What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-11 compared with 2024-02-06 · 103 added, 111 removed, 336 unchanged (39% of the section changed)

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• our markets may suffer declines in economic and/or office employment growth;

• unanticipated increases in interest rates could increase our debt service costs;

• unanticipated increases in operating expenses could negatively impact our operating results;

• increases in interest rates could increase our debt service costs;

• increases in operating expenses could negatively impact our operating results;

• natural disasters and climate change could have an adverse impact on our cash flow and operating results;

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Executive Summary

We are in the work-placemaking business.

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

communicate transparently with all stakeholders.

Our vision is to be a leader in the evolution of commercial real estate for the benefit of our customers, our communities and those who invest with us.

Our mission is to create environments and experiences that inspire our teammates and our customers to achieve more together.

We are in the work-placemaking business and believe that by creating exceptional environments and experiences, we can deliver greater value to our customers, their teammates and, in turn, our shareholders.

By creating and

operating commute-worthy places, we support the growth and success of our customers and contribute to the vitality of our communities.

We focus on owning and managing buildings in the most dynamic and vibrant BBDs.

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Providing the most talent-supportive workplace options in these environments is core to our work-placemaking strategy.

Our investment strategy is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets.

Our investment thesis is to generate attractive and sustainable returns over the long term for our stockholders by developing, acquiring and owning a portfolio of high-quality, differentiated office buildings in the BBDs of our core markets.

A core component of this strategy is to continuously strengthen the financial and operational performance, resiliency and long-term growth prospects of our existing in-service portfolio and recycle those properties that no longer meet our criteria.

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Asset acquisitions, dispositions and new developments placed in service directly impact our rental revenues and could impact our average occupancy, depending upon the occupancy rate of the properties that are acquired, sold or placed in service.

A further indicator of the predictability of future revenues is the expected lease expirations of our portfolio.

Another indicator of the predictability of future revenues is the expected lease expirations of our portfolio.

As a result, in addition to seeking to increase our average occupancy by leasing current vacant space, we also concentrate our leasing efforts on renewing existing leases prior to expiration.

For more information regarding our lease expirations, see “Item 2.

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

Properties - Lease Expirations” and “Item 1A.

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.

Occupancy in our office portfolio decreased from 88.9% as of December 31, 2023 to 87.1% as of December 31, 2024.

We expect average occupancy in our office portfolio to range from 85.0% to 86.5% for 2025.

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Annualized rental revenues from second generation leases expiring during any particular year are typically less than 15% of our total annual rental revenues.

The following table sets forth information regarding second generation office leases signed during the fourth quarter of 2023 (we define second generation office leases as leases with new customers and renewals of existing customers in office space that has been previously occupied under our ownership and leases with respect to vacant space in acquired buildings):

The following table sets forth information regarding second generation office leases signed during the fourth quarter of 2024 (we define second generation office leases as leases with new customers and renewals of existing customers in both consolidated and unconsolidated office space that has been previously occupied and leases with respect to vacant space in acquired buildings):

New Renewal All Office

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We have an internal guideline whereby customers that account for more than 3% of our revenues are periodically reviewed with the Company's Board of Directors.

December 31, 2023, only Bank of America (4.0%) and Asurion (3.5%) accounted for more than 3% of our annualized GAAP revenues.

As of December 31, 2024, only Bank of America (3.8%) and Asurion (3.5%) accounted for more than 3% of our annualized GAAP revenues.

Properties - Customers.”

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Rental property expenses are expenses associated with our ownership and operation of rental properties and include expenses that vary somewhat proportionately to occupancy and usage levels, such as janitorial services and utilities, and expenses that do not vary based on occupancy, such as property taxes and insurance.

Depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year, unless we buy, place in service or sell assets, since our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed lives.

Depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year, unless we buy, develop or sell assets, since our properties and related building and tenant improvement assets are depreciated on a straight-line basis over fixed lives.

General and administrative expenses consist primarily of management and employee salaries and benefits, corporate overhead and short and long-term incentive compensation.

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

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.

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 lost NOI from property dispositions.

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.

Consolidated same property NOI was $4.3 million, or 0.8%, lower in 2024 as compared to 2023 due to an increase of $8.3 million in same property expenses offset by an increase of $4.0 million in same property revenues.

We expect same property NOI to be lower in 2025 as compared to 2024 primarily due to lower anticipated 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 recently completed development projects exceeds the lost NOI from property dispositions.

NOI was $11.5 million, or 2.0%, lower in 2024 as compared to 2023 primarily due to lost NOI from property dispositions and lower consolidated same property NOI, partially offset by NOI from recently completed development projects in Raleigh and Charlotte.

We expect NOI to be lower in 2025 as compared to 2024 due to lost NOI from property dispositions and an anticipated decrease in same property NOI, partially offset by recently completed development projects.

