What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-06 compared with 2023-02-07 · 113 added, 122 removed, 334 unchanged (41% of the section changed)

27 unchanged sentences

We are in the work-placemaking business.

We believe that in creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stockholders.

We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders.

Our simple strategy is to own and operate high-quality workplaces in the BBDs within our footprint, maintain a strong balance sheet to be opportunistic throughout economic cycles, employ a talented and dedicated team and

16 unchanged sentences

Properties - Lease Expirations.” See also “Item 1A.

Risk Factors – Risks Related to our Operations – Potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, could materially and negatively impact the future demand for office space over the long-term.”

Occupancy in our office portfolio decreased from 91.2% as of December 31, 2021 to 91.0% as of December 31, 2022.

We expect average occupancy for our office portfolio to be approximately 89.0% to 90.0% for 2023.

Risk Factors – Risks Related to our Operations.

The continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements could materially and negatively impact the future demand for office space over the long-term.”

Occupancy in our office portfolio decreased from 91.0% as of December 31, 2022 to 88.8% (88.9% including our share of unconsolidated joint venture properties) as of December 31, 2023.

We expect average occupancy in our office portfolio to range from 87.0% to 89.0% for 2024.

Whether or not our rental revenue tracks average occupancy proportionally depends upon whether GAAP rents under signed new and renewal leases are higher or lower than the GAAP rents under expiring leases.

27 unchanged sentences

Whether or not we record increasing net operating income (“NOI”) in our same property portfolio typically depends upon our ability to garner higher rental revenues, whether from higher average occupancy, higher GAAP rents per rentable square foot or higher cost recovery income, that exceed any corresponding growth in operating expenses.

Same property NOI was $4.0 million, or 0.9%, higher in 2022 as compared to 2021 due to an increase of $21.8 million in same property revenues offset by an increase of $17.8 million in same property expenses.

We expect same property NOI to be lower in 2023 as compared to 2022 as an anticipated increase in same property expenses is expected to more than offset higher anticipated same property revenues.

We expect same property revenues to be higher due to higher average GAAP rents per rentable square foot and higher cost recovery and parking income, partially offset by an anticipated decrease in average occupancy.

In addition to the effect of same property NOI, whether or not NOI increases typically depends upon whether the NOI from our acquired properties and development properties placed in service exceeds the NOI from property dispositions.

NOI was $37.6 million, or 7.1%, higher in 2022 as compared to 2021 primarily due to development properties placed in service, the acquisition of real estate assets from Preferred Apartment Communities, Inc.

(“PAC”) in the third quarter of 2021, the acquisition of SIX50 at Legacy Union in the third quarter of 2022 and higher same property NOI, partially offset by NOI lost from property dispositions.

We expect 2023 NOI to be similar to 2022 as increases from development properties placed in service and the acquisition of SIX50 at Legacy Union are expected to be offset by NOI lost from property dispositions and an anticipated decrease in same property NOI.

Same property NOI was $6.5 million, or 1.2%, lower in 2023 as compared to 2022 due to an increase of $12.7 million in same property expenses offset by an increase of $6.2 million in same property revenues.

We expect same property NOI to be lower in 2024 as compared to 2023 as an anticipated increase in same property expenses and lower anticipated average occupancy are expected to more than offset higher anticipated same property revenues.

We expect same property rental property and other expenses to be higher due to anticipated increases to contract services, property taxes and property insurance.

NOI was $3.9 million, or 0.7%, lower in 2023 as compared to 2022 primarily due to lower same property NOI, lost NOI from property dispositions and the deconsolidation of our Highwoods-Markel Associates, LLC joint venture (“Markel”), partially offset by the acquisition of SIX50 at Legacy Union and development properties placed in service.

We expect NOI to be lower in 2024 as compared to 2023 due to lost NOI from property dispositions and an anticipated decrease in same property NOI, partially offset by development properties placed in service.

In calculating net cash related to operating activities, depreciation and amortization, which are non-cash expenses, are added back to net income.

10 unchanged sentences

We continue to maintain a conservative and flexible balance sheet and believe we have ample liquidity to fund our operations and growth prospects.

As of January 27, 2023, we had approximately $25 million of existing cash and $392.0 million drawn on our $750 million revolving credit facility, which is scheduled to mature in March 2026, assuming we exercise our option to extend the maturity date for two additional six-month periods.

As of January 26, 2024, we had approximately $15 million of existing cash and $36.0 million drawn on our $750 million revolving credit facility, which was modified in January 2024 and is now scheduled to mature in January 2028 (but which can be extended for two additional six-month periods at our option).

As of December 31, 2023, our leverage ratio, as measured by the ratio of our mortgages and notes payable and outstanding preferred stock to the undepreciated book value of our assets, was 41.9% and there were 107.9 million diluted shares of Common Stock outstanding.

Rental and other revenues are our principal source of funds to meet our short-term liquidity requirements.

