Attached files

file filename
EX-10.2 - AMENDMENT NO. 1, DATED AS OF JULY 27, 2011, TO CREDIT AGREEMENT, DATED AS OF FEBRUARY 2, 2011 - HIGHWOODS PROPERTIES INCexh10_2.htm
EX-12.1 - STATEMENT RE: COMPUTATION OF RATIOS FOR THE COMPANY - HIGHWOODS PROPERTIES INCexh12_1.htm
EX-32.2 - CERTIFICATION PURSUANT TO SECTION 906 FOR THE COMPANY - HIGHWOODS PROPERTIES INCexh32_2.htm
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 FOR THE COMPANY - HIGHWOODS PROPERTIES INCexh32_1.htm
EX-31.3 - CERTIFICATION PURSUANT TO SECTION 302 FOR THE OPERATING PARTNERSHIP - HIGHWOODS PROPERTIES INCexh31_3.htm
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 FOR THE COMPANY - HIGHWOODS PROPERTIES INCexh31_1.htm
EX-32.4 - CERTIFICATION PURSUANT TO SECTION 906 FOR THE OPERATING PARTNERSHIP - HIGHWOODS PROPERTIES INCexh32_4.htm
EX-31.2 - CERTIFICATION PURSUANT TO SECTION 302 FOR THE COMPANY - HIGHWOODS PROPERTIES INCexh31_2.htm
EX-31.4 - CERTIFICATION PURSUANT TO SECTION 302 FOR THE OPERATING PARTNERSHIP - HIGHWOODS PROPERTIES INCexh31_4.htm
EX-10.1 - THIRD AMENDED AND RESTATED CREDIT AGREEMENT, DATED AS OF JULY 27, 2011 - HIGHWOODS PROPERTIES INCexh10_1.htm
EX-32.3 - CERTIFICATION PURSUANT TO SECTION 906 FOR THE OPERATING PARTNERSHIP - HIGHWOODS PROPERTIES INCexh32_3.htm
EX-12.2 - STATEMENT RE: COMPUTATION OF RATIOS FOR THE OPERATING PARTNERSHIP - HIGHWOODS PROPERTIES INCexh12_2.htm




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011
______________

HIW Logo

HIGHWOODS PROPERTIES, INC.
(Exact name of registrant as specified in its charter)

 
Maryland
001-13100
56-1871668
 
 
(State or other jurisdiction
of incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)
 

HIGHWOODS REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

 
North Carolina
000-21731
56-1869557
 
 
(State or other jurisdiction
of incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)
 

3100 Smoketree Court, Suite 600
Raleigh, NC 27604
(Address of principal executive offices) (Zip Code)
 
919-872-4924
(Registrants’ telephone number, including area code)
______________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Highwoods Properties, Inc.  Yes  S    No £            Highwoods Realty Limited Partnership  Yes  S    No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Highwoods Properties, Inc.  Yes  £    No £            Highwoods Realty Limited Partnership  Yes  £    No £ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of ‘large accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Securities Exchange Act.
 
Highwoods Properties, Inc.
Large accelerated filer S    Accelerated filer £      Non-accelerated filer £      Smaller reporting company £
 
Highwoods Realty Limited Partnership
Large accelerated filer £    Accelerated filer £      Non-accelerated filer S      Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).
 
Highwoods Properties, Inc.  Yes  £    No S            Highwoods Realty Limited Partnership  Yes  £    No S

The Company had 72,399,428 shares of Common Stock outstanding as of July 20, 2011.



 
 

 


HIGHWOODS PROPERTIES, INC.
HIGHWOODS REALTY LIMITED PARTNERSHIP

QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 2011

TABLE OF CONTENTS
 
PART I – FINANCIAL INFORMATION
 
   
ITEM 1.    FINANCIAL STATEMENTS
2
   
HIGHWOODS PROPERTIES, INC.:
 
   
Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010
3
   
Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010
4
   
Consolidated Statements of Equity for the six months ended June 30, 2011 and 2010
5
   
Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010
6
   
Notes to Consolidated Financial Statements
8
   
HIGHWOODS REALTY LIMITED PARTNERSHIP:
 
   
Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010
24
   
Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010
25
   
Consolidated Statements of Equity for the six months ended June 30, 2011 and 2010
26
   
Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010
27
   
Notes to Consolidated Financial Statements
29
   
ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
43
   
Disclosure Regarding Forward-Looking Statements
43
   
Executive Summary
44
   
Results of Operations
45
   
Liquidity and Capital Resources
48
   
Critical Accounting Estimates
51
   
Non-GAAP Information
51
   
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
55
   
ITEM 4.    CONTROLS AND PROCEDURES
55
   
PART II – OTHER INFORMATION
 
   
ITEM 1A.  RISK FACTORS
56
   
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
63
   
ITEM 5.    OTHER EVENTS  63
 
 
ITEM 6.    EXHIBITS
63

 
1

 



PART I - FINANCIAL INFORMATION

 
ITEM 1.  FINANCIAL STATEMENTS

We refer to Highwoods Properties, Inc. as the “Company,” Highwoods Realty Limited Partnership as the “Operating Partnership,” the Company’s common stock as “Common Stock” or “Common Shares,” the Company’s preferred stock as “Preferred Stock” or “Preferred Shares,” the Operating Partnership’s common partnership interests as “Common Units,” the Operating Partnership’s preferred partnership interests as “Preferred Units” and in-service properties (excluding rental residential units) to which the Company and/or the Operating Partnership have title and 100.0% ownership rights as the “Wholly Owned Properties.” References to “we” and “our” mean the Company and the Operating Partnership, collectively, unless the context indicates otherwise.

The partnership agreement provides that the Operating Partnership will assume and pay when due, or reimburse the Company for payment of, all costs and expenses relating to the ownership and operations of, or for the benefit of, the Operating Partnership. The partnership agreement further provides that all expenses of the Company are deemed to be incurred for the benefit of the Operating Partnership.

Certain information contained herein is presented as of July 20, 2011, the latest practicable date prior to the filing of this Quarterly Report.

 
2

 


HIGHWOODS PROPERTIES, INC.
 
