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 Brendan C. Maiorana, 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, 2021 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 45 Table of Contents We have concluded that, at December 31, 2021, 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, 2021. 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, 2021 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, 2021, 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. 46 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, 2021, 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, 2021, 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, 2021 of the Company and our report dated February 8, 2022 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 US 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 accounting principles generally accepted in the United States of America (“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 8, 2022 47 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 2021 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 2021 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. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 48 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 10, 2022. No changes have been made to the procedures by which stockholders may recommend nominees to the Company’s board of directors since the 2021 annual meeting, which was held on May 11, 2021. 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 10, 2022. 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 10, 2022. 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 10, 2022. 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 10, 2022. 49 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Reference is made to the Index to Consolidated Financial Statements on page 52 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 4.125% Notes due March 15, 2028 (filed as part of the Company’s Current Report on Form 8-K dated March 5, 2018) 4.7 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) 4.8 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) 4.9 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) 4.10 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) 4.11 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) 4.12 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) 4.13 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) 4.14 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) 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) 50 Table of Contents Exhibit Number Description 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 * 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) 10.10 * 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) 10.11 * 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) 10.12 Sixth Amended and Restated Credit Agreement, dated as of March 18, 2021, by and among the Company, the Operating Partnership, Bank of America, N.A., as Administrative Agent, 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 Current Report on Form 8-K dated March 19, 2021) 10.13 * 2021 Long-Term Equity Incentive Plan (filed as part of the Company’s Current Report on Form 8-K dated May 11, 2021) 21 Schedule of Subsidiaries 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. 51 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Highwoods Properties, Inc. Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 53 Consolidated Financial Statements: Consolidated Balance Sheets at December 31, 2021 and 2020 56 Consolidated Statements of Income for the Years Ended December 31, 2021, 2020 and 2019 57 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019 58 Consolidated Statements of Equity for the Years Ended December 31, 2021, 2020 and 2019 59 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 61 Highwoods Realty Limited Partnership: Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 63 Consolidated Financial Statements: Consolidated Balance Sheets at December 31, 2021 and 2020 66 Consolidated Statements of Income for the Years Ended December 31, 2021, 2020 and 2019 67 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019 68 Consolidated Statements of Capital for the Years Ended December 31, 2021, 2020 and 2019 69 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 70 Notes to Consolidated Financial Statements 72 Schedule III 104 __________ 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. 52 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, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 8, 2022, 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 Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Impairment of Real Estate Assets - Refer to Note 1 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 53 Table of Contents 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 reading questionnaires 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. Real Estate and Related Assets—Acquisitions—Refer to Note 1, 3 and 6 to the financial statements Critical Audit Matter Description During 2021, the Company acquired a portfolio of real estate assets in Charlotte, Raleigh, and Atlanta for a net purchase price of $653.5 million and acquired its joint venture partner’s 75.0% interest in a portfolio of assets in Raleigh for a net purchase price of $131.3 million. The Company accounted for these transactions as asset acquisitions. The purchase prices paid for the assets acquired and liabilities assumed was allocated, based on relative fair values as determined by management, with the assistance of third-party specialists, to land, buildings, tenant improvements and intangible assets and liabilities such as above and below market leases and acquired in-place leases. Management assessed the relative fair value based on estimated cash flow projections that utilized discount and capitalization rates as well as available market information. Above and below market secured loans assumed in the transactions were assessed based on the present value of the difference between the property specific mortgage interest rate and the market interest rate over the years to maturity of the loan. Given the allocation of relative fair value to the assets acquired and liabilities assumed and the determination of the above and below market debt value required management to make significant estimates related to assumptions such as discount rates, capitalization rates, market rental rates, land values and market interest rates, performing audit procedures to evaluate the reasonableness of these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the relative fair value of assets acquired and liabilities assumed included the following, among others: • We tested the effectiveness of controls over the purchase price allocations, including management’s controls over the review of the third-party appraisals, the identification of real estate assets, intangible assets and liabilities and the valuation methodology for estimating the relative fair value of assets acquired and liabilities assumed. • With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, discount rates, capitalization rates, market rental rates, land values and market interest rates by developing a range of independent estimates and comparing our estimates to those used by management. 54 Table of Contents • We tested the mathematical accuracy of the valuation models and the source information underlying the determination of the intangible assets and liabilities fair value. /s/ Deloitte & Touche LLP Raleigh, North Carolina February 8, 2022 We have served as the Company’s auditor since 2006. 55 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2021 2020 Assets: Real estate assets, at cost: Land $ 549,228 $ 466,872 Buildings and tenant improvements 5,718,169 4,981,637 Development in-process 6,890 259,681 Land held for development 215,257 131,474 6,489,544 5,839,664 Less-accumulated depreciation ( 1,457,511 ) ( 1,418,379 ) Net real estate assets 5,032,033 4,421,285 Real estate and other assets, net, held for sale 3,518 11,360 Cash and cash equivalents 23,152 109,322 Restricted cash 8,046 79,922 Accounts receivable 14,002 27,488 Mortgages and notes receivable 1,227 1,341 Accrued straight-line rents receivable 268,324 259,381 Investments in and advances to unconsolidated affiliates 7,383 27,104 Deferred leasing costs, net of accumulated amortization of $ 143,111 and $ 151,698 , respectively 258,902 209,329 Prepaid expenses and other assets, net of accumulated depreciation of $ 21,408 and $ 21,154 , respectively 78,551 62,885 Total Assets $ 5,695,138 $ 5,209,417 Liabilities, Noncontrolling Interests in the Operating Partnership and Equity: Mortgages and notes payable, net $ 2,788,915 $ 2,470,021 Accounts payable, accrued expenses and other liabilities 294,976 268,727 Total Liabilities 3,083,891 2,738,748 Commitments and contingencies Noncontrolling interests in the Operating Partnership 111,689 112,499 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), 28,821 and 28,826 shares issued and outstanding, respectively 28,821 28,826 Common Stock, $ 0.01 par value, 200,000,000 authorized shares; 104,892,780 and 103,921,546 shares issued and outstanding, respectively 1,049 1,039 Additional paid-in capital 3,027,861 2,993,946 Distributions in excess of net income available for common stockholders ( 579,616 ) ( 686,225 ) Accumulated other comprehensive loss ( 973 ) ( 1,462 ) Total Stockholders’ Equity 2,477,142 2,336,124 Noncontrolling interests in consolidated affiliates 22,416 22,046 Total Equity 2,499,558 2,358,170 Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity $ 5,695,138 $ 5,209,417 See accompanying notes to consolidated financial statements. 56 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Income (in thousands, except per share amounts) Year Ended December 31, 2021 2020 2019 Rental and other revenues $ 768,007 $ 736,900 $ 735,979 Operating expenses: Rental property and other expenses 236,436 231,825 248,511 Depreciation and amortization 259,255 241,585 254,504 Impairments of real estate assets — 1,778 5,849 General and administrative 40,553 41,031 44,067 Total operating expenses 536,244 516,219 552,931 Interest expense 85,853 80,962 81,648 Other income/(loss) 1,394 ( 1,707 ) ( 2,510 ) Gains on disposition of property 174,059 215,897 39,517 Equity in earnings of unconsolidated affiliates 1,947 4,005 3,276 Net income 323,310 357,914 141,683 Net (income) attributable to noncontrolling interests in the Operating Partnership ( 8,321 ) ( 9,338 ) ( 3,551 ) Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,712 ) ( 1,174 ) ( 1,214 ) Dividends on Preferred Stock ( 2,486 ) ( 2,488 ) ( 2,488 ) Net income available for common stockholders $ 310,791 $ 344,914 $ 134,430 Earnings per Common Share – basic: Net income available for common stockholders $ 2.98 $ 3.32 $ 1.30 Weighted average Common Shares outstanding – basic 104,232 103,876 103,692 Earnings per Common Share – diluted: Net income available for common stockholders $ 2.98 $ 3.32 $ 1.30 Weighted average Common Shares outstanding – diluted 107,061 106,714 106,445 See accompanying notes to consolidated financial statements. 