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner 199 19,733 — — 19,932 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 12 ) ( 1,162 ) — 1,174 — Comprehensive income: Net income 3,579 354,335 — — 357,914 Other comprehensive loss — — ( 991 ) — ( 991 ) Total comprehensive income 356,923 Balance at December 31, 2020 $ 23,087 $ 2,285,673 $ ( 1,462 ) $ 22,046 $ 2,329,344 See accompanying notes to consolidated financial statements. 71 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2020 2019 2018 Operating activities: Net income $ 357,914 $ 141,683 $ 177,630 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 241,585 254,504 229,955 Amortization of lease incentives and acquisition-related intangible assets and liabilities ( 2,537 ) ( 505 ) ( 1,943 ) Share-based compensation expense 6,210 7,180 7,466 Credit losses on operating lease receivables 5,458 9,861 1,212 Write-off of mortgages and notes receivable — 4,087 — Accrued interest on mortgages and notes receivable ( 118 ) ( 184 ) ( 451 ) Amortization of debt issuance costs 3,092 2,970 2,857 Amortization of cash flow hedges 247 ( 1,250 ) ( 2,086 ) Amortization of mortgages and notes payable fair value adjustments 1,681 1,619 1,449 Impairments of real estate assets 1,778 5,849 423 Losses on debt extinguishment 3,674 640 — Net gains on disposition of property ( 215,897 ) ( 39,517 ) ( 37,638 ) Equity in earnings of unconsolidated affiliates ( 4,005 ) ( 3,276 ) ( 2,238 ) Distributions of earnings from unconsolidated affiliates 1,533 1,149 2,104 Settlement of cash flow hedges — ( 11,749 ) 7,216 Changes in operating assets and liabilities: Accounts receivable 437 ( 3,271 ) 1,759 Prepaid expenses and other assets ( 365 ) 1,610 1,217 Accrued straight-line rents receivable ( 36,576 ) ( 29,828 ) ( 23,203 ) Accounts payable, accrued expenses and other liabilities ( 5,951 ) 24,225 ( 7,101 ) Net cash provided by operating activities 358,160 365,797 358,628 Investing activities: Investments in acquired real estate and related intangible assets, net of cash acquired ( 2,363 ) ( 424,222 ) ( 50,649 ) Investments in development in-process ( 160,612 ) ( 116,111 ) ( 150,310 ) Investments in tenant improvements and deferred leasing costs ( 137,997 ) ( 138,754 ) ( 121,534 ) Investments in building improvements ( 62,154 ) ( 53,826 ) ( 68,256 ) Net proceeds from disposition of real estate assets 484,311 133,326 88,813 Distributions of capital from unconsolidated affiliates 72 7,833 105 Investments in mortgages and notes receivable ( 32 ) — — Repayments of mortgages and notes receivable 310 295 1,312 Investments in and advances to unconsolidated affiliates — ( 9,977 ) — Changes in other investing activities ( 10,853 ) ( 5,971 ) ( 6,230 ) Net cash provided by/(used in) investing activities $ 110,682 $ ( 607,407 ) $ ( 306,749 ) 72 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Cash Flows - Continued (in thousands) Year Ended December 31, 2020 2019 2018 Financing activities: Distributions on Common Units $ ( 204,002 ) $ ( 201,347 ) $ ( 195,712 ) Redemptions/repurchases of Preferred Units ( 33 ) ( 18 ) ( 15 ) Distributions on Preferred Units ( 2,488 ) ( 2,488 ) ( 2,492 ) Distributions to noncontrolling interests in consolidated affiliates ( 1,138 ) ( 1,767 ) ( 1,047 ) Proceeds from the issuance of Common Units 3,571 2,086 3,637 Costs paid for the issuance of Common Units ( 215 ) — ( 95 ) Repurchase of units related to tax withholdings ( 1,160 ) ( 1,788 ) ( 1,677 ) Borrowings on revolving credit facility 129,000 604,600 438,900 Repayments of revolving credit facility ( 350,000 ) ( 565,600 ) ( 501,900 ) Borrowings on mortgages and notes payable 398,364 747,990 345,863 Repayments of mortgages and notes payable ( 251,952 ) ( 326,876 ) ( 211,803 ) Payments of debt extinguishment costs ( 3,193 ) — — Changes in debt issuance costs and other financing activities ( 11,094 ) ( 8,583 ) ( 3,728 ) Net cash provided by/(used in) financing activities ( 294,340 ) 246,209 ( 130,069 ) Net increase/(decrease) in cash and cash equivalents and restricted cash 174,502 4,599 ( 78,190 ) Cash and cash equivalents and restricted cash at beginning of the period 14,742 10,143 88,333 Cash and cash equivalents and restricted cash at end of the period $ 189,244 $ 14,742 $ 10,143 Reconciliation of cash and cash equivalents and restricted cash: Year Ended December 31, 2020 2019 2018 Cash and cash equivalents at end of the period $ 109,322 $ 9,505 $ 3,769 Restricted cash at end of the period 79,922 5,237 6,374 Cash and cash equivalents and restricted cash at end of the period $ 189,244 $ 14,742 $ 10,143 Supplemental disclosure of cash flow information: Year Ended December 31, 2020 2019 2018 Cash paid for interest, net of amounts capitalized $ 72,350 $ 72,014 $ 67,235 Supplemental disclosure of non-cash investing and financing activities: Year Ended December 31, 2020 2019 2018 Unrealized gains/(losses) on cash flow hedges $ ( 1,238 ) $ ( 9,134 ) $ 4,161 Changes in accrued capital expenditures (1) ( 1,913 ) 5,625 ( 165 ) Write-off of fully depreciated real estate assets 46,656 85,727 76,558 Write-off of fully amortized leasing costs 25,618 45,042 34,191 Write-off of fully amortized debt issuance costs 1,438 1,791 2,733 Adjustment of Redeemable Common Units to fair value ( 26,880 ) 27,256 ( 38,049 ) Issuances of Common Units to acquire real estate assets 6,163 — — Contingent consideration in connection with the acquisition of land — 1,200 — Contributions from noncontrolling interests in consolidated affiliates — 4,987 — Initial recognition of lease liabilities related to right of use assets — 35,349 — __________ (1) Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at December 31, 2020, 2019 and 2018 were $ 66.0 million, $ 67.9 million and $ 62.2 million, respectively. See accompanying notes to consolidated financial statements. 73 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020 (tabular dollar amounts in thousands, except per share and per unit data) 1. Description of Business and Significant Accounting Policies Description of Business Highwoods Properties, Inc. (the “Company”) is a fully integrated real estate investment trust (“REIT”) that provides leasing, management, development, construction and other customer-related services for its properties and for third parties. The Company conducts its activities through Highwoods Realty Limited Partnership (the “Operating Partnership”). At December 31, 2020, we owned or had an interest in 27.2 million rentable square feet of in-service properties, 1.2 million rentable square feet of office properties under development and approximately 230 acres of development land. The Company is the sole general partner of the Operating Partnership. At December 31, 2020, the Company owned all of the Preferred Units and 103.5 million, or 97.3 %, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.8 million Common Units. In the event the Company issues shares of Common Stock, the net proceeds of the issuance are contributed to the Operating Partnership in exchange for additional Common Units. Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock. The Common Units owned by the Company are not redeemable. During 2020, the Company redeemed 3,570 Common Units for a like number of shares of Common Stock and the Operating Partnership issued 118,592 Common Units to acquire real estate assets. Basis of Presentation Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s Consolidated Financial Statements include the Operating Partnership, wholly owned subsidiaries and those entities in which the Company has the controlling interest. The Operating Partnership’s Consolidated Financial Statements include wholly owned subsidiaries and those entities in which the Operating Partnership has the controlling interest. We consolidate joint venture investments, such as interests in partnerships and limited liability companies, when we control the major operating and financial policies of the investment through majority ownership, in our capacity as a general partner or managing member or through some other contractual right. At December 31, 2020, three properties owned through a joint venture investment were consolidated. We also consolidate those entities deemed to be variable interest entities in which we are determined to be the primary beneficiary. At December 31, 2020, we have involvement with, and are the primary beneficiary in, an entity that we concluded to be a variable interest entity (see Note 4). In addition, during 2019, we acquired a building using a special purpose entity owned by a qualified intermediary to facilitate a potential Section 1031 reverse exchange under the Internal Revenue Code. We determined that this entity was a variable interest entity of which we were the primary beneficiary and therefore, we consolidated this entity as of December 31, 2019. During 2020, we completed the exchange by acquiring 100 % of the special purpose entity. All intercompany transactions and accounts have been eliminated. Certain amounts within the Consolidated Statements of Income for the year ended December 31, 2018 were removed and/or combined to conform to the current year presentation. Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. 74 Table of Contents Insurance We are primarily self-insured for health care claims for participating employees. We have stop-loss coverage to limit our exposure to significant claims on a per claim and annual aggregate basis. We determine our liabilities for claims, including incurred but not reported losses, based on all relevant information, including actuarial estimates of claim liabilities. At December 31, 2020, a reserve of $ 0.5 million was recorded to cover estimated reported and unreported claims. Real Estate and Related Assets Real estate and related assets are recorded at cost and stated at cost less accumulated depreciation. Renovations, replacements and other expenditures that improve or extend the life of assets are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful life of 40 years for buildings and depreciable land infrastructure costs, 15 years for building improvements and five to seven years for furniture, fixtures and equipment. Tenant improvements are amortized using the straight-line method over the initial fixed terms of the respective leases, which generally are from three to 10 years. Depreciation expense for real estate assets was $ 204.6 million, $ 214.7 million and $ 191.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Expenditures directly related to the development and construction of real estate assets are included in net real estate assets and are stated at depreciated cost. Development expenditures include pre-construction costs essential to the development of properties, development and construction costs, interest costs on qualifying assets, real estate taxes, development personnel salaries and related costs and other costs incurred during the period of development. Interest and other carrying costs are capitalized until the building is ready for its intended use, but not later than a year from cessation of major construction activity. We consider a construction project as substantially completed and ready for its intended use upon the completion of tenant improvements. We cease capitalization on the portion that is substantially completed and occupied or held available for occupancy and capitalize only those costs associated with the portion under construction. We record liabilities for the performance of asset retirement activities when the obligation to perform such activities is probable even when uncertainty exists about the timing and/or method of settlement. Upon the acquisition of real estate assets accounted for as asset acquisitions, we assess the fair value of acquired tangible assets such as land, buildings and tenant improvements, intangible assets and liabilities such as above and below market leases, acquired in-place leases and other identifiable intangible assets and assumed liabilities. We allocate fair value on a relative basis based on estimated cash flow projections that utilize discount and/or capitalization rates as well as available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The above and below market rate portions of leases acquired in connection with property acquisitions are recorded in deferred leasing costs and in accounts payable, accrued expenses and other liabilities, respectively, at fair value and amortized into rental revenue over the remaining term of the respective leases as described below. Fair value is calculated as the present value of the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) our estimate of fair market lease rates for each corresponding in-place lease, using a discount rate that reflects the risks associated with the leases acquired and measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any renewal option that the customer would be economically compelled to exercise for below-market leases. In-place leases acquired are recorded at fair value in deferred leasing costs and amortized to depreciation and amortization expense over the remaining term of the respective lease. The value of in-place leases is based on our evaluation of the specific characteristics of each customer’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, current market conditions, the customer’s credit quality and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, we consider tenant improvements, leasing commissions and legal and other related expenses. Real estate and other assets are classified as long-lived assets held for use or as long-lived assets held for sale. Real estate is classified as held for sale when the sale of the asset is probable, has been duly approved by the Company, a legally enforceable contract has been executed and the buyer’s due diligence period, if any, has expired. 