Consolidated Balance Sheets
 
(Unaudited and in thousands, except share and per share amounts)
 
   
June 30,
2011
 
December 31,
2010
 
Assets:
           
Real estate assets, at cost:
             
Land
 
$
345,791
 
$
345,088
 
Buildings and tenant improvements
   
2,886,871
   
2,883,092
 
Development in process
   
13,317
   
4,524
 
Land held for development
   
106,871
   
107,101
 
     
3,352,850
   
3,339,805
 
Less-accumulated depreciation
   
(863,730
)
 
(830,153
)
Net real estate assets
   
2,489,120
   
2,509,652
 
For-sale residential condominiums
   
5,840
   
8,225
 
Real estate and other assets, net, held for sale
   
11,609
   
13,607
 
Cash and cash equivalents
   
9,239
   
14,206
 
Restricted cash
   
7,619
   
4,399
 
Accounts receivable, net of allowance of $3,470 and $3,595, respectively
   
22,952
   
20,716
 
Mortgages and notes receivable, net of allowance of $617 and $868, respectively
   
18,809
   
19,044
 
Accrued straight-line rents receivable, net of allowance of $1,360 and $2,209, respectively
   
99,466
   
93,178
 
Investment in and advances to unconsolidated affiliates
   
103,025
   
63,607
 
Deferred financing and leasing costs, net of accumulated amortization of $62,542 and $59,360, respectively
   
85,168
   
85,001
 
Prepaid expenses and other assets
   
36,633
   
40,200
 
Total Assets
 
$
2,889,480
 
$
2,871,835
 
               
Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:
             
Mortgages and notes payable
 
$
1,615,068
 
$
1,522,945
 
Accounts payable, accrued expenses and other liabilities
   
106,105
   
106,716
 
Financing obligations
   
32,869
   
33,114
 
Total Liabilities
   
1,754,042
   
1,662,775
 
Commitments and contingencies
             
Noncontrolling interests in the Operating Partnership
   
125,075
   
120,838
 
Equity:
             
Preferred Stock, $.01 par value, 50,000,000 authorized shares;
             
8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 29,087 and 29,092 shares issued and outstanding, respectively
   
29,087
   
29,092
 
8.000% Series B Cumulative Redeemable Preferred Shares (liquidation preference $25 per share), 0 and 2,100,000 shares issued and outstanding, respectively
   
   
52,500
 
Common Stock, $.01 par value, 200,000,000 authorized shares;
             
72,399,428 and 71,690,487 shares issued and outstanding, respectively
   
724
   
717
 
Additional paid-in capital
   
1,782,889
   
1,766,886
 
Distributions in excess of net income available for common stockholders
   
(802,606
)
 
(761,785
)
Accumulated other comprehensive loss
   
(4,177
)
 
(3,648
)
Total Stockholders’ Equity
   
1,005,917
   
1,083,762
 
Noncontrolling interests in consolidated affiliates
   
4,446
   
4,460
 
Total Equity
   
1,010,363
   
1,088,222
 
Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity
 
$
2,889,480
 
$
2,871,835
 

See accompanying notes to consolidated financial statements.

 
3

 


HIGHWOODS PROPERTIES, INC.
 
Consolidated Statements of Income
 
(Unaudited and in thousands, except per share amounts)
 
 
   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Rental and other revenues                                                                               
 
$
117,057
 
$
113,765
 
$
232,036
 
$
228,268
 
Operating expenses:
                         
Rental property and other expenses
   
41,143
   
38,143
   
82,341
   
79,647
 
Depreciation and amortization
   
33,430
   
33,260
   
67,147
   
65,898
 
General and administrative
   
7,978
   
6,980
   
15,771
   
15,487
 
Total operating expenses
   
82,551
   
78,383
   
165,259
   
161,032
 
Interest expense:
                         
Contractual
   
22,940
   
21,705
   
45,371
   
43,507
 
Amortization of deferred financing costs
   
821
   
835
   
1,642
   
1,670
 
Financing obligations
   
146
   
394
   
437
   
870
 
     
23,907
   
22,934
   
47,450
   
46,047
 
Other income:
                         
Interest and other income
   
1,899
   
965
   
3,772
   
2,665
 
Loss on debt extinguishment
   
(24
)
 
   
(24
)
 
 
     
1,875
   
965
   
3,748
   
2,665
 
Income from continuing operations before disposition of property, condominiums and investment in unconsolidated affiliates and equity in earnings of unconsolidated affiliates
   
12,474
   
13,413
   
23,075
   
23,854
 
Gains on disposition of property
   
200
   
17
   
200
   
36
 
Gains on disposition of for-sale residential condominiums
   
116
   
163
   
154
   
353
 
Gains on disposition of investment in unconsolidated affiliates
   
   
25,330
   
   
25,330
 
Equity in earnings of unconsolidated affiliates
   
1,353
   
888
   
2,820
   
1,683
 
Income from continuing operations                                                                               
   
14,143
   
39,811
   
26,249
   
51,256
 
Discontinued operations:
                         
Income from discontinued operations
   
291
   
498
   
628
   
961
 
Net losses on disposition of discontinued operations
   
   
(260
)
 
   
(86
)
     
291
   
238
   
628
   
875
 
Net income                                                                               
   
14,434
   
40,049
   
26,877
   
52,131
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
   
(623
)
 
(1,933
)
 
(1,130
)
 
(2,453
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
   
(182
)
 
(215
)
 
(305
)
 
(429
)
Dividends on Preferred Stock
   
(1,622
)
 
(1,677
)
 
(3,299
)
 
(3,354
)
Excess of Preferred Stock redemption/repurchase cost over carrying value
   
(1,895
)
 
   
(1,895
)
 
 
Net income available for common stockholders
 
$
10,112
 
$
36,224
 
$
20,248
 
$
45,895
 
Earnings per Common Share - basic:
                         
Income from continuing operations available for common stockholders
 
$
0.14
 
$
0.51
 
$
0.27
 
$
0.63
 
Income from discontinued operations available for common stockholders
   
   
   