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

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

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 January 31, 2025, we had approximately $34 million of existing cash and $119.0 million drawn on our $750 million revolving credit facility, which is scheduled to mature in January 2028 (but can be extended for two additional six-month periods at our option).

As of December 31, 2024, 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 42.1%, and there were 109.8 million diluted shares of Common Stock outstanding.

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Building improvements are capital costs to maintain or enhance existing buildings not typically related to a specific customer.

Tenant improvements are the costs required to customize space for the specific needs of customers.

Tenant improvements are the costs required to customize space for our customers' specific needs.

We anticipate that our available cash and cash equivalents and cash provided by operating activities and planned financing activities, including borrowings under our revolving credit facility, will be adequate to meet our short-term liquidity requirements.

We use our revolving credit facility for working capital purposes and for the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt.

Continued ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.

We use our revolving credit facility for working capital purposes, the short-term funding of our development and acquisition activity and, in certain instances, the repayment of other debt.

The continued ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates.

We generally believe existing cash and rental and other revenues will continue to be sufficient to fund short-term liquidity needs such as funding operating and general and administrative expenses, paying interest expense, maintaining our existing quarterly dividend and funding existing portfolio capital expenditures, including building improvement costs, tenant improvement costs and lease commissions.

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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 2024 to 2023

Rental and Other Revenues

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.

Rental and other revenues were $8.1 million, or 1.0%, lower in 2024 as compared to 2023 primarily due to lost revenue from property dispositions in Raleigh, which decreased rental and other revenues by $14.4 million.

This decrease was partially offset by higher consolidated same property revenues and recently completed development projects in Raleigh and Charlotte, which increased rental and other revenues by $4.0 million and $3.1 million, respectively.

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

We expect rental and other revenues to be lower in 2025 as compared to 2024 due to lower anticipated average occupancy and lost revenue from property dispositions, partially offset by recently completed development projects in Raleigh and Charlotte.

Operating Expenses

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.

There are no assurances that EQT Corporation will renew all or any of its space upon expiration of its current lease.

Rental property and other expenses were $3.4 million, or 1.3%, higher in 2024 as compared to 2023 primarily due to $8.3 million of higher consolidated same property operating expenses, partially offset by a $4.6 million decrease in operating expenses from property dispositions in Raleigh.

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

We expect operating expenses to be lower in 2025 as compared to 2024 primarily due to property dispositions.

Depreciation and amortization expense was $0.4 million, or 0.1%, lower in 2024 as compared to 2023 primarily due to property dispositions in Raleigh and fully amortized acquisition-related intangible assets.

These decreases were partially offset by accelerated depreciation and amortization of tenant improvements and deferred leasing costs associated with the cancellation of a lease with a backfill customer for 110,000 square feet in the former Tivity building in Nashville that was originally scheduled to commence in the third quarter of 2024 and recently completed development projects in Raleigh and Charlotte.

We expect depreciation and amortization to be lower in 2025 as compared to 2024 due to property dispositions, fully amortized acquisition-related intangible assets and the accelerated costs relating to the Nashville lease cancellation in 2024.

In 2024, we recorded an impairment charge of $24.6 million to lower the carrying amount of EQT Plaza in Pittsburgh to its estimated fair value.

EQT Plaza is a 616,000 square foot non-core office building located in Pittsburgh’s CBD.

We recorded no such impairment in 2023.

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.

General and administrative expenses were $1.0 million, or 2.2%, lower in 2024 as compared to 2023, primarily due to lower predevelopment cost write-offs, partially offset by higher incentive compensation.

We expect general and administrative expenses to be lower in 2025 as compared to 2024 due to lower predevelopment cost write-offs, partially offset by higher salaries and benefits.

Interest Expense

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.

Interest expense was $10.5 million, or 7.7%, higher in 2024 as compared to 2023 primarily due to higher average interest rates and higher average debt balances.

We expect interest expense to be lower in 2025 as compared to 2024 due to lower average interest rates and lower average debt balances, partially offset by lower capitalized interest.

Other income was $7.9 million higher in 2024 as compared to 2023 primarily due to a refund of $5.8 million in the aggregate of Tennessee franchise taxes paid for the 2020 through 2023 tax years.

During the second quarter of 2024, the State of Tennessee modified the methodology for calculating franchise taxes.

The modification lowers our annual franchise tax obligation and was allowed to be applied retrospectively back to 2020.

We also earned higher interest income from seller financing and loans provided to the 2827 Peachtree and Midtown East joint ventures.

Gains on Disposition of Property

Gains on disposition of property were $1.0 million lower in 2024 as compared to 2023.

The gains during 2024 related to building dispositions in Raleigh and a land disposition in Greensboro, while the gains during 2023 related to building dispositions in Nashville, Tampa and Raleigh and a land disposition in Nashville.