75 Table of Contents Impairments of Real Estate Assets and Investments in Unconsolidated Affiliates With respect to assets classified as held for use, we perform an impairment analysis if our evaluation of events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, change in our designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost. This analysis is generally performed at the property level, except when an asset is part of an interdependent group such as an office park, and consists of determining whether the asset’s carrying amount will be recovered from its undiscounted estimated future operating and residual cash flows. These cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers, changes in market rental rates, costs to operate each property and expected ownership periods. For properties under development, the cash flows are based on expected service potential of the asset or asset group when development is substantially complete. If the carrying amount of a held for use asset exceeds the sum of its undiscounted future operating and residual cash flows, an impairment loss is recorded for the difference between estimated fair value of the asset and the carrying amount. We generally estimate the fair value of assets held for use by using discounted cash flow analyses. In some instances, appraisal information may be available and is used in addition to a discounted cash flow analysis. As the factors used in generating these cash flows are difficult to predict and are subject to future events that may alter our assumptions, the discounted and/or undiscounted future operating and residual cash flows estimated by us in our impairment analyses or those established by appraisal may not be achieved and we may be required to recognize future impairment losses on properties held for use. We record assets held for sale at the lower of the carrying amount or estimated fair value. Fair value of assets held for sale is equal to the estimated or contracted sales price with a potential buyer, less costs to sell. The impairment loss is the amount by which the carrying amount exceeds the estimated fair value. We also analyze our investments in unconsolidated affiliates for impairment. This analysis consists of determining whether an expected loss in market value of an investment is other than temporary by evaluating the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the investment, and our intent and ability to retain our investment for a period of time sufficient to allow for any anticipated recovery in market value. As the factors used in this analysis are difficult to predict and are subject to future events that may alter our assumptions, we may be required to recognize future impairment losses on our investments in unconsolidated affiliates. Sales of Real Estate For sales of real estate where we have collected the consideration to which we are entitled in exchange for transferring the real estate, the related assets and liabilities are removed from the balance sheet and the resultant gain or loss is recorded in the period the transaction closes. Any post-sale involvement is accounted for as separate performance obligations and when the separate performance obligations are satisfied, the sales price allocated to each is recognized. Leases See Note 2 for significant accounting policies and related disclosures with respect to revenue recognition for our leases, accounting for initial direct costs and lease incentive costs and credit losses on operating lease receivables as a result of the lease standard adoption effective January 1, 2019. Discontinued Operations Properties that are sold or classified as held for sale are classified as discontinued operations provided that the disposal represents a strategic shift that has (or will have) a major effect on our operations and financial results. Interest expense is included in discontinued operations if a related loan securing the sold property is to be paid off or assumed by the buyer in connection with the sale. Investments in Unconsolidated Affiliates We account for our joint venture investments using the equity method of accounting when our interests represent a general partnership interest but substantive participating rights or substantive kick out rights have been granted to the limited partners or when our interests do not represent a general partnership interest and we do not control the major operating and financial policies of the investment. These investments are initially recorded at cost as investments in unconsolidated affiliates and are 76 Table of Contents subsequently adjusted for our share of earnings and cash contributions and distributions. To the extent our cost basis at formation of the joint venture is different than the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in our share of equity in earnings of unconsolidated affiliates. Cash Equivalents We consider highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Restricted Cash Restricted cash represents cash deposits that are legally restricted or held by third parties on our behalf, such as construction-related escrows, property disposition proceeds set aside and designated or intended to fund future tax-deferred exchanges of qualifying real estate investments and escrows and reserves for debt service, real estate taxes and property insurance established pursuant to certain mortgage financing arrangements. Redeemable Common Units and Preferred Units Limited partners holding Common Units other than the Company (“Redeemable Common Units”) have the right to put any and all of the Common Units to the Operating Partnership and the Company has the right to put any and all of the Preferred Units to the Operating Partnership in exchange for their liquidation preference plus accrued and unpaid distributions in the event of a corresponding redemption by the Company of the underlying Preferred Stock. Consequently, these Redeemable Common Units and Preferred Units are classified outside of permanent partners’ capital in the Operating Partnership’s accompanying balance sheets. The recorded value of the Redeemable Common Units is based on fair value at the balance sheet date as measured by the closing price of Common Stock on that date multiplied by the total number of Redeemable Common Units outstanding. The recorded value of the Preferred Units is based on their redemption value. Income Taxes The Company has elected and expects to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). A corporate REIT is a legal entity that holds real estate assets and, through the payment of dividends to stockholders, is generally permitted to reduce or avoid the payment of federal and state income taxes at the corporate level. To maintain qualification as a REIT, the Company is required to pay dividends to its stockholders equal to at least 90.0 % of its annual REIT taxable income, excluding net capital gains. The partnership agreement requires the Operating Partnership to pay economically equivalent distributions on outstanding Common Units at the same time that the Company pays dividends on its outstanding Common Stock. Other than income taxes related to its taxable REIT subsidiary, the Operating Partnership does not reflect any federal income taxes in its financial statements, since as a partnership the taxable effects of its operations are attributed to its partners. The Operating Partnership does record state income tax for states that tax partnership income directly. We conduct certain business activities through a taxable REIT subsidiary, as permitted under the Code. The taxable REIT subsidiary is subject to federal, state and local income taxes on its taxable income. We record provisions for income taxes based on its income recognized for financial statement purposes, including the effects of differences between such income and the amount recognized for tax purposes. Concentration of Credit Risk At December 31, 2020, properties that we wholly own were leased to 1,378 customers. The geographic locations that comprise greater than 10.0 % of our rental and other revenues are Atlanta, Nashville, Raleigh and Tampa. Our customers engage in a wide variety of businesses. No single customer generated more than 5 % of our consolidated revenues during 2020. We maintain our cash and cash equivalents and our restricted cash at financial or other intermediary institutions. The combined account balances at each institution may exceed FDIC insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Additionally, from time to time in connection with tax-deferred 1031 transactions, our restricted cash balances may be commingled with other funds being held by any such intermediary institution, which would subject our balance to the credit risk of the institution. 77 Table of Contents Derivative Financial Instruments We borrow funds at a combination of fixed and variable rates. Borrowings under our revolving credit facility and bank term loans bear interest at variable rates. Our long-term debt, which consists of secured and unsecured long-term financings, typically bears interest at fixed rates. Our interest rate risk management objectives are to limit generally the impact of interest rate changes on earnings and cash flows and lower our overall borrowing costs. To achieve these objectives, from time to time, we enter into interest rate hedge contracts such as collars, swaps, caps and treasury lock agreements in order to mitigate our interest rate risk with respect to existing and prospective debt instruments. We generally do not hold or issue these derivative contracts for trading or speculative purposes. The interest rate on all of our variable rate debt is generally adjusted at one or three month intervals, subject to settlements under these interest rate hedge contracts. Interest rate swaps involve the receipt of variable rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income/(loss) and are subsequently reclassified into interest expense as interest payments are made on our debt. We account for terminated derivative instruments by recognizing the related accumulated other comprehensive income/(loss) balance in current earnings, unless the hedged forecasted transaction continues as originally planned, in which case we continue to amortize the accumulated other comprehensive income/(loss) into earnings over the originally designated hedge period. Earnings Per Share and Per Unit Basic earnings per share of the Company is computed by dividing net income available for common stockholders by the weighted Common Shares outstanding - basic. Diluted earnings per share is computed by dividing net income available for common stockholders (inclusive of noncontrolling interests in the Operating Partnership) by the weighted Common Shares outstanding - basic plus the dilutive effect of options, warrants and convertible securities outstanding, including Common Units, using the treasury stock method. Weighted Common Shares outstanding - basic includes all unvested restricted stock where dividends received on such restricted stock are non-forfeitable. Basic earnings per unit of the Operating Partnership is computed by dividing net income available for common unitholders by the weighted Common Units outstanding - basic. Diluted earnings per unit is computed by dividing net income available for common unitholders by the weighted Common Units outstanding - basic plus the dilutive effect of options and warrants, using the treasury stock method. Weighted Common Units outstanding - basic includes all of the Company’s unvested restricted stock where distributions received on such restricted stock are non-forfeitable. Recently Issued Accounting Standards The Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that changes certain disclosure requirements for fair value measurements. We adopted the ASU as of January 1, 2020 with no material effect on our Notes to Consolidated Financial Statements. The FASB issued an ASU that provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). Entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance in this ASU is optional and may be elected over the period March 12, 2020 through December 31, 2022 as reference rate reform activities occur. We will continue to evaluate the impact of this ASU; however, we currently expect to avail ourselves of such optional expedients and exceptions should our modified contracts meet the required criteria. Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, lessors may provide rent deferrals and other lease concessions to lessees. In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, we would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification 78 Table of Contents Q&A allows us, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. We have elected the practical expedient and will not apply lease modification accounting on a lease by lease basis where applicable. As a result, $ 3.7 million of deferred rent is included in accounts receivable on our Consolidated Balance Sheets at December 31, 2020. 2. Leases On January 1, 2019, we adopted Accounting Standards Codification Topic 842 “Leases” (“ASC 842”), which supersedes Accounting Standards Codification Topic 840 “Leases” (“ASC 840”). Information in this Note 2 with respect to our leases and lease related costs as both lessee and lessor and lease related receivables as lessor is presented under ASC 842 as of and for the years ended December 31, 2020 and 2019 and under ASC 840 for the year ended December 31, 2018. We adopted ASC 842 using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2019 as a result of this adoption. ASC 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. We operate as both a lessor and a lessee. As a lessor, we are required under ASC 842 to account for leases using an approach that is substantially equivalent to ASC 840’s guidance for operating leases and other leases such as sales-type leases and direct financing leases. In addition, ASC 842 requires lessors to capitalize and amortize only incremental direct leasing costs. As a lessee, we are required under the new standard to apply a dual approach, classifying leases, such as ground leases, as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASC 842 also requires lessees to record a right of use asset and a lease liability for all leases with a term of greater than a year regardless of their classification. We have also elected the practical expedient not to recognize right of use assets and lease liabilities for leases with a term of a year or less. On adoption of the standard, we elected the package of practical expedients provided for in ASC 842, including: • No reassessment of whether any expired or existing contracts were or contained leases; • No reassessment of the lease classification for any expired or existing leases; and • No reassessment of initial direct costs for any existing leases. The package of practical expedients was made as a single election and was consistently applied to all existing leases as of January 1, 2019. We also elected the practical expedient provided to lessors in a subsequent amendment to ASC 842 that removed the requirement to separate lease and nonlease components, provided certain conditions were met. Information as Lessor Under ASC 842 We generally lease our office properties to lessees in exchange for fixed monthly payments that cover rent, property taxes, insurance and certain cost recoveries, primarily common area maintenance (“CAM”). Office properties owned by us that are under lease are primarily located in Atlanta, Charlotte, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa and are leased to a wide variety of lessees across many industries. Our leases are operating leases and mostly range from three to 10 years. Payments from customers for CAM are considered nonlease components that are separated from lease components and are generally accounted for in accordance with the revenue recognition standard. However, we qualified for and elected the practical expedient related to combining the components because the lease component is classified as an operating lease and the timing and pattern of transfer of CAM income, which is not the predominant component, is the same as the lease component. As such, consideration for CAM is accounted for as part of the overall consideration in the lease. Payments from customers for property taxes and insurance are considered noncomponents of the lease and therefore no consideration is allocated to them because they do not transfer a good or service to the customer. Fixed contractual payments from our leases are recognized on a straight-line basis over the terms of the respective leases. This means that, with respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental revenue recognized for the period. Straight-line rental revenue is commenced when the customer assumes control of the leased premises. Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements. 