0.01
   
0.01
 
Net income available for common stockholders
 
$
0.14
 
$
0.51
 
$
0.28
 
$
0.64
 
Weighted average Common Shares outstanding - basic
   
72,211
   
71,601
   
72,015
   
71,508
 
Earnings per Common Share - diluted:
                         
Income from continuing operations available for common stockholders
 
$
0.14
 
$
0.50
 
$
0.27
 
$
0.63
 
Income from discontinued operations available for common stockholders
   
   
   
0.01
   
0.01
 
Net income available for common stockholders
 
$
0.14
 
$
0.50
 
$
0.28
 
$
0.64
 
Weighted average Common Shares outstanding - diluted
   
76,197
   
75,607
   
75,987
   
75,504
 
Dividends declared per Common Share
 
$
0.425
 
$
0.425
 
$
0.850
 
$
0.850
 
Net income available for common stockholders:
                         
Income from continuing operations available for common stockholders
 
$
9,836
 
$
35,998
 
$
19,652
 
$
45,064
 
Income from discontinued operations available for common stockholders
   
276
   
226
   
596
   
831
 
Net income available for common stockholders
 
$
10,112
 
$
36,224
 
$
20,248
 
$
45,895
 
 
See accompanying notes to consolidated financial statements.

 
4

 


HIGHWOODS PROPERTIES, INC.
 
Consolidated Statements of Equity
 
Six Months Ended June 30, 2011 and 2010
 
(Unaudited and in thousands, except share amounts)
 
   
Number of Common
 Shares
 
Common Stock
 
Series A Cumulative Redeemable Preferred Shares
 
Series B Cumulative Redeemable Preferred Shares
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive
Loss
 
Non-Controlling Interests in
Consolidated Affiliates
 
Distributions in Excess of Net Income Available for Common Stockholders
 
Total
 
Balance at December 31, 2010
 
71,690,487
 
$
717
 
$
29,092
 
$
52,500
 
$
1,766,886
 
$
(3,648
)
$
4,460
 
$
(761,785
)
$
1,088,222
 
Issuances of Common Stock, net
 
556,652
   
6
   
   
   
16,978
   
   
   
   
16,984
 
Conversion of Common Units to Common Stock
 
18,737
   
   
   
   
635
   
   
   
   
635
 
Dividends on Common Stock
 
   
   
   
   
   
   
   
(61,069
)
 
(61,069
)
Dividends on Preferred Stock
 
   
   
   
   
   
   
   
(3,299
)
 
(3,299
)
Adjustment of noncontrolling interests
in the Operating Partnership to fair value
 
   
   
   
   
(6,957
)
 
   
   
   
(6,957
)
Distributions to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
(319
)
 
   
(319
)
Issuances of restricted stock, net
 
133,552
   
   
   
   
   
   
   
   
 
Redemptions/repurchases of Preferred Stock
 
   
   
(5
)
 
(52,500
)
 
1,895
   
   
   
(1,895
)
 
(52,505
)
Share-based compensation expense
 
   
1
   
   
   
3,452
   
   
   
   
3,453
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
 
   
   
   
   
   
   
   
(1,130
)
 
(1,130
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
305
   
(305
)
 
 
Comprehensive income:
                                                     
Net income
 
   
   
   
   
   
   
   
26,877
   
26,877
 
Other comprehensive loss
 
   
   
   
   
   
(529
)
 
   
   
(529
)
Total comprehensive income
                                                 
26,348
 
Balance at June 30, 2011
 
72,399,428
 
$
724
 
$
29,087
 
$
 
$
1,782,889
 
$
(4,177
)
$
4,446
 
$
(802,606
)
$
1,010,363
 
 
   
Number of Common
 Shares
 
Common Stock
 
Series A Cumulative Redeemable Preferred Shares
 
Series B Cumulative Redeemable Preferred Shares
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive
Loss
 
Non-Controlling Interests in
Consolidated Affiliates
 
Distributions in Excess of Net Income Available for Common Stockholders
 
Total
 
Balance at December 31, 2009
 
71,285,303
 
$
713
 
$
29,092
 
$
52,500
 
$
1,751,398
 
$
(3,811
)
$
5,183
 
$
(701,932
)
$
1,133,143
 
Issuances of Common Stock, net
 
71,568
   
1
   
   
   
1,061
   
   
   
   
1,062
 
Conversion of Common Units to Common Stock
 
93,971
   
1
   
   
   
2,957
   
   
   
   
2,958
 
Dividends on Common Stock
 
   
   
   
   
   
   
   
(60,753
)
 
(60,753
)
Dividends on Preferred Stock
 
   
   
   
   
   
   
   
(3,354
)
 
(3,354
)
Adjustment of noncontrolling interests
in the Operating Partnership to fair value
 
   
   
   
   
20,612
   
   
   
   
20,612
 
Distributions to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
(324
)
 
   
(324
)
Issuances of restricted stock, net
 
164,143
   
   
   
   
   
   
   
   
 
Share-based compensation expense
 
   
1
   
   
   
3,496
   
   
   
   
3,497
 
Net (income) attributable to noncontrolling interests in the Operating Partnership
 
   
   
   
   
   
   
   
(2,453
)
 
(2,453
)
Net (income) attributable to noncontrolling interests in consolidated affiliates
 
   
   
   
   
   
   
429
   
(429
)
 
 
Comprehensive income:
                                                     
Net income
 
   
   
   
   
   
   
   
52,131
   
52,131
 
Other comprehensive income
 
   
   
   
   
   
536
   
   
   
536
 
Total comprehensive income
                                                 
52,667
 
Balance at June 30, 2010
 
71,614,985
 
$
716
 
$
29,092
 
$
52,500
 
$
1,779,524
 
$
(3,275
)
$
5,288
 
$
(716,790
)
$
1,147,055
 

See accompanying notes to consolidated financial statements.

 
5

 


HIGHWOODS PROPERTIES, INC.
 