57 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Comprehensive Income (in thousands) Year Ended December 31, 2021 2020 2019 Comprehensive income: Net income $ 323,310 $ 357,914 $ 141,683 Other comprehensive income/(loss): Unrealized losses on cash flow hedges ( 19 ) ( 1,238 ) ( 9,134 ) Amortization of cash flow hedges 508 247 ( 1,250 ) Total other comprehensive income/(loss) 489 ( 991 ) ( 10,384 ) Total comprehensive income 323,799 356,923 131,299 Less-comprehensive (income) attributable to noncontrolling interests ( 10,033 ) ( 10,512 ) ( 4,765 ) Comprehensive income attributable to common stockholders $ 313,766 $ 346,411 $ 126,534 See accompanying notes to consolidated financial statements. 58 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, 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 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 59 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, 2020 103,921,546 $ 1,039 $ 28,826 $ 2,993,946 $ ( 1,462 ) $ 22,046 $ ( 686,225 ) $ 2,358,170 Issuances of Common Stock, net of issuance costs and tax withholdings 459,477 8 — 21,656 — — — 21,664 Conversions of Common Units to Common Stock 333,920 — — 15,076 — — — 15,076 Dividends on Common Stock ($ 1.96 per share) — — — — — ( 204,182 ) ( 204,182 ) Dividends on Preferred Stock ($ 86.25 per share) — — — — — ( 2,486 ) ( 2,486 ) Adjustment of noncontrolling interests in the Operating Partnership to fair value — — ( 11,461 ) — — — ( 11,461 ) Distributions to noncontrolling interests in consolidated affiliates — — — — ( 1,342 ) — ( 1,342 ) Issuances of restricted stock 184,584 — — — — — — — Redemptions/repurchases of Preferred Stock — ( 5 ) — — — — ( 5 ) Share-based compensation expense, net of forfeitures ( 6,747 ) 2 — 8,644 — — — 8,646 Net (income) attributable to noncontrolling interests in the Operating Partnership — — — — — ( 8,321 ) ( 8,321 ) Net (income) attributable to noncontrolling interests in consolidated affiliates — — — — 1,712 ( 1,712 ) — Comprehensive income: Net income — — — — — 323,310 323,310 Other comprehensive income — — — 489 — — 489 Total comprehensive income 323,799 Balance at December 31, 2021 104,892,780 $ 1,049 $ 28,821 $ 3,027,861 $ ( 973 ) $ 22,416 $ ( 579,616 ) $ 2,499,558 See accompanying notes to consolidated financial statements. 60 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2021 2020 2019 Operating activities: Net income $ 323,310 $ 357,914 $ 141,683 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 259,255 241,585 254,504 Amortization of lease incentives and acquisition-related intangible assets and liabilities ( 1,903 ) ( 2,537 ) ( 505 ) Share-based compensation expense 8,646 6,210 7,180 Net credit losses on operating lease receivables 425 5,458 9,861 Write-off of mortgages and notes receivable — — 4,087 Accrued interest on mortgages and notes receivable ( 103 ) ( 118 ) ( 184 ) Amortization of debt issuance costs 4,451 3,092 2,970 Amortization of cash flow hedges 508 247 ( 1,250 ) Amortization of mortgages and notes payable fair value adjustments 862 1,681 1,619 Impairments of real estate assets — 1,778 5,849 Losses on debt extinguishment 286 3,674 640 Net gains on disposition of property ( 174,059 ) ( 215,897 ) ( 39,517 ) Equity in earnings of unconsolidated affiliates ( 1,947 ) ( 4,005 ) ( 3,276 ) Distributions of earnings from unconsolidated affiliates 1,417 1,533 1,149 Settlement of cash flow hedges — — ( 11,749 ) Changes in operating assets and liabilities: Accounts receivable 5,744 437 ( 3,271 ) Prepaid expenses and other assets 1,575 ( 365 ) 1,610 Accrued straight-line rents receivable ( 22,100 ) ( 36,576 ) ( 29,828 ) Accounts payable, accrued expenses and other liabilities 8,191 ( 5,951 ) 24,225 Net cash provided by operating activities 414,558 358,160 365,797 Investing activities: Investments in acquired real estate and related intangible assets, net of cash acquired ( 305,291 ) ( 2,363 ) ( 424,222 ) Investments in development in-process ( 77,854 ) ( 160,612 ) ( 116,111 ) Investments in tenant improvements and deferred leasing costs ( 93,654 ) ( 137,997 ) ( 138,754 ) Investments in building improvements ( 48,405 ) ( 62,154 ) ( 53,826 ) Investment in acquired controlling interest in unconsolidated affiliate ( 127,339 ) — — Net proceeds from disposition of real estate assets 374,016 484,311 133,326 Distributions of capital from unconsolidated affiliates — 72 7,833 Investments in mortgages and notes receivable ( 84 ) ( 32 ) — Repayments of mortgages and notes receivable 301 310 295 Investments in and advances to unconsolidated affiliates ( 6,079 ) — ( 9,977 ) Changes in other investing activities ( 3,289 ) ( 10,853 ) ( 5,971 ) Net cash provided by/(used in) investing activities $ ( 287,678 ) $ 110,682 $ ( 607,407 ) 61 Table on Contents HIGHWOODS PROPERTIES, INC. Consolidated Statements of Cash Flows – Continued (in thousands) Year Ended December 31, 2021 2020 2019 Financing activities: Dividends on Common Stock $ ( 204,182 ) $ ( 199,331 ) $ ( 196,935 ) Redemptions/repurchases of Preferred Stock ( 5 ) ( 33 ) ( 18 ) Dividends on Preferred Stock ( 2,486 ) ( 2,488 ) ( 2,488 ) Distributions to noncontrolling interests in the Operating Partnership ( 5,516 ) ( 5,456 ) ( 5,189 ) Distributions to noncontrolling interests in consolidated affiliates ( 1,342 ) ( 1,138 ) ( 1,767 ) Proceeds from the issuance of Common Stock 23,917 3,571 2,086 Costs paid for the issuance of Common Stock ( 535 ) ( 215 ) — Repurchase of shares related to tax withholdings ( 1,718 ) ( 1,160 ) ( 1,788 ) Borrowings on revolving credit facility 380,000 129,000 604,600 Repayments of revolving credit facility ( 310,000 ) ( 350,000 ) ( 565,600 ) Borrowings on mortgages and notes payable 200,000 398,364 747,990 Repayments of mortgages and notes payable ( 353,780 ) ( 251,952 ) ( 326,876 ) Payments of debt extinguishment costs — ( 3,193 ) — Changes in debt issuance costs and other financing activities ( 9,279 ) ( 10,309 ) ( 7,806 ) Net cash provided by/(used in) financing activities ( 284,926 ) ( 294,340 ) 246,209 Net increase/(decrease) in cash and cash equivalents and restricted cash ( 158,046 ) 174,502 4,599 Cash and cash equivalents and restricted cash at beginning of the period 189,244 14,742 10,143 Cash and cash equivalents and restricted cash at end of the period $ 31,198 $ 189,244 $ 14,742 Reconciliation of cash and cash equivalents and restricted cash: Year Ended December 31, 2021 2020 2019 Cash and cash equivalents at end of the period $ 23,152 $ 109,322 $ 9,505 Restricted cash at end of the period 8,046 79,922 5,237 Cash and cash equivalents and restricted cash at end of the period $ 31,198 $ 189,244 $ 14,742 Supplemental disclosure of cash flow information: Year Ended December 31, 2021 2020 2019 Cash paid for interest, net of amounts capitalized $ 79,474 $ 72,350 $ 72,014 Supplemental disclosure of non-cash investing and financing activities: Year Ended December 31, 2021 2020 2019 Unrealized losses on cash flow hedges $ ( 19 ) $ ( 1,238 ) $ ( 9,134 ) Conversions of Common Units to Common Stock 15,076 145 663 Changes in accrued capital expenditures (1) ( 9,843 ) ( 1,913 ) 5,625 Write-off of fully depreciated real estate assets 68,307 46,656 85,727 Write-off of fully amortized leasing costs 43,648 25,618 45,042 Write-off of fully amortized debt issuance costs 5,200 1,438 1,791 Adjustment of noncontrolling interests in the Operating Partnership to fair value 11,461 ( 30,617 ) 29,557 Assumption of mortgages and notes payable related to acquisition activities 403,000 — — 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 5,310 — 35,349 Future consideration in connection with the acquisition of land 16,000 — — __________ (1) Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at December 31, 2021, 2020 and 2019 were $ 56.1 million, $ 66.0 million and $ 67.9 million, respectively. See accompanying notes to consolidated financial statements. 62 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, 2021 and 2020, the related consolidated statements of income, comprehensive income, capital, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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 Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Impairment of Real Estate Assets - Refer to Note 1 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 circumstances indicating that the carrying amounts of real estate assets may not be recoverable required a high degree of auditor judgment. 63 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 reading questionnaires 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. Real Estate and Related Assets — Acquisitions — Refer to Note 1, 3 and 6 to the financial statements Critical Audit Matter Description During 2021, the Operating Partnership acquired a portfolio of real estate assets in Charlotte, Raleigh, and Atlanta for a net purchase price of $653.5 million and acquired its joint venture partner’s 75.0% interest in a portfolio of assets in Raleigh for a net purchase price of $131.3 million. The Operating Partnership accounted for these transactions as asset acquisitions. The purchase prices paid for the assets acquired and liabilities assumed was allocated, based on relative fair values as determined by management, with the assistance of third-party specialists, to land, buildings, tenant improvements and intangible assets and liabilities such as above and below market leases and acquired in-place leases. Management assessed the relative fair value based on estimated cash flow projections that utilized discount and capitalization rates as well as available market information. Above and below market secured loans assumed in the transactions were assessed based on the present value of the difference between the property specific mortgage interest rate and the market interest rate over the years to maturity of the loan. Given the allocation of relative fair value to the assets acquired and liabilities assumed and the determination of the above and below market debt value required management to make significant estimates related to assumptions such as discount rates, capitalization rates, market rental rates, land values and market interest rates, performing audit procedures to evaluate the reasonableness of these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the relative fair value of assets acquired and liabilities assumed included the following, among others: • We tested the effectiveness of controls over the purchase price allocations, including management’s controls over the review of the third-party appraisals, the identification of real estate assets, intangible assets and liabilities and the valuation methodology for estimating the relative fair value of assets acquired and liabilities assumed. • With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, discount rates, capitalization rates, market rental rates, land values and market interest rates by developing a range of independent estimates and comparing our estimates to those used by management. 64 • We tested the mathematical accuracy of the valuation models and the source information underlying the determination of the intangible assets and liabilities fair value. /s/ Deloitte & Touche LLP Raleigh, North Carolina February 8, 2022 We have served as the Operating Partnership’s auditor since 2006. 65 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Balance Sheets (in thousands, except unit and per unit data) December 31, 2021 2020 Assets: Real estate assets, at cost: Land $ 549,228 $ 466,872 Buildings and tenant improvements 5,718,169 4,981,637 Development in-process 6,890 259,681 Land held for development 215,257 131,474 6,489,544 5,839,664 Less-accumulated depreciation ( 1,457,511 ) ( 1,418,379 ) Net real estate assets 5,032,033 4,421,285 Real estate and other assets, net, held for sale 3,518 11,360 Cash and cash equivalents 23,152 109,322 Restricted cash 8,046 79,922 Accounts receivable 14,002 27,488 Mortgages and notes receivable 1,227 1,341 Accrued straight-line rents receivable 268,324 259,381 Investments in and advances to unconsolidated affiliates 7,383 27,104 Deferred leasing costs, net of accumulated amortization of $ 143,111 and $ 151,698 , respectively 258,902 209,329 Prepaid expenses and other assets, net of accumulated depreciation of $ 21,408 and $ 21,154 , respectively 78,551 62,885 Total Assets $ 5,695,138 $ 5,209,417 Liabilities, Redeemable Operating Partnership Units and Capital: Mortgages and notes payable, net $ 2,788,915 $ 2,470,021 Accounts payable, accrued expenses and other liabilities 294,976 268,727 Total Liabilities 3,083,891 2,738,748 Commitments and contingencies Redeemable Operating Partnership Units: Common Units, 2,504,805 and 2,838,725 outstanding, respectively 111,689 112,499 Series A Preferred Units (liquidation preference $ 1,000 per unit), 28,821 and 28,826 units issued and outstanding, respectively 28,821 28,826 Total Redeemable Operating Partnership Units 140,510 141,325 Capital: Common Units: General partner Common Units, 1,069,888 and 1,063,515 outstanding, respectively 24,492 23,087 Limited partner Common Units, 103,414,083 and 102,449,222 outstanding, respectively 2,424,802 2,285,673 Accumulated other comprehensive loss ( 973 ) ( 1,462 ) Noncontrolling interests in consolidated affiliates 22,416 22,046 Total Capital 2,470,737 2,329,344 Total Liabilities, Redeemable Operating Partnership Units and Capital $ 5,695,138 $ 5,209,417 See accompanying notes to consolidated financial statements. 66 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Income (in thousands, except per unit amounts) Year Ended December 31, 2021 2020 2019 Rental and other revenues $ 768,007 $ 736,900 $ 735,979 Operating expenses: Rental property and other expenses 236,436 231,825 248,511 Depreciation and amortization 259,255 241,585 254,504 Impairments of real estate assets — 1,778 5,849 General and administrative 40,553 41,031 44,067 Total operating expenses 536,244 516,219 552,931 Interest expense 85,853 80,962 81,648 Other income/(loss) 1,394 ( 1,707 ) ( 2,510 ) Gains on disposition of property 174,059 215,897 39,517 Equity in earnings of unconsolidated affiliates 1,947 4,005 3,276 Net income 323,310 357,914 141,683 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,712 ) ( 1,174 ) ( 1,214 ) Distributions on Preferred Units ( 2,486 ) ( 2,488 ) ( 2,488 ) Net income available for common unitholders $ 319,112 $ 354,252 $ 137,981 Earnings per Common Unit – basic: Net income available for common unitholders $ 2.99 $ 3.33 $ 1.30 Weighted average Common Units outstanding – basic 106,634 106,297 106,014 Earnings per Common Unit – diluted: Net income available for common unitholders $ 2.99 $ 3.33 $ 1.30 Weighted average Common Units outstanding – diluted 106,652 106,305 106,036 See accompanying notes to consolidated financial statements. 67 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Comprehensive Income (in thousands) Year Ended December 31, 2021 2020 2019 Comprehensive income: Net income $ 323,310 $ 357,914 $ 141,683 Other comprehensive income/(loss): Unrealized losses on cash flow hedges ( 19 ) ( 1,238 ) ( 9,134 ) Amortization of cash flow hedges 508 247 ( 1,250 ) Total other comprehensive income/(loss) 489 ( 991 ) ( 10,384 ) Total comprehensive income 323,799 356,923 131,299 Less-comprehensive (income) attributable to noncontrolling interests ( 1,712 ) ( 1,174 ) ( 1,214 ) Comprehensive income attributable to common unitholders $ 322,087 $ 355,749 $ 130,085 See accompanying notes to consolidated financial statements. 68 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, 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 Issuances of Common Units, net of issuance costs and tax withholdings 217 21,447 — — 21,664 Distributions on Common Units ($ 1.96 per unit) ( 2,089 ) ( 206,807 ) — — ( 208,896 ) Distributions on Preferred Units ($ 86.25 per unit) ( 25 ) ( 2,461 ) — — ( 2,486 ) Share-based compensation expense, net of forfeitures 86 8,560 — — 8,646 Distributions to noncontrolling interests in consolidated affiliates — — — ( 1,342 ) ( 1,342 ) Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner — 8 — — 8 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 17 ) ( 1,695 ) — 1,712 — Comprehensive income: Net income 3,233 320,077 — — 323,310 Other comprehensive income — — 489 — 489 Total comprehensive income 323,799 Balance at December 31, 2021 $ 24,492 $ 2,424,802 $ ( 973 ) $ 22,416 $ 2,470,737 See accompanying notes to consolidated financial statements. 69 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2021 2020 2019 Operating activities: Net income $ 323,310 $ 357,914 $ 141,683 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 259,255 241,585 254,504 Amortization of lease incentives and acquisition-related intangible assets and liabilities ( 1,903 ) ( 2,537 ) ( 505 ) Share-based compensation expense 8,646 6,210 7,180 Net credit losses on operating lease receivables 425 5,458 9,861 Write-off of mortgages and notes receivable — — 4,087 Accrued interest on mortgages and notes receivable ( 103 ) ( 118 ) ( 184 ) Amortization of debt issuance costs 4,451 3,092 2,970 Amortization of cash flow hedges 508 247 ( 1,250 ) Amortization of mortgages and notes payable fair value adjustments 862 1,681 1,619 Impairments of real estate assets — 1,778 5,849 Losses on debt extinguishment 286 3,674 640 Net gains on disposition of property ( 174,059 ) ( 215,897 ) ( 39,517 ) Equity in earnings of unconsolidated affiliates ( 1,947 ) ( 4,005 ) ( 3,276 ) Distributions of earnings from unconsolidated affiliates 1,417 1,533 1,149 Settlement of cash flow hedges — — ( 11,749 ) Changes in operating assets and liabilities: Accounts receivable 5,744 437 ( 3,271 ) Prepaid expenses and other assets 1,575 ( 365 ) 1,610 Accrued straight-line rents receivable ( 22,100 ) ( 36,576 ) ( 29,828 ) Accounts payable, accrued expenses and other liabilities 8,191 ( 5,951 ) 24,225 Net cash provided by operating activities 414,558 358,160 365,797 Investing activities: Investments in acquired real estate and related intangible assets, net of cash acquired ( 305,291 ) ( 2,363 ) ( 424,222 ) Investments in development in-process ( 77,854 ) ( 160,612 ) ( 116,111 ) Investments in tenant improvements and deferred leasing costs ( 93,654 ) ( 137,997 ) ( 138,754 ) Investments in building improvements ( 48,405 ) ( 62,154 ) ( 53,826 ) Investment in acquired controlling interest in unconsolidated affiliate ( 127,339 ) — — Net proceeds from disposition of real estate assets 374,016 484,311 133,326 Distributions of capital from unconsolidated affiliates — 72 7,833 Investments in mortgages and notes receivable ( 84 ) ( 32 ) — Repayments of mortgages and notes receivable 301 310 295 Investments in and advances to unconsolidated affiliates ( 6,079 ) — ( 9,977 ) Changes in other investing activities ( 3,289 ) ( 10,853 ) ( 5,971 ) Net cash provided by/(used in) investing activities $ ( 287,678 ) $ 110,682 $ ( 607,407 ) 70 Table of Contents HIGHWOODS REALTY LIMITED PARTNERSHIP Consolidated Statements of Cash Flows - Continued (in thousands) Year Ended December 31, 2021 2020 2019 Financing activities: Distributions on Common Units $ ( 208,896 ) $ ( 204,002 ) $ ( 201,347 ) Redemptions/repurchases of Preferred Units ( 5 ) ( 33 ) ( 18 ) Distributions on Preferred Units ( 2,486 ) ( 2,488 ) ( 2,488 ) Distributions to noncontrolling interests in consolidated affiliates ( 1,342 ) ( 1,138 ) ( 1,767 ) Proceeds from the issuance of Common Units 23,917 3,571 2,086 Costs paid for the issuance of Common Units ( 535 ) ( 215 ) — Repurchase of units related to tax withholdings ( 1,718 ) ( 1,160 ) ( 1,788 ) Borrowings on revolving credit facility 380,000 129,000 604,600 Repayments of revolving credit facility ( 310,000 ) ( 350,000 ) ( 565,600 ) Borrowings on mortgages and notes payable 200,000 398,364 747,990 Repayments of mortgages and notes payable ( 353,780 ) ( 251,952 ) ( 326,876 ) Payments of debt extinguishment costs — ( 3,193 ) — Changes in debt issuance costs and other financing activities ( 10,081 ) ( 11,094 ) ( 8,583 ) Net cash provided by/(used in) financing activities ( 284,926 ) ( 294,340 ) 246,209 Net increase/(decrease) in cash and cash equivalents and restricted cash ( 158,046 ) 174,502 4,599 Cash and cash equivalents and restricted cash at beginning of the period 189,244 14,742 10,143 Cash and cash equivalents and restricted cash at end of the period $ 31,198 $ 189,244 $ 14,742 Reconciliation of cash and cash equivalents and restricted cash: Year Ended December 31, 2021 2020 2019 Cash and cash equivalents at end of the period $ 23,152 $ 109,322 $ 9,505 Restricted cash at end of the period 8,046 79,922 5,237 Cash and cash equivalents and restricted cash at end of the period $ 31,198 $ 189,244 $ 14,742 Supplemental disclosure of cash flow information: Year Ended December 31, 2021 2020 2019 Cash paid for interest, net of amounts capitalized $ 79,474 $ 72,350 $ 72,014 Supplemental disclosure of non-cash investing and financing activities: Year Ended December 31, 2021 2020 2019 Unrealized losses on cash flow hedges $ ( 19 ) $ ( 1,238 ) $ ( 9,134 ) Changes in accrued capital expenditures (1) ( 9,843 ) ( 1,913 ) 5,625 Write-off of fully depreciated real estate assets 68,307 46,656 85,727 Write-off of fully amortized leasing costs 43,648 25,618 45,042 Write-off of fully amortized debt issuance costs 5,200 1,438 1,791 Adjustment of Redeemable Common Units to fair value ( 810 ) ( 26,880 ) 27,256 Assumption of mortgages and notes payable related to acquisition activities 403,000 — — 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 5,310 — 35,349 Future consideration in connection with the acquisition of land 16,000 — — __________ (1) Accrued capital expenditures included in accounts payable, accrued expenses and other liabilities at December 31, 2021, 2020 and 2019 were $ 56.1 million, $ 66.0 million and $ 67.9 million, respectively. See accompanying notes to consolidated financial statements. 71 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 (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, 2021, we owned or had an interest in 28.0 million rentable square feet of in-service properties, 0.6 million rentable square feet of office properties under development and development land with approximately 5.0 million rentable square feet of potential office build out. The Company is the sole general partner of the Operating Partnership. At December 31, 2021, the Company owned all of the Preferred Units and 104.5 million, or 97.7 %, of the Common Units in the Operating Partnership. Limited partners owned the remaining 2.5 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 2021, the Company redeemed 333,920 Common Units for a like number of shares of Common Stock. 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, 2021, we had involvement with, and are the primary beneficiary in, an entity that we concluded to be a variable interest entity. As such, this entity is consolidated. Additionally, at December 31, 2021, we had involvement with, but are not the primary beneficiary in, an entity that we concluded to be a variable interest entity. As such, this entity is not consolidated. We also owned three properties through a joint venture investment at December 31, 2021 that were consolidated. (See Note 4). All intercompany transactions and accounts have been eliminated. 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. 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, 2021, a reserve of $ 0.6 million was recorded to cover estimated reported and unreported claims. 72 Table of Contents 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 $ 218.6 million, $ 204.6 million and $ 214.7 million for the years ended December 31, 2021, 2020 and 2019, 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. Assumed debt, if any, is recorded at fair value based on the present value of the expected future payments. 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. 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, 73 Table of Contents 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 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. 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 rent recognized in a given year is affected accordingly. 74 Table of Contents 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. 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 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 75 Table of Contents 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, 2021, properties that we wholly own were leased to 1,468 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 2021. 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. 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. 76 Table of Contents 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 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 now 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 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, $ 0.7 million and $ 3.7 million of deferred rent is included in accounts receivable on our Consolidated Balance Sheets at December 31, 2021 and 2020, respectively. 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”). 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. 77 Table of Contents 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 We recognized rental and other revenues related to operating lease payments of $ 754.9 million, $ 726.0 million and $ 723.1 million, of which variable lease payments were $ 57.3 million, $ 56.0 million and $ 65.4 million, during the years ended December 31, 2021, 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, 2021 for our consolidated properties: 2022 $ 695,896 2023 669,753 2024 619,033 2025 525,223 2026 461,045 Thereafter 1,967,017 $ 4,937,967 Information as Lessee We have office assets encompassing 2.8 million rentable square feet 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, $ 2.6 million and $ 2.5 million of ground lease expense during the years ended December 31, 2021, 2020 and 2019, respectively, and paid $ 2.3 million, $ 2.2 million and $ 2.2 million in cash during 2021, 2020 and 2019, respectively . 78 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, 2021 and a reconciliation of those cash flows to the operating lease liability at December 31, 2021: 2022 $ 2,169 2023 2,167 2024 2,123 2025 2,170 2026 2,220 Thereafter 79,307 90,156 Discount ( 56,337 ) Lease liability $ 33,819 Acquired Finance Lease During 2021, we acquired a portfolio of real estate assets from Preferred Apartment Communities, Inc. (“PAC”) (see Note 3). In conjunction with the acquisition, we assumed the ground leasehold interest to land underneath a parking garage. Under the ground lease, we have an obligation to acquire fee simple title to the land at our discretion any time, but no later than October 31, 2029. We determined this lease to be a finance lease. As such, we recognized a lease liability (in accounts payable, accrued expenses and other liabilities) and a corresponding right of use asset (in prepaid expenses and other assets ) of $ 5.3 million on our Consolidated Balance Sheet on the date of acquisition equal to the present value of the minimum lease payments required under the ground lease. Through October 31, 2029, the expected date at which we estimate we will satisfy the obligation and acquire fee simple title to the land, we will recognize interest expense equal to the lease liability times our incremental borrowing rate, which reflects the fixed rate at which we could borrow a similar amount for the same term and with similar collateral. We determined this rate to be approximately 2.6 %. We also recorded an additional $ 3.1 million right of use asset ( in prepaid expenses and other assets ) to reflect favorable terms of the ground lease when compared with market terms. No amortization will be recorded for the right of use assets because they are comprised of land. 3. Real Estate Assets Acquisitions During 2021, we acquired a portfolio of real estate assets from PAC. The portfolio consists of the following assets: Asset Market Submarket/BBD Square Footage 150 Fayetteville Raleigh CBD 560,000 CAPTRUST Towers Raleigh North Hills 300,000 Capitol Towers Charlotte SouthPark 479,000 Morrocroft Centre Charlotte SouthPark 291,000 Galleria 75 Redevelopment Site Atlanta Cumberland/Galleria Our total purchase price, net of closing credits and cash acquired, was $ 653.6 million, including $ 4.5 million of capitalized acquisition costs. The acquisition included the assumption of four secured loans (see Note 6). 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. 79 Table of Contents The following table sets forth a summary of the relative fair value of the material assets acquired and liabilities assumed relating to this acquisition: Amount Recorded at Acquisition Real estate assets (1) $ 593,039 Acquisition-related intangible assets (in deferred financing and leasing costs) (1) $ 61,126 Right of use asset (in prepaid expenses and other assets) (1) $ 8,440 Mortgages and notes payable $ ( 403,000 ) Debt issuance costs (in mortgages and notes payable) (1) $ 3,473 Acquisition-related intangible liabilities (in accounts payable, accrued expenses and other liabilities) (1) $ ( 7,174 ) Lease liability (in accounts payable, accrued expenses and other liabilities) (1) $ ( 5,310 ) __________ (1) Included in purchase price. During 2021, we also acquired various development land parcels in Nashville for an aggregate purchase price, including capitalized acquisition costs, of $ 74.1 million. The $ 16.0 million purchase price for one of the acquired parcels is expected to be paid in or prior to second quarter 2023. Duri ng 2021, we also 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. 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 allocated our previously held equity interest at historical cost along with the consideration paid and acquisition costs to the assets acquired and liabilities assumed. 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 2020, we acquired two development land 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 land parcels totaling approximately 10 acres in Raleigh, Richmond and Pittsburgh for an aggregate purchase price, including capitalized acquisition costs, of $ 12.4 million. Dispositions During 2021, we sold a total of 13 office buildings and various land parcels in Atlanta, Memphis, Raleigh, Richmond and Tampa for an aggregate sale price of $ 384.6 million (before closing credits to buyer of $ 6.9 million) and recorded aggregate gains on disposition of property of $ 172.8 million. During 2020, we sold a total of 52 buildings 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. 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. 80 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. 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 at both December 31, 2021 and 2020. The following table sets forth our ownership in unconsolidated affiliates at December 31, 2021: Joint Venture Location Ownership Interest Plaza Colonnade, Tenant-in-Common Kansas City 50.0 % Brand/HRLP 2827 Peachtree LLC Atlanta 50.0 % Kessinger/Hunter & Company, LC Kansas City 26.5 % - Brand/HRLP 2827 Peachtree LLC (“2827 Peachtree joint venture”) During the fourth quarter of 2021, we and Brand Properties, LLC (“Brand”) formed the 2827 Peachtree joint venture to construct 2827 Peachtree, a 135,000 square foot, multi-customer office building located in Atlanta’s Buckhead submarket. 2827 Peachtree has an anticipated total investment of $ 79.0 million. Construction of 2827 Peachtree began in the first quarter of 2022 with a scheduled completion date in the third quarter of 2023. 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. 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 . The loan bears interest at LIBOR plus 300 basis points. As of December 31, 2021, no amounts under the loan have been funded. We determined that we have a variable interest in the 2827 Peachtree 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 equity holder and Brand as an equity holder. The 2827 Peachtree 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 Brand is not sufficient to finance its planned investments and operations. However, since we are the not the managing member or lead developer, we concluded we do not have the power to direct matters that most significantly impact the activities of the entity and therefore, do not qualify as the primary beneficiary. Accordingly, the entity was not consolidated. At December 31, 2021, our risk of loss with respect to this arrangement was limited to the carrying value of the investment balance of $ 6.1 million as no amounts were outstanding under the loan. The assets of the 2827 Peachtree 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 Activities 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, 2021, 2020 and 2019, we recognized $ 1.6 million, $ 1.0 million and $ 0.5 million, respectively, of development/construction, management and leasing fees from our unconsolidated joint ventures. At December 31, 2020, we had receivables of $ 0.2 million related to these fees in accounts receivable. Consolidated Variable Interest Entities 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 81 Table of Contents began in the third quarter of 2019 and the building was placed in service 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, 2021, $ 28.5 million under the loan has been funded. 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, 2021 2020 Net real estate assets $ 53,191 $ — Development in-process $ — $ 46,873 Cash and cash equivalents $ 389 $ — Accrued straight-line rents receivable $ 121 $ — Deferred leasing costs, net $ 1,519 $ 196 Prepaid expenses and other assets $ 163 $ 75 Accounts payable, accrued expenses and other liabilities $ 646 $ 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 $ 31.1 million had the entity been liquidated at December 31, 2021. 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. The assets of Markel can be used only to settle obligations of the joint venture and its creditors have no recourse to our wholly owned assets. During 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. 