Other sources of funds for short-term liquidity needs include available working capital and borrowings under our revolving credit facility, which had $357.9 million of availability as of January 27, 2023.

Other sources of funds for short-term liquidity needs include available working capital and borrowings under our revolving credit facility.

Our short-term liquidity requirements primarily consist of operating expenses, interest and principal amortization on our debt, distributions and capital expenditures, including building improvement costs, tenant improvement costs and lease commissions.

15 unchanged sentences

• the disposition of non-core assets.

We have no debt scheduled to mature prior to 2026 other than our recently obtained $200.0 million, two-year unsecured bank term loan that is scheduled to mature in October 2025, assuming we exercise our option to extend the maturity date for one additional year.

We generally believe we will be able to satisfy these obligations with existing cash, borrowings under our revolving credit facility, new bank term loans, issuance of other unsecured debt, mortgage debt and/or proceeds from the sale of additional non-core assets.

We have no debt scheduled to mature prior to 2026.

We generally believe we will be able to satisfy future obligations with existing cash, borrowings under our revolving credit facility, new bank term loans, issuance of other unsecured debt, mortgage debt and/or proceeds from the sale of additional non-core assets.

Investment Activity

1 unchanged sentence

We generally seek to acquire and develop office buildings that improve the average quality of our overall portfolio and deliver consistent and sustainable value for our stockholders over the long-term.

not an asset acquisition or new development results in higher per share net income or funds from operations (“FFO”) in any given period depends upon a number of factors, including whether the NOI for any such period exceeds the actual cost of capital used to finance the acquisition or development.

Additionally, given the length of construction cycles, development projects are not placed in service until several years after commencement in some cases.

Whether or not an asset acquisition or new development results in higher per share net income or funds from operations (“FFO”) in any given period depends upon a number of factors, including whether the NOI for any such period exceeds the actual cost of capital used to finance the acquisition or development.

Additionally, given the length of construction cycles, development

projects are not placed in service until several years after commencement in some cases.

Sales of non-core assets could result in lower per share net income or FFO in any given period in the event the return on the resulting use of proceeds does not exceed the capitalization rate on the sold properties.

During the third quarter of 2022, we entered the Dallas market through the formation of two joint ventures with Granite Properties (“Granite”) to develop Granite Park Six, a multi-customer office development comprising 422,000 square feet in the vibrant Frisco/Plano BBD, and 23Springs, a mixed-use development encompassing 626,000 square feet of multi-customer office and 16,000 square feet of retail in the heart of the dynamic Uptown Dallas BBD.

We own a 50% interest in each of the joint ventures.

Properties – In-Process Development.” During the fourth quarter of 2022, we expanded our Dallas market presence by acquiring McKinney & Olive, a 542,000 square foot trophy mixed-use asset in Uptown Dallas, through the formation of another joint venture with Granite in which we own a 50.0% interest.

See “Liquidity and Capital Resources – Investment Activity.”

We plan to fund our entry into the Dallas market over the long-term by exiting the Pittsburgh market.

Our Pittsburgh assets, which consist of 2,155,000 square feet of office that was 90.9% occupied as of December 31, 2022, represent approximately 6% of our overall net operating income.

We can provide no assurances, however, that we will dispose of any of our assets in Pittsburgh on favorable terms, or at all, because the dispositions are subject to the negotiation and execution of definitive and binding purchase and sale agreements and would then be subject to the buyers’ completion of satisfactory due diligence and other customary closing conditions.

There is no pre-determined timetable for our Pittsburgh market exit.

Results of Operations

Deconsolidation of Markel

Markel is a joint venture in which we own a 50.0% interest that was consolidated as of December 31, 2022 because we controlled the major operating and financial policies of the entity.

Effective January 1, 2023, the agreement governing the joint venture was modified to require the consent of both partners for major operating and financial policies of the entity.

As a result, Markel was deconsolidated effective January 1, 2023, and this joint venture is now accounted for using the equity method of accounting.

Comparison of 2023 to 2022

Rental and Other Revenues

Rental and other revenues were $60.9 million, or 7.9%, higher in 2022 as compared to 2021 primarily due to the acquisitions of real estate assets from PAC and SIX50 at Legacy Union, development properties placed in service and higher same property revenues, which increased rental and other revenues by $42.8 million, $25.8 million and $21.8 million, respectively.

Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot, higher average occupancy and higher cost recoveries, parking income and termination fees, partially offset by higher credit losses.

These increases were partially offset by lost revenue of $31.3 million from property dispositions.

We expect rental and other revenues to be higher in 2023 as compared to 2022 due to the acquisition of SIX50 at Legacy Union, higher same property revenues and development properties placed in service, partially offset by lost revenue from property dispositions.