Consolidated Statements of Cash Flows
 
(Unaudited and in thousands)

   
Six Months Ended
June 30,
 
   
2011
 
2010
 
Operating activities:
             
Net income
 
$
26,877
 
$
52,131
 
Adjustments to reconcile net income to net cash provided by operating activities:
             
Depreciation and amortization
   
67,274
   
66,447
 
Amortization of lease incentives and acquisition-related intangible assets and liabilities
   
968
   
537
 
Share-based compensation expense
   
3,453
   
3,497
 
Allowance for losses on accounts and accrued straight-line rents receivable
   
1,029
   
2,636
 
Amortization of deferred financing costs
   
1,642
   
1,670
 
Amortization of settled cash-flow hedges
   
(58
)
 
287
 
Loss on debt extinguishment
   
24
   
 
Net (gains)/losses on disposition of property
   
(200
)
 
50
 
Gains on disposition of for-sale residential condominiums
   
(154
)
 
(353
)
Gains on disposition of investment in unconsolidated affiliates
   
   
(25,330
)
Equity in earnings of unconsolidated affiliates
   
(2,820
)
 
(1,683
)
Changes in financing obligations
   
(245
)
 
81
 
Distributions of earnings from unconsolidated affiliates
   
2,162
   
1,717
 
Changes in operating assets and liabilities:
             
Accounts receivable
   
(1,821
)
 
(1,430
)
Prepaid expenses and other assets
   
(644
)
 
1,734
 
Accrued straight-line rents receivable
   
(6,098
)
 
(5,296
)
Accounts payable, accrued expenses and other liabilities
   
(3,794
)
 
3,352
 
Net cash provided by operating activities
   
87,595
   
100,047
 
Investing activities:
             
Additions to real estate assets and deferred leasing costs
   
(44,447
)
 
(38,292
)
Net proceeds from disposition of real estate assets
   
2,063
   
6,801
 
Net proceeds from disposition of for-sale residential condominiums
   
2,401
   
3,186
 
Proceeds from disposition of investment in unconsolidated affiliates
   
   
15,000
 
Distributions of capital from unconsolidated affiliates
   
632
   
1,106
 
Repayments of mortgages and notes receivable
   
235
   
29
 
Investment in and advances to unconsolidated affiliates
   
(39,402
)
 
(303
)
Changes in restricted cash and other investing activities
   
(395
)
 
(3,178
)
Net cash used in investing activities
   
(78,913
)
 
(15,651
)
Financing activities:
             
Dividends on Common Stock
   
(61,069
)
 
(60,753
)
Redemptions/repurchases of Preferred Stock
   
(52,505
)
 
 
Dividends on Preferred Stock
   
(3,299
)
 
(3,354
)
Distributions to noncontrolling interests in the Operating Partnership
   
(3,215
)
 
(3,243
)
Distributions to noncontrolling interests in consolidated affiliates
   
(319
)
 
(324
)
Net proceeds from the issuance of Common Stock
   
16,984
   
1,062
 
Borrowings on revolving credit facility
   
124,700
   
4,000
 
Repayments of revolving credit facility
   
(79,300
)
 
(4,000
)
Borrowings on mortgages and notes payable
   
200,000
   
 
Repayments of mortgages and notes payable
   
(153,522
)
 
(5,452
)
Additions to deferred financing costs and other financing activities
   
(2,104
)
 
(188
)
Net cash used in financing activities
   
(13,649
)
 
(72,252
)
Net increase/(decrease) in cash and cash equivalents
   
(4,967
)
 
12,144
 
Cash and cash equivalents at beginning of the period
   
14,206
   
23,699
 
Cash and cash equivalents at end of the period
 
$
9,239
 
$
35,843
 

See accompanying notes to consolidated financial statements.

 
6

 


HIGHWOODS PROPERTIES, INC.
 
Consolidated Statements of Cash Flows – Continued
 
(Unaudited and in thousands)

Supplemental disclosure of cash flow information:

   
Six Months Ended
June 30,
 
   
2011
 
2010
 
Cash paid for interest, net of amounts capitalized
 
$
44,948
 
$
43,204
 

Supplemental disclosure of non-cash investing and financing activities:

   
Six Months Ended
June 30,
 
   
2011
 
2010
 
Conversion of Common Units to Common Stock                                                                                                         
 
$
635
 
$
2,958
 
Change in accrued capital expenditures                                                                                                         
 
$
1,525
 
$
(2,294
)
Write-off of fully depreciated real estate assets                                                                                                         
 
$
23,352
 
$
24,273
 
Write-off of fully amortized deferred financing and leasing costs                                                                                                         
 
$
8,247
 
$
7,963
 
Unrealized gains on marketable securities of non-qualified deferred compensation plan
 
$
210
 
$
174
 
Settlement of financing obligation
 
$
 
$
4,184
 
Adjustment of noncontrolling interests in the Operating Partnership to fair value
 
$
6,957
 
$
(20,612
)
Unrealized gain/(loss) on tax increment financing bond                                                                                                         
 
$
(471
)
$
146
 
Mortgages receivable from seller financing                                                                                                         
 
$
 
$
17,030
 

See accompanying notes to consolidated financial statements.


 
7

 

HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements
 
June 30, 2011
 
(tabular dollar amounts in thousands, except per share data)
 
(Unaudited)

1.      Description of Business and Significant Accounting Policies

Description of Business

The Company is a fully-integrated, self-administered and self-managed equity real estate investment trust (“REIT”) that operates in the Southeastern and Midwestern United States. The Company conducts virtually all of its activities through the Operating Partnership. At June 30, 2011, the Company and/or the Operating Partnership wholly owned: 296 in-service office, industrial and retail properties, comprising 27.3 million square feet; 96 rental residential units; 19 for-sale residential condominiums; 603 acres of undeveloped land suitable for future development, of which 523 acres are considered core holdings; and an additional office property that is considered completed but not yet stabilized.

The Company is the sole general partner of the Operating Partnership. At June 30, 2011, the Company owned all of the Preferred Units and 72.0 million, or 95.0%, of the Common Units. Limited partners (including one officer and two directors of the Company) own the remaining 3.8 million Common Units. Generally, the Operating Partnership is obligated to redeem each Common Unit at the request of the holder thereof for cash equal to the value of one share of Common Stock, $.01 par value, based on the average of the market price for the 10 trading days immediately preceding the notice date of such redemption provided that the Company, at its option, may elect to acquire any such Common Units presented for redemption for cash or one share of Common Stock. The Common Units owned by the Company are not redeemable. During the six months ended June 30, 2011, the Company redeemed 18,737 Common Units for a like number of shares of Common Stock.

