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Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved.
−Removed: When considering such forward-looking statements, you should keep in mind important factors that could cause our actual results to differ materially from those contained in any forward-looking statement.
−Removed: Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the ongoing adverse effect of the COVID-19 pandemic, and federal, state, and/or local regulatory guidelines and private business actions to control it, on our financial condition, operating results and cash flows, our customers, the use of and demand for office space, the real estate market in which we operate, the global economy and the financial markets.
−Removed: The extent to which the COVID-19 pandemic impacts us and our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its ongoing impact on the U.S.
−Removed: economy and potential changes in customer behavior, among others.
−Removed: Additional factors, many of which may be influenced by the COVID-19 pandemic, that could cause actual outcomes or results to differ materially from those indicated in these statements include:
−Removed: • the financial condition of our customers could deteriorate or further worsen;
+Added: When considering such forward-looking statements, you should keep in mind important factors that could cause our actual results to differ materially from those contained in any forward-looking statement, including the following:
+Added: • buyers may not be available and pricing may not be adequate with respect to planned dispositions of non-core assets;
+Added: • comparable sales data on which we based our expectations with respect to the sales price of non-core assets may not reflect current market trends;
+Added: • the extent to which the ongoing COVID-19 pandemic impacts our financial condition, results of operations and cash flows depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its impact on the U.S.
+Added: economy and potential changes in customer behavior that could adversely affect the use of and demand for office space;
+Added: • the financial condition of our customers could deteriorate or further worsen, which could be further exacerbated by the COVID-19 pandemic;
+Added: • our assumptions regarding potential losses related to customer financial difficulties due to the COVID-19 pandemic could prove incorrect;
• counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity;
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Executive Summary
−Removed: Our Strategic Plan focuses on:
−Removed: • owning high-quality, differentiated office buildings in the BBDs of our core markets;
−Removed: • improving the operating results of our properties through concentrated leasing, asset management, cost control and customer service efforts;
−Removed: • developing and acquiring office buildings in BBDs that improve the overall quality of our portfolio and generate attractive returns over the long term for our stockholders;
−Removed: • disposing of properties no longer considered to be core assets primarily due to location, age, quality and/or overall strategic fit;
−Removed: • maintaining a balance sheet with ample liquidity to meet our funding needs and growth prospects.
−Removed: The unprecedented nationwide efforts to slow the spread of the COVID-19 virus have obviously had a significant impact on the U.S.
−Removed: It is very difficult to predict when, if and to what extent economic activity will return to pre-COVID-19 levels.
−Removed: The COVID-19 pandemic did have somewhat of an impact on our 2020 financial results, as described further in “Results of Operations.” Our financial results for 2021 and future leasing activity could be adversely affected by the COVID-19 pandemic.
−Removed: Factors that could cause actual results to differ materially from our current expectations are set forth under “Item 1A.
−Removed: Risk Factors” and “Disclosure Regarding Forward-Looking Statements.”
−Removed: While all buildings and parking facilities have remained open for business, the usage of our assets in 2020 was significantly lower due to the COVID-19 pandemic.
−Removed: As a result, parking and parking-related revenues were lower during this period.
−Removed: In addition, our operating expenses, net of expense recoveries, were lower during this period due to reduced electricity, janitorial and other variable expenses.
−Removed: Until usage increases, which will depend on the duration of the COVID-19 pandemic, which is difficult to estimate, we expect that reduced usage will continue to result in reduced parking revenues, which will be partially offset by reduced operating expenses.
−Removed: We do not expect usage to increase over the current level until the infection rate across the U.S.
−Removed: and, more specifically, our markets begins to meaningfully decline and/or an increasing number of employers believe the risk of virus spread in the workplace is manageable.
−Removed: Given the COVID-19 pandemic and its impact on economic activity, we have been experiencing slower speculative new leasing and we expect that trend will continue in 2021.
−Removed: It is too early to predict the pandemic’s impact on renewal activity in 2021.
−Removed: Lower overall leasing will negatively impact our rental revenues.
−Removed: We have incurred and may in the future incur losses due to customers that default on their leases, file bankruptcy and/or otherwise experience significant financial difficulty as a result of the COVID-19 pandemic.
−Removed: In 2020, such losses totaled $4.5 million, consisting of lost rental revenues resulting from customers that filed bankruptcy or otherwise irrevocably defaulted on their leases and non-cash credit losses of straight-line rent receivables.
−Removed: Of the straight-line rent receivable credit losses incurred during 2020, $1.3 million were due to the conversion of fixed rent leases to percentage rent leases for certain customers that remain in occupancy but have been impacted by social distancing measures.
−Removed: Generally, in cases where an otherwise viable, creditworthy customer has been able to demonstrate disruption due to the complete or partial shutdown of its business operations, we have agreed and/or may agree to defer, but not abate, the payment of rent for a limited period of time or, as noted above, convert traditional leases to percentage rent leases.
−Removed: In other cases, we have agreed and/or may agree to abate rent for a limited period of time as consideration for a lease term extension.
−Removed: The extent of any losses will depend on whether or not the collectability of future rents from customers experiencing financial difficulty is deemed to be probable under GAAP.
−Removed: For a discussion of the impact of the COVID-19 pandemic on our liquidity and balance sheet, see “Liquidity and Capital Resources” below.
+Added: We are in the work-placemaking business.
+Added: We believe that in creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stockholders.
+Added: Our simple strategy is to own and manage high-quality workplaces in the BBDs within our footprint, maintain a strong balance sheet to be opportunistic throughout economic cycles, employ a talented and dedicated team and communicate transparently with all stakeholders.
+Added: We focus on owning and managing buildings in the most dynamic and vibrant BBDs.
+Added: BBDs are highly-energized and amenitized workplace locations that enhance our customers’ ability to attract and retain talent.
+Added: They are both urban and suburban.
+Added: Providing the most talent-supportive workplace options in these environments is core to our work-placemaking strategy.
+Added: Our investment strategy is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets.
+Added: A core component of this strategy is to continuously strengthen the financial and operational performance, resiliency and long-term growth prospects of our existing in-service portfolio and recycle those properties that no longer meet our criteria.
+Added: Since the beginning of 2019, we have acquired 3.1 million square feet of trophy office assets for a total investment of $1.3 billion, placed in service 1.8 million square feet of highly pre-leased new office development for a total investment of $691 million and sold 6.7 million square feet of non-core office and industrial assets for $992 million.
+Added: This series of transactions included our exit from Greensboro and Memphis and entry into Charlotte, a higher-growth market with greater future upside opportunities.
Our operating results depend heavily on successfully leasing and operating the office space in our portfolio.
Economic growth and office employment levels in our core markets are important factors, among others, in predicting our future operating results.
+Added: Since March 2020, the COVID-19 pandemic has also had a significant impact on the U.S.
+Added: It is very difficult to predict when, if and to what extent economic activity will return to pre-COVID-19 levels.
+Added: The COVID-19 pandemic did impact our 2021 financial results.
+Added: While all buildings and parking facilities have remained open for business, the usage of our assets has continued to remain significantly lower than pre-pandemic levels.
+Added: As a result, compared to pre-pandemic levels, parking and parking-related revenues have continued to be low, largely offsetting reduced operating expenses, net of expense recoveries.