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.

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

We recorded no such gain on deconsolidation in 2024.

Equity in Earnings of Unconsolidated Affiliates

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.

Equity in earnings of unconsolidated affiliates was $3.1 million higher in 2024 as compared to 2023 primarily due to lower interest expense from our McKinney and Olive joint venture due to the payoff of a mortgage loan in the third quarter of 2024, higher income from our 2827 Peachtree joint venture, which was completed in the third quarter of 2023, and predevelopment cost write-offs on our Markel joint venture in 2023.

These increases were partially offset by a higher net loss from our Granite Park Six joint venture, which was completed in the third quarter of 2023 but is not yet stabilized.

Earnings Per Common Share - Diluted

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Comparison of 2024 to 2023

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.

The change in net cash provided by operating activities in 2024 as compared to 2023 was primarily due to net cash from the operations of consolidated same properties, recently completed development projects in Raleigh and Charlotte and changes in operating assets and liabilities, partially offset by property dispositions and higher interest expense.

We expect net cash related to operating activities to be lower in 2025 as compared to 2024 due to lower anticipated occupancy and property dispositions, partially offset by net cash from recently completed development projects in Raleigh and Charlotte.

The change in net cash used in investing activities in 2024 as compared to 2023 was primarily due to the redemption of our short-term preferred equity investment in the McKinney and Olive joint venture in 2023, contributions to the McKinney and Olive joint venture in 2024 to pay off a mortgage loan, contributions to the Granite Park Six joint venture in 2024 to pay down a construction loan, the acquisition of fee simple title to land underneath our Century Center assets in Atlanta in 2024 and higher investments in tenant improvements and deferred leasing costs in 2024.

These changes were partially offset by lower investments in building improvements and development in process.

We expect uses of cash for investing activities in 2025 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 2025.

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.

The change in net cash used in financing activities in 2024 as compared to 2023 was primarily due to higher net debt borrowings and proceeds from issuance of common stock in 2024.

Assuming the net effect of our acquisition, disposition and development activity in 2025 results in an increase to our assets, we would expect outstanding debt and/or Common Stock balances to increase.

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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 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.

During the fourth quarter of 2024, we acquired fee simple title to the land underneath our Century Center assets in Atlanta for a purchase price, including capitalized acquisition costs, of $50.8 million.

We previously held most of our buildings in Century Center, a 12-building office park encompassing 1.7 million square feet and 13 acres of developable land, pursuant to a long-term ground lease with a third party who owned fee simple title to the land.

Acquiring the land underneath our Century Center assets consolidates our ownership of the buildings and the land, which provides us with more long-term flexibility and certainty.

- Dispositions

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.

On February 3, 2025, we sold three buildings in Tampa for a sales price of $145.0 million and expect to record a gain on disposition of property of $82.3 million.

During the fourth quarter of 2024, we sold a building in Raleigh for a sales price of $21.4 million and recorded a gain on disposition of property of $4.2 million.

During the third quarter of 2024, we completed our exit from the Greensboro market by selling our last remaining land parcel for a sales price of $4.5 million and recorded a gain on disposition of property of $0.4 million.

During the second quarter of 2024, we sold seven buildings in Raleigh for a sales price of $62.5 million and recorded a gain on disposition of property of $35.0 million.

During the first quarter of 2024, we sold two buildings in Raleigh for an aggregate sales price of $16.9 million and recorded aggregate gains on disposition of property of $7.2 million.

- Impairments

During the fourth quarter of 2024, we recorded an impairment charge of $24.6 million to lower the carrying amount of EQT Plaza to its estimated fair value.

- Joint Venture Investments

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.

We have a 50% interest in the McKinney & Olive joint venture.

During the third quarter of 2024, the McKinney & Olive joint venture paid off at maturity the remaining $134.3 million balance on a secured mortgage loan with a stated interest rate of 4.5% and an effective interest rate of 5.3%.

In connection with this loan payoff, we and Granite each contributed $62.1 million to the joint venture.

We have a 50% interest in the Granite Park Six joint venture.

During the third quarter of 2024, the Granite Park Six joint venture paid down the outstanding $70.9 million balance with respect to a $115.0 million construction loan obtained in 2022.

The loan, which matures in January 2026, has an interest rate of SOFR plus 394 basis points.

In connection with this loan paydown, we and Granite each contributed $35.5 million to the joint venture.

In connection with this loan, the Granite Park Six joint venture obtained interest rate hedge contracts that effectively cap the underlying SOFR rate at 3.5%.

The initial contract capped the rate with respect to $95.2 million of any outstanding amounts and expired in July 2024.

The new contract caps the rate with respect to $38.8 million of any outstanding amounts and expires in July 2025.

As of December 31, 2024, $1.9 million was drawn on this loan.