Common Stock Offering

In the second quarter of 2011, we entered into equity sales agreements with various financial institutions to offer and sell, from time to time, shares of our Common Stock having an aggregate offering price of up to $150.0 million. During the second quarter of 2011, we issued 236,000 shares of Common Stock under these agreements at an average price of $35.62 per share raising net proceeds, after sales commissions and expenses, of $8.3 million.

Preferred Stock Retirements

In the second quarter of 2011, we redeemed the remaining 2.1 million outstanding 8.0% Series B Cumulative Redeemable Preferred Shares for an aggregate redemption price of $52.5 million, excluding accrued dividends. In connection with this redemption, the $1.9 million excess of the redemption cost over the net carrying amount of the redeemed shares was recorded as a reduction to net income available for common stockholders in the second quarter of 2011.

Basis of Presentation

Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Our Consolidated Balance Sheet at December 31, 2010 was revised from previously reported amounts to reflect those properties which required held for sale presentation. Our Consolidated Statements of Income for the three and six months ended June 30, 2010 were revised from previously reported amounts to reflect those properties sold or held for sale which required discontinued operations presentation.

Our Consolidated Financial Statements include the Operating Partnership, wholly owned subsidiaries and those entities in which we have the controlling financial interest. All significant intercompany transactions and accounts have been eliminated. At June 30, 2011 and December 31, 2010, we were not involved with any entities that were determined to be variable interest entities.


 
8

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 


1.      Description of Business and Significant Accounting Policies - Continued

The unaudited interim consolidated financial statements and accompanying unaudited consolidated financial information, in the opinion of management, contain all adjustments (including normal recurring accruals) necessary for a fair presentation of our financial position, results of operations and cash flows. We have omitted certain notes and other information from the interim consolidated financial statements presented in this Quarterly Report on Form 10-Q as permitted by SEC rules and regulations. These Consolidated Financial Statements should be read in conjunction with our 2010 Annual Report on Form 10-K.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recently Issued Accounting Standards

Beginning with our Quarterly Report on Form 10-Q for the three months ended March 31, 2012, we will be required to enhance our disclosure of assets and liabilities measured at fair value. This includes disclosing any significant transfers between Levels 1 and 2 of the fair value hierarchy, additional quantitative and qualitative information regarding fair value measurements categorized as Level 3 of the fair value hierarchy and the hierarchy classification for items whose fair value is not recorded on our Consolidated Balance Sheets but is disclosed in our Notes to Consolidated Financial Statements. Additionally, we will be required to present comprehensive income on the face of our Consolidated Statements of Income, which previously has been disclosed in our Notes to Consolidated Financial Statements.

2.      Real Estate Assets

Acquisitions

During the second quarter of 2011, we acquired a 48,000 square foot medical office property in Raleigh, NC for approximately $9.0 million in cash and incurred $0.1 million of acquisition-related costs.

3.      Mortgages and Notes Receivable

The following table sets forth our mortgages and notes receivable:

   
June 30,
2011
 
December 31,
2010
 
Seller financing (first mortgages)
 
$
17,180
 
$
17,180
 
Less allowance
   
   
 
     
17,180
   
17,180
 
Promissory notes
   
2,246
   
2,732
 
Less allowance
   
(617
)
 
(868
)
     
1,629
   
1,864
 
Mortgages and notes receivable, net
 
$
18,809
 
$
19,044
 


 
9

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



3.      Mortgages and Notes Receivable - Continued

The following table sets forth our notes receivable allowance, which relates only to promissory notes:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Beginning notes receivable allowance
 
$
497
 
$
732
 
$
868
 
$
698
 
Bad debt expense
   
162
   
25
   
184
   
88
 
Write-offs
   
   
(5
)
 
(364
)
 
(5
)
Recoveries/other
   
(42
)
 
19
   
(71
)
 
(10
)
Total notes receivable allowance
 
$
617
 
$
771
 
$
617
 
$
771
 

Our mortgages and notes receivable consists primarily of seller financing issued in conjunction with two disposition transactions in the second quarter of 2010. As of June 30, 2011, the interest payments on both mortgages receivable were current and there were no indications of impairment on the receivables.

4.      Investment in and Advances to Unconsolidated Affiliates

We have equity interests ranging from 10.0% to 50.0% in various joint ventures with unrelated third parties and a debt interest in one of those joint ventures, as described below. The following table sets forth the combined, summarized income statements for our unconsolidated joint ventures:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Income Statements:
                         
Revenues                                                                      
 
$
24,779
 
$
31,714
 
$
49,996
 
$
67,302
 
Expenses:
                         
Rental property and other expenses
   
10,774
   
15,632
   
22,771
   
32,799
 
Depreciation and amortization
   
6,295
   
7,778
   
12,911
   
17,378
 
Interest expense
   
5,858
   
7,233
   
11,865
   
15,798
 
Total expenses
   
22,927
   
30,643
   
47,547
   
65,975
 
Net income
 
$
1,852
 
$
1,071
 
$
2,449
 
$
1,327
 
Our share of:
                         
Depreciation and amortization of real estate assets
 
$
2,033
 
$
2,737
 
$
4,126
 
$
6,078
 
Interest expense
 
$
2,033
 
$
2,755
 
$
4,194
 
$
6,178
 
Net income
 
$
749
 
$
308
 
$
1,670
 
$
520
 
                           
Our share of net income
 
$
749
 
$
308
 
$
1,670
 
$
520
 
Purchase accounting and management, leasing and other fees adjustments
   
604
   
580
   
1,150
   
1,163
 
Equity in earnings of unconsolidated affiliates
 
$
1,353
 
$
888
 
$
2,820
 
$
1,683
 


 
10

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



4.      Investment in and Advances to Unconsolidated Affiliates - Continued

In the second quarter of 2011, we provided a one-year $38.3 million interest-only secured loan to an unconsolidated joint venture, which was used to repay a secured loan before maturity to a third party lender. The loan bears interest at LIBOR plus 500 basis points, which may be reduced by up to 50 basis points upon the use of proceeds from the sale of certain assets by the joint venture to repay the loan.