82 Table of Contents 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, 2021 2020 Assets: Deferred leasing costs (including lease incentives and above market lease and in-place lease acquisition-related intangible assets) $ 402,013 $ 361,027 Less accumulated amortization ( 143,111 ) ( 151,698 ) $ 258,902 $ 209,329 Liabilities (in accounts payable, accrued expenses and other liabilities): Acquisition-related below market lease liabilities $ 57,703 $ 63,748 Less accumulated amortization ( 28,978 ) ( 37,838 ) $ 28,725 $ 25,910 The following table sets forth amortization of intangible assets and below market lease liabilities: Year Ended December 31, 2021 2020 2019 Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization) $ 38,173 $ 34,401 $ 37,386 Amortization of lease incentives (in rental and other revenues) $ 1,885 $ 1,847 $ 4,281 Amortization of acquisition-related intangible assets (in rental and other revenues) $ 1,932 $ 1,137 $ 1,290 Amortization of acquisition-related intangible assets (in rental property and other expenses) $ — $ 510 $ 557 Amortization of acquisition-related below market lease liabilities (in rental and other revenues) $ ( 5,720 ) $ ( 6,031 ) $ ( 6,633 ) 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) 2022 $ 41,823 $ 1,534 $ 2,986 $ ( 5,294 ) 2023 36,891 1,428 2,829 ( 4,824 ) 2024 32,716 1,284 2,573 ( 4,111 ) 2025 25,856 1,209 1,667 ( 2,594 ) 2026 21,992 1,084 1,336 ( 2,294 ) Thereafter 73,343 3,557 4,794 ( 9,608 ) $ 232,621 $ 10,096 $ 16,185 $ ( 28,725 ) Weighted average remaining amortization periods as of December 31, 2021 (in years) 8.2 8.5 7.6 8.3 83 Table of Contents The following table sets forth the intangible assets acquired and below market lease liabilities assumed as a result of the acquisition of real estate assets from PAC and our joint venture partner's 75.0 % interest in the Forum: Acquisition-Related Intangible Assets (amortized in Rental and Other Revenues) Acquisition-Related Intangible Assets (amortized in Depreciation and Amortization) Acquisition-Related Below Market Lease Liabilities (amortized in Rental and Other Revenues) Amount recorded at acquisition $ 13,824 $ 84,298 $ ( 8,535 ) Weighted average remaining amortization periods as of December 31, 2021 (in years) 7.1 7.1 8.1 6. Mortgages and Notes Payable Our mortgages and notes payable consisted of the following: December 31, 2021 2020 Secured indebtedness (1) : 4.27% (3.61% effective rate) mortgage loan due 2028 (2) $ 115,731 $ — 4.00% mortgage loan due 2029 91,318 93,350 3.61% (3.19% effective rate) mortgage loan due 2029 (3) 84,973 — 3.40% (3.50% effective rate) mortgage loan due 2033 (4) 69,422 — 4.60% (3.73% effective rate) mortgage loan due 2037 (5) 130,498 — 491,942 93,350 Unsecured indebtedness: 3.20% (3.363% effective rate) notes due 2021 (6) — 149,901 3.625% (3.752% effective rate) notes due 2023 (7) 249,726 249,464 3.875% (4.038% effective rate) notes due 2027 (8) 297,934 297,534 4.125% (4.271% effective rate) notes due 2028 (9) 347,449 347,035 4.20% (4.234% effective rate) notes due 2029 (10) 349,288 349,189 3.050% (3.079% effective rate) notes due 2030 (11) 399,204 399,106 2.600% (2.645% effective rate) notes due 2031 (12) 398,579 398,423 Variable rate term loan due 2022 (13) 200,000 200,000 Revolving credit facility due 2025 (14) 70,000 — 2,312,180 2,390,652 Less-unamortized debt issuance costs ( 15,207 ) ( 13,981 ) Total mortgages and notes payable, net $ 2,788,915 $ 2,470,021 __________ (1) Our secured mortgage loans were collateralized by real estate assets with an undepreciated book value of $ 727.8 million at December 31, 2021. We paid down $ 3.8 million of secured loan balances through principal amortization during 2021. (2) Net of unamortized fair market value premium of $ 3.9 million as of December 31, 2021. (3) Net of unamortized fair market value premium of $ 2.3 million as of December 31, 2021. (4) Net of unamortized fair market value discount of $ 0.6 million as of December 31, 2021. (5) Net of unamortized fair market value premium of $ 10.0 million as of December 31, 2021. (6) Net of unamortized original issuance discount of $ 0.1 million as of December 31, 2020. This debt was repaid in 2021. (7) Net of unamortized original issuance discount of $ 0.3 million and $ 0.5 million as of December 31, 2021 and 2020, respectively. (8) Net of unamortized original issuance discount of $ 2.1 million and $ 2.5 million as of December 31, 2021 and 2020, respectively. (9) Net of unamortized original issuance discount of $ 2.6 million and $ 3.0 million as of December 31, 2021 and 2020, respectively. (10) Net of unamortized original issuance discount of $ 0.7 million and $ 0.8 million as of December 31, 2021 and 2020, respectively. 84 Table of Contents (11) Net of unamortized original issuance discount of $ 0.8 million and $ 0.9 million as of December 31, 2021 and 2020, respectively. (12) Net of unamortized original issuance discount of $ 1.4 million and $ 1.6 million as of December 31, 2021 and 2020, respectively. (13) 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 1.20 % at December 31, 2021. (14) The interest rate was 1.00 % at December 31, 2021. The following table sets forth scheduled future principal payments, including amortization, due on our mortgages and notes payable at December 31, 2021: Years Ending December 31, Amount 2022 $ 206,524 2023 257,059 2024 7,365 2025 77,176 2026 6,911 Thereafter 2,249,087 Less-unamortized debt issuance costs ( 15,207 ) $ 2,788,915 During 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. 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. 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. The financial and other covenants under the new facility are substantially similar to our previous credit facility. 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. We recorded $ 0.1 million of loss on debt extinguishment. 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. During 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. We incurred $ 3.5 million of debt issuance costs related to these assumptions, which will be amortized over the remaining terms of the loans. During the third quarter of 2021, we also obtained a $ 200.0 million, six -month unsecured bridge facility. The bridge facility was originally scheduled to mature in January 2022. 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. We incurred $ 1.0 million of debt issuance costs related to this bridge facility which were being amortized over the six -month term. As of December 31, 2021, this bridge facility was prepaid in full without penalty. We recorded $ 0.2 million of loss on debt extinguishment related to this prepayment. During 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. We recorded $ 0.1 million of loss on debt extinguishment related to this prepayment. 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 85 Table of Contents 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. We are currently in compliance with financial covenants with respect to our consolidated debt. 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 $ 35.0 million with respect to other loans in some circumstances. The Operating Partnership has $ 249.7 million carrying amount of 2023 notes outstanding, $ 297.9 million carrying amount of 2027 notes outstanding, $ 347.4 million carrying amount of 2028 notes outstanding, $ 349.3 million carrying amount of 2029 notes outstanding, $ 399.2 million carrying amount of 2030 notes outstanding and $ 398.6 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 8, 2022 (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 $ 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. 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. 86 Table of Contents Capitalized Interest Total interest capitalized to development and significant building and tenant improvement projects was $ 9.6 million, $ 8.3 million and $ 5.6 million for the years ended December 31, 2021, 2020 and 2019, 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. 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 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 %. As of January 28, 2022, these interest rate swaps have expired. 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 2022, we estimate that $ 0.2 million will be reclassified as a net decrease to interest expense. The following table sets forth the fair value of our derivatives: December 31, 2021 2020 Derivatives: Derivatives designated as cash flow hedges in accounts payable, accrued expenses and other liabilities: Interest rate swaps $ 60 $ 846 87 Table of Contents 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, 2021 2020 2019 Derivatives Designated as Cash Flow Hedges: Amount of unrealized losses recognized in accumulated other comprehensive income/(loss) on derivatives: Interest rate swaps $ ( 19 ) $ ( 1,238 ) $ ( 9,134 ) Amount of (gains)/losses reclassified out of accumulated other comprehensive income/(loss) into interest expense: Interest rate swaps $ 508 $ 247 $ ( 1,250 ) 8. Commitments and Contingencies Lease and Contractual Commitments We have $ 241.9 million of lease and contractual commitments at December 31, 2021. 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 $ 55.5 million was recorded on our Consolidated Balance Sheets at December 31, 2021. Contingent Consideration We had $ 0.8 million of contingent consideration related to a parcel of acquired development land at both December 31, 2021 and 2020. The contingent consideration 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 in 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, the COVID-19 pandemic had a significant impact on the U.S. economy. We continue to follow the policies described in Note 1 , 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 years ended December 31, 2021 and 2020, respectively, circumstances related to the COVID-19 pandemic may result in recording impairments, lease modifications and credit losses in future periods. 88 Table of Contents 9. Noncontrolling Interests Noncontrolling Interests in Consolidated Affiliates At December 31, 2021, 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 the Midtown One joint venture. See Note 4. 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, 2021 2020 Beginning noncontrolling interests in the Operating Partnership $ 112,499 $ 133,216 Adjustment of noncontrolling interests in the Operating Partnership to fair value 11,461 ( 30,617 ) Issuances of Common Units — 6,163 Conversions of Common Units to Common Stock ( 15,076 ) ( 145 ) Net income attributable to noncontrolling interests in the Operating Partnership 8,321 9,338 Distributions to noncontrolling interests in the Operating Partnership ( 5,516 ) ( 5,456 ) Total noncontrolling interests in the Operating Partnership $ 111,689 $ 112,499 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, 2021 2020 2019 Net income available for common stockholders $ 310,791 $ 344,914 $ 134,430 Increase in additional paid in capital from conversions of Common Units to Common Stock 15,076 145 663 Issuances of Common Units — ( 6,163 ) — Change from net income available for common stockholders and transfers from noncontrolling interests $ 325,867 $ 338,896 $ 135,093 89 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. 90 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, 2021: Assets: Mortgages and notes receivable, at fair value (1) $ 1,227 $ — $ 1,227 Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets) 2,866 2,866 — Total Assets $ 4,093 $ 2,866 $ 1,227 Noncontrolling Interests in the Operating Partnership $ 111,689 $ 111,689 $ — Liabilities: Mortgages and notes payable, net, at fair value (1) $ 2,907,492 $ — $ 2,907,492 Interest rate swaps (in accounts payable, accrued expenses and other liabilities) 60 — 60 Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities) 2,866 2,866 — Total Liabilities $ 2,910,418 $ 2,866 $ 2,907,552 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 __________ (1) Amounts are not recorded at fair value on our Consolidated Balance Sheets at December 31, 2021 and 2020. 