+Added: Until usage increases, which will depend on the duration of the COVID-19 pandemic, which is difficult to estimate, we expect that reduced usage will continue to result in reduced parking revenues, which will be partially offset by reduced operating expenses.
+Added: We currently expect usage will gradually increase throughout 2022.
+Added: Factors that could cause actual results to differ materially from our current expectations are set forth under “Disclosure Regarding Forward-Looking Statements.”
The key components affecting our rental and other revenues are average occupancy, rental rates, cost recovery income, new developments placed in service, acquisitions and dispositions.
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For more information regarding our lease expirations, see “Item 2.
−Removed: Properties - Lease Expirations.” Occupancy in our office portfolio decreased from 92.0% at December 31, 2019 to 90.3% at December 31, 2020.
+Added: Properties - Lease Expirations.” Occupancy in our office portfolio increased from 90.3% at December 31, 2020 to 91.2% at December 31, 2021.
We expect average occupancy for our office portfolio to be approximately 90.5% to 91.5% for 2022.
−Removed: However, average occupancy in 2021 will be lower, perhaps significantly lower, if the COVID-19 pandemic causes vacancies and move-outs due to (a) customers that default on their leases, file bankruptcy or otherwise experience significant financial difficulty and/or (b) potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, which could materially and negatively impact the future demand for office space over the long-term.
+Added: However, average occupancy in 2022 will be lower, perhaps significantly lower, if the COVID-19 pandemic causes vacancies and move-outs due to potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, which could materially and negatively impact the future demand for office space, resulting in slower overall leasing and negatively impacting our revenues.
Whether or not our rental revenue tracks average occupancy proportionally depends upon whether GAAP rents under signed new and renewal leases are higher or lower than the GAAP rents under expiring leases.
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We have an internal guideline whereby customers that account for more than 3% of our revenues are periodically reviewed with the Company’s Board of Directors.
−Removed: As of December 31, 2020, no customer accounted for more than 3% of our cash revenues other than the Federal Government and Bank of America, which accounted for 4.3% and 4.1%, respectively, of our cash revenues on an annualized basis.
−Removed: Upon stabilization of the MetLife III development project in Raleigh, it is expected that MetLife will account for approximately 3.4% of our revenues based on annualized cash revenues for December 2020.
+Added: As of December 31, 2021, the Federal Government (4.0%) and Bank of America (3.7%) accounted for more than 3% of our annualized cash revenues.
Properties - Customers.”
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From time to time, expenses also include impairments of real estate assets.
−Removed: Rental property expenses are expenses associated with our ownership and operation of rental properties and include expenses that vary
−Removed: somewhat proportionately to occupancy levels, such as janitorial services and utilities, and expenses that do not vary based on occupancy, such as property taxes and insurance.
+Added: Rental property expenses are expenses associated with our ownership and operation of rental properties and include expenses that vary somewhat proportionately to occupancy and usage levels, such as janitorial services and utilities, and expenses that do not vary based on occupancy, such as property taxes and insurance.
Depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year, unless we buy, place in service or sell assets, since our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed lives.
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Whether or not we record increasing net operating income (“NOI”) in our same property portfolio typically depends upon our ability to garner higher rental revenues, whether from higher average occupancy, higher GAAP rents per rentable square foot or higher cost recovery income, that exceed any corresponding growth in operating expenses.
−Removed: Same property NOI was $16.3 million, or 3.9%, higher in 2020 as compared to 2019 due to a decrease of $10.4 million in same property expenses, mostly from reduced usage of our assets because of the COVID-19 pandemic, and an increase of $6.0 million in same property revenues.
−Removed: Same property revenues were higher primarily due to higher average GAAP rents per rentable square foot and no credit losses and write-offs associated with Laser Spine Institute (See “Results of Operations - Comparison of 2020 to 2019 - Laser Spine Institute”), partly offset by lower cost recovery income and lower parking income as a result of reduced usage of our assets because of the COVID-19 pandemic.
−Removed: We expect same property NOI to be lower in 2021 as compared to 2020 as an anticipated increase in same property expenses, mostly from increased usage of our assets, is expected to more than offset higher anticipated same property revenues.
−Removed: We expect same property revenues to be higher due to higher average GAAP rents per rentable square foot, higher cost recovery income and higher parking income, partly offset by an anticipated decrease in average occupancy.
−Removed: With the fluidity of the COVID-19 pandemic and its uncertain impact on economic activity, same property NOI could be further negatively impacted if the COVID-19 pandemic causes losses related to customer difficulties.
+Added: Same property NOI was $5.4 million, or 1.2%, higher in 2021 as compared to 2020 due to an increase of $6.4 million in same property revenues offset by an increase of $1.0 million in same property expenses.
+Added: We expect same property NOI to be lower in 2022 as compared to 2021 as an anticipated increase in same property expenses, mostly from the anticipated gradual increase in usage of our assets, is expected to more than offset higher anticipated same property revenues.
+Added: We expect same property revenues to be higher due to higher average GAAP rents per rentable square foot and higher cost recovery and parking income.
In addition to the effect of same property NOI, whether or not NOI increases typically depends upon whether the NOI from our acquired properties and development properties placed in service exceeds the NOI from property dispositions.
−Removed: NOI was $17.6 million, or 3.6%, higher in 2020 as compared to 2019 primarily due to acquisitions, higher same property NOI and development properties placed in service, partly offset by NOI lost from property dispositions.
−Removed: We expect NOI to be lower in 2021 as compared to 2020 due to NOI lost from property dispositions and lower same property NOI, partly offset by NOI from the acquisition of our joint venture partner’s 75.0% interest in our Highwoods DLF Forum, LLC joint venture (the “Forum”) in the first quarter of 2021 and development properties placed in service.
−Removed: Similar to same property NOI, NOI could be further negatively impacted if the COVID-19 pandemic causes losses related to customer difficulties.
+Added: NOI was $26.5 million, or 5.2%, higher in 2021 as compared to 2020 primarily due to the acquisitions of real estate assets from Preferred Apartment Communities, Inc.
+Added: (“PAC”) in the third quarter of 2021 and our joint venture partner’s 75.0% interest in our Highwoods DLF Forum, LLC joint venture (the “Forum”) in the first quarter of 2021, development properties placed in service and higher same property NOI, partially offset by NOI lost from property dispositions.
+Added: We expect NOI to be higher in 2022 as
+Added: compared to 2021 due to the acquisition of real estate assets from PAC and development properties placed in service, partially offset by NOI lost from property dispositions and lower same property NOI.
In calculating net cash related to operating activities, depreciation and amortization, which are non-cash expenses, are added back to net income.
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We continue to maintain a conservative and flexible balance sheet and believe we have ample liquidity to fund our operations and growth prospects.
−Removed: As of January 29, 2021, we had approximately $85 million of existing cash and zero drawn on our $600 million revolving credit facility, which is scheduled to mature in January 2022.
+Added: As of January 28, 2022, we had approximately $22 million of existing cash and $70.0 million drawn on our $750 million revolving credit facility, which is scheduled to mature in March 2025.
Assuming we are in compliance with our covenants, we have an option to extend the maturity for two additional six-month periods.
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Continued ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.