During the second quarter of 2010, we sold our equity interests in a series of unconsolidated joint ventures relating to properties in Des Moines, IA. For information regarding this sale, see Note 3 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K.

5.      Intangible Assets and Liabilities

The following table sets forth total intangible assets and liabilities, net of accumulated amortization:

   
June 30,
2011
 
December 31,
2010
 
Assets:
             
Deferred financing costs
 
$
17,295
 
$
16,412
 
Less accumulated amortization
   
(7,996
)
 
(7,054
)
     
9,299
   
9,358
 
Deferred leasing costs (including lease incentives and acquisition-related intangible assets)
   
130,415
   
127,949
 
Less accumulated amortization
   
(54,546
)
 
(52,306
)
     
75,869
   
75,643
 
Deferred financing and leasing costs, net
 
$
85,168
 
$
85,001
 
               
Liabilities (in accounts payable, accrued expenses and other liabilities):
             
Acquisition-related intangible liabilities
 
$
720
 
$
658
 
Less accumulated amortization
   
(226
)
 
(125
)
   
$
494
 
$
533
 

The following table sets forth amortization of intangible assets and liabilities:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Amortization of deferred financing costs
 
$
821
 
$
835
 
$
1,642
 
$
1,670
 
Amortization of deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization)
 
$
4,401
 
$
3,817
 
$
8,757
 
$
7,583
 
Amortization of lease incentives (in rental and other revenues)
 
$
303
 
$
276
 
$
641
 
$
537
 
Amortization of acquisition-related intangible assets and liabilities (in rental and other revenues)
 
$
166
 
$
36
 
$
327
 
$
76
 


 
11

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



5.      Intangible Assets and Liabilities - Continued

The following table sets forth scheduled future amortization of intangible assets and liabilities:

   
Amortization of Deferred Financing Costs
 
Amortization of Deferred Leasing Costs and Acquisition-Related Intangible Assets (in Depreciation and Amortization)
 
Amortization of Lease Incentives (in Rental and Other Revenues)
 
Amortization of Acquisition-Related Intangible Assets and Liabilities (in Rental and Other Revenues)
 
July 1, 2011 through December 31, 2011
 
$
1,724
 
$
8,653
 
$
613
 
$
320
 
2012                                                             
   
3,093
   
15,087
   
1,141
   
561
 
2013                                                             
   
1,486
   
12,106
   
983
   
390
 
2014                                                             
   
1,098
   
9,398
   
819
   
298
 
2015                                                             
   
1,098
   
6,966
   
603
   
188
 
Thereafter                                                             
   
800
   
14,690
   
2,088
   
471
 
   
$
9,299
 
$
66,900
 
$
6,247
 
$
2,228
 

The weighted average remaining amortization periods for deferred financing costs, deferred leasing costs and acquisition-related intangible assets (in depreciation and amortization), lease incentives (in rental and other revenues) and acquisition-related intangible assets and liabilities (in rental and other revenues) were 3.3 years, 6.1 years, 7.9 years and 6.3 years, respectively, as of June 30, 2011.

In connection with the acquisition of a medical office property in Raleigh, NC in the second quarter of 2011, we recorded $0.1 million of above market lease intangible assets and $0.9 million of in-place lease intangible assets with weighted average amortization periods of 3.0 years each at the date of the acquisition.


 
12

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



6.      Mortgages and Notes Payable

The following table sets forth our consolidated mortgages and notes payable:

   
June 30,
2011
 
December 31,
2010
 
Secured indebtedness                                                                                                      
 
$
748,563
 
$
754,399
 
Unsecured indebtedness                                                                                                      
   
866,505
   
768,546
 
Total mortgages and notes payable
 
$
1,615,068
 
$
1,522,945
 

At June 30, 2011, our secured mortgage loans were secured by real estate assets with an aggregate undepreciated book value of $1.2 billion.

Our $400.0 million unsecured revolving credit facility is scheduled to mature on February 21, 2013 and includes an accordion feature that allows for an additional $50.0 million of borrowing capacity subject to additional lender commitments. Assuming we continue to have three publicly announced ratings from the credit rating agencies, the interest rate and facility fee under our revolving credit facility are based on the lower of the two highest publicly announced ratings. Based on our current credit ratings, the interest rate is LIBOR plus 290 basis points and the annual facility fee is 60 basis points. There was $75.4 million and $77.0 million outstanding under our revolving credit facility at June 30, 2011 and July 20, 2011, respectively. At both June 30, 2011 and July 20, 2011, we had $0.2 million of outstanding letters of credit, which reduces the availability on our revolving credit facility. As a result, the unused capacity of our revolving credit facility at June 30, 2011 and July 20, 2011 was $324.4 million and $322.8 million, respectively.

Our secured construction facility, which has $52.1 million outstanding at June 30, 2011, is scheduled to mature on December 20, 2011. Assuming no defaults have occurred, we have the option to extend the maturity date for an additional one-year period. The interest rate is LIBOR plus 85 basis points. During the second quarter of 2011, we exercised our right to reduce the borrowing capacity of this facility to $52.1 million.

In the second quarter of 2011, we repaid the remaining $10.0 million of a three-year unsecured term loan before maturity. We incurred no penalties related to this repayment.

We are currently in compliance with the debt covenants and other requirements with respect to our outstanding debt.