79 Table of Contents Some of our leases are subject to annual changes in the Consumer Price Index (“CPI”). Although increases in the CPI are not estimated as part of our measurement of straight-line rental revenue, to the extent that actual CPI is greater or less than the CPI at lease commencement, the amount of straight-line rent recognized in a given year is affected accordingly. Some of our leases have termination options and/or extension options. Termination options allow the customer to terminate the lease prior to the end of the lease term under certain circumstances. Termination options generally become effective half way or further into the original lease term and require advance notification from the customer and payment of a termination fee that reimburses us for a portion of the remaining rent under the original lease term and the undepreciated lease inception costs such as commissions, tenant improvements and lease incentives. Termination fee income is recognized on a straight-line basis from the date of the executed termination agreement through lease expiration when the amount of the fee is determinable and collectability of the fee is reasonably assured. Our extension options generally require a re-negotiation with the customer at market rates. Initial direct costs, primarily commissions, related to the leasing of our office properties are included in deferred leasing costs and are stated at amortized cost. Such expenditures are part of the investment necessary to execute leases and, therefore, are classified as investment activities in the statement of cash flows. All leasing commissions paid to third parties and our in-house personnel for new leases or lease renewals are capitalized. Capitalized leasing costs are amortized on a straight-line basis over the initial fixed terms of the respective leases. All other costs to negotiate or arrange a lease are expensed as incurred. Lease incentive costs, which are payments made to or on behalf of a customer as an incentive to sign a lease, are capitalized in deferred leasing costs and amortized on a straight-line basis over the respective lease terms as a reduction of rental revenues. Lease related receivables, which include accounts receivable and accrued straight-line rents receivable, are reduced for credit losses. Such amounts are recognized as a reduction to rental and other revenues. We regularly evaluate the collectability of our lease related receivables. Our evaluation of collectability primarily consists of reviewing the credit quality of our customer, historical trends of the customer and changes in customer payment terms. We do not maintain a general reserve to estimate amounts that may not be collectible. If our assumptions regarding the collectability of lease related receivables prove incorrect, we could experience credit losses in excess of what was recognized in rental and other revenues. We recognized rental and other revenues related to operating lease payments of $ 726.0 million and $ 723.1 million, of which variable lease payments were $ 56.0 million and $ 65.4 million, during the years ended December 31, 2020 and 2019, respectively. The following table sets forth the undiscounted cash flows for future minimum base rents to be received from customers for leases in effect at December 31, 2020 for the properties that we wholly own: 2021 $ 623,888 2022 619,530 2023 570,417 2024 513,483 2025 432,272 Thereafter 2,049,545 $ 4,809,135 Information as Lessor Under ASC 840 Minimum contractual rents from leases are recognized on a straight-line basis over the terms of the respective leases. This means that, with respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental revenue recognized for the period. Straight-line rental revenue is commenced when the customer assumes control of the leased premises. Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements. Contingent rental revenue, such as percentage rent, is accrued when the contingency is removed. Termination fee income is recognized at the later of when the customer has vacated the space or the lease has expired and a fully executed lease termination agreement has been delivered, the amount of the fee is determinable and collectability of the fee is reasonably assured. Cost recovery income is determined on a calendar year and a lease-by-lease basis. The most common types of cost recovery income in our leases are CAM and real estate taxes, for which a customer typically pays its pro-rata share of operating and administrative expenses and real estate taxes in excess of the costs incurred during a contractually specified base year. The 80 Table of Contents computation of cost recovery income is complex and involves numerous judgments, including the interpretation of lease provisions. Leases are not uniform in dealing with such cost recovery income and there are many variations in the computation. Many customers make monthly fixed payments of CAM, real estate taxes and other cost reimbursement items. We accrue income related to these payments each month. We make quarterly accrual adjustments, positive or negative, to cost recovery income to adjust the recorded amounts to our best estimate of the final annual amounts to be billed and collected. After the end of the calendar year, we compute each customer’s final cost recovery income and, after considering amounts paid by the customer during the year, issue a bill or credit for the appropriate amount to the customer. The differences between the amounts billed less previously received payments and the accrual adjustment are recorded as increases or decreases to cost recovery income when the final bills are prepared, which occurs during the first half of the subsequent year. Accounts receivable, accrued straight-line rents receivable and mortgages and notes receivable are reduced by an allowance for amounts that may become uncollectible in the future. We regularly evaluate the adequacy of our allowance for doubtful accounts. The evaluation primarily consists of reviewing past due account balances and considering such factors as the credit quality of our customer, historical trends of the customer and changes in customer payment terms. Additionally, with respect to customers in bankruptcy, we estimate the probable recovery through bankruptcy claims and adjust the allowance for amounts deemed uncollectible. If our assumptions regarding the collectability of receivables prove incorrect, we could experience losses in excess of our allowance for doubtful accounts. The allowance and its related receivable are written-off when we have concluded there is a low probability of collection and we have discontinued collection efforts. The following table sets forth the activity of allowance for doubtful accounts: Balance at December 31, 2017 Additions Deductions Balance at December 31, 2018 Allowance for Doubtful Accounts - Straight-Line Rent $ 819 $ 599 $ ( 777 ) $ 641 Allowance for Doubtful Accounts - Accounts Receivable 753 969 ( 556 ) 1,166 Allowance for Doubtful Accounts - Notes Receivable 72 — ( 28 ) 44 Totals $ 1,644 $ 1,568 $ ( 1,361 ) $ 1,851 Lease incentive costs, which are payments made to or on behalf of a customer as an incentive to sign a lease, are capitalized in deferred leasing costs and amortized on a straight-line basis over the respective lease terms as a reduction of rental revenues. Our real estate assets are leased to customers under operating leases. The minimum rental amounts under the leases are generally subject to scheduled fixed increases. Generally, the leases also provide that we receive cost recovery income from customers for increases in certain costs above the costs incurred during a contractually specified base year. Information as Lessee Under ASC 842 We have 20 properties subject to operating ground leases in Atlanta, Nashville, Orlando, Raleigh and Tampa with a weighted average remaining term of 51 years. Rental payments on these leases are adjusted periodically based on either the CPI or on a pre-determined schedule. The monthly payments on a pre-determined schedule are recognized on a straight-line basis over the terms of the respective leases. Changes in the CPI are not estimated as part of our measurement of straight-line rental expense. Upon initial adoption of ASC 842, we recognized a lease liability of $ 35.3 million ( in accounts payable, accrued expenses and other liabilities ) and a related right of use asset of $ 29.7 million ( in prepaid expenses and other assets ) on our Consolidated Balance Sheets equal to the present value of the minimum lease payments required under each ground lease. The difference between the recorded lease liability and right of use asset represents the accrued straight-line rent liability previously recognized under ASC 840. We used a discount rate of approximately 4.5 %, which was derived from our assessment of the credit quality of the Company and adjusted to reflect secured borrowing, estimated yield curves and long-term spread adjustments over appropriate tenors. Some of our ground leases contain extension options; however, these did not impact our calculation of the right of use asset and liability as they extend beyond the useful life of the properties subject to the operating ground leases. We recognized $ 2.6 million and $ 2.5 million of ground lease expense during the years ended December 31, 2020 and 2019, respectively, and paid $ 2.2 million in cash during both years. 81 Table of Contents The following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments on operating ground leases at December 31, 2020 and a reconciliation of those cash flows to the operating lease liability at December 31, 2020: 2021 $ 2,127 2022 2,169 2023 2,167 2024 2,123 2025 2,170 Thereafter 81,527 92,283 Discount ( 57,892 ) Lease liability $ 34,391 Information as Lessee Under ASC 840 Certain of our properties are subject to operating ground leases. Rental payments on these leases are adjusted periodically based on either the CPI or on a pre-determined schedule. Total rental property expense recorded for operating ground leases was $ 2.5 million for the year ended December 31, 2018. 3. Real Estate Assets Acquisitions During 2020, we acquired two development parcels totaling less than one acre in Raleigh and Nashville for an aggregate purchase price of $ 8.5 million, including the issuance of 118,592 Common Units and capitalized acquisition costs. During 2019, we acquired a building in the central business district of Charlotte, which delivered in 2019 and encompasses 841,000 rentable square feet, for a net purchase price of $ 399.1 million. The assets acquired and liabilities assumed were recorded at relative fair value as determined by management, with the assistance of third party specialists, based on information available at the acquisition date and on current assumptions as to future operations. During 2019, we also acquired four development parcels totaling approximately 10 acres in Raleigh, Richmond and Pittsburgh for an aggregate purchase price, including capitalized acquisition costs, of $ 12.4 million. During 2018, we acquired two development parcels totaling approximately nine acres in Nashville for an aggregate purchase price, including capitalized acquisition costs, of $ 50.6 million. Dispositions During 2020, we sold a total of 52 buildings, encompassing 4,489,000 rentable square feet, in Greensboro and Memphis and various land parcels for an aggregate sale price of $ 494.2 million (before closing credits to buyer of $ 5.7 million) and recorded aggregate gains on disposition of property of $ 215.5 million. During 2020, we also recognized $ 0.4 million of gain related to the satisfaction of a performance obligation as part of a 2016 land sale. During 2019, we sold a total of six buildings and various land parcels for an aggregate sale price of $ 136.4 million and recorded aggregate gains on disposition of property of $ 39.5 million. During 2018, we sold a total of three buildings and various land parcels for an aggregate sale price of $ 90.6 million and recorded aggregate gains on disposition of property of $ 37.6 million. Impairments During 2020, we recorded an impairment of real estate assets of $ 1.8 million, which resulted from a change in market-based inputs and our assumptions about the use of the assets. 82 Table of Contents During 2019, we recorded aggregate impairments of real estate assets of $ 5.8 million as a result of shortened hold periods from classifying all of our assets in Greensboro and Memphis as non-core and changes in market-based inputs and our assumptions about the use of the assets. During 2018, we recorded an impairment of real estate assets of $ 0.4 million, which resulted from a change in market-based inputs and our assumptions about the use of the assets. 4. Investments in and Advances to Affiliates Unconsolidated Affiliates We have equity interests of up to 50.0 % in various joint ventures with unrelated third parties that are accounted for using the equity method of accounting because we have the ability to exercise significant influence over the operating and financial policies of the joint venture investment. The difference between the cost of these investments and the net book value of the underlying net assets was $ 0.6 million and $ 0.7 million at December 31, 2020 and 2019, respectively. The following table sets forth our ownership in unconsolidated affiliates at December 31, 2020: Joint Venture Location Ownership Interest Plaza Colonnade, Tenant-in-Common Kansas City 50.0 % Kessinger/Hunter & Company, LC Kansas City 26.5 % Highwoods DLF Forum, LLC (1) Raleigh 25.0 % __________ (1) We acquired our joint venture partner’s 75.0 % interest in our Highwoods DLF Forum, LLC joint venture (the “Forum”) in the first quarter of 2021. See Note 19. We receive development, management and leasing fees for services provided to certain of our joint ventures. These fees are recognized in income to the extent of our respective joint venture partner’s interest. During the years ended December 31, 2020, 2019 and 2018, we recognized $ 1.0 million, $ 0.5 million and $ 0.4 million, respectively, of development/construction, management and leasing fees from our unconsolidated joint ventures. At December 31, 2020 and 2019, we had receivables of $ 0.2 million and $ 0.1 million, respectively, related to these fees in accounts receivable. Consolidated Variable Interest Entity In 2019, we and The Bromley Companies formed a joint venture (the “Midtown One joint venture”) to construct Midtown West, a 150,000 square foot, multi-customer office building located in the mixed-use Midtown Tampa project in Tampa’s Westshore submarket. Midtown West has an anticipated total investment of $ 71.3 million. Construction of Midtown West began in the third quarter of 2019 with a scheduled completion date in the second quarter of 2021. At closing, we agreed to contribute cash of $ 20.0 million, which has been fully funded, in exchange for an 80.0 % interest in the Midtown One joint venture and The Bromley Companies contributed land valued at $ 5.0 million in exchange for the remaining 20.0 % interest. We also committed to provide a $ 46.3 million interest-only secured construction loan to the Midtown One joint venture that is scheduled to mature on the second anniversary of completion. The loan bears interest at LIBOR plus 250 basis points. As of December 31, 2020, $ 18.5 million under the loan has been funded. 83 Table of Contents We determined that we have a variable interest in the Midtown One joint venture primarily because the entity was designed to pass along interest rate risk, equity price risk and operation risk to us as both a debt and an equity holder and The Bromley Companies as an equity holder. The Midtown One joint venture was further determined to be a variable interest entity as it requires additional subordinated financial support in the form of a loan because the initial equity investment provided by us and The Bromley Companies is not sufficient to finance its planned investments and operations. We, as majority owner and managing member and through our control rights as set forth in the joint venture’s governance documents, were determined to be the primary beneficiary as we have both the power to direct the activities that most significantly affect the entity (primarily lease rates, property operations and capital expenditures) and significant economic exposure through our equity investment and loan commitment. As such, the Midtown One joint venture is consolidated and all intercompany transactions and accounts are eliminated. The following table sets forth the assets and liabilities of the Midtown One joint venture included on our Consolidated Balance Sheets: December 31, 2020 Development in-process $ 46,873 Deferred leasing costs $ 196 Prepaid expenses and other assets $ 75 Accounts payable, accrued expenses and other liabilities $ 2,693 The assets of the Midtown One joint venture can be used only to settle obligations of the joint venture and its creditors have no recourse to our wholly owned assets. Other Consolidated Affiliate We have a 50.0 % ownership interest in Highwoods-Markel Associates, LLC (“Markel”), a consolidated joint venture. We are the manager and leasing agent for Markel’s properties, which are located in Richmond in exchange for customary management and leasing fees. We consolidate Markel since we are the managing member and control the major operating and financial policies of the entity. As controlling member, we have an obligation to cause this property-owning entity to distribute proceeds of liquidation to the noncontrolling interest member in these partially owned properties only if the net proceeds received by the entity from the sale of any of Markel’s assets warrant a distribution as determined by the agreement governing the joint venture. We estimate the value of such noncontrolling interest distributions would have been $ 30.7 million had the entity been liquidated at December 31, 2020. This estimated settlement value is based on the fair value of the underlying properties which is based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers, changes in market rental rates and costs to operate each property. If the entity’s underlying assets are worth less than the underlying liabilities on the date of such liquidation, we would have no obligation to remit any consideration to the noncontrolling interest holder. 