−Removed: Subject to potential losses related to customer financial difficulties due to the COVID-19 pandemic, we generally believe existing cash and rental and other revenues will continue to be sufficient to fund short-term liquidity needs such as funding operating and general and administrative expenses, paying interest expense, maintaining our existing quarterly dividend and funding existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions.
+Added: We generally believe existing cash and rental and other revenues will continue to be sufficient to fund short-term liquidity needs such as funding operating and general and administrative expenses, paying interest expense, maintaining our existing quarterly dividend and funding existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions.
Our long-term liquidity uses generally consist of the retirement or refinancing of debt upon maturity, funding of building improvements, new building developments and land infrastructure projects and funding acquisitions of buildings and development land.
−Removed: Our expected future capital expenditures for started and/or committed new development projects were approximately $104 million at December 31, 2020.
−Removed: Additionally, we may, from time to time, retire outstanding equity and/or debt securities through redemptions, open market repurchases, privately negotiated acquisitions or otherwise.
+Added: Our expected future capital expenditures for started and/or committed new consolidated and unconsolidated development projects were approximately $176 million at December 31, 2021.
+Added: Additionally, we may, from time to time, retire
+Added: outstanding equity and/or debt securities through redemptions, open market repurchases, privately negotiated acquisitions or otherwise.
We expect to meet our long-term liquidity needs through a combination of:
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• the disposition of non-core assets.
−Removed: We have no debt scheduled to mature during 2021 except for the remaining $150.0 million principal amount of 3.20% (3.363% effective rate) notes that are scheduled to mature in June 2021.
−Removed: We intend to exercise our right to redeem the remaining 3.20% notes at par on April 15, 2021.
−Removed: During 2021, we forecast funding approximately $109 million of our $503 million development pipeline, which was over 75% funded as of December 31, 2020.
+Added: We have no debt scheduled to mature during 2022, except for our $200.0 million unsecured bank term loan that is scheduled to mature in November 2022.
+Added: During 2022, we forecast funding approximately $93 million of our $283 million consolidated and unconsolidated development pipeline, which was over 37% funded as of December 31, 2021.
We generally believe we will be able to satisfy these obligations with existing cash, borrowings under our revolving credit facility, new bank term loans, issuance of other unsecured debt, mortgage debt and/or proceeds from the sale of additional non-core assets.
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As noted above, a key tenet of our strategic plan is to continuously upgrade the quality of our office portfolio through acquisitions, dispositions and development.
−Removed: We generally seek to acquire and develop office buildings that improve the average
−Removed: quality of our overall portfolio and deliver consistent and sustainable value for our stockholders over the long-term.
+Added: We generally seek to acquire and develop office buildings that improve the average quality of our overall portfolio and deliver consistent and sustainable value for our stockholders over the long-term.
Whether or not an asset acquisition or new development results in higher per share net income or funds from operations (“FFO”) in any given period depends upon a number of factors, including whether the NOI for any such period exceeds the actual cost of capital used to finance the acquisition or development.
Additionally, given the length of construction cycles, development projects are not placed in service until, in some cases, several years after commencement.
−Removed: Sales of non-core assets could result in lower per share net income or FFO in any given period in the event the resulting use of proceeds does not exceed the capitalization rate on the sold properties.
+Added: Sales of non-core assets could result in lower per share net income or FFO in any given period in the event the return on the resulting use of proceeds does not exceed the capitalization rate on the sold properties.
Results of Operations
Comparison of 2021 to 2020
−Removed: Laser Spine Institute
−Removed: In the first quarter of 2019, we provided information on Laser Spine Institute, which occupied a 176,000 square-foot, six-story building with structured parking in Tampa’s Westshore submarket, a BBD.
−Removed: The building, developed by us, had been used by Laser Spine Institute for both its company headquarters and an ambulatory surgery center.
−Removed: After the market closed on March 1, 2019, Laser Spine Institute announced it would immediately discontinue its operations.
−Removed: This unexpected announcement affected all of its locations nationwide.
−Removed: As a result of this sudden closure, in the first quarter of 2019, we incurred $5.6 million of credit losses on operating lease receivables and write-offs of $2.3 million of lease incentives, $4.1 million of notes receivable and $11.6 million of tenant improvements and deferred leasing costs.
Rental and Other Revenues
−Removed: Rental and other revenues were $0.9 million, or 0.1%, higher in 2020 as compared to 2019 primarily due to acquisitions, development properties placed in service and higher same property revenues, which increased rental and other revenues by $31.4 million, $6.9 million and $6.0 million, respectively.
−Removed: Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot and no credit losses and write-offs associated with Laser Spine Institute, partly offset by lower cost recovery income and lower parking income as a result of reduced usage of our assets because of the COVID-19 pandemic.
−Removed: These increases were partly offset by lost revenue of $42.8 million from property dispositions.
−Removed: We expect rental and other revenues to be higher in 2021 as compared to 2020 due to the acquisition of our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and higher same property revenues, partly offset by lost revenue from property dispositions.
−Removed: Rental and other revenues, particularly same property revenues, could be adversely affected, perhaps significantly, in the event customers default on their leases, file bankruptcy and/or otherwise experience significant financial difficulty as a result of the COVID-19 pandemic or if our overall leasing and demand for office space are negatively impacted by potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements.
+Added: Rental and other revenues were $31.1 million, or 4.2%, higher in 2021 as compared to 2020 primarily due to the acquisitions of real estate assets from PAC and our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and higher same property revenues, which increased rental and other revenues by $43.0 million, $13.2 million and $6.4 million, respectively.
+Added: Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher parking income and lower credit losses, partially offset by a decrease in average occupancy.
+Added: These increases were partially offset by lost revenue of $31.7 million from property dispositions.
+Added: We expect rental and other revenues to be higher in 2022 as compared to 2021 due to the acquisition of real estate assets from PAC, development properties placed in service and higher same property revenues, partially offset by lost revenue from property dispositions.
Operating Expenses
−Removed: Rental property and other expenses were $16.7 million, or 6.7%, lower in 2020 as compared to 2019 primarily due to property dispositions and lower same property operating expenses, which decreased operating expenses by $13.5 million and $10.4 million, respectively.
−Removed: Same property operating expenses were lower primarily due to lower utilities, contract services and repairs and maintenance as a result of reduced usage of our assets because of the COVID-19 pandemic, partly offset by higher property taxes.
−Removed: These decreases were partly offset by acquisitions and development properties placed in service, which increased operating expenses by $6.6 million and $1.6 million, respectively.
−Removed: We expect rental property and other expenses to be higher in 2021 as compared to 2020 due to higher same property operating expenses as a result of increased usage of our assets, the acquisition of our joint venture partner’s 75.0% interest in the Forum and development properties placed in service, partly offset by lower operating expenses from property dispositions.
−Removed: Depreciation and amortization was $12.9 million, or 5.1%, lower in 2020 as compared to 2019 primarily due to property dispositions and accelerated depreciation and amortization of tenant improvements and deferred leasing costs associated with Laser Spine Institute in 2019, partly offset by acquisitions and development properties placed in service.
−Removed: We expect depreciation and amortization to be higher in 2021 as compared to 2020 due to the acquisition of our joint venture partner’s 75.0% interest in the Forum and development properties placed in service, partly offset by fully amortized acquisition-related intangible assets and property dispositions.
−Removed: In 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.