Rental and other revenues were $5.1 million, or 0.6%, higher in 2023 as compared to 2022 primarily due to the acquisition of SIX50 at Legacy Union, higher same property revenues and development properties placed in service, which increased rental and other revenues by $8.7 million, $6.2 million and $5.2 million, respectively.

Same property rental and other revenues were higher primarily due to higher average GAAP rents per rentable square foot and higher cost recovery and parking income, partially offset by a decrease in average occupancy.

These increases were partially offset by lost revenue from property dispositions and the deconsolidation of our Markel joint venture, which decreased rental and other revenues by $7.8 million and $5.8 million, respectively.

We expect rental and other revenues to be lower in 2024 as compared to 2023 due to lower anticipated average occupancy and lost revenue from property dispositions, partially offset by development properties placed in service.

Operating Expenses

Rental property and other expenses were $23.4 million, or 9.9%, higher in 2022 as compared to 2021 primarily due to higher same property operating expenses, the acquisitions of real estate assets from PAC and SIX50 at Legacy Union and development properties placed in service, which increased operating expenses by $17.8 million, $11.7 million and $3.9 million, respectively.

Same property operating expenses were higher primarily due to higher contract services, utilities, property taxes, property insurance and repairs and maintenance.

These increases were partially offset by a $11.3 million decrease in operating expenses from property dispositions.

We expect rental property and other expenses to be higher in 2023 as compared to 2022 due to higher same property operating expenses, the acquisition of SIX50 at Legacy Union and development properties placed in service, partially offset by lower operating expenses from property dispositions.

Depreciation and amortization was $28.4 million, or 10.9%, higher in 2022 as compared to 2021 primarily due to the acquisitions of real estate assets from PAC and SIX50 at Legacy Union, development properties placed in service and higher same property lease related depreciation and amortization, partially offset by fully amortized acquisition-related intangible assets and property dispositions.

We expect depreciation and amortization to be higher in 2023 as compared to 2022 due to the acquisition of SIX50 at Legacy Union, higher same property lease related depreciation and amortization and development properties placed in service, partially offset by property dispositions.

We recorded impairment charges of $36.5 million in 2022 to lower the carrying amounts of EQT Plaza and a land parcel to their estimated fair value less costs to sell.

EQT Plaza is a 616,000 square foot office building located in the heart of

Pittsburgh’s CBD.

Rental property and other expenses were $9.0 million, or 3.5%, higher in 2023 as compared to 2022 primarily due to higher same property operating expenses, the acquisition of SIX50 at Legacy Union, carry costs for acquired land parcels and development properties placed in service, which increased operating expenses by $12.7 million, $1.9 million, $1.0 million and $0.8 million, respectively.

Same property operating expenses were higher primarily due to higher contract services, utilities, property insurance, property taxes and repairs and maintenance.

These increases were partially offset by decreases in operating expenses from property dispositions and the deconsolidation of our Markel joint venture, which decreased operating expenses by $2.8 million and $2.2 million, respectively.

We expect rental property and other expenses to be higher in 2024 as compared to 2023 due to higher same property operating expenses and development properties placed in service, partially offset by lower operating expenses from property dispositions.

Depreciation and amortization was $11.8 million, or 4.1%, higher in 2023 as compared to 2022 primarily due to higher same property depreciation and amortization, the acquisition of SIX50 at Legacy Union and development properties placed in service, partially offset by property dispositions and the deconsolidation of our Markel joint venture.

We expect depreciation and amortization to be higher in 2024 as compared to 2023 due to higher same property lease related depreciation and amortization and development properties placed in service, partially offset by property dispositions.

We recorded impairment charges of $36.5 million in 2022 to lower the carrying amount of EQT Plaza and a land parcel to their estimated fair value less cost to sell.

EQT Plaza is a 616,000 square foot office building located in the heart of Pittsburgh’s CBD.

EQT Corporation’s lease of 317,000 square feet at EQT Plaza is scheduled to expire in September 2024.

1 unchanged sentence

We recorded no such impairment in 2023.

General and administrative expenses were $1.7 million, or 4.2%, higher in 2022 as compared to 2021 primarily due to higher salaries, benefits and office rent, partially offset by lower incentive compensation.

We expect general and administrative expenses to be lower in 2023 as compared to 2022 due to lower incentive compensation and office rent, partially offset by higher salaries and benefits.

General and administrative expenses were $0.6 million, or 1.4%, higher in 2023 as compared to 2022 primarily due to predevelopment cost write-offs and gains on deferred compensation plan investments (which is fully offset by a corresponding increase in other income), partially offset by lower incentive compensation and office rent.

We expect general and administrative expenses to be lower in 2024 as compared to 2023 due to lower predevelopment cost write-offs, partially offset by higher salaries.

Interest Expense

Interest expense was $19.5 million, or 22.8%, higher in 2022 as compared to 2021 primarily due to higher average debt balances, higher average interest rates and lower capitalized interest.

We expect interest expense to be higher in 2023 as compared to 2022 due to higher average interest rates and higher average debt balances, partially offset by higher capitalized interest.