5. Intangible Assets and Below Market Lease Liabilities The following table sets forth total intangible assets and acquisition-related below market lease liabilities, net of accumulated amortization: December 31, 2020 2019 Assets: Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets) $ 361,027 $ 377,472 Less accumulated amortization ( 151,698 ) ( 146,125 ) $ 209,329 $ 231,347 Liabilities (in accounts payable, accrued expenses and other liabilities): Acquisition-related below market lease liabilities $ 63,748 $ 65,971 Less accumulated amortization ( 37,838 ) ( 34,014 ) $ 25,910 $ 31,957 84 Table of Contents The following table sets forth amortization of intangible assets and below market lease liabilities: Year Ended December 31, 2020 2019 2018 Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization) $ 34,401 $ 37,386 $ 36,486 Amortization of lease incentives (in rental and other revenues) $ 1,847 $ 4,281 $ 1,908 Amortization of acquisition-related intangible assets (in rental and other revenues) $ 1,137 $ 1,290 $ 1,677 Amortization of acquisition-related intangible assets (in rental property and other expenses) $ 510 $ 557 $ 557 Amortization of acquisition-related below market lease liabilities (in rental and other revenues) $ ( 6,031 ) $ ( 6,633 ) $ ( 6,085 ) The following table sets forth scheduled future amortization of intangible assets and below market lease liabilities: Years Ending December 31, Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization) Amortization of Lease Incentives (in Rental and Other Revenues) Amortization of Acquisition-Related Intangible Assets (in Rental and Other Revenues) Amortization of Acquisition-Related Below Market Lease Liabilities (in Rental and Other Revenues) 2021 $ 34,063 $ 1,563 $ 711 $ ( 4,958 ) 2022 30,011 1,353 601 ( 3,977 ) 2023 26,496 1,279 447 ( 3,600 ) 2024 23,348 1,133 373 ( 2,932 ) 2025 19,224 1,064 342 ( 1,673 ) Thereafter 60,979 4,523 1,819 ( 8,770 ) $ 194,121 $ 10,915 $ 4,293 $ ( 25,910 ) Weighted average remaining amortization periods as of December 31, 2020 (in years) 8.3 9.5 9.7 8.6 85 Table of Contents 6. Mortgages and Notes Payable Our mortgages and notes payable consisted of the following: December 31, 2020 2019 Secured indebtedness: 4.00% mortgage loan due 2029 (1) $ 93,350 $ 95,303 93,350 95,303 Unsecured indebtedness: 3.20% (3.363% effective rate) notes due 2021 (2) 149,901 299,369 3.625% (3.752% effective rate) notes due 2023 (3) 249,464 249,201 3.875% (4.038% effective rate) notes due 2027 (4) 297,534 297,134 4.125% (4.271% effective rate) notes due 2028 (5) 347,035 346,621 4.20% (4.234% effective rate) notes due 2029 (6) 349,189 349,091 3.050% (3.079% effective rate) notes due 2030 (7) 399,106 399,009 2.600% (2.645% effective rate) notes due 2031 (8) 398,423 — Variable rate term loan due 2022 (9) — 100,000 Variable rate term loan due 2022 (10) 200,000 200,000 Revolving credit facility due 2022 — 221,000 2,390,652 2,461,425 Less-unamortized debt issuance costs ( 13,981 ) ( 13,018 ) Total mortgages and notes payable, net $ 2,470,021 $ 2,543,710 __________ (1) Our secured mortgage loan was collateralized by real estate assets with an undepreciated book value of $ 147.9 million at December 31, 2020. We paid down $ 2.0 million of secured loan balances through principal amortization during 2020. (2) Net of unamortized original issuance discount of $ 0.1 million and $ 0.6 million as of December 31, 2020 and 2019, respectively. (3) Net of unamortized original issuance discount of $ 0.5 million and $ 0.8 million as of December 31, 2020 and 2019, respectively. (4) Net of unamortized original issuance discount of $ 2.5 million and $ 2.9 million as of December 31, 2020 and 2019, respectively. (5) Net of unamortized original issuance discount of $ 3.0 million and $ 3.4 million as of December 31, 2020 and 2019, respectively. (6) Net of unamortized original issuance discount of $ 0.8 million and $ 0.9 million as of December 31, 2020 and 2019, respectively. (7) Net of unamortized original issuance discount of $ 0.9 million and $ 1.0 million as of December 31, 2020 and 2019, respectively. (8) Net of unamortized original issuance discount of $ 1.6 million as of December 31, 2020. (9) This debt was repaid in 2020. (10) As more fully described in Note 7, we entered into floating-to-fixed interest rate swaps that effectively fix LIBOR for $50.0 million of this loan through January 2022. Accordingly, the equivalent fixed rate of this amount is 2.79 %. The interest rate on the remaining $150.0 million was 1.25 % at December 31, 2020. 86 Table of Contents The following table sets forth scheduled future principal payments, including amortization, due on our mortgages and notes payable at December 31, 2020: Years Ending December 31, Principal Amount 2021 $ 150,504 2022 200,686 2023 251,024 2024 1,124 2025 (1) ( 185 ) Thereafter 1,880,849 Less-unamortized debt issuance costs ( 13,981 ) $ 2,470,021 __________ (1) Represents amortization of discounts in excess of principal payments due. Our $ 600.0 million unsecured revolving credit facility is scheduled to mature in January 2022 and includes an accordion feature that allows for an additional $ 400.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for two additional six -month periods. The interest rate at our current credit ratings is LIBOR plus 100 basis points and the annual facility fee is 20 basis points. There were no amounts outstanding under our revolving credit facility at both December 31, 2020 and January 29, 2021. At both December 31, 2020 and January 29, 2021, we had $ 0.1 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at both December 31, 2020 and January 29, 2021 was $ 599.9 million. During 2020, the Operating Partnership issued $ 400.0 million aggregate principal amount of 2.600 % notes due February 2031, less original issuance discount of $ 1.6 million. These notes were priced to yield 2.645 %. Underwriting fees and other expenses were incurred that aggregated $ 3.4 million; these costs were deferred and will be amortized over the term of the notes. The net proceeds from the issuance were used: (1) to finance the Operating Partnership’s cash tender offer to purchase $ 150.0 million principal amount of its 3.20 % notes due June 15, 2021 at a purchase price of 101.908 % of the face amount of the notes, plus accrued and unpaid interest; (2) to prepay without penalty our $ 100.0 million unsecured bank term loan that was scheduled to mature in January 2022 and which bore interest at LIBOR plus 110 basis points; and (3) for general corporate purposes. We recorded $ 3.7 million of aggregate losses on debt extinguishment related to the repurchase of the 3.20% notes and the term loan prepayment. During 2019, the Operating Partnership issued $ 400.0 million aggregate principal amount of 3.050 % notes due February 2030, less original issuance discount of $ 1.0 million. These notes were priced to yield 3.079 %. Underwriting fees and other expenses were incurred that aggregated $ 3.4 million; these costs were deferred and will be amortized over the term of the notes. During 2019, the Operating Partnership issued $ 350.0 million aggregate principal amount of 4.20 % notes due April 2029, less original issuance discount of $ 1.0 million. These notes were priced to yield 4.234 %. Underwriting fees and other expenses were incurred that aggregated $ 3.1 million; these costs were deferred and will be amortized over the term of the notes. During 2019, we prepaid without penalty the remaining $ 225.0 million on our seven -year unsecured bank term loan, which was scheduled to mature in June 2020. The term loan bore interest at LIBOR plus 110 basis points. We recorded $ 0.4 million of loss on debt extinguishment related to this prepayment. During 2019, we prepaid without penalty $ 100.0 million on our $ 200.0 million unsecured bank term loan and recorded $ 0.3 million of loss on debt extinguishment related to this prepayment. During 2020, we prepaid without penalty the remaining $ 100.0 million upon issuance of the $ 400.0 million aggregate principal amount of 2.600 % notes due February 2031. The term loan was scheduled to mature in January 2022 and bore interest at LIBOR plus 110 basis points. During 2018, we paid off at maturity $ 200.0 million principal amount of 7.5 % unsecured notes. 87 Table of Contents During 2018, the Operating Partnership issued $ 350.0 million aggregate principal amount of 4.125 % notes due March 2028, less original issuance discount of $ 4.1 million. These notes were priced to yield 4.271 %. Underwriting fees and other expenses were incurred that aggregated $ 2.9 million; these costs were deferred and will be amortized over the term of the notes. Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on the revolving credit facility, the lenders having at least 51.0 % of the total commitments under the revolving credit facility can accelerate all borrowings then outstanding, and we could be prohibited from borrowing any further amounts under our revolving credit facility, which would adversely affect our ability to fund our operations. In addition, certain of our unsecured debt agreements contain cross-default provisions giving the unsecured lenders the right to declare a default if we are in default under more than $ 30.0 million with respect to other loans in some circumstances. We are currently in compliance with financial covenants with respect to our consolidated debt. The Operating Partnership has $ 149.9 million carrying amount of 2021 notes outstanding, $ 249.5 million carrying amount of 2023 notes outstanding, $ 297.5 million carrying amount of 2027 notes outstanding, $ 347.0 million carrying amount of 2028 notes outstanding, $ 349.2 million carrying amount of 2029 notes outstanding, $ 399.1 million carrying amount of 2030 notes outstanding and $ 398.4 million carrying amount of 2031 notes outstanding. The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0 % in principal amount of any series of notes can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days. We have considered our short-term liquidity needs within one year from February 9, 2021 (the date of issuance of the annual financial statements) and the adequacy of our estimated cash flows from operating activities and other available financing sources to meet these needs. In particular, we have considered our scheduled debt maturities during such one-year period, including the remaining $ 150.0 million principal amount of unsecured notes that are scheduled to mature on June 15, 2021. We intend to exercise our right to redeem the remaining 3.20 % notes at par on April 15, 2021. We have concluded it is probable we will meet these short-term liquidity requirements through a combination of the following: • available cash and cash equivalents; • cash flows from operating activities; • issuance of debt securities by the Operating Partnership; • issuance of secured debt; • bank term loans; • borrowings under our revolving credit facility; • issuance of equity securities by the Company or the Operating Partnership; and • the disposition of non-core assets. Capitalized Interest Total interest capitalized to development and significant building and tenant improvement projects was $ 8.3 million, $ 5.6 million and $ 6.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. 7. Derivative Financial Instruments During 2019, we entered into $ 150.0 million notional amount of forward-starting swaps that effectively locked the underlying 10 -year treasury rate at 1.87 % with respect to a planned issuance of debt securities by the Operating Partnership. Upon the subsequent issuance of the $ 400.0 million aggregate principal amount of 3.050 % notes due February 2030 during 2019, we terminated the forward-starting swaps and paid cash upon settlement. The unrealized loss of $ 6.6 million in accumulated other comprehensive income/(loss) will be reclassified to interest expense as interest payments are made on the debt. 88 Table of Contents During 2018, we entered into an aggregate of $ 225.0 million notional amount of forward-starting swaps that effectively locked the underlying 10 -year treasury rate at a weighted average of 2.86 % with respect to a planned issuance of debt securities by the Operating Partnership. Upon issuance of the $ 350.0 million aggregate principal amount of 4.20 % notes due April 2029 during 2019, we terminated the forward-starting swaps and paid cash upon settlement. The unrealized loss of $ 5.1 million in accumulated other comprehensive income/(loss) will be reclassified to interest expense as interest payments are made on the debt. We previously entered into $ 150.0 million notional amount of forward-starting swaps that effectively locked the underlying 10 -year treasury rate at 2.44 % with respect to a planned issuance of debt securities by the Operating Partnership. Upon issuance of the $ 350.0 million aggregate principal amount of 4.125 % notes due March 2028 during 2018, we terminated the forward-starting swaps and received cash upon settlement. The unrealized gain of $ 7.0 million in accumulated other comprehensive income/(loss) will be reclassified to interest expense as interest payments are made on the debt and a gain of $ 0.2 million of hedge ineffectiveness was recognized in interest expense. We previously entered into floating-to-fixed interest rate swaps through January 2022 with respect to an aggregate of $ 50.0 million LIBOR-based borrowings. These swaps effectively fix the underlying one -month LIBOR rate at a weighted average rate of 1.693 %. We also had floating-to-fixed interest rate swaps with respect to an aggregate of $ 225.0 million LIBOR-based borrowings. These swaps effectively fixed the underlying one -month LIBOR rate at a weighted average rate of 1.678 %. During 2019, these interest rate swaps expired. The counterparties under our swaps are major financial institutions. The swap agreements contain a provision whereby if we default on certain of our indebtedness and which default results in repayment of such indebtedness being, or becoming capable of being, accelerated by the lender, then we could also be declared in default on our swaps. Our interest rate swaps have been designated as and are being accounted for as cash flow hedges with changes in fair value recorded in other comprehensive income/(loss) each reporting period. We have no collateral requirements related to our interest rate swaps. Amounts reported in accumulated other comprehensive income/(loss) related to derivatives will be reclassified to interest expense as interest payments are made on our debt. During 2021, we estimate that $ 0.5 million will be reclassified as a net increase to interest expense. The following table sets forth the fair value of our derivatives: December 31, 2020 2019 Derivatives: Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities: Interest rate swaps $ 846 $ 154 The following table sets forth the effect of our cash flow hedges on accumulated other comprehensive income/(loss) and interest expense: Year Ended December 31, 2020 2019 2018 Derivatives Designated as Cash Flow Hedges: Amount of unrealized gains/(losses) recognized in accumulated other comprehensive income/(loss) on derivatives: Interest rate swaps $ ( 1,238 ) $ ( 9,134 ) $ 4,161 Amount of (gains)/losses reclassified out of accumulated other comprehensive income/(loss) into interest expense: Interest rate swaps $ 247 $ ( 1,250 ) $ ( 2,086 ) 89 Table of Contents 8. Commitments and Contingencies Lease and Contractual Commitments We have $ 212.9 million of lease and contractual commitments at December 31, 2020. Lease and contractual commitments represent commitments under signed leases and contracts for operating properties (excluding tenant-funded tenant improvements) and contracts for development/redevelopment projects, of which $ 58.0 million was recorded on our Consolidated Balance Sheets at December 31, 2020. Contingent Consideration We had $ 0.8 million and $ 5.3 million of contingent consideration related to certain parcels of acquired development land at December 31, 2020 and 2019, respectively. The contingent consideration for each is payable in cash to a third party if and to the extent future development milestones as outlined in the purchase agreements are met. Environmental Matters Substantially all of our in-service and development properties have been subjected to Phase I environmental assessments and, in certain instances, Phase II environmental assessments. Such assessments and/or updates have not revealed, nor are we aware of, any environmental liability that we believe would have a material adverse effect on our Consolidated Financial Statements. Litigation, Claims and Assessments We are from time to time a party to a variety of legal proceedings, claims and assessments arising in the ordinary course of our business. We regularly assess the liabilities and contingencies in connection with these matters based on the latest information available. For those matters where it is probable that we have incurred or will incur a loss and the loss or range of loss can be reasonably estimated, the estimated loss is accrued and charged to income in our Consolidated Financial Statements. In other instances, because of the uncertainties related to both the probable outcome and amount or range of loss, a reasonable estimate of liability, if any, cannot be made. Based on the current expected outcome of such matters, none of these proceedings, claims or assessments is expected to have a material effect on our business, financial condition, results of operations or cash flows. COVID-19 Since early March 2020, efforts to slow the spread of the COVID-19 virus have had a significant impact on the U.S. economy. We continue to follow the policies described in Notes 1 and 2, including those related to impairments of real estate assets and investments in unconsolidated affiliates, leases and estimates of credit losses on operating lease receivables. While the results of our current analyses did not result in any material adjustments to amounts as of and for the year ended December 31, 2020, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and credit losses in future periods. 90 Table of Contents 9. Noncontrolling Interests Noncontrolling Interests in Consolidated Affiliates At December 31, 2020, our noncontrolling interests in consolidated affiliates relate to our joint venture partners’ 50.0 % interest in office properties in Richmond and 20.0 % interest in an office development property in Tampa. Our joint venture partners are unrelated third parties. Noncontrolling Interests in the Operating Partnership Noncontrolling interests in the Operating Partnership relate to the ownership of Redeemable Common Units. Net income attributable to noncontrolling interests in the Operating Partnership is computed by applying the weighted average percentage of Redeemable Common Units during the period, as a percent of the total number of outstanding Common Units, to the Operating Partnership’s net income for the period after deducting distributions on Preferred Units. When a noncontrolling unitholder redeems a Common Unit for a share of Common Stock or cash, the noncontrolling interests in the Operating Partnership are reduced and the Company’s share in the Operating Partnership is increased by the fair value of each security at the time of redemption. The following table sets forth the Company’s noncontrolling interests in the Operating Partnership: Year Ended December 31, 2020 2019 Beginning noncontrolling interests in the Operating Partnership $ 133,216 $ 105,960 Adjustment of noncontrolling interests in the Operating Partnership to fair value ( 30,617 ) 29,557 Issuances of Common Units 6,163 — Conversions of Common Units to Common Stock ( 145 ) ( 663 ) Net income attributable to noncontrolling interests in the Operating Partnership 9,338 3,551 Distributions to noncontrolling interests in the Operating Partnership ( 5,456 ) ( 5,189 ) Total noncontrolling interests in the Operating Partnership $ 112,499 $ 133,216 The following table sets forth net income available for common stockholders and transfers from the Company’s noncontrolling interests in the Operating Partnership: Year Ended December 31, 2020 2019 2018 Net income available for common stockholders $ 344,914 $ 134,430 $ 169,343 Increase in additional paid in capital from conversions of Common Units to Common Stock 145 663 4,043 Issuances of Common Units ( 6,163 ) — — Change from net income available for common stockholders and transfers from noncontrolling interests $ 338,896 $ 135,093 $ 173,386 91 Table of Contents 10. Disclosure About Fair Value of Financial Instruments The following summarizes the levels of inputs that we use to measure fair value. Level 1. Quoted prices in active markets for identical assets or liabilities. Our Level 1 asset is our investment in marketable securities that we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 liability is our non-qualified deferred compensation obligation. The Company’s Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company. Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Our Level 2 assets include the fair value of our mortgages and notes receivable. Our Level 2 liabilities include the fair value of our mortgages and notes payable and interest rate swaps. The fair value of mortgages and notes receivable and mortgages and notes payable is estimated by the income approach utilizing contractual cash flows and market-based interest rates to approximate the price that would be paid in an orderly transaction between market participants. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments of interest rate swaps are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments are considered in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented. Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Our Level 3 assets include any real estate assets recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis, which are valued using unobservable local and national industry market data such as comparable sales, appraisals, brokers’ opinions of value and/or the terms of definitive sales contracts. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement. 92 Table of Contents The following table sets forth our assets and liabilities and the Company’s noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy: Level 1 Level 2 Total Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Observable Inputs Fair Value at December 31, 2020: Assets: Mortgages and notes receivable, at fair value (1) $ 1,341 $ — $ 1,341 Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets) 2,573 2,573 — Total Assets $ 3,914 $ 2,573 $ 1,341 Noncontrolling Interests in the Operating Partnership $ 112,499 $ 112,499 $ — Liabilities: Mortgages and notes payable, net, at fair value (1) $ 2,639,163 $ — $ 2,639,163 Interest rate swaps (in accounts payable, accrued expenses and other liabilities) 846 — 846 Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities) 2,573 2,573 — Total Liabilities $ 2,642,582 $ 2,573 $ 2,640,009 Fair Value at December 31, 2019: Assets: Mortgages and notes receivable, at fair value (1) $ 1,501 $ — $ 1,501 Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets) 2,345 2,345 — Total Assets $ 3,846 $ 2,345 $ 1,501 Noncontrolling Interests in the Operating Partnership $ 133,216 $ 133,216 $ — Liabilities: Mortgages and notes payable, net, at fair value (1) $ 2,615,776 $ — $ 2,615,776 Interest rate swaps (in accounts payable, accrued expenses and other liabilities) 154 — 154 Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities) 2,345 2,345 — Total Liabilities $ 2,618,275 $ 2,345 $ 2,615,930 __________ (1) Amounts are not recorded at fair value on our Consolidated Balance Sheets at December 31, 2020 and 2019. The Level 3 impaired real estate assets measured at a fair value of $ 2.1 million in the second quarter of 2020 included a non-core office building. The impairment resulted from a change in our assumptions about the use of the assets and was calculated using brokers’ opinions of value, letters of intent and comparable sales as observable inputs were not available. The Level 3 impaired real estate assets measured at a fair value of $ 7.6 million in the third quarter of 2019 included an office building and land held for development. The aggregate impairments resulted from a change in our assumptions about the use of the assets and were calculated using brokers’ opinions of value and comparable sales as observable inputs were not available. The Level 3 impaired real estate assets measured at a fair value of $ 0.7 million in the second quarter of 2019 included land held for development. The impairment resulted from a change in our assumptions about the use of the assets and was calculated using the terms of definitive sales contracts as observable inputs were not available. 93 Table of Contents 11. Equity Common Stock Issuances At December 31, 2020, the Company had 96.1 million remaining shares of Common Stock authorized to be issued under its charter. Common Stock Dividends Dividends of the Company declared per share of Common Stock aggregated $ 1.92 , $ 1.90 and $ 1.85 for the years ended December 31, 2020, 2019 and 2018, respectively. The following table sets forth the Company’s estimated taxability to the common stockholders of dividends per share for federal income tax purposes: Year Ended December 31, 2020 2019 2018 Ordinary dividend $ 1.65 $ 1.64 $ 1.48 Capital gains 0.25 0.13 0.31 Return of capital 0.02 0.13 0.06 Total $ 1.92 $ 1.90 $ 1.85 The Company’s tax returns have not been examined by the Internal Revenue Service (“IRS”) and, therefore, the taxability of dividends is subject to change. Preferred Stock The following table sets forth the Company’s Preferred Stock: Issue Date Number of Shares Outstanding Carrying Value Liquidation Preference Per Share Optional Redemption Date Annual Dividends Payable Per Share (in thousands) December 31, 2020 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,826 $ 1,000 2/12/2027 $ 86.25 December 31, 2019 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,859 $ 1,000 2/12/2027 $ 86.25 The following table sets forth the Company’s estimated taxability to the preferred stockholders of dividends per share for federal income tax purposes: Year Ended December 31, 2020 2019 2018 8.625% Series A Cumulative Redeemable: Ordinary dividend $ 74.96 $ 79.90 $ 71.22 Capital gains 11.29 6.35 15.03 Total $ 86.25 $ 86.25 $ 86.25 The Company’s tax returns have not been examined by the IRS and, therefore, the taxability of dividends is subject to change. 94 Table of Contents Warrants At both December 31, 2020 and 2019, we had 15,000 warrants outstanding with an exercise price of $ 32.50 per share. Upon exercise of a warrant, the Company will contribute the exercise price to the Operating Partnership in exchange for Common Units. Therefore, the Operating Partnership accounts for such warrants as if issued by the Operating Partnership. These warrants have no expiration date. Common Unit Distributions Distributions of the Operating Partnership declared per Common Unit aggregated $ 1.92 , $ 1.90 and $ 1.85 for the years ended December 31, 2020, 2019 and 2018, respectively. Redeemable Common Units Generally, the Operating Partnership is obligated to redeem each Redeemable Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption, provided that the Company, at its option, may elect to acquire any such Redeemable Common Unit presented for redemption for cash or one share of Common Stock. When a holder redeems a Redeemable Common Unit for a share of Common Stock or cash, the Company’s share in the Operating Partnership will be increased. The Common Units owned by the Company are not redeemable. Preferred Units The following table sets forth the Operating Partnership’s Preferred Units: Issue Date Number of Units Outstanding Carrying Value Liquidation Preference Per Unit Optional Redemption Date Annual Distributions Payable Per Unit (in thousands) December 31, 2020 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,826 $ 1,000 2/12/2027 $ 86.25 December 31, 2019 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,859 $ 1,000 2/12/2027 $ 86.25 95 Table of Contents 12. Employee Benefit Plans Officer, Management and Director Compensation Programs Officers of the Company participate in an annual non-equity incentive program pursuant to which they are eligible to earn cash payments based on a percentage of their annual base salary in effect for December of the applicable year. Under this component of our executive compensation program, officers are eligible to earn additional cash compensation to the extent specific performance-based metrics are achieved during the most recently completed year. The position held by each officer has a target annual incentive percentage that ranges from 35 % to 130 % of base salary. The more senior the position, the greater the portion of compensation that varies with performance. The percentage amount an officer may earn under the annual non-equity incentive plan is the product of the target annual incentive percentage times an “actual performance factor,” which can range from zero to 200 %. The actual performance factor depends upon the relationship between actual performance in specific areas at each of our divisions and predetermined goals. For corporate officers, the actual performance factor is based on the goals and criteria applied to the Company’s performance as a whole. For officers who oversee our divisions, the actual performance factor is based on the goals and criteria applied partly to that division’s performance and partly to the Company’s performance overall. Amounts under our annual non-equity incentive plan are accrued and expensed in the year earned, but are typically paid early in the following year. Certain other employees participate in a similar annual non-equity incentive program. Incentive eligibility ranges from 10 % to 30 % of annual base salary. The actual incentive payment is determined by a mix of the Company’s overall performance, the performance of any applicable division and the individual’s performance during each year. These amounts are also accrued and expensed in the year earned, but are typically paid early in the following year. The Company’s officers are eligible to receive a mix of long-term equity incentive awards on or about March 1 of each year. Prior to 2018, the mix generally consisted of stock options, time-based restricted stock and total return-based restricted stock. Since 2018, the mix has consisted of time-based restricted stock and total return-based restricted stock. Time-based restricted stock grants are also made annually to directors and certain other employees. Dividends received on restricted stock are non-forfeitable and are paid at the same rate and on the same date as on shares of Common Stock, except that, with respect to shares of total return-based restricted stock issued to the Company’s chief executive officer, dividends accumulate and are payable only if and to the extent the shares vest. Dividends paid on subsequently forfeited shares are expensed. Additional shares of total return-based restricted stock may be issued at the end of the applicable measurement periods if and to the extent actual performance exceeds certain levels of performance. Such additional shares, if any, would be fully vested when issued. No expense is recorded for additional shares of total return-based restricted stock that may be issued at the end of the applicable measurement period since that possibility is reflected in the grant date fair value. The following table sets forth the number of shares of Common Stock reserved for future issuance under the Company’s long-term equity incentive plans: December 31, 2020 2019 Outstanding stock options and warrants 552,373 599,902 Possible future issuance under equity incentive plans 1,926,324 2,016,659 2,478,697 2,616,561 Of the possible future issuance under the Company’s long-term equity incentive plans at December 31, 2020, no more than an additional 0.3 million shares can be in the form of restricted stock. During the years ended December 31, 2020, 2019 and 2018, we recognized $ 6.2 million, $ 7.2 million and $ 7.5 million, respectively, of share-based compensation expense. Because REITs generally do not pay income taxes, we do not realize tax benefits on share-based payments. At December 31, 2020, there was $ 5.2 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 1.9 years. 