 
13

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



7.      Noncontrolling Interests

Noncontrolling Interests in the Operating Partnership

Noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company. The following table sets forth noncontrolling interests in the Operating Partnership:

   
Six Months Ended
June 30,
 
   
2011
 
2010
 
Beginning noncontrolling interests in the Operating Partnership
 
$
120,838
 
$
129,769
 
Adjustments of noncontrolling interests in the Operating Partnership to fair value
   
6,957
   
(20,612
)
Conversion of Common Units to Common Stock
   
(635
)
 
(2,958
)
Net income attributable to noncontrolling interests in the Operating Partnership
   
1,130
   
2,453
 
Distributions to noncontrolling interests in the Operating Partnership
   
(3,215
)
 
(3,243
)
Total noncontrolling interests in the Operating Partnership
 
$
125,075
 
$
105,409
 

The following table sets forth net income available for common stockholders and transfers from noncontrolling interests in the Operating Partnership:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Net income available for common stockholders                                                                               
 
$
10,112
 
$
36,224
 
$
20,248
 
$
45,895
 
Increase in additional paid in capital from conversion of Common Units to Common Stock
   
449
   
33
   
635
   
2,957
 
Change in equity from net income available for common stockholders and conversion of Common Units to Common Stock
 
$
10,561
 
$
36,257
 
$
20,883
 
$
48,852
 

Noncontrolling Interests in Consolidated Affiliates

At June 30, 2011, noncontrolling interests in consolidated affiliates relates to our joint venture partner’s 50.0% interest in office properties located in Richmond, VA. Our joint venture partner is an unrelated third party.

8.      Disclosure About Fair Value of Financial Instruments

The following summarizes the three levels of inputs that we use to measure fair value, as well as the assets, noncontrolling interests in the Operating Partnership and liabilities that we recognize at fair value using those levels of inputs.

Level 1.  Quoted prices in active markets for identical assets or liabilities.

Our Level 1 assets are investments in marketable securities which we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company. Our Level 1 liability is our non-qualified deferred compensation obligation.


 
14

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



8.      Disclosure About Fair Value of Financial Instruments - Continued

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

We had no Level 2 assets or liabilities at both June 30, 2011 and December 31, 2010.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our Level 3 asset is our tax increment financing bond, which is not routinely traded but whose fair value is determined using an estimate of projected redemption value based on quoted bid/ask prices for similar unrated municipal bonds.

The following tables set forth the assets, noncontrolling interests in the Operating Partnership and liability that we measure at fair value by level within the fair value hierarchy. We determine the level based on the lowest level of substantive input used to determine fair value.

   
June 30,
2011
 
Level 1
 
Level 3
 
Assets:
                   
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
$
3,876
 
$
3,876
 
$
 
Tax increment financing bond (in prepaid expenses and other assets)
   
15,228
   
   
15,228
 
Total Assets
 
$
19,104
 
$
3,876
 
$
15,228
 
                     
Noncontrolling Interests in the Operating Partnership
 
$
125,075
 
$
125,075
 
$
 
                     
Liability:
                   
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
$
3,876
 
$
3,876
 
$
 


   
December 31,
2010
 
Level 1
 
Level 3
 
Assets:
                   
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)
 
$
3,479
 
$
3,479
 
$
 
Tax increment financing bond (in prepaid expenses and other assets)
   
15,699
   
   
15,699
 
Total Assets
 
$
19,178
 
$
3,479
 
$
15,699
 
                     
Noncontrolling Interests in the Operating Partnership
 
$
120,838
 
$
120,838
 
$
 
                     
Liability:
                   
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)
 
$
4,091
 
$
4,091
 
$
 


 
15

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



8.      Disclosure About Fair Value of Financial Instruments – Continued

The following table sets forth our Level 3 asset:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Asset:
                         
Tax Increment Financing Bond
                         
Beginning balance
 
$
15,564
 
$
17,090
 
$
15,699
 
$
16,871
 
Unrealized gain/(loss) (in AOCL)
   
(336
)
 
(73
)
 
(471
)
 
146
 
Ending balance
 
$
15,228
 
$
17,017
 
$
15,228
 
$
17,017
 

We own a tax increment financing bond associated with a property developed by us. This bond amortizes to maturity in 2020. The estimated fair value at June 30, 2011 was $3.0 million below the outstanding principal due on the bond. If the yield-to-maturity used to fair value this bond was 100 basis points higher or lower, the fair value of the bond would have been $0.6 million lower or higher, respectively, as of June 30, 2011. Currently, we intend to hold this bond and have concluded that we will not be required to sell this bond before recovery of the bond principal. Payment of the principal and interest for the bond is guaranteed by us and, therefore, we have recorded no credit losses related to the bond in the three and six months ended June 30, 2011 and 2010. There is no legal right of offset with the liability, which we report as a financing obligation, related to this tax increment financing bond.

The following table sets forth the carrying amounts and fair values of our financial instruments not disclosed elsewhere in this Quarterly Report on Form 10-Q:

   
Carrying
Amount
 
Fair Value
 
June 30, 2011
             
Mortgages and notes receivable
 
$
18,809
 
$
19,141
 
Mortgages and notes payable
 
$
1,615,068
 
$
1,725,186
 
Financing obligations
 
$
32,869
 
$
20,852
 
               
December 31, 2010
             
Mortgages and notes receivable                                                                                                
 
$
19,044
 
$
19,093
 
Mortgages and notes payable                                                                                                
 
$
1,522,945
 
$
1,581,518
 
Financing obligations                                                                                                
 
$
33,114
 
$
23,880
 

The fair values of our mortgages and notes receivable, mortgages and notes payable and financing obligations were estimated using the income or market approaches to approximate the price that would be paid in an orderly transaction between market participants on the respective measurement dates. The carrying values of our cash and cash equivalents, restricted cash, accounts receivable, marketable securities of non-qualified deferred compensation plan, tax increment financing bond, non-qualified deferred compensation obligation and noncontrolling interests in the Operating Partnership are equal to or approximate fair value.


 
16

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



9.      Share-Based Payments

During the six months ended June 30, 2011, we granted 146,581 stock options with an exercise price equal to the closing market price of a share of our Common Stock on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $6.47. During the six months ended June 30, 2011, we also granted 76,166 shares of time-based restricted stock and 57,386 shares of total return-based restricted stock with weighted average grant date fair values per share of $33.74 and $41.02, respectively. We recorded stock-based compensation expense of $1.4 million each during the three months ended June 30, 2011 and 2010, and $3.5 million each during the six months ended June 30, 2011 and 2010. At June 30, 2011, there was $7.9 million of total unrecognized stock-based compensation costs, which will be recognized over a weighted average remaining service period of 2.4 years.