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. 11. Equity Common Stock Issuances During 2020, we entered into separate equity distribution agreements in which the Company may offer and sell up to $ 300.0 million in aggregate gross sales price of shares of Common Stock. During 2021, the Company issued 456,273 shares of Common Stock under its equity distribution agreements at an average gross sales price of $ 46.23 per share and received net proceeds, after sales commissions, of $ 20.8 million. At December 31, 2021, the Company had 95.1 million remaining shares of Common Stock authorized to be issued under its charter. 91 Table of Contents Common Stock Dividends Dividends of the Company declared per share of Common Stock aggregated $ 1.96 , $ 1.92 and $ 1.90 for the years ended December 31, 2021, 2020 and 2019, 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, 2021 2020 2019 Ordinary dividend $ 1.87 $ 1.65 $ 1.64 Capital gains 0.09 0.25 0.13 Return of capital — 0.02 0.13 Total $ 1.96 $ 1.92 $ 1.90 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 outstanding 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, 2021 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,821 $ 1,000 2/12/2027 $ 86.25 December 31, 2020 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,826 $ 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, 2021 2020 2019 8.625% Series A Cumulative Redeemable: Ordinary dividend $ 82.38 $ 74.96 $ 79.90 Capital gains 3.87 11.29 6.35 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. Warrants At both December 31, 2021 and 2020, 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 $ 1.96 , $ 1.92 and $ 1.90 for the years ended December 31, 2021, 2020 and 2019, respectively. 92 Table of Contents 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 outstanding 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, 2021 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,821 $ 1,000 2/12/2027 $ 86.25 December 31, 2020 8.625% Series A Cumulative Redeemable 2/12/1997 29 $ 28,826 $ 1,000 2/12/2027 $ 86.25 93 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 generally 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 25 % 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 %. 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 5 % to 30 % of annual base salary. 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, 2021 2020 Outstanding stock options and warrants 527,067 552,373 Possible future issuance under equity incentive plans 2,999,100 1,926,324 3,526,167 2,478,697 Of the possible future issuance under the Company’s long-term equity incentive plans at December 31, 2021, no more than an additional 1.0 million shares can be in the form of restricted stock. During the years ended December 31, 2021, 2020 and 2019, we recognized $ 8.6 million, $ 6.2 million and $ 7.2 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, 2021, there was $ 3.4 million of total unrecognized share-based compensation costs, which will be recognized over a weighted average remaining contractual term of 1.9 years. - 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. 94 Table of Contents The following table sets forth stock option activity: Options Outstanding Number of Options Weighted Average Exercise Price 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 537,373 46.07 Exercised ( 25,306 ) 43.76 Stock options outstanding at December 31, 2021 (1) 512,067 $ 46.18 __________ (1) The Company had 512,067 options exercisable at December 31, 2021 with a weighted average exercise price of $ 46.18 , weighted average remaining life of 4.0 years and intrinsic value of $ 0.6 million. Of these exercisable options, 279,549 had exercise prices higher than the market price of our Common Stock at December 31, 2021. Cash received or receivable from options exercised was $ 1.1 million, $ 1.9 million and $ 0.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 0.1 million, $ 0.4 million and $ 0.1 million, respectively. The total intrinsic value of options outstanding at December 31, 2021, 2020 and 2019 was $ 0.6 million, $ 0.1 million and $ 2.4 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. 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, 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 Awarded and issued (1) 103,120 39.99 Vested (2) ( 89,264 ) 45.90 Forfeited ( 3,327 ) 43.13 Restricted shares outstanding at December 31, 2021 219,719 $ 42.63 __________ 95 Table of Contents (1) The weighted average fair value at grant date of time-based restricted stock issued during the years ended December 31, 2021, 2020 and 2019 was $ 4.1 million, $ 3.7 million and $ 4.8 million, respectively. (2) The vesting date fair value of time-based restricted stock that vested during the years ended December 31, 2021, 2020 and 2019 was $ 3.6 million, $ 3.9 million and $ 3.3 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 2021 and 2020. The weighted average grant date fair value of such shares of total return-based restricted stock issued in 2021, 2020 and 2019 was determined to be $ 36.41 , $ 38.31 and $ 39.42 , 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: 2021 2020 2019 Risk free interest rate (1) 0.3 % 0.9 % 2.4 % Common stock dividend yield (2) 4.8 % 3.9 % 4.4 % Expected volatility (3) 26.8 % 20.4 % 27.3 % __________ (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. 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, 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 Awarded and issued (1) 81,464 36.41 Vested (2) ( 55,452 ) 43.01 Forfeited (3) ( 21,904 ) 42.33 Restricted shares outstanding at December 31, 2021 229,292 $ 38.00 __________ (1) The fair value at grant date of total return-based restricted stock issued during the years ended December 31, 2021, 2020 and 2019 was $ 2.9 million, $ 2.5 million and $ 3.4 million, respectively, at target. (2) The vesting date fair value of total return-based restricted stock that vested during the years ended December 31, 2021 and 2019 was $ 2.2 million and $ 2.1 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. 96 Table of Contents (3) The 2021, 2020 and 2019 amounts include 18,484 , 46,852 and 9,521 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, 2021, 2020 and 2019, we contributed $ 1.3 million, $ 1.4 million and $ 1.5 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 $ 2.9 million and $ 2.6 million at December 31, 2021 and 2020, 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. The following table sets forth our deferred compensation liability: Year Ended December 31, 2021 2020 2019 Beginning deferred compensation liability $ 2,573 $ 2,345 $ 1,849 Mark-to-market adjustment to deferred compensation (in general and administrative expenses) 293 228 496 Total deferred compensation liability $ 2,866 $ 2,573 $ 2,345 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, 2021, 2020 and 2019, the Company issued 38,460 , 47,208 and 38,618 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 $ 0.2 million, $ 0.3 million and $ 0.3 million in the years ended December 31, 2021, 2020 and 2019, respectively. 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. 97 Table of Contents 13. Accumulated Other Comprehensive Income/(Loss) The following table sets forth the components of accumulated other comprehensive income/(loss): December 31, 2021 2020 Cash flow hedges: Beginning balance $ ( 1,462 ) $ ( 471 ) Unrealized losses on cash flow hedges ( 19 ) ( 1,238 ) Amortization of cash flow hedges (1) 508 247 Total accumulated other comprehensive loss $ ( 973 ) $ ( 1,462 ) __________ (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, 2021 and 2020, which are considered non-core: December 31, 2021 2020 Assets: Land $ — $ 2,612 Buildings and tenant improvements — 12,238 Land held for development 3,482 — Less-accumulated depreciation — ( 3,577 ) Net real estate assets 3,482 11,273 Deferred leasing costs, net — 87 Prepaid expenses and other assets 36 — Real estate and other assets, net, held for sale $ 3,518 $ 11,360 98 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, 2021 2020 2019 Earnings per Common Share - basic: Numerator: Net income $ 323,310 $ 357,914 $ 141,683 Net (income) attributable to noncontrolling interests in the Operating Partnership ( 8,321 ) ( 9,338 ) ( 3,551 ) Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,712 ) ( 1,174 ) ( 1,214 ) Dividends on Preferred Stock ( 2,486 ) ( 2,488 ) ( 2,488 ) Net income available for common stockholders $ 310,791 $ 344,914 $ 134,430 Denominator: Denominator for basic earnings per Common Share – weighted average shares (1) 104,232 103,876 103,692 Net income available for common stockholders $ 2.98 $ 3.32 $ 1.30 Earnings per Common Share - diluted: Numerator: Net income $ 323,310 $ 357,914 $ 141,683 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,712 ) ( 1,174 ) ( 1,214 ) Dividends on Preferred Stock ( 2,486 ) ( 2,488 ) ( 2,488 ) Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership $ 319,112 $ 354,252 $ 137,981 Denominator: Denominator for basic earnings per Common Share – weighted average shares (1) 104,232 103,876 103,692 Add: Stock options using the treasury method 18 8 22 Noncontrolling interests Common Units 2,811 2,830 2,731 Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions 107,061 106,714 106,445 Net income available for common stockholders $ 2.98 $ 3.32 $ 1.30 __________ (1) Includes all unvested restricted stock where dividends on such restricted stock are non-forfeitable. 99 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, 2021 2020 2019 Earnings per Common Unit - basic: Numerator: Net income $ 323,310 $ 357,914 $ 141,683 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,712 ) ( 1,174 ) ( 1,214 ) Distributions on Preferred Units ( 2,486 ) ( 2,488 ) ( 2,488 ) Net income available for common unitholders $ 319,112 $ 354,252 $ 137,981 Denominator: Denominator for basic earnings per Common Unit – weighted average units (1) 106,634 106,297 106,014 Net income available for common unitholders $ 2.99 $ 3.33 $ 1.30 Earnings per Common Unit - diluted: Numerator: Net income $ 323,310 $ 357,914 $ 141,683 Net (income) attributable to noncontrolling interests in consolidated affiliates ( 1,712 ) ( 1,174 ) ( 1,214 ) Distributions on Preferred Units ( 2,486 ) ( 2,488 ) ( 2,488 ) Net income available for common unitholders $ 319,112 $ 354,252 $ 137,981 Denominator: Denominator for basic earnings per Common Unit – weighted average units (1) 106,634 106,297 106,014 Add: Stock options using the treasury method 18 8 22 Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions 106,652 106,305 106,036 Net income available for common unitholders $ 2.99 $ 3.33 $ 1.30 __________ (1) Includes all unvested restricted stock where distributions on such restricted stock are non-forfeitable. 100 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 $ 1.61 , $ 1.41 and $ 1.44 per share in 2021, 2020 and 2019, 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 $ 5.2 billion and $ 3.2 billion, respectively, at December 31, 2021 and $ 4.7 billion and $ 2.8 billion, respectively, at December 31, 2020. The tax basis of the Operating Partnership’s assets (net of accumulated tax depreciation and amortization) and liabilities was approximately $ 5.0 billion and $ 3.2 billion, respectively, at December 31, 2021 and $ 4.6 billion and $ 2.8 billion, respectively, at December 31, 2020. During the years ended December 31, 2021, 2020 and 2019, 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, 2021 2020 2019 Current tax expense: Federal $ 40 $ 110 $ 202 State 79 240 148 119 350 350 Deferred tax expense/(benefit): Federal ( 39 ) ( 9 ) 14 State 58 ( 4 ) ( 120 ) 19 ( 13 ) ( 106 ) Total income tax expense $ 138 $ 337 $ 244 The Company’s net deferred tax liability was $ 0.1 million at both December 31, 2021 and 2020. 