96 Table of Contents - Stock Options Stock options issued from 2014 through 2017 vest ratably on an annual basis over four years and expire after 10 years. All stock options have an exercise price equal to the last reported stock price of our Common Stock on the New York Stock Exchange (“NYSE”) on the last trading day prior to grant. The value of all options as of the date of grant is calculated using the Black-Scholes option-pricing model and is amortized over the respective vesting period or the service period, if shorter, for employees who are or will become eligible under the Company’s retirement plan. The following table sets forth stock option activity: Options Outstanding Number of Options Weighted Average Exercise Price Stock options outstanding at December 31, 2017 640,822 $ 45.29 Exercised ( 44,304 ) 40.15 Stock options outstanding at December 31, 2018 596,518 45.67 Exercised ( 9,026 ) 39.53 Forfeited ( 2,590 ) 48.79 Stock options outstanding at December 31, 2019 584,902 45.75 Exercised ( 42,163 ) 41.10 Forfeited ( 5,366 ) 50.82 Stock options outstanding at December 31, 2020 (1) (2) 537,373 $ 46.07 __________ (1) The outstanding options at December 31, 2020 had a weighted average remaining life of 5.0 years. (2) The Company had 496,656 options exercisable at December 31, 2020 with a weighted average exercise price of $ 45.54 , weighted average remaining life of 4.9 years and intrinsic value of $ 0.1 million. Of these exercisable options, 436,880 had exercise prices higher than the market price of our Common Stock at December 31, 2020. Cash received or receivable from options exercised was $ 1.9 million, $ 0.4 million and $ 1.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $ 0.4 million, $ 0.1 million and $ 0.4 million, respectively. The total intrinsic value of options outstanding at December 31, 2020, 2019 and 2018 was $ 0.1 million, $ 2.4 million and $ 0.1 million, respectively. The Company generally does not permit the net cash settlement of exercised stock options, but does permit net share settlement so long as the shares received are held for at least a year. The Company has a practice of issuing new shares to satisfy stock option exercises. - Time-Based Restricted Stock Shares of time-based restricted stock vest ratably on an annual basis generally over four years . Beginning in 2019, shares of time-based restricted stock granted to non-employee directors vest on the first anniversary of the grant date. The value of grants of time-based restricted stock is based on the market value of Common Stock as of the date of grant and is amortized to expense over the respective vesting period or the service period, if shorter, for employees who are or will become eligible under the Company’s retirement plan. 97 Table of Contents The following table sets forth time-based restricted stock activity: Number of Shares Weighted Average Grant Date Fair Value Restricted shares outstanding at December 31, 2017 172,246 $ 46.46 Awarded and issued (1) 94,984 43.01 Vested (2) ( 73,307 ) 44.19 Forfeited ( 2,684 ) 45.89 Restricted shares outstanding at December 31, 2018 191,239 45.62 Awarded and issued (1) 103,590 45.98 Vested (2) ( 73,036 ) 45.79 Forfeited ( 3,642 ) 46.07 Restricted shares outstanding at December 31, 2019 218,151 45.73 Awarded and issued (1) 83,116 44.88 Vested (2) ( 88,326 ) 45.86 Forfeited ( 3,751 ) 45.78 Restricted shares outstanding at December 31, 2020 209,190 $ 45.34 __________ (1) The weighted average fair value at grant date of time-based restricted stock issued during the years ended December 31, 2020, 2019 and 2018 was $ 3.7 million, $ 4.8 million and $ 4.1 million, respectively. (2) The vesting date fair value of time-based restricted stock that vested during the years ended December 31, 2020, 2019 and 2018 was $ 3.9 million, $ 3.3 million and $ 3.2 million, respectively. Vested shares include those shares surrendered by employees to satisfy tax withholding obligations in connection with such vesting. - Total Return-Based Restricted Stock Shares of total return-based restricted stock vest to the extent the Company’s absolute total returns for certain pre-determined three -year periods exceed predetermined goals. The amount subject to vesting ranges from zero to 150 %. For total return-based restricted stock issued prior to 2020, notwithstanding the Company’s absolute total return, if the Company’s total return exceeds 100 % of the average peer group total return index, at least 75 % of total return-based restricted stock issued will vest at the end of the applicable period. This amount was increased from 75% to 100 % for total return-based restricted stock issued in 2020. The weighted average grant date fair value of such shares of total return-based restricted stock issued in 2020, 2019 and 2018 was determined to be $ 38.31 , $ 39.42 and $ 40.81 , respectively, and is amortized over the respective three-year period or the service period, if shorter, for employees who are or will become eligible under the Company’s retirement plan. The fair values of the total return-based restricted stock granted were determined at the grant dates using a Monte Carlo simulation model and the following assumptions: 2020 2019 2018 Risk free interest rate (1) 0.9 % 2.4 % 2.3 % Common stock dividend yield (2) 3.9 % 4.4 % 3.9 % Expected volatility (3) 20.4 % 27.3 % 41.1 % __________ (1) Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the total return-based restricted stock grants. (2) The dividend yield is calculated utilizing the then current regular dividend rate for a one -year period and the average per share price of Common Stock during the three -month period preceding the date of grant. (3) Based on the historical volatility of Common Stock over a period relevant to the related total return-based restricted stock grant. 98 Table of Contents The following table sets forth total return-based restricted stock activity: Number of Shares Weighted Average Grant Date Fair Value Restricted shares outstanding at December 31, 2017 160,724 $ 44.72 Awarded and issued (1) 77,456 40.81 Vested (2) ( 41,160 ) 45.61 Forfeited (3) ( 16,926 ) 45.24 Restricted shares outstanding at December 31, 2018 180,094 43.34 Awarded and issued (1) 87,344 39.42 Vested (2) ( 45,901 ) 43.68 Forfeited (3) ( 12,689 ) 43.58 Restricted shares outstanding at December 31, 2019 208,848 42.22 Awarded and issued (1) 66,188 38.31 Forfeited (3) ( 49,852 ) 51.93 Restricted shares outstanding at December 31, 2020 225,184 $ 39.53 __________ (1) The fair value at grant date of total return-based restricted stock issued during the years ended December 31, 2020, 2019 and 2018 was $ 2.5 million, $ 3.4 million and $ 3.2 million, respectively, at target. (2) The vesting date fair value of total return-based restricted stock that vested during the years ended December 31, 2019 and 2018 was $ 2.1 million and $ 1.8 million, respectively, based on the performance of the specific plans. Vested shares include those shares surrendered by employees to satisfy tax withholding obligations in connection with such vesting. There were no vested shares of total return-based restricted stock during the year ended December 31, 2020. (3) The 2020, 2019 and 2018 amounts include 46,852 , 9,521 and 13,707 shares, respectively, that were forfeited at the end of the applicable measurement period because the applicable total return did not meet targeted levels. 401(k) Retirement Savings Plan We have a 401(k) Retirement Savings Plan covering substantially all employees who meet certain age and employment criteria. We contribute amounts for each participant at a rate of 75 % of the employee’s contribution (up to 6 % of each employee’s bi-weekly salary and cash incentives, subject to statutory limits). During the years ended December 31, 2020, 2019 and 2018, we contributed $ 1.4 million, $ 1.5 million and $ 1.4 million, respectively, to the 401(k) savings plan. The assets of this qualified plan are not included in our Consolidated Financial Statements since the assets are not owned by us. Retirement Plan The Company has a retirement plan for employees with at least 30 years of continuous service or are at least 55 years old with at least 10 years of continuous service. Subject to advance written notice and a non-compete agreement, eligible retirees would be entitled to receive a pro rata amount of any annual non-equity incentive compensation earned during the year of retirement and stock options and time-based restricted stock would be non-forfeitable and vest according to the terms of their original grants. Eligible retirees would also be entitled to retain any total return-based restricted stock that subsequently vests after the retirement date according to the terms of their original grants. For employees who meet the age and service eligibility requirements, 100 % of their annual grants are expensed at the grant date as if fully vested. For employees who will meet the age and service eligibility requirements within the normal vesting periods, the grants are amortized over the shorter service period. Deferred Compensation Prior to 2010, officers could elect to defer all or a portion of their cash compensation, which was then invested in unrelated mutual funds under a non-qualified deferred compensation plan. These investments are recorded at fair value, which aggregated $ 2.6 million and $ 2.3 million at December 31, 2020 and 2019, respectively, and are included in prepaid expenses and other assets, with an offsetting deferred compensation liability recorded in accounts payable, accrued expenses and other liabilities. Deferred amounts ultimately payable to the participants are based on the value of the related mutual fund investments. Accordingly, changes in the value of the unrelated mutual funds are recorded in interest and other income and the corresponding offsetting changes in the deferred compensation liability are recorded in general and administrative expense. As a result, there is no effect on our net income. 99 Table of Contents The following table sets forth our deferred compensation liability: Year Ended December 31, 2020 2019 2018 Beginning deferred compensation liability $ 2,345 $ 1,849 $ 2,388 Mark-to-market adjustment to deferred compensation (in general and administrative expenses) 228 496 ( 182 ) Distributions from deferred compensation plans — — ( 357 ) Total deferred compensation liability $ 2,573 $ 2,345 $ 1,849 Employee Stock Purchase Plan 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. At the end of each quarter, each participant’s account balance, which includes accumulated dividends, is applied to acquire shares of Common Stock at a cost that is calculated at 85 % of the average closing price on the NYSE on the five consecutive days preceding the last day of the quarter. In the years ended December 31, 2020, 2019 and 2018, the Company issued 47,208 , 38,618 and 38,951 shares, respectively, of Common Stock under the ESPP. The 15 % discount on newly issued shares, which is taxable income to the participants and is recorded by us as additional compensation expense, aggregated $ 0.3 million in each of the years ended December 31, 2020, 2019 and 2018. Generally, shares purchased under the ESPP must be held at least one year. The Company satisfies its ESPP obligations by issuing additional shares of Common Stock. 13. Accumulated Other Comprehensive Income/(Loss) The following table sets forth the components of accumulated other comprehensive income/(loss): December 31, 2020 2019 Cash flow hedges: Beginning balance $ ( 471 ) $ 9,913 Unrealized losses on cash flow hedges ( 1,238 ) ( 9,134 ) Amortization of cash flow hedges (1) 247 ( 1,250 ) Total accumulated other comprehensive loss $ ( 1,462 ) $ ( 471 ) __________ (1) Amounts reclassified out of accumulated other comprehensive income/(loss) into interest expense. 14. Real Estate and Other Assets Held For Sale The following table sets forth the assets held for sale at December 31, 2020 and 2019, which are considered non-core: December 31, 2020 2019 Assets: Land $ 2,612 $ 4,815 Buildings and tenant improvements 12,238 29,581 Less-accumulated depreciation ( 3,577 ) ( 16,775 ) Net real estate assets 11,273 17,621 Accrued straight-line rents receivable — 2,073 Deferred leasing costs, net 87 1,096 Real estate and other assets, net, held for sale $ 11,360 $ 20,790 100 Table of Contents 15. Earnings Per Share and Per Unit The following table sets forth the computation of basic and diluted earnings per share of the Company: Year Ended December 31, 2020 2019 2018 Earnings per Common Share - basic: Numerator: Net income $ 357,914 $ 141,683 $ 177,630 Net (income) attributable to noncontrolling interests in the Operating Partnership ( 9,338 ) ( 3,551 ) ( 4,588 ) Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,174 ) ( 1,214 ) ( 1,207 ) Dividends on Preferred Stock ( 2,488 ) ( 2,488 ) ( 2,492 ) Net income available for common stockholders $ 344,914 $ 134,430 $ 169,343 Denominator: Denominator for basic earnings per Common Share – weighted average shares (1) 103,876 103,692 103,439 Net income available for common stockholders $ 3.32 $ 1.30 $ 1.64 Earnings per Common Share - diluted: Numerator: Net income $ 357,914 $ 141,683 $ 177,630 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,174 ) ( 1,214 ) ( 1,207 ) Dividends on Preferred Stock ( 2,488 ) ( 2,488 ) ( 2,492 ) Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership $ 354,252 $ 137,981 $ 173,931 Denominator: Denominator for basic earnings per Common Share – weighted average shares (1) 103,876 103,692 103,439 Add: Stock options using the treasury method 8 22 33 Noncontrolling interests Common Units 2,830 2,731 2,796 Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions 106,714 106,445 106,268 Net income available for common stockholders $ 3.32 $ 1.30 $ 1.64 __________ (1) Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable. 101 Table of Contents The following table sets forth the computation of basic and diluted earnings per unit of the Operating Partnership: Year Ended December 31, 2020 2019 2018 Earnings per Common Unit - basic: Numerator: Net income $ 357,914 $ 141,683 $ 177,630 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,174 ) ( 1,214 ) ( 1,207 ) Distributions on Preferred Units ( 2,488 ) ( 2,488 ) ( 2,492 ) Net income available for common unitholders $ 354,252 $ 137,981 $ 173,931 Denominator: Denominator for basic earnings per Common Unit – weighted average units (1) 106,297 106,014 105,826 Net income available for common unitholders $ 3.33 $ 1.30 $ 1.64 Earnings per Common Unit - diluted: Numerator: Net income $ 357,914 $ 141,683 $ 177,630 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,174 ) ( 1,214 ) ( 1,207 ) Distributions on Preferred Units ( 2,488 ) ( 2,488 ) ( 2,492 ) Net income available for common unitholders $ 354,252 $ 137,981 $ 173,931 Denominator: Denominator for basic earnings per Common Unit – weighted average units (1) 106,297 106,014 105,826 Add: Stock options using the treasury method 8 22 33 Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions 106,305 106,036 105,859 Net income available for common unitholders $ 3.33 $ 1.30 $ 1.64 __________ (1) Includes all unvested restricted stock where distributions on such restricted stock are non-forfeitable. 