−Removed: In 2019, we recorded aggregate impairments of real estate assets of $5.8
−Removed: million primarily as a result of shortened hold periods from classifying all of our assets in Greensboro and Memphis as non-core.
−Removed: General and administrative expenses were $3.0 million, or 6.9%, lower in 2020 as compared to 2019 primarily due to lower incentive compensation, salaries and benefits, expensed pre-development costs and executive retirement and consulting costs, partly offset by higher severance and early retirement costs.
−Removed: We expect general and administrative expenses to be lower in 2021 as compared to 2020 due to lower salaries and benefits, severance and early retirement costs, partly offset by higher long-term equity incentive compensation.
+Added: Rental property and other expenses were $4.6 million, or 2.0%, higher in 2021 as compared to 2020 primarily due to the acquisitions of real estate assets from PAC and our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and higher same property operating expenses, which increased operating expenses by $11.4 million, $2.5 million and $1.0 million, respectively.
+Added: Same property operating expenses were higher primarily due to higher contract services and utilities, partially offset by lower repairs and maintenance.
+Added: These increases were partially offset by a $10.8 million decrease in operating expenses from property dispositions.
+Added: We expect rental property and other expenses to be higher in 2022 as compared to 2021 due to the acquisition of real estate assets from PAC, development properties placed in service and higher
+Added: same property operating expenses due to the anticipated gradual increase in usage throughout 2022, partially offset by lower operating expenses from property dispositions.
+Added: Depreciation and amortization was $17.7 million, or 7.3%, higher in 2021 as compared to 2020 primarily due to the acquisitions of real estate assets from PAC and our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and higher same property lease related depreciation and amortization, partially offset by fully amortized acquisition-related intangible assets and property dispositions.
+Added: We expect depreciation and amortization to be higher in 2022 as compared to 2021 due to the acquisition of real estate assets from PAC and development properties placed in service, partially offset by property dispositions.
+Added: We recorded an impairment of real estate assets of $1.8 million in 2020, which resulted from a change in market-based inputs and our assumptions about the use of the assets.
+Added: We recorded no impairments in 2021.
+Added: General and administrative expenses were $0.5 million, or 1.2%, lower in 2021 as compared to 2020 primarily due to lower salaries, benefits, severance and early retirement costs, partially offset by higher incentive compensation.
+Added: We experienced lower salaries and benefits in 2021 as a result of the reduction in the number of employees throughout 2020 primarily due to our exiting of the Greensboro and Memphis markets and the subsequent closing of those division offices and the resulting synergies garnered from the ongoing simplification of our business.
+Added: We expect general and administrative expenses to be higher in 2022 as compared to 2021 due to higher salaries and benefits and higher office rent, partially offset by lower incentive compensation.
Interest Expense
−Removed: Interest expense was $0.7 million, or 0.8%, lower in 2020 as compared to 2019 primarily due to lower average interest rates and higher capitalized interest, partly offset by higher average debt balances.
−Removed: We expect interest expense to be lower in 2021 as compared to 2020 for similar reasons.
−Removed: Other loss was $1.7 million in 2020 primarily due to losses on debt extinguishment and $2.5 million in 2019 primarily due to the write-off of notes receivable associated with Laser Spine Institute.
+Added: Interest expense was $4.9 million, or 6.0%, higher in 2021 as compared to 2020 primarily due to higher average debt balances, partially offset by higher capitalized interest and lower average interest rates.
+Added: We expect interest expense to be higher in 2022 as compared to 2021 due to higher average debt balances and lower capitalized interest.
+Added: Other Income/(Loss)
+Added: Other income/(loss) was income of $1.4 million in 2021 as compared to a loss of $1.7 million in 2020 primarily due to losses on debt extinguishment in 2020.
Gains on Disposition of Property
−Removed: Gains on disposition of property were $176.4 million higher in 2020 as compared to 2019 primarily due to our market rotation plan of exiting the Greensboro and Memphis markets in 2020.
+Added: Gains on disposition of property were $41.8 million lower in 2021 as compared to 2020 due to the net effect of the disposition activity in such periods.
Equity in Earnings of Unconsolidated Affiliates
−Removed: Equity in earnings of unconsolidated affiliates was $0.7 million, or 22.3%, higher in 2020 as compared to 2019 primarily due to higher average occupancy.
−Removed: We expect equity in earnings of unconsolidated affiliates to be lower in 2021 as compared to 2020 due to the acquisition of our joint venture partner’s 75.0% interest in the Forum.
−Removed: Equity in earnings of unconsolidated affiliates could be adversely affected, perhaps significantly, in the event customers of our unconsolidated affiliates default on their leases, file bankruptcy and/or otherwise experience significant financial difficulty as a result of the COVID-19 pandemic.
+Added: Equity in earnings of unconsolidated affiliates was $2.1 million, or 51.4%, lower in 2021 as compared to 2020 primarily due to the acquisition of our joint venture partner’s 75.0% interest in the Forum.
Earnings Per Common Share - Diluted
−Removed: Diluted earnings per common share was $2.02 higher in 2020 as compared to 2019 due to an increase in net income for the reasons discussed above.
+Added: Diluted earnings per common share was $0.34 lower in 2021 as compared to 2020 due to a decrease in net income for the reasons discussed above.
Comparison of 2020 to 2019
12 unchanged sentences
Comparison of 2021 to 2020
−Removed: The change in net cash provided by operating activities in 2020 as compared to 2019 was primarily due to property dispositions and the timing of cash paid for operating expenses, partly offset by higher net cash from the operations of acquisitions, development properties placed in service and same properties and the settlement of cash flow hedges in 2019.
−Removed: We expect net cash related to operating activities to be higher in 2021 as compared to 2020 due to the acquisition of our joint venture partner’s 75.0% interest in the Forum, development properties placed in service and same properties, partly offset by property dispositions.
−Removed: With the fluidity of the COVID-19 pandemic and its uncertain impact on economic activity, net cash related to operating activities could be negatively impacted if the COVID-19 pandemic causes losses related to customer difficulties.
−Removed: The change in net cash provided by/(used in) investing activities in 2020 as compared to 2019 was primarily due to the acquisition of Bank of America Tower at Legacy Union in Charlotte in 2019 and net proceeds from disposition activity in 2020, partly offset by higher investments in development in-process in 2020.
+Added: The change in net cash provided by operating activities in 2021 as compared to 2020 was primarily due to higher net cash from the operations of acquired real estate assets from PAC and our joint venture partner’s 75.0% interest in the Forum, same properties and development properties placed in service and changes in operating assets, partially offset by property dispositions.
+Added: We expect net cash related to operating activities to be higher in 2022 as compared to 2021 due to higher net cash from the operations of acquired real estate assets from PAC and development properties placed in service, partially offset by property dispositions.
+Added: The change in net cash provided by/(used in) investing activities in 2021 as compared to 2020 was primarily due to the acquisitions of real estate assets from PAC and our joint venture partner’s 75.0% interest in the Forum and net proceeds from disposition activity in 2020, partially offset by higher investments in development in-process, tenant improvements and building improvements in 2020.
We expect uses of cash for investing activities in 2022 to be primarily driven by whether or not we acquire and commence development of additional office buildings in the BBDs of our markets.
−Removed: Additionally, as of December 31, 2020, we have approximately $104 million left to fund of our previously-announced development activity in 2021 and future years.
+Added: Additionally, as of December 31, 2021, we have approximately $176 million left to fund of our previously-announced consolidated and unconsolidated development activity in 2022 and future years.
We expect these uses of cash for investing activities will be partly offset by proceeds from property dispositions in 2022.
−Removed: The change in net cash provided by/(used in) financing activities in 2020 as compared to 2019 was primarily due to higher net debt borrowings in 2019.
+Added: The change in net cash used in financing activities in 2021 as compared to 2020 was primarily due to higher proceeds from the issuance of common stock in 2021, partially offset by higher net debt repayments in 2021.
Assuming the net effect of our acquisition, disposition and development activity in 2022 results in an increase to our assets, we would expect outstanding debt and/or Common Stock balances to increase.
13 unchanged sentences
See also “Executive Summary - Liquidity and Capital Resources.”
−Removed: Our mortgages and notes payable as of December 31, 2020 consisted of $93.4 million of secured indebtedness with an interest rate of 4.0% and $2,390.7 million of unsecured indebtedness with a weighted average interest rate of 3.42%.
−Removed: The secured indebtedness was collateralized by real estate assets with an undepreciated book value of $147.9 million.
+Added: Our mortgages and notes payable as of December 31, 2021 consisted of $491.9 million of secured indebtedness with a weighted average interest rate of 3.63% and $2,312.2 million of unsecured indebtedness with a weighted average interest rate of 3.35%.
+Added: The secured indebtedness, which includes four secured loans recorded at fair value of $403 million in the aggregate assumed as part of the acquisition of real estate assets from PAC, was collateralized by real estate assets with an undepreciated book value of $727.8 million.
As of December 31, 2021, $220.0 million of our debt does not bear interest at fixed rates or is not protected by interest rate hedge contracts.
+Added: On January 28, 2022, floating-to-fixed interest rate swaps with respect to an aggregate of $50.0 million of LIBOR-based borrowings expired.
+Added: Subsequently, as of January 28, 2022, we had $270.0 million of variable rate debt outstanding not protected by interest rate hedge contracts.
Investment Activity
+Added: - Acquisitions
In the normal course of business, we regularly evaluate potential acquisitions.
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Risk Factors – Risks Related to our Capital Recycling Activity – Recent and future acquisitions and development properties may fail to perform in accordance with our expectations and may require renovation and development costs exceeding our estimates.”
−Removed: 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.
+Added: During the fourth quarter of 2021, we acquired various development land parcels in Nashville for an aggregate purchase price, including capitalized acquisition costs, of $35.1 million .
+Added: During the third quarter of 2021, we acquired a portfolio of real estate assets from PAC.
+Added: The portfolio consists of the following assets:
+Added: Asset Market Submarket/BBD Square Footage
+Added: 150 Fayetteville Raleigh CBD 560,000
+Added: CAPTRUST Towers Raleigh North Hills 300,000
+Added: Capitol Towers Charlotte SouthPark 479,000
+Added: Morrocroft Centre Charlotte SouthPark 291,000
+Added: Galleria 75 Redevelopment Site Atlanta Cumberland/Galleria
+Added: Our total purchase price, net of closing credits and cash acquired, was $653.6 million, including $4.5 million of capitalized acquisition costs.
+Added: The acquisition included the assumption of four secured loans recorded at fair value of $403 million in the aggregate, with a weighted average effective interest rate of 3.54% and a weighted average maturity of 10.7 years.
+Added: We incurred $3.5 million of debt issuance costs related to these assumptions.
+Added: During the third quarter of 2021, we also acquired development land in Nashville for a purchase price, including capitalized acq uisition costs, of $22.9 million.
+Added: During the second quarter of 2021, we acquired development land in Nashville for a purchase price of $16.1 million, including capitalized acq uisition costs, of which $16.0 million is expected to be paid within two years.
+Added: Duri ng the first quarter of 2021, we acquired our joint venture partner’s 75.0% interest in our Highwoods DLF Forum, LLC joint venture (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.
−Removed: During the second quarter of 2020, we acquired development land in Raleigh for a purchase price, including capitalized acquisition costs, of $2.3 million.
−Removed: During the first quarter of 2020, we acquired development land in Nashville for a purchase price of $6.2 million, which consisted of the issuance of 118,592 Common Units and capitalized acquisition costs.
−Removed: 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.
−Removed: During the fourth quarter of 2020, we sold nine buildings in Greensboro and Memphis for an aggregate sale price of $129.7 million (before closing credits to buyer of $1.2 million) and recorded aggregate gains on disposition of property of $52.5 million.
−Removed: During the third quarter of 2020, we sold two buildings in Memphis for an aggregate sale price of $23.3 million (before closing credits to buyer of $0.7 million) and recorded aggregate gains on disposition of property of $9.4 million.
−Removed: During the third quarter of 2020, we also recognized $0.6 million of aggregate gains related to the disposition of property in the first quarter of 2020.
−Removed: During the second quarter of 2020, we sold land in Atlanta for a sale price of $2.8 million and recorded a loss on disposition of property of $0.1 million.
−Removed: During the second quarter of 2020, we also recognized $0.4 million of gain related to the satisfaction of a performance obligation as part of a 2016 land sale.
−Removed: During the first quarter of 2020, we sold 41 buildings and land in Greensboro and Memphis for an aggregate sale price of $338.4 million (before closing credits to buyer of $3.8 million) and recorded aggregate gains on disposition of property of $153.1 million.
−Removed: During the second quarter of 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.
+Added: The assets and liabilities of the joint venture are now wholly owned and we have determined the acquisition constitutes an asset purchase.
+Added: As such, because the Forum is not a variable interest entity, we allocated our previously held equity interest at historical cost along with the consideration paid and acquisition costs to the assets acquired and liabilities assumed.
+Added: 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.
+Added: - Dispositions
+Added: During the fourth quarter of 2021, we sold nine office buildings and various land parcels in Atlanta, Raleigh, Richmond and Tampa for an aggregate sale price of $191.2 million (before closing credits to buyer of $1.6 million) and recorded aggregate gains on disposition of property of $93.7 million, including land sale gains of $9.7 million.
+Added: During the third quarter of 2021, we sold two office buildings in Richmond and Memphis for an aggregate sale price of $119.7 million (before closing credits to buyer of $4.4 million) and recorded aggregate gains on disposition of property of $37.3 million.
+Added: We have a 50.0% ownership interest in Highwoods-Markel Associates, LLC (“Markel”), a consolidated joint venture.
+Added: During the third quarter of 2021, Markel sold land in Richmond for a sale price of $3.0 million and recorded gain on disposition of property of $1.3 million.
+Added: During the second quarter of 2021, we sold an office building in Tampa for a sale price of $43.0 million (before closing credits to buyer of $0.9 million) and recorded a gain on disposition of property of $22.9 million.
+Added: During the first quarter of 2021, we sold an office building in Atlanta for a sale price of $30.7 million and recorded a gain on disposition of property of $18.9 million.
+Added: - New Joint Venture Investments
+Added: During the fourth quarter of 2021, we and Brand Properties, LLC (“Brand”) formed a joint venture (the “2827 Peachtree joint venture”) to construct 2827 Peachtree, a 135,000 square foot, multi-customer office building located in Atlanta’s Buckhead submarket.
+Added: 2827 Peachtree has an anticipated total investment of $79.0 million.
+Added: Construction of 2827 Peachtree began in the first quarter of 2022 with a scheduled completion date in the third quarter of 2023.
+Added: At closing, we agreed to contribute cash of $13.3 million ($6.1 million of which was funded as of December 31, 2021) in exchange for a 50.0% interest in the 2827 Peachtree joint venture and Brand contributed land valued at $7.7 million and agreed to contribute cash of $5.6 million in exchange for the remaining 50.0% interest.
+Added: We also committed to provide a $49.6 million interest-only secured construction loan to the 2827 Peachtree joint venture that is scheduled to mature in December 2024 with an option to extend for one year.
+Added: The loan bears interest at LIBOR plus 300 basis points.
+Added: As of December 31, 2021, no amounts under the loan have been funded.
- In-Process Development
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Financing Activity
−Removed: During the first quarter of 2020, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, Capital One Securities, Inc., Fifth Third Securities, Inc., Jefferies LLC, J.P.
+Added: During 2020, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, Capital One Securities, Inc., Fifth Third Securities, Inc., Jefferies LLC, J.P.
Morgan Securities LLC, Regions Securities LLC and SunTrust Robinson Humphrey, Inc.
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Sales of the shares, if any, may be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices or as otherwise agreed with any of such firms (which may include block trades).
−Removed: The Company did not issue any shares of Common Stock under these agreements during 2020.
−Removed: 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.
+Added: During the fourth quarter of 2021, the Company issued 156,913 shares of Common Stock at an average gross sales price of $46.75 per share and received net proceeds, after sales commissions, of $7.2 million.
+Added: We paid an aggregate of $0.1 million in sales commissions to Jefferies, LLC during the fourth quarter of 2021.
+Added: During the first quarter of 2021, we entered into a new $750.0 million unsecured revolving credit facility, which replaced our previously existing $600.0 million revolving credit facility and includes an accordion feature that allows for an additional $550.0 million of borrowing capacity subject to additional lender commitments.
+Added: Our new revolving credit facility is scheduled to mature in March 2025.
Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods.
−Removed: The interest rate at our current credit ratings is LIBOR plus 100 basis points and the annual facility fee is 20 basis points.
+Added: The current interest rate on the new facility at our existing credit ratings is LIBOR plus 90 basis points and the annual facility fee is 20 basis points.
The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services.
−Removed: There were no amounts outstanding under our revolving credit facility at both December 31, 2020 and January 29, 2021.
+Added: The financial and other covenants under the new
+Added: facility are substantially similar to our previous credit facility.
+Added: We incurred $4.8 million of debt issuance costs, which are being amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility.
+Added: We recorded $0.1 million of loss on debt extinguishment.
+Added: There was $70.0 million outstanding under our new revolving credit facility at both December 31, 2021 and January 28, 2022.
At both December 31, 2021 and January 28, 2022, 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, 2021 and January 28, 2022 was $679.9 million.
−Removed: During the third quarter of 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.
−Removed: These notes were priced to yield 2.645%.
−Removed: Underwriting fees and other expenses were incurred that aggregated $3.4 million;
−Removed: these costs were deferred and will be amortized over the term of the notes.
−Removed: The net effect of the amortization of these items resulted in an effective fixed interest rate of 2.74%.
−Removed: The net proceeds from the issuance were used:
−Removed: (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;
−Removed: (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;
−Removed: and (3) for general corporate purposes.
−Removed: 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.
+Added: 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.
+Added: These swaps effectively fix the underlying one-month LIBOR rate at a weighted average rate of 1.693%.
+Added: As of January 28, 2022, these interest rate swaps have expired.
+Added: During the third quarter of 2021, in conjunction with the acquisition of real estate assets from PAC, we assumed four secured mortgage loans recorded at fair value of $403 million in the aggregate, with a weighted average effective interest rate of 3.54% and a weighted average maturity of 10.7 years.
+Added: We incurred $3.5 million of debt issuance costs related to these assumptions, which will be amortized over the remaining terms of the loans.
+Added: During the third quarter of 2021, we also obtained a $200.0 million, six-month unsecured bridge facility.
+Added: The bridge facility was originally scheduled to mature in January 2022.
+Added: The bridge facility bore interest at LIBOR plus 85 basis points, had a commitment fee of 20 basis points and contained financial and other covenants that are similar to the covenants under our $750 million unsecured revolving credit facility.
+Added: We incurred $1.0 million of debt issuance costs related to this bridge facility which were being amortized over the six-month term.
+Added: As of December 31, 2021, this bridge facility was prepaid in full without penalty.
+Added: We recorded $0.2 million of loss on debt extinguishment related to this prepayment.
+Added: During the second quarter of 2021, we prepaid without penalty the remaining $150.0 million principal amount of 3.20% unsecured notes that was scheduled to mature in June 2021.
+Added: We recorded $0.1 million of loss on debt extinguishment related to this prepayment.
We regularly evaluate the financial condition of the financial institutions that participate in our credit facilities and as counterparties under interest rate swap agreements using publicly available information.
4 unchanged sentences
We are currently in compliance with financial covenants and other requirements with respect to our consolidated debt.
−Removed: Although we expect to remain in compliance with these covenants and ratios for at least the next year, depending upon our future operating performance, property and financing transactions and general economic conditions, we cannot assure you that we will continue to be in compliance.
+Added: Although we expect to remain in compliance with these covenants and ratios for at least the next year, depending upon our future operating performance, property and financing transactions and general economic conditions, we cannot provide any assurances that we will continue to be in compliance.
Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements.
−Removed: 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.
+Added: Upon an event of default on our revolving credit facility, the lenders having at least 51.0% of the total commitments under our 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 $35.0 million with respect to other loans in some circumstances.
1 unchanged sentence
Face Amount Carrying Amount Stated Interest Rate Effective Interest Rate
−Removed: Notes due June 2021 $ 150,000 $ 149,901 3.200 % 3.363 %
Notes due January 2023 $ 250,000 $ 249,726 3.625 % 3.752 %
9 unchanged sentences
Any such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions.
+Added: Off-Balance Sheet Arrangements
+Added: During the fourth quarter of 2022, we and Brand formed the 2827 Peachtree joint venture.
+Added: We own a 50% interest in this unconsolidated joint venture.
+Added: For additional information, see “Investment Activity – New Joint Venture Investments.”
Contractual Obligations
−Removed: The following table sets forth a summary regarding our known contractual obligations, including required interest payments for those items that are interest bearing, at December 31, 2020 (in thousands):
+Added: The following table sets forth a summary regarding our known material contractual obligations on a cash basis, including required interest payments for those items that are interest bearing, at December 31, 2021 (in thousands):
Amounts due during the years ending December 31,
7 unchanged sentences
241,852 183,040 51,142 5,312 — — 2,358
−Removed: Operating Lease Obligations:
−Removed: Operating ground leases 92,283 2,127 2,169 2,167 2,123 2,170 81,527
+Added: Other Commitments:
+Added: Advances to unconsolidated affiliates 49,562 20,405 26,801 2,356 — — —
+Added: Operating and Finance Lease Obligations:
+Added: Ground leases 95,156 2,169 2,167 2,123 2,170 2,220 84,307
Total $ 3,819,129 $ 506,673 $ 420,206 $ 99,509 $ 160,843 $ 90,202 $ 2,541,696
1 unchanged sentence
(2) Consists primarily of commitments under signed leases and contracts for operating properties, excluding tenant-funded tenant improvements, and contracts for development/redevelopment projects.