Other income was $0.1 million higher in 2022 as compared to 2021 primarily due to higher dividend and interest income and losses on debt extinguishment in 2021, partially offset by losses on deferred compensation plan investments (which is fully offset by a corresponding decrease in general and administrative expenses).

Interest expense was $31.3 million, or 29.7%, higher in 2023 as compared to 2022 primarily due to higher average interest rates and higher average debt balances, partially offset by higher capitalized interest.

We expect interest expense to be higher in 2024 as compared to 2023 due to higher average interest rates, higher average debt balances and lower capitalized interest.

Other income was $2.9 million higher in 2023 as compared to 2022 primarily due to dividend income from short-term preferred equity contributed to the McKinney and Olive joint venture, interest income on the loan provided to the 2827 Peachtree joint venture and gains on deferred compensation plan investments (which is fully offset by a corresponding increase in general and administrative expenses), partially offset by debt extinguishment costs.

Gains on Disposition of Property

Gains on disposition of property were $15.8 million lower in 2023 as compared to 2022.

Gain on Deconsolidation of Affiliate

We recognized a gain on deconsolidation of $11.8 million in 2023 related to adjusting our retained interest in Markel to fair value.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates was $0.4 million lower in 2022 as compared to 2021 primarily due to the acquisition of our joint venture partner’s 75.0% interest in our Highwoods DLF Forum, LLC joint venture (the “Forum”) in the first quarter of 2021 and higher property taxes.

Equity in earnings of unconsolidated affiliates was $0.4 million lower in 2023 as compared to 2022 primarily due to expenses on Granite Park Six, which was completed in the third quarter of 2023 but is not yet stabilized.

This decrease was partially offset by the deconsolidation of our Markel joint venture and the acquisition of McKinney and Olive.

Earnings Per Common Share - Diluted

10 unchanged sentences

Net Cash Provided By Operating Activities $ 386,962 $ 421,779 $ 414,558 $ (34,817) $ 7,221

Net Cash Provided By/(Used In) Investing Activities (614,799) (287,678) 110,682 (327,121) (398,360)

Net Cash Used In Investing Activities (169,686) (614,799) (287,678) 445,113 (327,121)

Net Cash Provided By/(Used In) Financing Activities (205,426) 187,927 (284,926) (393,353) 472,853

1 unchanged sentence

Comparison of 2023 to 2022

The change in net cash provided by operating activities in 2022 as compared to 2021 was primarily due to higher net cash from the operations of acquired real estate assets from PAC, the acquisition of SIX50 at Legacy Union, same properties and development properties placed in service, partially offset by property dispositions and higher interest expense.

We expect net cash related to operating activities to be lower in 2023 as compared to 2022 due to higher interest expense and property dispositions, partially offset by net cash from the operations of acquired properties and development properties placed in service.

The change in net cash used in investing activities in 2022 as compared to 2021 was primarily due to investments in the 2827 Peachtree, Granite Park Six, 23Springs and McKinney & Olive joint ventures in 2022, lower net proceeds from disposition activity in 2022 and higher investments in tenant and building improvements in 2022, partially offset by lower acquisition activity and investments in development in-process in 2022.

The change in net cash provided by operating activities in 2023 as compared to 2022 was primarily due to higher interest expense, property dispositions and changes in operating assets and liabilities, partially offset by net cash from the operations of properties acquired and development properties placed in service.

We expect net cash related to operating activities to be lower in 2024 as compared to 2023 due to higher interest expense and property dispositions, partially offset by net cash from development properties placed in service.

The change in net cash used in investing activities in 2023 as compared to 2022 was primarily due to lower investments in acquired real estate, joint ventures, tenant and building improvements, development in process and the redemption of our short-term preferred equity investment in the McKinney and Olive joint venture, partially offset by lower net proceeds from disposition activity.

We expect uses of cash for investing activities in 2024 to be primarily driven by whether or not we acquire and commence development of additional office buildings in the BBDs of our markets.

We expect these uses of cash for investing activities will be partially offset by proceeds from property dispositions in 2024.

The change in net cash provided by/(used in) financing activities in 2022 as compared to 2021 was primarily due to net debt borrowings to fund our investment activity in 2022.

The change in net cash provided by/(used in) financing activities in 2023 as compared to 2022 was primarily due to higher net debt borrowings in 2022 to fund our investment activity.

Assuming the net effect of our acquisition, disposition and development activity in 2024 results in an increase to our assets, we would expect outstanding debt and/or Common Stock balances to increase.

24 unchanged sentences

Risk Factors – Risks Related to our Investment Activity – Recent and future acquisitions and development properties may fail to perform in accordance with our expectations and may require renovation and development costs exceeding our estimates.”