102 Table of Contents 16. Income Taxes Our Consolidated Financial Statements include the operations of the Company’s taxable REIT subsidiary, which is not entitled to the dividends paid deduction and is subject to federal, state and local income taxes on its taxable income. The minimum dividend per share of Common Stock required for the Company to maintain its REIT status was $ 1.41 , $ 1.44 and $ 1.26 per share in 2020, 2019 and 2018, respectively. Continued qualification as a REIT depends on the Company’s ability to satisfy the dividend distribution tests, stock ownership requirements and various other qualification tests. The tax basis of the Company’s assets (net of accumulated tax depreciation and amortization) and liabilities was approximately $ 4.7 billion and $ 2.8 billion, respectively, at December 31, 2020 and $ 4.7 billion and $ 2.9 billion, respectively, at December 31, 2019. The tax basis of the Operating Partnership’s assets (net of accumulated tax depreciation and amortization) and liabilities was approximately $ 4.6 billion and $ 2.8 billion, respectively, at December 31, 2020 and $ 4.7 billion and $ 2.9 billion, respectively, at December 31, 2019. During the years ended December 31, 2020, 2019 and 2018, the Company qualified as a REIT and incurred no federal income tax expense; accordingly, the only federal income taxes included in the accompanying Consolidated Financial Statements relate to activities of the Company’s taxable REIT subsidiary. The following table sets forth the Company’s income tax expense: Year Ended December 31, 2020 2019 2018 Current tax expense: Federal $ 110 $ 202 $ 133 State 240 148 112 350 350 245 Deferred tax expense/(benefit): Federal ( 9 ) 14 ( 95 ) State ( 4 ) ( 120 ) ( 68 ) ( 13 ) ( 106 ) ( 163 ) Total income tax expense $ 337 $ 244 $ 82 The Company’s net deferred tax liability was $ 0.1 million at both December 31, 2020 and 2019. The net deferred tax liability is comprised primarily of tax versus book differences related to property (depreciation, amortization and basis differences). For the years ended December 31, 2020 and 2019, there were no unrecognized tax benefits. The Company is subject to federal, state and local income tax examinations by taxing authorities for 2017 through 2020. The Company does not expect that the total amount of unrecognized benefits will materially change within the next year. 17. Segment Information Our principal business is the operation, acquisition and development of rental real estate properties. We evaluate our business by geographic location. The operating results by geographic grouping are regularly reviewed by our chief operating decision maker for assessing performance and other purposes. There are no material inter-segment transactions. Our accounting policies of the segments are the same as those used in our Consolidated Financial Statements. All operations are within the United States. 103 Table of Contents The following tables summarize the rental and other revenues and net operating income, the primary industry property-level performance metric used by our chief operating decision maker and which is defined as rental and other revenues less rental property and other expenses, for each of our reportable segments. Our segment information as of December 31, 2019 and for the years ended December 31, 2019 and 2018 have been retrospectively revised from previously reported amounts to reflect a change in our reportable segments as a result of recent dispositions. Year Ended December 31, 2020 2019 2018 Rental and Other Revenues: Office: Atlanta $ 146,704 $ 151,279 $ 141,337 Charlotte 35,733 4,650 — Nashville 138,089 133,867 121,836 Orlando 49,459 52,679 53,771 Pittsburgh 58,518 60,755 61,177 Raleigh 128,189 122,173 118,352 Richmond 48,079 49,428 45,729 Tampa 99,520 86,431 102,404 Total Office Segment 704,291 661,262 644,606 Other 32,609 74,717 75,429 Total Rental and Other Revenues $ 736,900 $ 735,979 $ 720,035 Net Operating Income: Office: Atlanta $ 95,448 $ 97,019 $ 87,503 Charlotte 28,431 3,791 — Nashville 99,901 97,386 88,554 Orlando 29,546 32,062 32,841 Pittsburgh 35,631 36,249 36,233 Raleigh 95,926 88,402 86,053 Richmond 33,667 33,756 31,276 Tampa 67,059 50,339 65,819 Total Office Segment 485,609 439,004 428,279 Other 19,466 48,464 49,341 Total Net Operating Income 505,075 487,468 477,620 Reconciliation to net income: Depreciation and amortization ( 241,585 ) ( 254,504 ) ( 229,955 ) Impairments of real estate assets ( 1,778 ) ( 5,849 ) ( 423 ) General and administrative expenses ( 41,031 ) ( 44,067 ) ( 40,006 ) Interest expense ( 80,962 ) ( 81,648 ) ( 71,422 ) Other income/(loss) ( 1,707 ) ( 2,510 ) 1,940 Gains on disposition of property 215,897 39,517 37,638 Equity in earnings of unconsolidated affiliates 4,005 3,276 2,238 Net income $ 357,914 $ 141,683 $ 177,630 104 Table of Contents December 31, 2020 2019 Total Assets: Office: Atlanta $ 1,011,807 $ 1,040,869 Charlotte 443,051 425,045 Nashville 1,191,219 1,045,125 Orlando 289,129 289,743 Pittsburgh 313,783 323,792 Raleigh 839,831 830,128 Richmond 240,976 246,546 Tampa 556,951 521,620 Total Office Segment 4,886,747 4,722,868 Other 322,670 415,376 Total Assets $ 5,209,417 $ 5,138,244 105 Table of Contents 18. Quarterly Financial Data (Unaudited) The following tables set forth quarterly financial information of the Company: Year Ended December 31, 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Total Rental and other revenues $ 192,800 $ 183,153 $ 181,043 $ 179,904 $ 736,900 Net income 191,340 38,956 42,331 85,287 357,914 Net (income) attributable to noncontrolling interests in the Operating Partnership ( 4,960 ) ( 1,017 ) ( 1,107 ) ( 2,254 ) ( 9,338 ) Net (income) attributable to noncontrolling interests in consolidated affiliates ( 285 ) ( 289 ) ( 298 ) ( 302 ) ( 1,174 ) Dividends on Preferred Stock ( 622 ) ( 622 ) ( 622 ) ( 622 ) ( 2,488 ) Net income available for common stockholders $ 185,473 $ 37,028 $ 40,304 $ 82,109 $ 344,914 Earnings per Common Share – basic: Net income available for common stockholders $ 1.79 $ 0.36 $ 0.39 $ 0.79 $ 3.32 Earnings per Common Share – diluted: Net income available for common stockholders $ 1.79 $ 0.36 $ 0.39 $ 0.79 $ 3.32 Year Ended December 31, 2019 First Quarter Second Quarter Third Quarter Fourth Quarter Total Rental and other revenues $ 172,363 $ 184,070 $ 187,475 $ 192,071 $ 735,979 Net income 8,386 41,394 29,557 62,346 141,683 Net (income) attributable to noncontrolling interests in the Operating Partnership ( 193 ) ( 1,044 ) ( 737 ) ( 1,577 ) ( 3,551 ) Net (income) attributable to noncontrolling interests in consolidated affiliates ( 316 ) ( 306 ) ( 297 ) ( 295 ) ( 1,214 ) Dividends on Preferred Stock ( 622 ) ( 622 ) ( 622 ) ( 622 ) ( 2,488 ) Net income available for common stockholders $ 7,255 $ 39,422 $ 27,901 $ 59,852 $ 134,430 Earnings per Common Share – basic: Net income available for common stockholders $ 0.07 $ 0.38 $ 0.27 $ 0.58 $ 1.30 Earnings per Common Share – diluted: Net income available for common stockholders $ 0.07 $ 0.38 $ 0.27 $ 0.58 $ 1.30 106 Table of Contents The following tables set forth quarterly financial information of the Operating Partnership: Year Ended December 31, 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Total Rental and other revenues $ 192,800 $ 183,153 $ 181,043 $ 179,904 $ 736,900 Net income 191,340 38,956 42,331 85,287 357,914 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 285 ) ( 289 ) ( 298 ) ( 302 ) ( 1,174 ) Distributions on Preferred Units ( 622 ) ( 622 ) ( 622 ) ( 622 ) ( 2,488 ) Net income available for common unitholders $ 190,433 $ 38,045 $ 41,411 $ 84,363 $ 354,252 Earnings per Common Unit – basic: Net income available for common unitholders $ 1.79 $ 0.36 $ 0.39 $ 0.79 $ 3.33 Earnings per Common Unit – diluted: Net income available for common unitholders $ 1.79 $ 0.36 $ 0.39 $ 0.79 $ 3.33 Year Ended December 31, 2019 First Quarter Second Quarter Third Quarter Fourth Quarter Total Rental and other revenues $ 172,363 $ 184,070 $ 187,475 $ 192,071 $ 735,979 Net income 8,386 41,394 29,557 62,346 141,683 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 316 ) ( 306 ) ( 297 ) ( 295 ) ( 1,214 ) Distributions on Preferred Units ( 622 ) ( 622 ) ( 622 ) ( 622 ) ( 2,488 ) Net income available for common unitholders $ 7,448 $ 40,466 $ 28,638 $ 61,429 $ 137,981 Earnings per Common Unit – basic: Net income available for common unitholders $ 0.07 $ 0.38 $ 0.27 $ 0.58 $ 1.30 Earnings per Common Unit – diluted: Net income available for common unitholders $ 0.07 $ 0.38 $ 0.27 $ 0.58 $ 1.30 107 Table of Contents 19. Subsequent Events On January 15, 2021, we sold a building in Atlanta for a sale price of $ 30.7 million and expect to record a gain on disposition of property of $ 18.9 million. On January 21, 2021, we acquired our joint venture partner’s 75.0 % interest in the Forum, which owned five buildings in Raleigh encompassing 636,000 rentable square feet, for a purchase price of $ 131.3 million. We previously accounted for our 25.0 % interest in this joint venture using the equity method of accounting. The assets and liabilities of the joint venture are now wholly owned and we have determined the acquisition constitutes an asset purchase. As such, because the Forum is not a variable interest entity, we expect to allocate our previously held equity interest at historical cost along with the consideration paid and acquisition costs to the assets acquired and liabilities assumed. On February 2, 2021, the Company declared a cash dividend of $ 0.48 per share of Common Stock, which is payable on March 9, 2021 to stockholders of record as of February 16, 2021. See also Note 8 for information regarding the potential impact of the COVID-19 pandemic in future periods. The severity and duration of the COVID-19 pandemic and the resulting economic recession and the future demand for office space over the long-term are difficult to predict and could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance. 108 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP NOTE TO SCHEDULE III (in thousands) The following table sets forth the activity of real estate assets and accumulated depreciation: December 31, 2020 2019 2018 Real estate assets: Beginning balance $ 5,776,804 $ 5,296,551 $ 5,173,754 Acquisitions, development and improvements 259,470 677,842 274,863 Cost of real estate sold and retired ( 441,441 ) ( 197,589 ) ( 152,066 ) Ending balance (a) $ 5,594,833 $ 5,776,804 $ 5,296,551 Accumulated depreciation: Beginning balance $ 1,405,341 $ 1,296,562 $ 1,211,728 Depreciation expense 204,585 214,682 191,035 Real estate sold and retired ( 187,970 ) ( 105,903 ) ( 106,201 ) Ending balance (b) $ 1,421,956 $ 1,405,341 $ 1,296,562 (a) Reconciliation of total real estate assets to balance sheet caption: 2020 2019 2018 Total per Schedule III $ 5,594,833 $ 5,776,804 $ 5,296,551 Development in-process exclusive of land included in Schedule III 259,681 172,706 165,537 Real estate assets, net, held for sale ( 14,850 ) ( 34,396 ) — Total real estate assets $ 5,839,664 $ 5,915,114 $ 5,462,088 (b) Reconciliation of total accumulated depreciation to balance sheet caption: 2020 2019 2018 Total per Schedule III $ 1,421,956 $ 1,405,341 $ 1,296,562 Real estate assets, net, held for sale ( 3,577 ) ( 16,775 ) — Total accumulated depreciation $ 1,418,379 $ 1,388,566 $ 1,296,562 109 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands) December 31, 2020 Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Description Property Type 2020 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Life on Which Depreciation is Calculated Atlanta, GA 1700 Century Circle Office $ — $ 2,482 $ 2 $ 1,478 $ 2 $ 3,960 $ 3,962 $ 1,925 1983 5-40 yrs. 1800 Century Boulevard Office 1,444 29,081 — 11,265 1,444 40,346 41,790 24,040 1975 5-40 yrs. 1825 Century Boulevard Office 864 — 303 15,166 1,167 15,166 16,333 6,729 2002 5-40 yrs. 1875 Century Boulevard Office — 8,924 — 8,329 — 17,253 17,253 8,706 1976 5-40 yrs. 1900 Century Boulevard Office — 4,744 — 710 — 5,454 5,454 5,341 1971 5-40 yrs. 2200 Century Parkway Office — 14,432 — 9,059 — 23,491 23,491 11,732 1971 5-40 yrs. 2400 Century Parkway Office — — 406 14,776 406 14,776 15,182 7,686 1998 5-40 yrs. 2500 Century Parkway Office — — 328 12,684 328 12,684 13,012 4,589 2005 5-40 yrs. 2500/2635 Parking Garage Office — — — 6,447 — 6,447 6,447 2,424 2005 5-40 yrs. 2600 Century Parkway Office — 10,679 — 4,244 — 14,923 14,923 7,898 1973 5-40 yrs. 2635 Century Parkway Office — 21,643 — 20,514 — 42,157 42,157 18,043 1980 5-40 yrs. 2800 Century Parkway Office — 20,449 — 10,653 — 31,102 31,102 17,782 1983 5-40 yrs. 50 Glenlake Office 2,500 20,006 — 4,308 2,500 24,314 26,814 13,172 1997 5-40 yrs. Century Plaza I Office 1,290 8,567 — 5,022 1,290 13,589 14,879 6,872 1981 5-40 yrs. Century Plaza II Office 1,380 7,733 — 3,108 1,380 10,841 12,221 5,559 1984 5-40 yrs. 5405 Windward Parkway Office 3,342 32,111 — 19,729 3,342 51,840 55,182 26,543 1998 5-40 yrs. Riverpoint - Land Industrial 7,250 — ( 4,439 ) 718 2,811 718 3,529 185 N/A 5-40 yrs. Riverwood 100 Office 5,785 64,913 ( 29 ) 26,071 5,756 90,984 96,740 23,842 1989 5-40 yrs. Tradeport - Land Industrial 5,243 — ( 4,819 ) — 424 — 424 — N/A N/A Two Alliance Center Office 9,579 125,549 — 906 9,579 126,455 136,034 33,618 2009 5-40 yrs. One Alliance Center Office 14,775 123,071 — 17,587 14,775 140,658 155,433 32,298 2001 5-40 yrs. 10 Glenlake North Office 5,349 26,334 — 11,303 5,349 37,637 42,986 10,897 2000 5-40 yrs. 10 Glenlake South Office 5,103 22,811 — 3,523 5,103 26,334 31,437 7,056 1999 5-40 yrs. Riverwood 200 Office 4,777 89,708 450 2,905 5,227 92,613 97,840 11,172 2017 5-40 yrs. Riverwood 300 - Land Office 400 — — 710 400 710 1,110 70 N/A 5-40 yrs. Monarch Tower Office 22,717 143,068 — 17,074 22,717 160,142 182,859 25,234 1997 5-40 yrs. Monarch Plaza Office 27,678 88,962 — 11,147 27,678 100,109 127,787 15,755 1983 5-40 yrs. Charlotte, NC Bank of America Tower Office 29,273 354,749 — 20,087 29,273 374,836 404,109 12,090 2019 5-40 yrs. 110 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Description Property Type 2020 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Life on Which Depreciation is Calculated Nashville, TN 3322 West End Office 3,025 27,490 — 11,806 3,025 39,296 42,321 18,539 1986 5-40 yrs. 3401 West End Office 5,862 22,917 — 6,566 5,862 29,483 35,345 16,114 1982 5-40 yrs. 5310 Maryland Way Office 1,863 7,201 — 3,809 1,863 11,010 12,873 6,540 1994 5-40 yrs. Cool Springs I & II Deck Office — — — 3,990 — 3,990 3,990 1,314 2007 5-40 yrs. Cool Springs III & IV Deck Office — — — 4,463 — 4,463 4,463 1,535 2007 5-40 yrs. Cool Springs I Office 1,583 — 15 15,891 1,598 15,891 17,489 7,396 1999 5-40 yrs. Cool Springs II Office 1,824 — 346 24,705 2,170 24,705 26,875 10,089 1999 5-40 yrs. Cool Springs III Office 1,631 — 804 16,241 2,435 16,241 18,676 5,698 2006 5-40 yrs. Cool Springs IV Office 1,715 — — 19,221 1,715 19,221 20,936 6,131 2008 5-40 yrs. Cool Springs V (Healthways) Office 3,688 — 295 53,100 3,983 53,100 57,083 23,044 2007 5-40 yrs. Harpeth On The Green II Office 1,419 5,677 — 3,216 1,419 8,893 10,312 4,607 1984 5-40 yrs. Harpeth On The Green III Office 1,660 6,649 — 2,263 1,660 8,912 10,572 5,015 1987 5-40 yrs. Harpeth On The Green IV Office 1,713 6,842 — 3,171 1,713 10,013 11,726 5,598 1989 5-40 yrs. Harpeth On The Green V Office 662 — 197 5,795 859 5,795 6,654 2,686 1998 5-40 yrs. Hickory Trace Office 1,164 — 164 6,111 1,328 6,111 7,439 2,474 2001 5-40 yrs. Highwoods Plaza I Office 1,552 — 307 9,951 1,859 9,951 11,810 5,020 1996 5-40 yrs. Highwoods Plaza II Office 1,448 — 307 9,600 1,755 9,600 11,355 4,988 1997 5-40 yrs. Seven Springs I Office 2,076 — 592 13,216 2,668 13,216 15,884 5,916 2002 5-40 yrs. SouthPointe Office 1,655 — 310 9,430 1,965 9,430 11,395 4,107 1998 5-40 yrs. Ramparts Office 2,394 12,806 — 10,313 2,394 23,119 25,513 9,057 1986 5-40 yrs. Westwood South Office 2,106 — 382 12,317 2,488 12,317 14,805 6,168 1999 5-40 yrs. 100 Winners Circle Office 1,497 7,258 — 2,760 1,497 10,018 11,515 5,121 1987 5-40 yrs. The Pinnacle at Symphony Place Office 93,350 — 141,469 — 6,406 — 147,875 147,875 36,904 2010 5-40 yrs. Seven Springs East (LifePoint) Office 2,525 37,587 — 192 2,525 37,779 40,304 8,512 2013 5-40 yrs. The Shops at Seven Springs Office 803 8,223 — 581 803 8,804 9,607 2,604 2013 5-40 yrs. Seven Springs West Office 2,439 51,306 — 1,995 2,439 53,301 55,740 7,947 2016 5-40 yrs. Seven Springs II Office 2,356 30,048 — 3,011 2,356 33,059 35,415 4,058 2017 5-40 yrs. Bridgestone Tower Office 19,223 169,582 — 110 19,223 169,692 188,915 16,369 2017 5-40 yrs. Virginia Springs II Office — — 4,821 21,578 4,821 21,578 26,399 70 2020 5-40 yrs. MARS Campus Office 7,010 87,474 — 32 7,010 87,506 94,516 5,505 2019 5-40 yrs. 5501 Virginia Way Office 4,534 25,632 — 274 4,534 25,906 30,440 1,775 2018 5-40 yrs. 1100 Broadway - Land Office 29,845 — — — 29,845 — 29,845 — N/A N/A Ovation - Land Office 31,063 — 104 — 31,167 — 31,167 — N/A N/A 111 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Description Property Type 2020 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Life on Which Depreciation is Calculated Broadway Stem - Land Office — — 6,218 — 6,218 — 6,218 — N/A N/A Orlando, FL Capital Plaza Three - Land Office 2,994 — 18 — 3,012 — 3,012 — N/A N/A Eola Park - Land Office 2,027 — — — 2,027 — 2,027 — N/A N/A The 1800 Eller Drive Building Office — 9,851 — 3,526 — 13,377 13,377 9,158 1983 5-40 yrs. Seaside Plaza Office 3,893 29,541 — 10,104 3,893 39,645 43,538 8,963 1982 5-40 yrs. Capital Plaza Two Office 4,346 43,394 — 8,433 4,346 51,827 56,173 12,253 1999 5-40 yrs. Capital Plaza One Office 3,482 27,321 — 7,668 3,482 34,989 38,471 7,387 1975 5-40 yrs. Landmark Center Two Office 4,743 22,031 — 9,352 4,743 31,383 36,126 7,595 1985 5-40 yrs. Landmark Center One Office 6,207 22,655 — 10,026 6,207 32,681 38,888 7,556 1983 5-40 yrs. 300 South Orange Office 3,490 56,079 — 10,243 3,490 66,322 69,812 12,867 2000 5-40 yrs. Eola Centre Office 3,758 11,160 — 12,739 3,758 23,899 27,657 3,710 1969 5-40 yrs. Pittsburgh, PA One PPG Place Office 9,819 107,643 — 51,500 9,819 159,143 168,962 51,382 1983-1985 5-40 yrs. Two PPG Place Office 2,302 10,978 — 10,655 2,302 21,633 23,935 5,670 1983-1985 5-40 yrs. Three PPG Place Office 501 2,923 — 4,680 501 7,603 8,104 2,737 1983-1985 5-40 yrs. Four PPG Place Office 620 3,239 — 3,675 620 6,914 7,534 2,220 1983-1985 5-40 yrs. Five PPG Place Office 803 4,924 — 3,168 803 8,092 8,895 2,828 1983-1985 5-40 yrs. Six PPG Place Office 3,353 25,602 — 15,502 3,353 41,104 44,457 11,416 1983-1985 5-40 yrs. EQT Plaza Office 16,457 83,812 — 15,175 16,457 98,987 115,444 25,863 1987 5-40 yrs. East Liberty - Land Office 2,478 — — — 2,478 — 2,478 — N/A N/A Raleigh, NC 3600 Glenwood Avenue Office — 10,994 — 4,948 — 15,942 15,942 8,885 1986 5-40 yrs. 3737 Glenwood Avenue Office — — 318 17,281 318 17,281 17,599 8,596 1999 5-40 yrs. 4800 North Park Office 2,678 17,630 — 10,224 2,678 27,854 30,532 16,546 1985 5-40 yrs. 5000 North Park Office 1,010 4,612 ( 49 ) 2,674 961 7,286 8,247 4,078 1980 5-40 yrs. 801 Raleigh Corporate Center Office 828 — 272 11,233 1,100 11,233 12,333 4,604 2002 5-40 yrs. 2500 Blue Ridge Road Office 722 4,606 — 1,497 722 6,103 6,825 3,844 1982 5-40 yrs. 2418 Blue Ridge Road Office 462 1,410 — 2,718 462 4,128 4,590 1,623 1988 5-40 yrs. Cape Fear Office 131 1,630 ( 2 ) ( 1,004 ) 129 626 755 382 1979 5-40 yrs. Catawba - Land Office 125 1,635 ( 2 ) ( 1,635 ) 123 — 123 — N/A N/A 2000 CentreGreen Office 1,529 — ( 391 ) 12,445 1,138 12,445 13,583 4,544 2000 5-40 yrs. 4000 CentreGreen Office 1,653 — ( 389 ) 11,339 1,264 11,339 12,603 5,202 2001 5-40 yrs. 5000 CentreGreen Office 1,291 34,572 — 2,875 1,291 37,447 38,738 4,997 2017 5-40 yrs. 112 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Description Property Type 2020 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Life on Which Depreciation is Calculated 3000 CentreGreen Office 1,779 — ( 397 ) 14,505 1,382 14,505 15,887 4,860 2002 5-40 yrs. 1000 CentreGreen Office 1,280 — 55 12,888 1,335 12,888 14,223 3,736 2008 5-40 yrs. Cottonwood Office 609 3,244 — 437 609 3,681 4,290 2,435 1983 5-40 yrs. GlenLake - Land Office 13,003 — ( 9,924 ) 114 3,079 114 3,193 56 N/A 5-40 yrs. GlenLake One Office 924 — 1,324 22,714 2,248 22,714 24,962 10,176 2002 5-40 yrs. GlenLake Four Office 1,659 — 493 20,311 2,152 20,311 22,463 7,243 2006 5-40 yrs. GlenLake Six Office 941 — ( 365 ) 20,118 576 20,118 20,694 6,532 2008 5-40 yrs. 701 Raleigh Corporate Center Office 1,304 — 540 17,337 1,844 17,337 19,181 8,802 1996 5-40 yrs. Highwoods Centre Office 531 — ( 267 ) 7,981 264 7,981 8,245 4,290 1998 5-40 yrs. Inveresk Parcel 2 - Land Office 657 — 38 103 695 103 798 14 N/A 5-40 yrs. 4201 Lake Boone Trail Office 1,450 6,311 — 684 1,450 6,995 8,445 1,998 1998 5-40 yrs. 4620 Creekstone Drive Office 149 — 107 3,380 256 3,380 3,636 1,511 2001 5-40 yrs. 4825 Creekstone Drive Office 398 — 293 10,478 691 10,478 11,169 5,269 1999 5-40 yrs. Pamlico Office 289 — — 9,188 289 9,188 9,477 7,209 1980 5-40 yrs. 751 Corporate Center Office 2,665 16,939 — — 2,665 16,939 19,604 1,817 2018 5-40 yrs. PNC Plaza Office 1,206 — — 70,389 1,206 70,389 71,595 24,643 2008 5-40 yrs. 4301 Lake Boone Trail Office 878 3,730 — 2,405 878 6,135 7,013 3,896 1990 5-40 yrs. 4207 Lake Boone Trail Office 362 1,818 — 1,407 362 3,225 3,587 2,130 1993 5-40 yrs. 2301 Rexwoods Drive Office 919 2,816 — 1,650 919 4,466 5,385 2,769 1992 5-40 yrs. 4325 Lake Boone Trail Office 586 — — 4,872 586 4,872 5,458 2,764 1995 5-40 yrs. 2300 Rexwoods Drive Office 1,301 — 184 8,129 1,485 8,129 9,614 2,938 1998 5-40 yrs. 4709 Creekstone Drive Office 469 4,038 23 5,383 492 9,421 9,913 3,081 1987 5-40 yrs. 4700 Six Forks Road Office 666 2,665 — 1,180 666 3,845 4,511 2,356 1982 5-40 yrs. 4700 Homewood Court Office 1,086 4,533 — 2,078 1,086 6,611 7,697 3,925 1983 5-40 yrs. 4800 Six Forks Road Office 862 4,411 — 3,433 862 7,844 8,706 4,401 1987 5-40 yrs. Smoketree Tower Office 2,353 11,743 — 6,818 2,353 18,561 20,914 10,951 1984 5-40 yrs. 4601 Creekstone Drive Office 255 — 217 6,221 472 6,221 6,693 3,545 1997 5-40 yrs. Weston - Land Office 22,771 — ( 19,894 ) — 2,877 — 2,877 — N/A N/A 4625 Creekstone Drive Office 458 — 268 6,122 726 6,122 6,848 3,621 1995 5-40 yrs. 11000 Weston Parkway Office 2,651 18,850 — 15,357 2,651 34,207 36,858 6,014 1998 5-40 yrs. GlenLake Five Office 2,263 30,264 — 3,693 2,263 33,957 36,220 8,605 2014 5-40 yrs. 11800 Weston Parkway Office 826 13,188 — 13 826 13,201 14,027 2,836 2014 5-40 yrs. CentreGreen Café Office 41 3,509 — ( 2 ) 41 3,507 3,548 533 2014 5-40 yrs. CentreGreen Fitness Center Office 27 2,322 — ( 1 ) 27 2,321 2,348 353 2014 5-40 yrs. 113 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Description Property Type 2020 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Life on Which Depreciation is Calculated One City Plaza Office 11,288 68,375 — 26,766 11,288 95,141 106,429 20,423 1986 5-40 yrs. Edison - Land Office 5,984 — 2,196 — 8,180 — 8,180 — N/A N/A Charter Square Office 7,267 65,881 — 4,913 7,267 70,794 78,061 10,208 2015 5-40 yrs. MetLife Global Technology Campus Office 21,580 149,889 — ( 153 ) 21,580 149,736 171,316 19,477 2015 5-40 yrs. GlenLake Seven Office — — 1,662 34,077 1,662 34,077 35,739 435 2020 5-40 yrs. Hargett - Land Office 6,582 — 2,816 — 9,398 — 9,398 — N/A N/A Other Property Other 27,260 20,868 ( 6,084 ) 96,118 21,176 116,986 138,162 50,227 N/A 5-40 yrs. Richmond, VA 4900 Cox Road Office 1,324 5,311 15 3,731 1,339 9,042 10,381 5,460 1991 5-40 yrs. Colonnade Building Office 1,364 6,105 — 2,462 1,364 8,567 9,931 3,885 2003 5-40 yrs. Dominion Place - Pitts Parcel - Land Office 1,101 — ( 404 ) — 697 — 697 — N/A N/A Markel 4521 Office 1,581 13,299 168 ( 396 ) 1,749 12,903 14,652 6,260 1999 5-40 yrs. Hamilton Beach Office 1,086 4,345 10 2,997 1,096 7,342 8,438 3,849 1986 5-40 yrs. Highwoods Commons Office 521 — 458 4,651 979 4,651 5,630 2,261 1999 5-40 yrs. Highwoods One Office 1,688 — 22 14,116 1,710 14,116 15,826 7,416 1996 5-40 yrs. Highwoods Two Office 786 — 226 10,292 1,012 10,292 11,304 3,936 1997 5-40 yrs. Highwoods Five Office 783 — 11 8,000 794 8,000 8,794 3,744 1998 5-40 yrs. Highwoods Plaza Office 909 — 187 5,897 1,096 5,897 6,993 2,865 2000 5-40 yrs. Innslake Center Office 845 — 195 8,023 1,040 8,023 9,063 3,527 2001 5-40 yrs. Highwoods Centre Office 1,205 4,825 — 1,967 1,205 6,792 7,997 3,505 1990 5-40 yrs. Markel 4501 Office 1,300 13,259 213 ( 3,367 ) 1,513 9,892 11,405 4,039 1998 5-40 yrs. 4600 Cox Road Office 1,700 17,081 169 ( 3,450 ) 1,869 13,631 15,500 5,576 1989 5-40 yrs. North Park Office 2,163 8,659 6 3,666 2,169 12,325 14,494 6,976 1989 5-40 yrs. North Shore Commons I Office 951 — 137 12,624 1,088 12,624 13,712 6,525 2002 5-40 yrs. North Shore Commons II Office 2,067 — ( 89 ) 10,848 1,978 10,848 12,826 3,873 2007 5-40 yrs. North Shore Commons C - Land Office 1,497 — 55 10 1,552 10 1,562 1 N/A 5-40 yrs. North Shore Commons D - Land Office 1,261 — — — 1,261 — 1,261 — N/A N/A Nuckols Corner - Land Office 1,259 — 231 — 1,490 — 1,490 — N/A N/A One Shockoe Plaza Office — — 356 21,530 356 21,530 21,886 10,372 1996 5-40 yrs. Pavilion - Land Office 181 46 ( 181 ) ( 46 ) — — — — N/A N/A Lake Brook Commons Office 1,600 8,864 21 2,877 1,621 11,741 13,362 5,503 1996 5-40 yrs. Sadler & Cox - Land Office 1,535 — 343 — 1,878 — 1,878 — N/A N/A Highwoods Three Office 1,918 — 358 12,128 2,276 12,128 14,404 4,345 2005 5-40 yrs. Stony Point VI (Virginia Urology) Office 1,925 25,868 — ( 2 ) 1,925 25,866 27,791 2,059 2018 5-40 yrs. 114 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Description Property Type 2020 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Life on Which Depreciation is Calculated Stony Point I Office 1,384 11,630 ( 267 ) 4,115 1,117 15,745 16,862 8,432 1990 5-40 yrs. Stony Point II Office 1,240 — 103 13,296 1,343 13,296 14,639 6,534 1999 5-40 yrs. Stony Point III Office 995 — — 10,762 995 10,762 11,757 5,361 2002 5-40 yrs. Stony Point IV Office 955 — — 12,057 955 12,057 13,012 4,467 2006 5-40 yrs. Virginia Mutual Office 1,301 6,036 15 1,201 1,316 7,237 8,553 3,639 1996 5-40 yrs. Waterfront Plaza Office 585 2,347 8 2,291 593 4,638 5,231 2,157 1988 5-40 yrs. Innsbrook Centre Office 914 8,249 — 1,126 914 9,375 10,289 4,093 1987 5-40 yrs. Elks Pass - Land Office 3,326 — — — 3,326 — 3,326 — N/A N/A Tampa, FL Meridian Three Office 2,673 16,470 — 5,930 2,673 22,400 25,073 7,048 1989 5-40 yrs. Bayshore Place Office 2,276 11,817 — 3,632 2,276 15,449 17,725 7,269 1990 5-40 yrs. 5525 Gray Street Office 4,054 — 406 23,977 4,460 23,977 28,437 8,606 2005 5-40 yrs. Highwoods Preserve Building V Office 881 — — 25,368 881 25,368 26,249 11,031 2001 5-40 yrs. Highwoods Bay Center I Office 3,565 — ( 64 ) 38,263 3,501 38,263 41,764 12,745 2007 5-40 yrs. HIW Bay Center II - Land Office 3,482 — — — 3,482 — 3,482 — N/A N/A Highwoods Preserve Building VII Office 790 — — 16,996 790 16,996 17,786 4,481 2007 5-40 yrs. HIW Preserve VII Garage Office — — — 6,932 — 6,932 6,932 2,367 2007 5-40 yrs. Horizon Office — 6,257 — 4,443 — 10,700 10,700 5,546 1980 5-40 yrs. LakePointe One Office 2,106 89 — 41,475 2,106 41,564 43,670 23,659 1986 5-40 yrs. LakePointe Two Office 2,000 15,848 672 15,211 2,672 31,059 33,731 15,976 1999 5-40 yrs. Lakeside Office — 7,369 — 7,726 — 15,095 15,095 7,504 1978 5-40 yrs. Lakeside/Parkside Garage Office — — — 5,732 — 5,732 5,732 2,455 2004 5-40 yrs. One Harbour Place Office 2,016 25,252 — 16,693 2,016 41,945 43,961 18,333 1985 5-40 yrs. Parkside Office — 9,407 — 3,231 — 12,638 12,638 6,111 1979 5-40 yrs. Pavilion Office — 16,394 — 6,071 — 22,465 22,465 12,081 1982 5-40 yrs. Pavilion Parking Garage Office — — — 5,801 — 5,801 5,801 3,038 1999 5-40 yrs. Spectrum Office 1,454 14,502 — 4,751 1,454 19,253 20,707 10,099 1984 5-40 yrs. Tower Place Office 3,218 19,898 — 6,948 3,218 26,846 30,064 14,011 1988 5-40 yrs. Westshore Square Office 1,126 5,186 — 1,706 1,126 6,892 8,018 3,687 1976 5-40 yrs. Independence Park - Land Office 4,943 — 5,058 2,227 10,001 2,227 12,228 214 N/A 5-40 yrs. Independence One Office 2,531 4,526 — 5,741 2,531 10,267 12,798 5,104 1983 5-40 yrs. Meridian One Office 1,849 22,363 — 3,187 1,849 25,550 27,399 6,028 1984 5-40 yrs. Meridian Two Office 1,302 19,588 — 5,425 1,302 25,013 26,315 6,064 1986 5-40 yrs. 5332 Avion Drive Office — — 6,310 39,358 6,310 39,358 45,668 3,937 2016 5-40 yrs. 115 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Description Property Type 2020 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Life on Which Depreciation is Calculated Suntrust Financial Centre Office 1,980 102,138 — 25,020 1,980 127,158 129,138 20,758 1992 5-40 yrs. Suntrust Financial - Land Office 2,225 — — — 2,225 — 2,225 — N/A N/A $ 606,086 $ 3,274,841 $ ( 5,128 ) $ 1,719,034 $ 600,958 $ 4,993,875 $ 5,594,833 $ 1,421,956 __________ (1) The cost basis for income tax purposes of aggregate land and buildings and tenant improvements as of December 31, 2020 is $ 5.5 billion. 116 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on February 9, 2021. Highwoods Properties, Inc. By: /s/ Theodore J. Klinck Theodore J. Klinck President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. Signature Title Date /s/ Carlos E. Evans Chairman of the Board of Directors February 9, 2021 Carlos E. Evans /s/ Theodore J. Klinck President, Chief Executive Officer and Director February 9, 2021 Theodore J. Klinck /s/ Charles A. Anderson Director February 9, 2021 Charles A. Anderson /s/ Gene H. Anderson Director February 9, 2021 Gene H. Anderson /s/ Thomas P. Anderson Director February 9, 2021 Thomas P. Anderson /s/ David L. Gadis Director February 9, 2021 David L. Gadis /s/ David J. Hartzell Director February 9, 2021 David J. Hartzell /s/ Sherry A. Kellett Director February 9, 2021 Sherry A. Kellett /s/ Anne H. Lloyd Director February 9, 2021 Anne H. Lloyd /s/ Mark F. Mulhern Executive Vice President and Chief Financial Officer February 9, 2021 Mark F. Mulhern /s/ Daniel L. Clemmens Vice President and Chief Accounting Officer February 9, 2021 Daniel L. Clemmens 117 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on February 9, 2021. Highwoods Realty Limited Partnership By: Highwoods Properties, Inc., its sole general partner By: /s/ Theodore J. Klinck Theodore J. Klinck President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. Signature Title Date /s/ Carlos E. Evans Chairman of the Board of Directors of the General Partner February 9, 2021 Carlos E. Evans /s/ Theodore J. Klinck President, Chief Executive Officer and Director of the General Partner February 9, 2021 Theodore J. Klinck /s/ Charles A. Anderson Director of the General Partner February 9, 2021 Charles A. Anderson /s/ Gene H. Anderson Director of the General Partner February 9, 2021 Gene H. Anderson /s/ Thomas P. Anderson Director of the General Partner February 9, 2021 Thomas P. Anderson /s/ David L. Gadis Director of the General Partner February 9, 2021 David L. Gadis /s/ David J. Hartzell Director of the General Partner February 9, 2021 David J. Hartzell /s/ Sherry A. Kellett Director of the General Partner February 9, 2021 Sherry A. Kellett /s/ Anne H. Lloyd Director of the General Partner February 9, 2021 Anne H. Lloyd /s/ Mark F. Mulhern Executive Vice President and Chief Financial Officer of the General Partner February 9, 2021 Mark F. Mulhern /s/ Daniel L. Clemmens Vice President and Chief Accounting Officer of the General Partner February 9, 2021 Daniel L. Clemmens 118