−Removed: This includes $127.6 million of contractual commitments related to our in-process development activity and newly acquired properties, of which $112.5 million is scheduled to be funded in 2021.
−Removed: For a description of our development activity, see “Item 2.
−Removed: Properties - In-Process Development.” 2021 includes future spend for tenant improvements that can be used at the option of the customer during the remaining lease term.
+Added: This includes $134.1 million of contractual commitments related to our consolidated development pipeline activity, newly acquired properties and future consideration for a parcel of development land, of which $80.1 million is scheduled to be funded in 2022.
+Added: 2022 includes future spend for tenant improvements that can be used at the option of the customer during the remaining lease term.
The timing of these lease and contractual commitments may fluctuate.
The interest payments due on mortgages and notes payable are based on the stated rates for the fixed rate debt and on the rates in effect at December 31, 2021 for the variable rate debt.
−Removed: The weighted average interest rate on our fixed (including debt with a variable rate that is effectively fixed by related interest rate swaps) and variable rate debt was 3.58% and 1.25%, respectively, at December 31, 2020.
−Removed: For additional information about our operating lease obligations, mortgages and notes payable and purchase obligations, see Notes 2, 6 and 8, respectively, to our Consolidated Financial Statements.
+Added: The weighted average interest rate on our fixed (including debt with a variable rate that is effectively fixed by related interest rate swaps) and variable rate debt was 3.59% and 1.14%,
+Added: respectively, at December 31, 2021.
+Added: For additional information about our operating and finance lease obligations, mortgages and notes payable and purchase obligations, see Notes 2, 6 and 8, respectively, to our Consolidated Financial Statements.
Dividends and Distributions
13 unchanged sentences
• changes in operating expenses;
−Removed: • anticipated leasing capital expenditures attributable to the renewal of existing leases or replacement leases;
+Added: • anticipated leasing capital expenditures attributable to the renewal of existing leases or new leases;
• anticipated building improvements;
• expected cash flows from financing and investing activities, including from the sales of assets generating taxable gains to the extent such assets are not sold in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction.
−Removed: During each quarter of 2020, the Company declared and paid a cash dividend of $0.48 per share of Common Stock.
+Added: The Company declared and paid a cash dividend of $0.48 per share of Common Stock in the first and second quarter of 2021, respectively, and $0.50 per share of Common Stock in the third and fourth quarter of 2021, respectively.
On February 1, 2022, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 15, 2022 to stockholders of record as of February 21, 2022.
Current and Future Cash Needs
−Removed: We anticipate that our available cash and cash equivalents, cash flows from operating activities and other available financing sources, including the issuance of debt securities by the Operating Partnership, the issuance of secured debt, bank term loans, borrowings under our revolving credit facility, the issuance of equity securities by the Company or the Operating Partnership and the disposition of non-core assets, will be adequate to meet our short-term liquidity requirements, including the remaining $150.0 million principal amount of unsecured notes that are scheduled to mature on June 15, 2021.
−Removed: We intend to exercise our right to redeem the remaining 3.20% notes at par on April 15, 2021.
+Added: We anticipate that our available cash and cash equivalents, cash flows from operating activities and other available financing sources, including the issuance of debt securities by the Operating Partnership, the issuance of secured debt, bank term loans, borrowings under our revolving credit facility, the issuance of equity securities by the Company or the Operating Partnership and the disposition of non-core assets, will be adequate to meet our short-term liquidity requirements, including the $200.0 million unsecured bank term loan that is scheduled to mature in November 2022 and the $250.0 million principal amount of unsecured notes that are scheduled to mature in January 2023.
+Added: We generally believe existing cash and rental and other revenues will continue to be sufficient to fund operating and general and administrative expenses, interest expense, our existing quarterly dividend and existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions.
We had $23.2 million of cash and cash equivalents as of December 31, 2021.
The unused capacity of our revolving credit facility at both December 31, 2021 and January 28, 2022 was $679.9 million, excluding an accordion feature that allows for an additional $550.0 million of borrowing capacity subject to additional lender commitments.
−Removed: We have a currently effective automatic shelf registration statement on Form S-3 with the SEC pursuant to which, at any time and from time to time, in one or more offerings on an as-needed basis, the Company may sell an indefinite amount of
−Removed: common stock, preferred stock and depositary shares and the Operating Partnership may sell an indefinite amount of debt securities, subject to our ability to effect offerings on satisfactory terms based on prevailing market conditions.
+Added: We have a currently effective automatic shelf registration statement on Form S-3 with the SEC pursuant to which, at any time and from time to time, in one or more offerings on an as-needed basis, the Company may sell an indefinite amount of common stock, preferred stock and depositary shares and the Operating Partnership may sell an indefinite amount of debt securities, subject to our ability to effect offerings on satisfactory terms based on prevailing market conditions.
The Company from time to time enters into equity distribution agreements with a variety of firms pursuant to which the Company may offer and sell shares of common stock from time to time through such firms, acting as agents of the Company or as principals.
Sales of the shares, if any, may be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices or as otherwise agreed with any of such firms (which may include block trades).
−Removed: During the remainder of 2021, we expect to sell an additional $100 million to $150 million of properties no longer considered to be core assets due to location, age, quality and/or overall strategic fit.
−Removed: We can make no assurance, however, that we will sell any non-core assets or, if we do, what the timing or terms of any such sale will be.
+Added: In April 2021, we announced a plan to fund the acquisition of real estate assets from PAC by selling $500 million to $600 million of non-core assets by mid-2022.
+Added: From the date of that announcement through December 31, 2021, we sold $353 million of properties no longer considered to be core assets due to location, age, quality and/or overall strategic fit.
+Added: We can make no assurance, however, that we will sell any additional non-core assets or, if we do, what the timing or terms of any such sale will be.
See also “Executive Summary - Liquidity and Capital Resources.”
6 unchanged sentences
We consider our critical accounting estimates to be those used in the determination of the reported amounts and disclosure related to the following:
−Removed: • Real estate and related assets;
−Removed: • Impairments of real estate assets and investments in unconsolidated affiliates;
−Removed: • Sales of real estate;
−Removed: Real Estate and Related Assets
−Removed: Real estate and related assets are recorded at cost and stated at cost less accumulated depreciation.
−Removed: Renovations, replacements and other expenditures that improve or extend the life of assets are capitalized and depreciated over their estimated useful lives.
−Removed: Expenditures for ordinary maintenance and repairs are charged to expense as incurred.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We consider a construction project as substantially completed and ready for its intended use upon the completion of tenant improvements.
−Removed: 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.
−Removed: 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.
−Removed: Such expenditures are part of the investment necessary to execute leases and, therefore, are classified as investment activities in the statement of cash flows.
−Removed: All leasing commissions paid to third parties and our in-house personnel for new leases or lease renewals are capitalized.
−Removed: Capitalized leasing costs are amortized on a straight-line basis over the initial fixed terms of the respective leases.
−Removed: All other costs to negotiate or arrange a lease are expensed as incurred.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The value of in-place leases is based on our evaluation of the specific characteristics of each customer’s lease.
−Removed: 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.
−Removed: 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.
−Removed: In estimating costs to execute similar leases, we consider tenant improvements, leasing commissions and legal and other related expenses.
−Removed: Real estate and other assets are classified as long-lived assets held for use or as long-lived assets held for sale.
−Removed: 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.
−Removed: Impairments of Real Estate Assets and Investments in Unconsolidated Affiliates
−Removed: With respect to assets classified as held for use, we perform an impairment analysis if our evaluation of events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant decline in occupancy, identification of materially adverse legal or environmental factors, change in our designation of an asset from core to non-core, which may impact the anticipated holding period, or a decline in market value to an amount less than cost.
−Removed: 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.
−Removed: 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.
−Removed: For properties under development, the cash flows are based on expected service potential of the asset or asset group when development is substantially complete.
−Removed: 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.
−Removed: We generally estimate the fair value of assets held for use by using discounted cash flow analyses.
−Removed: In some instances, appraisal information may be available and is used in addition to a discounted cash flow analysis.
−Removed: 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.
−Removed: We record assets held for sale at the lower of the carrying amount or estimated fair value.
−Removed: Fair value of assets held for sale is equal to the estimated or contracted sales price with a potential buyer, less costs to sell.
−Removed: The impairment loss is the amount by which the carrying amount exceeds the estimated fair value.
−Removed: We also analyze our investments in unconsolidated affiliates for impairment.
−Removed: 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.
−Removed: 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.
−Removed: Sales of Real Estate
−Removed: 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.
−Removed: 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.
−Removed: 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”).
−Removed: 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.
−Removed: Our leases are operating leases and mostly range from three to 10 years.
−Removed: 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.
−Removed: 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.
−Removed: As such, consideration for CAM is accounted for as part of the overall consideration in the lease.
−Removed: 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.
−Removed: Fixed contractual payments from our leases are recognized on a straight-line basis over the terms of the respective leases.
−Removed: 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.
−Removed: Straight-line rental revenue is commenced when the customer assumes control of the leased premises.
−Removed: Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements.
−Removed: Some of our leases are subject to annual changes in the Consumer Price Index (“CPI”).
−Removed: 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.
−Removed: Some of our leases have termination options and/or extension options.
−Removed: Termination options allow the customer to terminate the lease prior to the end of the lease term under certain circumstances.
−Removed: 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.
−Removed: 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.
−Removed: Our extension options generally require a re-negotiation with the customer at market rates.
−Removed: Lease related receivables, which include accounts receivable and accrued straight-line rents receivable, are reduced for credit losses.
−Removed: Such amounts are recognized as a reduction to rental and other revenues.
−Removed: We regularly evaluate the collectability of our lease related receivables.
−Removed: 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.
−Removed: We do not maintain a general reserve to estimate amounts that may not be collectible.
−Removed: 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.
+Added: • Acquisition of real estate assets and liabilities;
+Added: • Impairments of real estate assets;
+Added: • Credit losses on lease related receivables.
+Added: Acquisition of Real Estate Assets and Liabilities
+Added: Primarily all of our acquisitions of real estate assets and liabilities are accounted for as asset acquisitions.
+Added: As such, the purchase prices of acquired tangible and intangible assets and liabilities are recorded and allocated at fair value on a relative basis.
+Added: The recorded allocations are based on estimated cash flow projections of the properties acquired which incorporates discount, capitalization and interest rates as well as available comparable market information.
+Added: See Note 1 to our Consolidated Financial Statements for additional details regarding our specific procedures for purchase price allocation.
+Added: We use considerable judgement in our estimates of cash flow projections, discount, capitalization and interest rates, fair market lease rates, carrying costs during hypothetical expected lease-up periods and costs to execute similar leases.
+Added: While our methodology for purchase price allocation did not change during the year ended December 31, 2021, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of acquisition.
+Added: Significant increases or decreases in these key estimates, particularly with regards to cash flow projections and discount and capitalization rates, would result in a significantly lower or higher fair value measurement of the real estate assets being acquired.
+Added: Impairments of Real Estate Assets
+Added: We record impairments of our real estate assets classified as held for use when the carrying amount of the asset exceeds the sum of its undiscounted future operating and residual cash flows at the difference between estimated fair value of the asset and the carrying amount.
+Added: We record impairments of our real estate assets classified as held for sale at the lower of the carrying amount or estimated fair value using the estimated or contracted sales price less costs to sell.
+Added: See Note 1 to our Consolidated Financial Statements for additional details regarding our specific procedures with respect to impairments of our real estate assets classified as held for use and held for sale.
+Added: Any real estate assets recorded at fair value on a non-recurring basis as a result of our impairment analysis are valued using unobservable local and national industry market data such as comparable sales, appraisals, brokers’ opinions of value and/or terms of definitive sales contracts.
+Added: Additionally, the analysis includes considerable judgement in our estimates of hold periods, projected cash flows and discount and capitalization rates.
+Added: Significant increases or decreases in any of these inputs, particularly with regards to cash flow projections and discount and capitalization rates, would result in a significantly lower or higher fair value measurement of the real estate assets being assessed.
+Added: Credit Losses on Lease Related Receivables
+Added: Credit losses on lease related receivables, which include accounts receivable and accrued straight-line rents receivable, are recorded as a reduction to rental and other revenues when the amount recorded is determined, in management’s judgement, to not be probable of collection.
+Added: Management’s evaluation of collectability requires the exercise of considerable judgement in assessing the current credit quality of our customers using payment history and other available information about the financial condition of the customers.
+Added: During the year ended December 31, 2021, we have not experienced significant credit losses based on management’s evaluation of collectability of our lease receivables.
+Added: If management’s assumptions regarding the collectability of lease related receivables prove incorrect, we could experience credit losses in excess of what was recognized in rental and other revenues.
Non-GAAP Information
40 unchanged sentences
As of December 31, 2020, our same property portfolio consisted of 159 in-service properties encompassing 24.4 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2019 to December 31, 2020).
−Removed: The change in our same property portfolio was due to the addition of four newly developed properties encompassing 0.4 million rentable square feet placed in service during 2018.
−Removed: These additions were offset by the removal of 51 properties encompassing 4.4 million rentable square feet that were sold during 2020 and one property encompassing less than 0.1 million rentable square feet that is planned for demolition.
+Added: The change in our same property portfolio was due to the addition of one property encompassing 0.8 million rentable square feet acquired during 2019 and three newly developed properties encompassing 0.7 million rentable square feet placed in service during 2019.
+Added: These additions were offset by the removal of 15 properties (13 office properties and two amenity retail properties) encompassing 1.7 million rentable square feet that were sold during 2021.
Rental and other revenues related to properties not in our same property portfolio were $90.4 million and $65.8 million for the years ended December 31, 2021 and 2020, respectively.
17 unchanged sentences
Same property cash net operating income $ 453,720 $ 423,830
−Removed: (1) Includes $3.4 million of temporary rent deferrals, net of repayments, granted by the Company during the year ended December 31, 2020.
+Added: (1) Includes $2.9 million of repayments of temporary rent deferrals, net of additional temporary rent deferrals granted by the Company during the year ended December 31, 2021, and $3.6 million of temporary rent deferrals, net of repayments, granted by the Company during the year ended December 31, 2020.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.