We have a 50% interest in the 23Springs joint venture.

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 interest rate hedge contracts that effectively cap the underlying SOFR rate at 3.5%.

The initial contract capped the rate with respect to $83.0 million of any outstanding amounts and expired in April 2024.

The new contract caps the rate with respect to $134.0 million of any outstanding amounts and expires in April 2025.

As of December 31, 2024, $94.6 million was drawn on this loan.

- In-Process Development

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Financing Activity

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.

During 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.

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

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.

During the fourth quarter of 2024, the Company issued 1.6 million shares of Common Stock under its equity distribution agreements at an average gross sales price of $32.71 per share and received net proceeds, after sales commissions, of $51.3 million.

We paid an aggregate of $0.8 million in sales commissions to BTIG, LLC, TD Securities (USA) LLC and Truist Securities, Inc.

during the fourth quarter of 2024.

Our $750.0 million unsecured revolving credit facility was modified during the first quarter of 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 revolving credit facility is 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.

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.

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.

As of both December 31, 2023 and January 26, 2024, we had $0.9 million of outstanding letters of credit, which reduces the availability on our revolving credit facility.

We incurred $7.7 million of debt issuance costs during the first quarter of 2024, which will be amortized along with certain existing unamortized debt issuance costs over the remaining term of our new revolving credit facility and recorded $0.2 million of loss on debt extinguishment.

During the second quarter of 2024, we modified the revolving credit facility to provide that the interest rate may be adjusted upward or downward by 2.5 basis points depending upon whether or not we achieve certain pre-determined sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.

There was $104.0 million and $119.0 million outstanding under our revolving credit facility as of December 31, 2024 and

January 31, 2025, respectively.

As of both December 31, 2024 and January 31, 2025, we had $0.1 million of outstanding letters of credit, which reduce the availability on our revolving credit facility.

As a result, the unused capacity of our revolving credit facility as of December 31, 2024 and January 31, 2025 was $645.9 million and $630.9 million, respectively.

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.

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• expected cash flows from financing and investing activities, including from the sales of assets generating taxable gains to the extent such assets are not sold in a tax-deferred exchange under Section 1031 of the Internal Revenue Code or another tax-free or tax-deferred transaction.

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

On January 29, 2025, the Company declared a cash dividend of $0.50 per share of Common Stock, which is payable on March 11, 2025 to stockholders of record as of February 18, 2025.

The Company declared and paid a cash dividend of $0.50 per share of Common Stock in each quarter of 2024.

Current and Future Cash Needs

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During 2024, we expect to sell up to $200 million of properties no longer considered to be core assets due to location, age, quality and/or overall strategic fit.

During the remainder of 2025, we expect to sell up to an additional $150 million of properties no longer considered to be core assets due to location, age, quality and/or overall strategic fit.

We can make no assurance, however, that we will sell any additional non-core assets or, if we do, what the timing or terms of any such sale will be.

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Other REITs may use different methodologies to calculate NOI, same property NOI and cash NOI.

As of December 31, 2023, our same property portfolio consisted of 154 in-service properties encompassing 26.6 million rentable square feet that were wholly owned during the entirety of the periods presented (from January 1, 2022 to December 31, 2023).

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 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.

Rental property and other expenses related to properties not in our same property portfolio were $8.6 million and $12.3 million for the years ended December 31, 2023 and 2022, respectively.

In previous periods, our same property portfolio consisted only of wholly owned in-service properties.

Beginning in 2024, we updated our same property portfolio to include our share of in-service joint venture properties.

As of December 31, 2024, our same property portfolio consisted of 152 wholly owned and joint venture in-service properties encompassing 27.2 million rentable square feet that were owned during the entirety of the periods presented (from January 1, 2023 to December 31, 2024).

As of December 31, 2023, our same property portfolio consisted of 154 wholly owned in-service properties encompassing 26.6 million rentable square feet that were owned during the entirety of the periods presented (from January 1, 2022 to December 31, 2023).

The change in our same property portfolio was due to the addition of six joint venture properties encompassing 0.7 million rentable square feet, one property acquired during 2022 encompassing 0.4 million rentable square feet and one newly developed property placed in service during 2022 encompassing 0.1 million rentable square feet, offset by the removal of 10 properties that were sold during 2024 encompassing 0.6 million rentable square feet.

The following table sets forth the Company’s NOI, same property NOI and same property cash NOI (in thousands):

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Net operating income 553,689 565,215

Non same property and other net operating income (19,813) (17,227)

Our share of unconsolidated joint venture same property net operating income 18,686 18,436

Partner's share of consolidated joint venture same property net operating income (1,110) (1,009)

Non same property and other net operating (income)/loss (3,242) (10,536)

Same property net operating income $ 568,023 $ 572,106

3 unchanged sentences

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