During the third quarter of 2022, we acquired SIX50 at Legacy Union, a 367,000 square foot trophy office building in Charlotte’s Uptown CBD submarket, for a net purchase price of $198.0 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 the second quarter of 2022, we acquired land in Charlotte for an aggregate purchase price, including capitalized acquisition costs, of $27.0 million.

During the second quarter of 2023, we acquired land in Raleigh for a purchase price, including capitalized acquisition costs, of $2.7 million.

During 2021, we acquired development land in Nashville for a purchase price, including capitalized acq uisition costs, of $16.0 million, which was fully paid in or prior to t he second quarter of 2023.

- Dispositions

During the third quarter of 2022, we sold land in Richmond for a sales price of $23.3 million and recorded a gain on disposition of property of $9.4 million.

During the second quarter of 2022, we sold office buildings and land in Atlanta, Greensboro and Tampa for an aggregate sales price of $100.7 million (before closing credits to buyers of $1.1 million) and recorded aggregate gains on disposition of property of $50.0 million.

During the first quarter of 2022, we sold land in Tampa for a sales price of $9.6 million and recorded a gain on disposition of property of $4.1 million.

During the fourth quarter of 2023, we sold a building and land in Nashville and Tampa for an aggregate sales price of $52.5 million and recorded aggregate gains on disposition of property of $28.4 million.

During the second quarter of 2023, we sold three buildings in Tampa and Raleigh for an aggregate sales price of $51.3 million and recorded aggregate gains on disposition of property of $19.4 million.

- Seller Financed Transaction

During 2023, we sold a land parcel in Tampa for an aggregate sales price of $21.0 million.

In connection with this disposition, we received cash of $2.0 million and provided $19.0 million of non-recourse seller financing in the form of a two-year, interest-only first mortgage that bears interest at SOFR plus 100 basis points.

We have deemed repayment of the mortgage to be not probable primarily because the seller financing represents a significant portion of the aggregate sales price and, since the seller financing is non-recourse, our only remedy in the event of a default would be to foreclose on the asset.

As a result, the disposition does not meet the contract criteria to be recognized as a sale.

Until such time as the contract criteria are met, we will continue to account for the land parcel as land held for development on our Consolidated Balance Sheets, and the mortgage associated with the seller financing will not be recorded on our Consolidated Balance Sheets.

The cash received at closing is recorded as a nonrefundable deposit in accounts payable, accrued expenses and other liabilities on our Consolidated Balance Sheets as of December 31, 2023.

- Joint Venture Investments

During the third quarter of 2022, we entered the Dallas market through the formation of two joint ventures with Granite to develop Granite Park Six and 23Springs.

In connection with the formation, we agreed to contribute our 50.0% share of the equity required to fund each development project.

The Granite Park Six joint venture has an anticipated total investment of $200.0 million and the 23Springs joint venture has an anticipated total investment of $460.0 million.

As of December 31, 2022, we have fully funded our share of the equity for the Granite Park Six joint venture and we have funded $41.9 million of our share of the equity for the 23Springs joint venture.

The Granite Park Six joint venture obtained a construction loan for $115.0 million, with an interest rate of SOFR plus 394 basis points and a maturity date of January 2026.

In connection with this loan, the Granite Park Six joint venture obtained an interest rate hedge contract that effectively caps the underlying SOFR rate at 3.5% with respect to $95.2 million of any outstanding amounts.

The cap expires in July 2024.

As of December 31, 2022, $15.3 million was drawn on this loan.

The 23Springs joint venture obtained a construction loan for $265.0 million, with an interest rate of SOFR plus 355 basis points and a maturity date of March 2026.

In connection with this loan, the 23Springs joint venture obtained an interest rate

hedge contract that effectively caps the underlying SOFR rate at 3.5% with respect to $83.0 million of any outstanding amounts.

The cap expires in April 2024.

As of December 31, 2022, no amounts were drawn on this loan.

During the fourth quarter of 2022, we expanded our Dallas market presence by acquiring McKinney & Olive through the formation of another joint venture with Granite in which we own a 50% interest.

The McKinney & Olive joint venture has an anticipated total investment of $394.7 million, which includes $1.7 million of near-term building improvements and $2.0 million of transaction costs.

As part of the transaction, the McKinney & Olive joint venture assumed a secured loan recorded at fair value of $137.0 million, with a stated interest rate of 4.5% and an effective interest rate of 5.3%, that is scheduled to mature in July 2024.

The remainder of the purchase price was funded with $80.0 million of short-term preferred equity contributed by us and $86.4 million of common equity contributed by each of Granite and us.

The preferred equity contributed by us will be entitled to receive monthly distributions initially at a minimum rate of SOFR plus 350 basis points.

During the fourth quarter of 2022, we formed a joint venture with The Bromley Companies (“Bromley”) in which we own a 50% interest to construct Midtown East, a multi-customer office development project located in the mixed-use Midtown Tampa project in Tampa’s Westshore submarket.