10.           Comprehensive Income and Accumulated Other Comprehensive Loss

The following table sets forth the components of comprehensive income:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Net income                                                                             
 
$
14,434
 
$
40,049
 
$
26,877
 
$
52,131
 
Other comprehensive income/(loss):
                         
Unrealized gain/(loss) on tax increment financing bond
   
(336
)
 
(73
)
 
(471
)
 
146
 
Amortization of settled cash-flow hedges
   
(29
)
 
48
   
(58
)
 
287
 
Sale of cash-flow hedge related to disposition of investment
in unconsolidated affiliate
   
   
103
   
   
103
 
Total other comprehensive income/(loss)
   
(365
)
 
78
   
(529
)
 
536
 
Total comprehensive income
 
$
14,069
 
$
40,127
 
$
26,348
 
$
52,667
 

The following table sets forth the components of AOCL:

   
June 30,
2011
 
December 31,
2010
 
Tax increment financing bond                                                                                                      
 
$
3,013
 
$
2,543
 
Settled cash-flow hedges                                                                                                      
   
1,164
   
1,105
 
Total accumulated other comprehensive loss
 
$
4,177
 
$
3,648
 


 
17

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 



11.      Discontinued Operations

The following table sets forth our operations which required classification as discontinued operations:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Rental and other revenues                                                                                     
 
$
500
 
$
1,227
 
$
1,113
 
$
2,557
 
Operating expenses:
                         
Rental property and other expenses
   
178
   
455
   
359
   
1,048
 
Depreciation and amortization
   
32
   
275
   
127
   
549
 
Total operating expenses
   
210
   
730
   
486
   
1,597
 
Other income
   
1
   
1
   
1
   
1
 
Income from discontinued operations
   
291
   
498
   
628
   
961
 
Net losses on disposition of discontinued operations
   
   
(260
)
 
   
(86
)
Total discontinued operations                                                                                     
 
$
291
 
$
238
 
$
628
 
$
875
 

The following table sets forth the major classes of assets and liabilities of the properties classified as held for sale:

   
June 30,
2011
 
December 31,
2010
 
Assets:
             
Land
 
$
2,788
 
$
2,788
 
Buildings and tenant improvements                                                                                                 
   
12,663
   
12,707
 
Land held for development                                                                                                 
   
967
   
2,766
 
Total real estate assets                                                                                            
   
16,418
   
18,261
 
Less accumulated depreciation                                                                                                 
   
(5,113
)
 
(5,012
)
Net real estate assets
   
11,305
   
13,249
 
Deferred leasing costs, net
   
55
   
58
 
Accrued straight line rents receivable
   
249
   
257
 
Prepaid expenses and other assets
   
   
43
 
Real estate and other assets, net, held for sale
 
$
11,609
 
$
13,607
 
Tenant security deposits, deferred rents and accrued costs (1)                                                                                                      
 
$
123
 
$
11
 

 
(1)
Included in accounts payable, accrued expenses and other liabilities.
 


 
18

 
HIGHWOODS PROPERTIES, INC.
 
Notes To Consolidated Financial Statements (Continued)
 
(tabular dollar amounts in thousands, except per share data)
 


 

12.      Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per Common Share:

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
   
2011
 
2010
 
2011
 
2010
 
Earnings per Common Share - basic:
                         
Numerator:
                         
Income from continuing operations
 
$
14,143
 
$
39,811
 
$
26,249
 
$
51,256
 
Net (income) attributable to noncontrolling  interests in the Operating Partnership from continuing operations
   
(608
)
 
(1,921
)
 
(1,098
)
 
(2,409
)
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
   
(182
)
 
(215
)
 
(305
)
 
(429
)
Dividends on Preferred Stock
   
(1,622
)
 
(1,677
)
 
(3,299
)
 
(3,354
)
Excess of Preferred Stock redemption/repurchase cost over carrying value
   
(1,895
)
 
   
(1,895
)
 
 
Income from continuing operations available for common stockholders
   
9,836
   
35,998
   
19,652
   
45,064
 
Income from discontinued operations
   
291
   
238
   
628
   
875
 
Net (income) attributable to noncontrolling interests in the Operating Partnership from discontinued operations
   
(15
)
 
(12
)
 
(32
)
 
(44
)
Income from discontinued operations available for common stockholders
   
276
   
226
   
596
   
831
 
Net income available for common stockholders
 
$
10,112
 
$
36,224
 
$
20,248
 
$
45,895
 
Denominator:
                         
Denominator for basic earnings per Common Share – weighted average
shares
   
72,211
   
71,601
   
72,015
   
71,508
 
Earnings per Common Share – basic:
                         
Income from continuing operations available for common stockholders
 
$
0.14
 
$
0.51
 
$
0.27
 
$
0.63
 
Income from discontinued operations available for common stockholders
   
   
   
0.01
   
0.01
 
Net income available for common stockholders
 
$
0.14
 
$
0.51
 
$
0.28
 
$
0.64
 
Earnings per Common Share - diluted:
                         
Numerator:
                         
Income from continuing operations
 
$
14,143
 
$
39,811
 
$
26,249
 
$
51,256
 
Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations
   
(182
)
 
(215
)
 
(305
)
 
(429
)
Dividends on Preferred Stock
   
(1,622
)
 
(1,677
)
 
(3,299
)
 
(3,354
)
Excess of Preferred Stock redemption/repurchase cost over carrying value
   
(1,895
)
 
   
(1,895
)
 
 
Income from continuing operations available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership
   
10,444
   
37,919
   
20,750
   
47,473
 
Income from discontinued operations available for common stockholders
   
291
   
238
   
628
   
875
 
Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership
 
$
10,735
 
$
38,157
 
$
21,378
 
$
48,348
 
Denominator:
                         
Denominator for basic earnings per Common Share –weighted average
shares
   
72,211
   
71,601
   
72,015
   
71,508
 
Add:
                         
Stock options using the treasury method
   
202
   
209
   
185
   
188
 
Noncontrolling interests partnership units
   
3,784
   
3,797
   
3,787
   
3,808
 
Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions (1)
   
76,197
   
75,607
   
75,987
   
75,504
 
Earnings per Common Share – diluted:
                         
Income from continuing operations available for common stockholders