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, 2021 and 2020, there were no unrecognized tax benefits. The Company is subject to federal, state and local income tax examinations by taxing authorities for 2018 through 2021. 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. 101 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 and for the year ended December 31, 2019 has 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, 2021 2020 2019 Rental and Other Revenues: Office: Atlanta $ 143,612 $ 146,704 $ 151,279 Charlotte 49,347 35,733 4,650 Nashville 149,674 138,089 133,867 Orlando 51,281 49,459 52,679 Pittsburgh 57,371 58,518 60,755 Raleigh 162,115 128,189 122,173 Richmond 45,941 48,079 49,428 Tampa 97,954 99,520 86,431 Total Office Segment 757,295 704,291 661,262 Other 10,712 32,609 74,717 Total Rental and Other Revenues $ 768,007 $ 736,900 $ 735,979 Net Operating Income: Office: Atlanta $ 94,122 $ 95,448 $ 97,019 Charlotte 38,464 28,431 3,791 Nashville 110,039 99,901 97,386 Orlando 31,301 29,546 32,062 Pittsburgh 34,248 35,631 36,249 Raleigh 121,005 95,926 88,402 Richmond 31,726 33,667 33,756 Tampa 64,396 67,059 50,339 Total Office Segment 525,301 485,609 439,004 Other 6,270 19,466 48,464 Total Net Operating Income 531,571 505,075 487,468 Reconciliation to net income: Depreciation and amortization ( 259,255 ) ( 241,585 ) ( 254,504 ) Impairments of real estate assets — ( 1,778 ) ( 5,849 ) General and administrative expenses ( 40,553 ) ( 41,031 ) ( 44,067 ) Interest expense ( 85,853 ) ( 80,962 ) ( 81,648 ) Other income/(loss) 1,394 ( 1,707 ) ( 2,510 ) Gains on disposition of property 174,059 215,897 39,517 Equity in earnings of unconsolidated affiliates 1,947 4,005 3,276 Net income $ 323,310 $ 357,914 $ 141,683 102 Table of Contents December 31, 2021 2020 Total Assets: Office: Atlanta $ 947,877 $ 1,011,807 Charlotte 771,121 443,051 Nashville 1,294,178 1,191,219 Orlando 285,781 289,129 Pittsburgh 310,296 313,783 Raleigh 1,269,200 839,831 Richmond 202,488 240,976 Tampa 514,303 556,951 Total Office Segment 5,595,244 4,886,747 Other 99,894 322,670 Total Assets $ 5,695,138 $ 5,209,417 18. Subsequent Events 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. 103 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, 2021 2020 2019 Real estate assets: Beginning balance $ 5,594,833 $ 5,776,804 $ 5,296,551 Acquisitions, development and improvements 1,248,256 259,470 677,842 Cost of real estate sold and retired ( 356,953 ) ( 441,441 ) ( 197,589 ) Ending balance (a) $ 6,486,136 $ 5,594,833 $ 5,776,804 Accumulated depreciation: Beginning balance $ 1,421,956 $ 1,405,341 $ 1,296,562 Depreciation expense 218,628 204,585 214,682 Real estate sold and retired ( 183,073 ) ( 187,970 ) ( 105,903 ) Ending balance (b) $ 1,457,511 $ 1,421,956 $ 1,405,341 (a) Reconciliation of total real estate assets to balance sheet caption: 2021 2020 2019 Total per Schedule III $ 6,486,136 $ 5,594,833 $ 5,776,804 Development in-process exclusive of land included in Schedule III 6,890 259,681 172,706 Real estate assets, net, held for sale ( 3,482 ) ( 14,850 ) ( 34,396 ) Total real estate assets $ 6,489,544 $ 5,839,664 $ 5,915,114 (b) Reconciliation of total accumulated depreciation to balance sheet caption: 2021 2020 2019 Total per Schedule III $ 1,457,511 $ 1,421,956 $ 1,405,341 Real estate assets, net, held for sale — ( 3,577 ) ( 16,775 ) Total accumulated depreciation $ 1,457,511 $ 1,418,379 $ 1,388,566 104 Table of Contents HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands) December 31, 2021 Initial Costs Costs Capitalized Subsequent to Acquisition Gross Value at Close of Period Life on Which Depreciation is Calculated Description Property Type 2021 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Atlanta, GA 1700 Century Circle Office $ — $ 2,482 $ 2 $ 1,431 $ 2 $ 3,913 $ 3,915 $ 2,110 1983 5-40 yrs. 1800 Century Boulevard Office 1,444 29,081 — 6,935 1,444 36,016 37,460 20,861 1975 5-40 yrs. 1825 Century Boulevard Office 864 — 303 15,181 1,167 15,181 16,348 7,207 2002 5-40 yrs. 1875 Century Boulevard Office — 8,924 — 8,820 — 17,744 17,744 9,491 1976 5-40 yrs. 1900 Century Boulevard Office — 4,744 — 340 — 5,084 5,084 5,084 1971 5-40 yrs. 2200 Century Parkway Office — 14,432 — 9,012 — 23,444 23,444 12,327 1971 5-40 yrs. 2400 Century Parkway Office — — 406 14,785 406 14,785 15,191 8,262 1998 5-40 yrs. 2500 Century Parkway Office — — 328 12,824 328 12,824 13,152 5,035 2005 5-40 yrs. 2500/2635 Parking Garage Office — — — 6,447 — 6,447 6,447 2,594 2005 5-40 yrs. 2600 Century Parkway Office — 10,679 — 5,694 — 16,373 16,373 8,514 1973 5-40 yrs. 2635 Century Parkway Office — 21,643 — 20,711 — 42,354 42,354 20,219 1980 5-40 yrs. 2800 Century Parkway Office — 20,449 — 11,852 — 32,301 32,301 19,130 1983 5-40 yrs. Century Plaza I Office 1,290 8,567 — 4,746 1,290 13,313 14,603 7,206 1981 5-40 yrs. Century Plaza II Office 1,380 7,733 — 4,119 1,380 11,852 13,232 5,904 1984 5-40 yrs. Riverpoint - Land Industrial 7,250 — ( 4,649 ) 718 2,601 718 3,319 203 N/A 5-40 yrs. Riverwood 100 Office 5,785 64,913 ( 29 ) 25,295 5,756 90,208 95,964 26,300 1989 5-40 yrs. Tradeport - Land Industrial 5,243 — ( 4,733 ) — 510 — 510 — N/A N/A Two Alliance Center Office 9,579 125,549 — 555 9,579 126,104 135,683 34,023 2009 5-40 yrs. One Alliance Center Office 14,775 123,071 — 21,171 14,775 144,242 159,017 35,121 2001 5-40 yrs. 10 Glenlake North Office 5,349 26,334 — 7,754 5,349 34,088 39,437 8,341 2000 5-40 yrs. 10 Glenlake South Office 5,103 22,811 — 5,234 5,103 28,045 33,148 8,177 1999 5-40 yrs. Riverwood 200 Office 4,777 89,708 450 2,995 5,227 92,703 97,930 14,342 2017 5-40 yrs. Riverwood 300 - Land Office 400 — — 710 400 710 1,110 87 N/A 5-40 yrs. Monarch Tower Office 22,717 143,068 — 19,398 22,717 162,466 185,183 30,985 1997 5-40 yrs. Monarch Plaza Office 27,678 88,962 — 12,410 27,678 101,372 129,050 19,148 1983 5-40 yrs. Galleria 75 - Land Office — — 19,740 — 19,740 — 19,740 — N/A N/A Charlotte, NC Bank of America Tower Office 29,273 354,749 — 21,466 29,273 376,215 405,488 23,734 2019 5-40 yrs. Morrocroft Office 69,421 — — 19,286 177,199 19,286 177,199 196,485 2,660 1992 5-40 yrs. Capitol Towers Office 130,498 — — 9,202 102,179 9,202 102,179 111,381 1,351 2015 5-40 yrs. 105 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 Life on Which Depreciation is Calculated Description Property Type 2021 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Nashville, TN 3322 West End Office 3,025 27,490 — 12,054 3,025 39,544 42,569 20,091 1986 5-40 yrs. 3401 West End Office 5,862 22,917 — 6,755 5,862 29,672 35,534 16,937 1982 5-40 yrs. 5310 Maryland Way Office 1,863 7,201 — 3,796 1,863 10,997 12,860 7,051 1994 5-40 yrs. Cool Springs I & II Deck Office — — — 3,994 — 3,994 3,994 1,415 2007 5-40 yrs. Cool Springs III & IV Deck Office — — — 4,466 — 4,466 4,466 1,649 2007 5-40 yrs. Cool Springs I Office 1,583 — 15 18,202 1,598 18,202 19,800 8,279 1999 5-40 yrs. Cool Springs II Office 1,824 — 346 23,961 2,170 23,961 26,131 9,567 1999 5-40 yrs. Cool Springs III Office 1,631 — 804 17,091 2,435 17,091 19,526 6,329 2006 5-40 yrs. Cool Springs IV Office 1,715 — — 20,234 1,715 20,234 21,949 6,701 2008 5-40 yrs. Cool Springs V (Healthways) Office 3,688 — 295 53,116 3,983 53,116 57,099 24,867 2007 5-40 yrs. Harpeth On The Green II Office 1,419 5,677 — 4,164 1,419 9,841 11,260 4,870 1984 5-40 yrs. Harpeth On The Green III Office 1,660 6,649 — 3,621 1,660 10,270 11,930 5,195 1987 5-40 yrs. Harpeth On The Green IV Office 1,713 6,842 — 3,553 1,713 10,395 12,108 5,439 1989 5-40 yrs. Harpeth On The Green V Office 662 — 197 6,187 859 6,187 7,046 3,007 1998 5-40 yrs. Hickory Trace Office 1,164 — 164 6,335 1,328 6,335 7,663 2,792 2001 5-40 yrs. Highwoods Plaza I Office 1,552 — 307 9,857 1,859 9,857 11,716 5,431 1996 5-40 yrs. Highwoods Plaza II Office 1,448 — 307 10,062 1,755 10,062 11,817 5,449 1997 5-40 yrs. Seven Springs I Office 2,076 — 592 13,612 2,668 13,612 16,280 6,419 2002 5-40 yrs. SouthPointe Office 1,655 — 310 9,410 1,965 9,410 11,375 4,582 1998 5-40 yrs. Ramparts Office 2,394 12,806 — 10,834 2,394 23,640 26,034 9,660 1986 5-40 yrs. Westwood South Office 2,106 — 382 12,337 2,488 12,337 14,825 6,893 1999 5-40 yrs. 100 Winners Circle Office 1,497 7,258 — 2,729 1,497 9,987 11,484 5,293 1987 5-40 yrs. The Pinnacle at Symphony Place Office 91,318 — 141,469 — 6,535 — 148,004 148,004 42,086 2010 5-40 yrs. Seven Springs East (LifePoint) Office 2,525 37,587 — 281 2,525 37,868 40,393 9,716 2013 5-40 yrs. The Shops at Seven Springs Office 803 8,223 — 404 803 8,627 9,430 2,855 2013 5-40 yrs. Seven Springs West Office 2,439 51,306 — 2,034 2,439 53,340 55,779 9,777 2016 5-40 yrs. Seven Springs II Office 2,356 30,048 — 3,033 2,356 33,081 35,437 5,376 2017 5-40 yrs. Bridgestone Tower Office 19,223 169,582 — 309 19,223 169,891 189,114 21,278 2017 5-40 yrs. Virginia Springs II Office 4,821 26,448 — — 4,821 26,448 31,269 720 2020 5-40 yrs. MARS Campus Office 7,010 87,474 — 99 7,010 87,573 94,583 8,787 2019 5-40 yrs. 5501 Virginia Way Office 4,534 25,632 — 274 4,534 25,906 30,440 2,760 2018 5-40 yrs. 1100 Broadway - Land Office 29,845 — ( 200 ) — 29,645 — 29,645 — N/A N/A Asurion Office — — 33,219 230,569 33,219 230,569 263,788 2,089 2021 5-40 yrs. Ovation - Land Office 31,063 — 58,168 — 89,231 — 89,231 — N/A N/A 106 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 Life on Which Depreciation is Calculated Description Property Type 2021 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Broadway Stem - Land Office 6,218 — — 526 6,218 526 6,744 4 N/A 5-40 yrs. YMCA Site - land Office — — 16,121 — 16,121 — 16,121 — N/A N/A Orlando, FL Capital Plaza Three - Land Office 2,994 — 18 — 3,012 — 3,012 — N/A N/A The 1800 Eller Drive Building Office — 9,851 — 3,092 — 12,943 12,943 8,809 1983 5-40 yrs. Seaside Plaza Office 3,893 29,541 — 12,311 3,893 41,852 45,745 10,684 1982 5-40 yrs. Capital Plaza Two Office 4,346 43,394 — 8,482 4,346 51,876 56,222 12,421 1999 5-40 yrs. Capital Plaza One Office 3,482 27,321 — 8,988 3,482 36,309 39,791 8,932 1975 5-40 yrs. Landmark Center Two Office 4,743 22,031 — 9,656 4,743 31,687 36,430 9,074 1985 5-40 yrs. Landmark Center One Office 6,207 22,655 — 10,604 6,207 33,259 39,466 8,449 1983 5-40 yrs. 300 South Orange Office 3,490 56,079 — 7,980 3,490 64,059 67,549 12,732 2000 5-40 yrs. Eola Centre Office 5,785 11,160 — 14,473 5,785 25,633 31,418 4,301 1969 5-40 yrs. Pittsburgh, PA One PPG Place Office 9,819 107,643 — 51,888 9,819 159,531 169,350 50,381 1983-1985 5-40 yrs. Two PPG Place Office 2,302 10,978 — 12,103 2,302 23,081 25,383 6,258 1983-1985 5-40 yrs. Three PPG Place Office 501 2,923 — 4,736 501 7,659 8,160 3,174 1983-1985 5-40 yrs. Four PPG Place Office 620 3,239 — 3,477 620 6,716 7,336 2,204 1983-1985 5-40 yrs. Five PPG Place Office 803 4,924 — 2,577 803 7,501 8,304 2,171 1983-1985 5-40 yrs. Six PPG Place Office 3,353 25,602 — 17,141 3,353 42,743 46,096 13,387 1983-1985 5-40 yrs. EQT Plaza Office 16,457 83,812 — 17,574 16,457 101,386 117,843 29,851 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 — 6,121 — 17,115 17,115 9,386 1986 5-40 yrs. 3737 Glenwood Avenue Office — — 318 17,213 318 17,213 17,531 9,183 1999 5-40 yrs. 4800 North Park Office 2,678 17,630 — 7,396 2,678 25,026 27,704 14,800 1985 5-40 yrs. 5000 North Park Office 1,010 4,612 ( 49 ) 3,231 961 7,843 8,804 4,394 1980 5-40 yrs. 801 Raleigh Corporate Center Office 828 — 272 11,686 1,100 11,686 12,786 5,135 2002 5-40 yrs. 2500 Blue Ridge Road Office 722 4,606 — 1,428 722 6,034 6,756 4,013 1982 5-40 yrs. 2418 Blue Ridge Road Office 462 1,410 — 2,869 462 4,279 4,741 1,881 1988 5-40 yrs. 2000 CentreGreen Office 1,529 — ( 391 ) 13,299 1,138 13,299 14,437 5,027 2000 5-40 yrs. 4000 CentreGreen Office 1,653 — ( 389 ) 11,270 1,264 11,270 12,534 4,959 2001 5-40 yrs. 5000 CentreGreen Office 1,291 34,572 — 2,963 1,291 37,535 38,826 6,789 2017 5-40 yrs. 3000 CentreGreen Office 1,779 — ( 397 ) 14,714 1,382 14,714 16,096 5,302 2002 5-40 yrs. 1000 CentreGreen Office 1,280 — 55 13,969 1,335 13,969 15,304 4,252 2008 5-40 yrs. GlenLake - Land Office 13,003 — ( 12,382 ) 114 621 114 735 59 N/A 5-40 yrs. 107 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 Life on Which Depreciation is Calculated Description Property Type 2021 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction GlenLake One Office 924 — 1,324 23,185 2,248 23,185 25,433 10,795 2002 5-40 yrs. GlenLake Four Office 1,659 — 493 20,527 2,152 20,527 22,679 7,671 2006 5-40 yrs. GlenLake Six Office 941 — ( 365 ) 20,058 576 20,058 20,634 6,887 2008 5-40 yrs. 701 Raleigh Corporate Center Office 1,304 — 540 18,440 1,844 18,440 20,284 9,149 1996 5-40 yrs. Highwoods Centre Office 531 — ( 267 ) 8,028 264 8,028 8,292 4,555 1998 5-40 yrs. Inveresk Parcel 2 - Land Office 657 — 38 103 695 103 798 16 N/A 5-40 yrs. 4201 Lake Boone Trail Office 1,450 6,311 — 916 1,450 7,227 8,677 2,254 1998 5-40 yrs. 4620 Creekstone Drive Office 149 — 107 3,395 256 3,395 3,651 1,623 2001 5-40 yrs. 4825 Creekstone Drive Office 398 — 293 10,670 691 10,670 11,361 5,653 1999 5-40 yrs. 751 Corporate Center Office 2,665 16,939 — ( 50 ) 2,665 16,889 19,554 2,564 2018 5-40 yrs. PNC Plaza Office 1,206 — — 70,872 1,206 70,872 72,078 27,086 2008 5-40 yrs. 4301 Lake Boone Trail Office 878 3,730 — 2,524 878 6,254 7,132 4,220 1990 5-40 yrs. 4207 Lake Boone Trail Office 362 1,818 — 1,448 362 3,266 3,628 2,299 1993 5-40 yrs. 2301 Rexwoods Drive Office 919 2,816 — 1,633 919 4,449 5,368 2,964 1992 5-40 yrs. 4325 Lake Boone Trail Office 586 — — 4,842 586 4,842 5,428 3,050 1995 5-40 yrs. 2300 Rexwoods Drive Office 1,301 — 184 8,863 1,485 8,863 10,348 3,405 1998 5-40 yrs. 4709 Creekstone Drive Office 469 4,038 23 5,434 492 9,472 9,964 3,415 1987 5-40 yrs. 4700 Six Forks Road Office 666 2,665 — 1,803 666 4,468 5,134 2,420 1982 5-40 yrs. 4700 Homewood Court Office 1,086 4,533 — 1,870 1,086 6,403 7,489 3,887 1983 5-40 yrs. 4800 Six Forks Road Office 862 4,411 — 3,338 862 7,749 8,611 4,703 1987 5-40 yrs. 4601 Creekstone Drive Office 255 — 217 5,771 472 5,771 6,243 3,334 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 6,016 726 6,016 6,742 3,632 1995 5-40 yrs. 11000 Weston Parkway Office 2,651 18,850 — 14,540 2,651 33,390 36,041 7,842 1998 5-40 yrs. GlenLake Five Office 2,263 30,264 — 3,694 2,263 33,958 36,221 10,197 2014 5-40 yrs. 11800 Weston Parkway Office 826 13,188 — 18 826 13,206 14,032 3,345 2014 5-40 yrs. CentreGreen Café Office 41 3,509 — ( 2 ) 41 3,507 3,548 621 2014 5-40 yrs. CentreGreen Fitness Center Office 27 2,322 — ( 1 ) 27 2,321 2,348 411 2014 5-40 yrs. One City Plaza Office 11,288 68,375 — 26,283 11,288 94,658 105,946 24,562 1986 5-40 yrs. Edison - Land Office 5,984 — 2,031 — 8,015 — 8,015 — N/A N/A Charter Square Office 7,267 65,881 — 4,464 7,267 70,345 77,612 11,979 2015 5-40 yrs. MetLife Global Technology Campus Office 21,580 149,889 — 41 21,580 149,930 171,510 24,164 2015 5-40 yrs. GlenLake Seven Office 1,662 37,332 — — 1,662 37,332 38,994 1,624 2020 5-40 yrs. Hargett - Land Office 9,248 — — — 9,248 — 9,248 — N/A N/A Forum I Office — — 1,278 27,809 1,278 27,809 29,087 1,197 1985 5-40 yrs. 108 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 Life on Which Depreciation is Calculated Description Property Type 2021 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Forum II Office — — 1,327 18,088 1,327 18,088 19,415 758 1988 5-40 yrs. Forum III Office — — 994 23,931 994 23,931 24,925 1,001 1995 5-40 yrs. Forum IV Office — — 2,118 43,889 2,118 43,889 46,007 1,590 2000 5-40 yrs. Forum V Office — — 1,552 26,263 1,552 26,263 27,815 1,190 2007 5-40 yrs. Captrust Tower Office 84,972 — — 9,670 124,530 9,670 124,530 134,200 1,673 2010 5-40 yrs. 150 Fayetteville Office 115,731 — — 7,677 130,049 7,677 130,049 137,726 2,185 1991 5-40 yrs. Other Property Other 27,260 20,868 ( 13,177 ) 31,819 14,083 52,687 66,770 28,878 N/A 5-40 yrs. Richmond, VA 4900 Cox Road Office 1,324 5,311 15 3,930 1,339 9,241 10,580 5,815 1991 5-40 yrs. Colonnade Building Office 1,364 6,105 — 2,479 1,364 8,584 9,948 3,997 2003 5-40 yrs. Dominion Place - Pitts Parcel - Land Office 1,101 — ( 465 ) — 636 — 636 — N/A N/A Markel 4521 Office 1,581 13,299 168 ( 397 ) 1,749 12,902 14,651 6,641 1999 5-40 yrs. Highwoods Commons Office 521 — 458 4,581 979 4,581 5,560 2,342 1999 5-40 yrs. Highwoods One Office 1,688 — 22 14,252 1,710 14,252 15,962 7,762 1996 5-40 yrs. Highwoods Two Office 786 — 226 10,483 1,012 10,483 11,495 4,504 1997 5-40 yrs. Highwoods Five Office 783 — 11 8,177 794 8,177 8,971 4,130 1998 5-40 yrs. Highwoods Plaza Office 909 — 187 5,880 1,096 5,880 6,976 2,885 2000 5-40 yrs. Innslake Center Office 845 — 125 7,735 970 7,735 8,705 3,566 2001 5-40 yrs. Highwoods Centre Office 1,205 4,825 — 2,795 1,205 7,620 8,825 3,789 1990 5-40 yrs. Markel 4501 Office 1,300 13,259 213 ( 3,295 ) 1,513 9,964 11,477 4,389 1998 5-40 yrs. 4600 Cox Road Office 1,700 17,081 169 ( 3,432 ) 1,869 13,649 15,518 6,007 1989 5-40 yrs. North Park Office 2,163 8,659 6 3,436 2,169 12,095 14,264 6,708 1989 5-40 yrs. North Shore Commons I Office 951 — 137 12,972 1,088 12,972 14,060 6,435 2002 5-40 yrs. North Shore Commons II Office 2,067 — ( 89 ) 11,526 1,978 11,526 13,504 4,036 2007 5-40 yrs. North Shore Commons C - Land Office 1,497 — 55 10 1,552 10 1,562 1 N/A N/A North Shore Commons D - Land Office 1,261 — — — 1,261 — 1,261 — N/A N/A One Shockoe Plaza Office — — 356 21,632 356 21,632 21,988 11,239 1996 5-40 yrs. Pavilion - Land Office 181 46 ( 181 ) ( 46 ) — — — — N/A N/A Lake Brook Commons Office 1,600 8,864 21 3,018 1,621 11,882 13,503 6,082 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 12,337 2,276 12,337 14,613 4,797 2005 5-40 yrs. Stony Point I Office 1,384 11,630 ( 267 ) 4,472 1,117 16,102 17,219 8,937 1990 5-40 yrs. Stony Point II Office 1,240 — 103 13,949 1,343 13,949 15,292 6,983 1999 5-40 yrs. Stony Point III Office 995 — — 11,166 995 11,166 12,161 5,785 2002 5-40 yrs. Stony Point IV Office 955 — — 11,955 955 11,955 12,910 4,860 2006 5-40 yrs. 109 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 Life on Which Depreciation is Calculated Description Property Type 2021 Encumbrance Land Bldg & Improv Land Bldg & Improv Land Bldg & Improv Total Assets (1) Accumulated Depreciation Date of Construction Virginia Mutual Office 1,301 6,036 15 2,598 1,316 8,634 9,950 3,865 1996 5-40 yrs. Innsbrook Centre Office 914 8,249 — 896 914 9,145 10,059 4,279 1987 5-40 yrs. Elks Pass Lane - Land Office 3,326 — 141 — 3,467 — 3,467 — N/A N/A Tampa, FL Meridian Three Office 2,673 16,470 — 6,510 2,673 22,980 25,653 8,097 1989 5-40 yrs. Bayshore Place Office 2,276 11,817 — 3,575 2,276 15,392 17,668 7,730 1990 5-40 yrs. 5525 Gray Street Office 4,054 — 406 25,163 4,460 25,163 29,623 9,273 2005 5-40 yrs. Highwoods Bay Center I Office 3,565 — ( 64 ) 38,144 3,501 38,144 41,645 14,054 2007 5-40 yrs. Horizon Office — 6,257 — 4,475 — 10,732 10,732 5,419 1980 5-40 yrs. LakePointe One Office 2,106 89 — 41,965 2,106 42,054 44,160 24,503 1986 5-40 yrs. LakePointe Two Office 2,000 15,848 672 15,394 2,672 31,242 33,914 17,421 1999 5-40 yrs. Lakeside Office — 7,369 — 7,160 — 14,529 14,529 7,722 1978 5-40 yrs. Lakeside/Parkside Garage Office — — — 5,731 — 5,731 5,731 2,702 2004 5-40 yrs. One Harbour Place Office 2,016 25,252 — 16,815 2,016 42,067 44,083 19,922 1985 5-40 yrs. Parkside Office — 9,407 — 3,417 — 12,824 12,824 6,566 1979 5-40 yrs. Pavilion Office — 16,394 — 5,793 — 22,187 22,187 13,108 1982 5-40 yrs. Pavilion Parking Garage Office — — — 5,911 — 5,911 5,911 3,192 1999 5-40 yrs. Spectrum Office 1,454 14,502 — 5,112 1,454 19,614 21,068 10,788 1984 5-40 yrs. Tower Place Office 3,218 19,898 — 8,630 3,218 28,528 31,746 14,728 1988 5-40 yrs. Westshore Square Office 1,126 5,186 — 1,738 1,126 6,924 8,050 3,925 1976 5-40 yrs. Independence Park - Land Office 4,943 — 5,058 2,227 10,001 2,227 12,228 269 N/A 5-40 yrs. Independence One Office 2,531 4,526 — 5,813 2,531 10,339 12,870 5,718 1983 5-40 yrs. Meridian One Office 1,849 22,363 — 3,314 1,849 25,677 27,526 6,611 1984 5-40 yrs. Meridian Two Office 1,302 19,588 — 5,470 1,302 25,058 26,360 6,826 1986 5-40 yrs. 5332 Avion Park Drive Office — — 6,310 39,620 6,310 39,620 45,930 5,378 2016 5-40 yrs. Truist Place Office 1,980 102,138 — 25,702 1,980 127,840 129,820 24,605 1992 5-40 yrs. Truist Place - Land Office 2,225 — — — 2,225 — 2,225 — N/A N/A Midtown Office — — 16,543 34,818 16,543 34,818 51,361 533 2021 5-40 yrs. $ 602,096 $ 3,235,692 $ 165,871 $ 2,482,477 $ 767,967 $ 5,718,169 $ 6,486,136 $ 1,457,511 __________ (1) The cost basis for income tax purposes of aggregate land and buildings and tenant improvements as of December 31, 2021 is $ 6.0 billion. 110 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 8, 2022. 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 8, 2022 Carlos E. Evans /s/ Theodore J. Klinck President, Chief Executive Officer and Director February 8, 2022 Theodore J. Klinck /s/ Charles A. Anderson Director February 8, 2022 Charles A. Anderson /s/ Gene H. Anderson Director February 8, 2022 Gene H. Anderson /s/ Thomas P. Anderson Director February 8, 2022 Thomas P. Anderson /s/ David L. Gadis Director February 8, 2022 David L. Gadis /s/ David J. Hartzell Director February 8, 2022 David J. Hartzell /s/ Sherry A. Kellett Director February 8, 2022 Sherry A. Kellett /s/ Anne H. Lloyd Director February 8, 2022 Anne H. Lloyd /s/ Brendan C. Maiorana Executive Vice President and Chief Financial Officer February 8, 2022 Brendan C. Maiorana /s/ Daniel L. Clemmens Vice President and Chief Accounting Officer February 8, 2022 Daniel L. Clemmens 111 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 8, 2022. 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 8, 2022 Carlos E. Evans /s/ Theodore J. Klinck President, Chief Executive Officer and Director of the General Partner February 8, 2022 Theodore J. Klinck /s/ Charles A. Anderson Director of the General Partner February 8, 2022 Charles A. Anderson /s/ Gene H. Anderson Director of the General Partner February 8, 2022 Gene H. Anderson /s/ Thomas P. Anderson Director of the General Partner February 8, 2022 Thomas P. Anderson /s/ David L. Gadis Director of the General Partner February 8, 2022 David L. Gadis /s/ David J. Hartzell Director of the General Partner February 8, 2022 David J. Hartzell /s/ Sherry A. Kellett Director of the General Partner February 8, 2022 Sherry A. Kellett /s/ Anne H. Lloyd Director of the General Partner February 8, 2022 Anne H. Lloyd /s/ Brendan C. Maiorana Executive Vice President and Chief Financial Officer of the General Partner February 8, 2022 Brendan C. Maiorana /s/ Daniel L. Clemmens Vice President and Chief Accounting Officer of the General Partner February 8, 2022 Daniel L. Clemmens 112