Upon completion, the Midtown East joint venture will own 143,000 square feet of an overall 432,000 square foot tower.

The rest of Midtown East will serve as the future headquarters of Tampa Electric and Peoples Gas.

The total anticipated investment for the Midtown East joint venture’s share of the overall project is $83.0 million.

In connection with the formation, we agreed to contribute our 50% share of the equity required to fund the development project, $0.3 million of which was funded as of December 31, 2022.

We also committed to provide a $52.3 million interest-only secured construction loan to the Midtown East joint venture that is scheduled to mature on the third anniversary of completion.

The loan bears interest at SOFR plus 450 basis points.

As of December 31, 2022, no amounts were drawn on this loan.

During 2022, we expanded our Dallas market presence by acquiring McKinney & Olive, a 542,000 square foot trophy mixed-use asset in Uptown Dallas, through the formation of a joint venture with Granite Properties in which we own a 50.0% interest.

At closing, a portion of the purchase price paid by the joint venture was funded with $80.0 million of short-term preferred equity contributed by us and $86.4 million of common equity contributed by each of Granite and us.

During the second quarter of 2023, we and Granite each contributed an additional $40.0 million of common equity to the joint venture.

Such proceeds were then used by the joint venture to redeem our $80.0 million short-term preferred equity investment in full.

Prior to the redemption, we received monthly distributions on the preferred equity at a rate of SOFR plus 350 basis points.

reconsideration event did not change our initial conclusion that the McKinney & Olive joint venture is a variable interest entity of which we are not the primary beneficiary.

As such, the entity remains unconsolidated.

We own an 80.0% interest in the Midtown West joint venture, which is consolidated.

During the fourth quarter of 2023, the Midtown West joint venture obtained a $45.0 million, five-year secured mortgage loan from a third party lender, with an effective fixed rate of 7.29%.

This loan is scheduled to mature in November 2028.

The joint venture incurred $0.8 million of debt issuance costs, which will be amortized over the term of the loan.

The proceeds were used to repay the balance of a $46.3 million interest-only secured construction loan that we provided the joint venture at closing.

This reconsideration event did not change our initial conclusion that the Midtown West joint venture is a variable interest entity of which we are the primary beneficiary.

As such, the entity remains consolidated and all intercompany transactions and accounts are eliminated.

- In-Process Development

As of December 31, 2022, we were developing 1.6 million rentable square feet of office properties.

For a table summarizing our announced and in-process office developments, see “Item 2.

For a table summarizing our in-process office development activity, see “Item 2.

Properties - In-Process Development.”

Financing Activity

During 2020, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, Capital One Securities, Inc., Fifth Third Securities, Inc., Jefferies LLC, J.P.

Morgan Securities LLC, Regions Securities LLC and SunTrust Robinson Humphrey, Inc.

During the first quarter of 2023, we entered into separate equity distribution agreements with each of Wells Fargo Securities, LLC, BofA Securities, Inc., BTIG, LLC, Jefferies LLC, J.P.

Morgan Securities LLC, Regions Securities LLC, TD Securities (USA) LLC and Truist Securities, Inc.

Under the terms of the equity distribution agreements, the Company may offer and sell up to $300.0 million in aggregate gross sales price of shares of Common Stock from time to time through such firms, acting as agents of the Company or as principals.

Sales of the shares, if any, may be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices or as otherwise agreed with any of such firms (which may include block trades).

During the first quarter of 2022, the Company issued 130,011 shares of Common Stock at an average gross sales price of $46.50 per share and received net proceeds, after sales commissions, of $6.0 million.

We paid an aggregate of $0.1 million in sales commissions to Jefferies, LLC during the first quarter of 2022.

Our $750.0 million unsecured revolving credit facility is scheduled to mature in March 2025 and includes an accordion feature that currently allows for an additional $200.0 million of borrowing capacity subject to additional lender commitments.

Assuming no defaults have occurred, we have an option to extend the maturity for two additional six-month periods.

During the second quarter of 2022, in connection with the modification of our $200.0 million term loan as discussed below, the interest rate on our revolving credit facility was converted from LIBOR plus 90 basis points to SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 85 basis points, based on current credit ratings.

The annual facility fee is 20 basis points.

During 2023, there were no shares of common stock issued under these agreements.

Our $750.0 million unsecured revolving credit facility was modified in January 2024 and is now scheduled to mature in January 2028 (but can be extended for two additional six-month periods at our option assuming no defaults have occurred).

The interest rate on our newly modified revolving credit facility remains SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 85 basis points, based on current credit ratings, and the annual facility fee remains 20 basis points.

The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services.

We may be entitled to a temporary reduction in the interest rate of one basis point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.

Subject to written consent of the lenders, we may elect to amend the newly modified revolving credit facility no later than May 15, 2024 to provide that the interest rate may be adjusted upward or downward by up to 2.5 basis points subject to satisfaction of certain to-be-determined sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.

The financial and other covenants under our newly modified facility are substantially similar to our previous credit facility.

We expect to incur $7.9 million of debt issuance costs, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility.

We expect to record $0.2 million of loss on debt extinguishment.

There was $20.0 million and $36.0 million outstanding under our revolving credit facility as of December 31, 2023 and January 26, 2024, respectively.

1 unchanged sentence

As a result, the unused capacity of our revolving credit facility as of December 31, 2023 and January 26, 2024 was $729.1 million and $713.1 million, respectively.

During the second quarter of 2022, we modified our $200.0 million unsecured bank term loan to extend the maturity date from November 2022 to May 2026.

As part of this modification, we also obtained a $150.0 million delayed-draw term loan, which was drawn in its entirety in the third quarter of 2022, that is scheduled to mature in May 2027.

The interest rate, based on current credit ratings, is SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 95 basis points.

The interest rate is based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services.

We may be entitled to a temporary reduction in the interest rate of one basis point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.

We incurred $2.7 million of debt issuance costs, which are being amortized along with certain existing unamortized debt issuance costs over the remaining term of our modified term loan.

During the fourth quarter of 2022, we obtained a $200.0 million, two-year unsecured bank term loan that is scheduled to mature in October 2024.

Assuming no defaults have occurred, we have an option to extend the maturity for one additional year.

The interest rate, based on current credit ratings, is SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 95 basis points.

The interest rate is based on the higher of the publicly announced ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services.

We may be entitled to a temporary reduction in the interest rate of one basis point provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.

Additionally, we used the additional $200.0 million of borrowings, together with available cash and borrowings under our revolving credit facility, to prepay without penalty $250.0 million principal amount of 3.625% unsecured notes that were scheduled to mature in January 2023.

During the fourth quarter of 2023, the Operating Partnership issued $350.0 million aggregate principal amount of 7.65% notes due February 2034, less original issuance discount of $4.6 million.

These notes were priced to yield 7.836%.

Previously during the fourth quarter of 2023, we obtained an aggregate of $200.0 million notional amount of forward-starting swaps that effectively locked the underlying 10-year treasury rate at 4.498%.

Upon the subsequent issuance of the notes, we terminated the forward-starting swaps and paid cash upon settlement.

The unrealized loss of $0.5 million will be classified to interest expense as interest payments are made on the debt.

Underwriting fees and other expenses totaled $3.2 million and will be amortized over the term of the notes.

The net amortization of these items effectively fixes the interest rate at 7.981%.

The net proceeds from the issuance were used:

(1) to prepay, without penalty, a $200.0 million unsecured bank term loan that was scheduled to mature in October 2024 and which bore interest at SOFR plus a related spread adjustment of 10 basis points and a borrowing spread of 95 basis points;

(2) to repay amounts outstanding under our revolving credit facility;

and (3) for general corporate purposes.

We recorded $0.6 million of loss on debt extinguishment related to the term loan prepayment.

During the first quarter of 2023, we obtained a $200.0 million, five-year secured mortgage loan from a third party lender, with an effective fixed interest rate of 5.69%.

This loan is scheduled to mature in April 2028.

We incurred $1.3 million of debt issuance costs, which will be amortized over the term of the loan.

We regularly evaluate the financial condition of the financial institutions that participate in our credit facilities and as counterparties under any interest rate swap agreements using publicly available information.

15 unchanged sentences

Notes due February 2031 $ 400,000 $ 398,892 2.600 % 2.645 %

Notes due February 2034 $ 350,000 $ 345,407 7.650 % 7.836 %

(1) The effective rate included in the table above excludes the amortized impact of unrealized losses or gains associated with the termination of related forward-starting swaps, if any, and underwriting fees and other expenses.

The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios.

3 unchanged sentences

Any such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding new development activity, making opportunistic acquisitions, repurchasing our securities or paying distributions.

Off-Balance Sheet Arrangements

During the third quarter of 2022, we formed two joint ventures with Granite.

During the fourth quarter of 2022, we formed an additional joint venture with Granite and a joint venture with Bromley.

We own a 50% interest in each of these unconsolidated joint ventures.

For additional information, see “— Investment Activity – Joint Venture Investments.”

Contractual Obligations

17 unchanged sentences

(2) Consists primarily of commitments under signed leases and contracts for operating properties (excluding tenant-funded tenant improvements), contracts for development/redevelopment projects and unfunded joint venture equity contributions agreed to at formation.

Future spend for tenant improvements that can be used at the option of the customer during the remaining lease term has been included in 2023.

Tenant improvements that can be used at the option of the customer at any time during the remaining lease term have been reflected in 2024.

The timing of these lease and contractual commitments may fluctuate.

22 unchanged sentences

The Company declared and paid a cash dividend of $0.50 per share of Common Stock in each quarter of 2023.

On February 1, 2023, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 14, 2023 to stockholders of record as of February 21, 2023.

On January 31, 2024, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 12, 2024 to stockholders of record as of February 20, 2024.

Current and Future Cash Needs

2 unchanged sentences

We had $25.1 million of cash and cash equivalents as of December 31, 2023.

The unused capacity of our revolving credit facility as of December 31, 2022 and January 27, 2023, respectively, was $363.9 million and $357.9 million, excluding an accordion feature that allows for an additional $200.0 million of borrowing capacity subject to additional lender commitments.

The unused capacity of our revolving credit facility as of December 31, 2023 and January 26, 2024, respectively, was $729.1 million and $713.1 million.

We have a currently effective automatic shelf registration statement on Form S-3 with the SEC pursuant to which, at any time and from time to time, in one or more offerings on an as-needed basis, the Company may sell an indefinite amount of common stock, preferred stock and depositary shares and the Operating Partnership may sell an indefinite amount of debt securities, subject to our ability to effect offerings on satisfactory terms based on prevailing market conditions.

8 unchanged sentences

The policies used in the preparation of our Consolidated Financial Statements are described in Note 1 to our Consolidated Financial Statements.

However, certain of our significant accounting policies contain an increased level of assumptions used or estimates made in determining their impact in our Consolidated Financial Statements.

However, certain of our significant accounting policies contain an increased level of assumptions used or

estimates made in determining their impact in our Consolidated Financial Statements.

Management has reviewed and determined the appropriateness of our critical accounting policies and estimates with the audit committee of the Company’s Board of Directors.

20 unchanged sentences

Credit losses on lease related receivables, which include accounts receivable and accrued straight-line rents receivable, are recorded as a reduction to rental and other revenues when the amount recorded is determined, in management’s judgement, to not be probable of collection.

Management’s evaluation of collectability requires the exercise of considerable judgement in assessing the current credit quality of our customers using payment history and other available information about the financial

condition of the customers.

During the year ended December 31, 2023, we have not experienced significant credit losses based on management’s evaluation of collectability of our lease receivables.

2 unchanged sentences

The Company believes that FFO, FFO available for common stockholders and FFO available for common stockholders per share are beneficial to management and investors and are important indicators of the performance of any equity REIT.

Because these FFO calculations exclude such factors as depreciation, amortization and impairments of real estate assets and gains or losses from sales of operating real estate assets, which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful life estimates, they facilitate comparisons of operating performance between periods and between other REITs.

these FFO calculations exclude such factors as depreciation, amortization and impairments of real estate assets and gains or losses from sales of operating real estate assets, which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful life estimates, they facilitate comparisons of operating performance between periods and between other REITs.

Management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time.

6 unchanged sentences

• Net income/(loss) computed in accordance with GAAP;

• Less net income attributable to noncontrolling interests in consolidated affiliates;

• Less net income, or plus net loss, attributable to noncontrolling interests in consolidated affiliates;

• Plus depreciation and amortization of depreciable operating properties;

9 unchanged sentences

Net income $ 151,330 $ 163,958 $ 323,310

Net (income) attributable to noncontrolling interests in consolidated affiliates (1,230) (1,712) (1,174)

Net (income)/loss attributable to noncontrolling interests in consolidated affiliates 549 (1,230) (1,712)

Depreciation and amortization of real estate assets 296,705 284,723 256,488

1 unchanged sentence

(Gains) on disposition of depreciable properties (33,288) (47,807) (163,065)

(Gain) on deconsolidation of affiliate (11,778) — —

Unconsolidated affiliates:

13 unchanged sentences

As of December 31, 2022, our same property portfolio consisted of 148 in-service properties encompassing 24.4 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2021 to December 31, 2022).

The change in our same property portfolio was due to the addition of five properties encompassing 0.6 million rentable square feet, offset by the removal of five properties encompassing 0.4 million rentable square feet that were sold during 2022.

The change in our same property portfolio was due to the addition of seven properties encompassing 1.6 million rentable square feet, offset by the removal of four properties encompassing 0.4 million rentable square feet that were sold during 2023.

Rental and other revenues related to properties not in our same property portfolio were $28.4 million and $29.5 million for the years ended December 31, 2023 and 2022, respectively.

4 unchanged sentences

Equity in earnings of unconsolidated affiliates (1,107) (1,535)

Gain on deconsolidation of affiliate (11,778) —

Gains on disposition of property (47,773) (63,546)

Other loss (1,530) (1,394)

Other income (4,435) (1,530)

Interest expense 136,710 105,385

7 unchanged sentences

Lease termination fees, straight-line rent and other non-cash adjustments (15,232) (24,523)

(16,159) (13,851)

Same property cash net operating income $ 530,170 $ 527,373

(1) Includes $0.1 million and $3.0 million of repayments of temporary rent deferrals, net of additional temporary rent deferrals granted by the Company during the years ended December 31, 2022 and 2021, respectively.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis