Real Estate Assets

12 Months Ended

Dec. 31, 2012

Significant Acquisitions and Disposals [Line Items]

Real Estate Assets

Real Estate Assets

Acquisitions

During 2012, we acquired:

• a 492,000 square foot office property in Atlanta, GA for a purchase price of $144.9 million;

• a 616,000 square foot office property in Pittsburgh, PA for a purchase price of $91.2 million;

• three medical office properties in Greensboro, NC for a purchase price of $29.6 million, which consisted of the issuance of 66,864 Common Units to noncontrolling interests, contingent consideration with fair value at the acquisition date of $0.7 million, and the assumption of secured debt due August 2014 recorded at fair value of $7.9 million, with an effective interest rate of 4.06%;

• a 178,300 square foot office property in Cary, NC from our DLF I joint venture for an agreed upon value of $26.0 million, the net proceeds of which were used to reduce the balance of the advance due to us from the joint venture; and

• 68 acres of development land currently zoned for 1.3 million square feet of future office development in Nashville, TN for a purchase price of $15.0 million.

We expensed $1.5 million of acquisition costs (included in general and administrative expenses) in 2012 related to these acquisitions. The assets acquired and liabilities assumed were recorded at fair value as determined by management based on information available at the acquisition date and on current assumptions as to future operations.  

The following table sets forth a summary of the assets acquired and liabilities assumed in the acquisition of the 492,000 square foot office building in Atlanta, GA discussed in the preceding paragraph:

	Total Purchase Price Allocation
Real estate assets	$	135,128
Acquisition-related intangible assets (in deferred financing and leasing costs)	21,637
Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)	(11,875		)
Total allocation	$	144,890

2. Real Estate Assets - Continued

The following table sets forth our rental and other revenues and net income, adjusted for interest expense and depreciation and amortization related to purchase price allocations and acquisition costs, assuming the 492,000 square foot office building in Atlanta, GA discussed in the preceding paragraphs had been acquired on January 1, 2011:

	Year Ended December 31,
	2012		2011
	(unaudited)
Pro forma rental and other revenues	$	530,613	$	479,908
Pro forma net income	$	84,135	$	44,817
Pro forma earnings per share - basic	$	1.02	$	0.49
Pro forma earnings per share - diluted	$	1.01	$	0.49

During 2011, we acquired a six-building, 1.54 million square foot office complex in Pittsburgh, PA for a purchase price of $188.5 million. The purchase price included the assumption of secured debt recorded at fair value of $124.5 million, with an effective interest rate of 4.27%, including amortization of deferred financing costs. This debt matures in November 2017. We expensed $4.0 million of costs related to this acquisition (included in general and administrative expenses). Additionally, we acquired a 503,000 square foot office building in Atlanta, GA for a purchase price of $78.3 million. The purchase price included the assumption of secured debt recorded at fair value of $67.9 million, with an effective interest rate of 5.45%, including amortization of deferred financing costs. This debt matures in January 2014. We expensed $0.3 million of costs related to this acquisition.

The following table sets forth a summary of the acquisition purchase price consideration for each major class of assets acquired and liabilities assumed in the acquisitions discussed above:

	Total Purchase Price Allocation
Real estate assets	$	241,602
Acquisition-related intangible assets (in deferred financing and leasing costs)	39,721
Furniture, fixtures and equipment (in prepaid expenses and other assets)	1,101
Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)	(15,627		)
Total allocation	$	266,797

The following table sets forth our rental and other revenues and net income, adjusted for interest expense and depreciation and amortization related to purchase price allocations and acquisition costs, assuming the 1.54 million square foot office complex in Pittsburgh, PA and the 503,000 square foot office building in Atlanta, GA discussed in the preceding paragraph had been acquired on January 1, 2010:

	Year Ended December 31,
	2011		2010
	(unaudited)
Pro forma rental and other revenues	$	505,072	$	491,573
Pro forma net income	$	45,674	$	65,409
Pro forma earnings per share - basic	$	0.50	$	0.77
Pro forma earnings per share - diluted	$	0.50	$	0.77

2. Real Estate Assets - Continued

During 2011, we also acquired a 48,000 square foot medical office property in Raleigh, NC for $8.9 million and expensed $0.1 million of acquisition costs related to this transaction.

During 2010, we acquired a 336,000 square foot office property in Memphis, TN for $52.6 million. This purchase price included the assumption of secured debt recorded at fair value of $40.3 million, with an effective interest rate of 6.43%. This debt matures in November 2015. We expensed $0.4 million of acquisition costs related to this transaction. We also acquired a 117,000 square foot office property and 32.6 acres of development land in Tampa, FL for $12.0 million. We expensed $0.2 million of acquisition costs related to this transaction. Lastly, we acquired our partner’s interest in a joint venture that owned for-sale residential condominiums for $0.5 million.

Dispositions

During 2012, we sold:

• three non-core buildings in Jackson, MS and Atlanta, GA for a sale price of $86.5 million and recorded gain on disposition of discontinued operations of $14.0 million;

• five non-core office properties in Nashville, TN for a sale price of $41.0 million and recorded gain on disposition of discontinued operations of $7.0 million;

• a non-core office property in Pinellas County, FL for a sale price of $9.5 million and recorded gain on disposition of discontinued operations of $1.4 million;

• a non-core office property in Kansas City, MO for a sale price of $6.5 million and recorded gain on disposition of discontinued operations of $1.9 million;

• 96 vacant non-core rental residential units in Kansas City, MO for a sale price of $11.0 million and recorded gain on disposition of discontinued operations of $5.1 million; and

• 17 for-sale residential condominiums in Raleigh, NC for a sale price of $5.5 million and recorded a net gain of $0.4 million. All for-sale residential condominiums were sold as of December 31, 2012.

During 2011, we sold an office property and adjacent land parcel in a single transaction in Winston-Salem, NC for $15.0 million and recorded gain on disposition of discontinued operations of $2.6 million related to the office property and gain on disposition of property of $0.3 million related to the land.

During 2010, we sold seven office properties in Winston Salem, NC and six industrial properties in Greensboro, NC in two separate transactions for $24.9 million. In the aggregate, we received cash of $7.9 million, provided seller financing of $17.0 million and committed to lend up to an additional $1.7 million for tenant improvements and lease commissions, of which $0.2 million was funded as of December 31, 2012. We have accounted for these dispositions using the installment method, whereby the $0.4 million gain on disposition of property related to the office properties has been deferred and will be recognized when the seller financing is repaid, and recorded impairment of $0.3 million related to the industrial properties. In 2010, we also recorded a completed sale in connection with the disposition of an office property in Raleigh, NC in the fourth quarter of 2009 where the buyer's limited right to compel us to repurchase the property expired and recorded a gain of $0.2 million.

Impairments

During 2011, we recorded impairments of real estate assets of $2.4 million related to two office properties located in Orlando, FL due to a change in the assumed timing of future dispositions, which reduced the future expected cash flows from the properties.

Highwoods Realty Limited Partnership [Member]

Significant Acquisitions and Disposals [Line Items]

Real Estate Assets

Real Estate Assets

Acquisitions

During 2012, we acquired:

• a 492,000 square foot office property in Atlanta, GA for a purchase price of $144.9 million;

• a 616,000 square foot office property in Pittsburgh, PA for a purchase price of $91.2 million;

• three medical office properties in Greensboro, NC for a purchase price of $29.6 million, which consisted of the issuance of 66,864 Common Units, contingent consideration with fair value at the acquisition date of $0.7 million, and the assumption of secured debt due August 2014 recorded at fair value of $7.9 million, with an effective interest rate of 4.06%;

• a 178,300 square foot office property in Cary, NC from our DLF I joint venture for an agreed upon value of $26.0 million, the net proceeds of which were used to reduce the balance of the advance due to us from the joint venture; and

• 68 acres of development land currently zoned for 1.3 million square feet of future office development in Nashville, TN for a purchase price of $15.0 million.

We expensed $1.5 million of acquisition costs (included in general and administrative expenses) in 2012 related to these acquisitions. The assets acquired and liabilities assumed were recorded at fair value as determined by management based on information available at the acquisition date and on current assumptions as to future operations.  

The following table sets forth a summary of the assets acquired and liabilities assumed in the acquisition of the 492,000 square foot office building in Atlanta, GA discussed in the preceding paragraph:

	Total Purchase Price Allocation
Real estate assets	$	135,128
Acquisition-related intangible assets (in deferred financing and leasing costs)	21,637
Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)	(11,875		)
Total allocation	$	144,890

2. Real Estate Assets - Continued

The following table sets forth our rental and other revenues and net income, adjusted for interest expense and depreciation and amortization related to purchase price allocations and acquisition costs, assuming the 492,000 square foot office building in Atlanta, GA discussed in the preceding paragraphs had been acquired on January 1, 2011:

	Year Ended December 31,
	2012		2011
	(unaudited)
Pro forma rental and other revenues	$	530,613	$	479,908
Pro forma net income	$	84,195	$	44,878
Pro forma earnings per share - basic	$	1.02	$	0.50
Pro forma earnings per share - diluted	$	1.02	$	0.50

During 2011, we acquired a six-building, 1.54 million square foot office complex in Pittsburgh, PA for a purchase price of $188.5 million. The purchase price included the assumption of secured debt recorded at fair value of $124.5 million, with an effective interest rate of 4.27%, including amortization of deferred financing costs. This debt matures in November 2017. We expensed $4.0 million of costs related to this acquisition (included in general and administrative expenses). Additionally, we acquired a 503,000 square foot office building in Atlanta, GA for a purchase price of $78.3 million. The purchase price included the assumption of secured debt recorded at fair value of $67.9 million, with an effective interest rate of 5.45%, including amortization of deferred financing costs. This debt matures in January 2014. We expensed $0.3 million of costs related to this acquisition.

The following table sets forth a summary of the acquisition purchase price consideration for each major class of assets acquired and liabilities assumed in the acquisitions discussed above:

	Total Purchase Price Allocation
Real estate assets	$	241,602
Acquisition-related intangible assets (in deferred financing and leasing costs)	39,721
Furniture, fixtures and equipment (in prepaid expenses and other assets)	1,101
Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)	(15,627		)
Total allocation	$	266,797

The following table sets forth our rental and other revenues and net income, adjusted for interest expense and depreciation and amortization related to purchase price allocations and acquisition costs, assuming the 1.54 million square foot office complex in Pittsburgh, PA and the 503,000 square foot office building in Atlanta, GA discussed in the preceding paragraph had been acquired on January 1, 2010:

	Year Ended December 31,
	2011		2010
	(unaudited)
Pro forma rental and other revenues	$	505,072	$	491,573
Pro forma net income	$	38,470	$	58,216
Pro forma earnings per share - basic	$	0.51	$	0.78
Pro forma earnings per share - diluted	$	0.51	$	0.77

2. Real Estate Assets - Continued

During 2011, we also acquired a 48,000 square foot medical office property in Raleigh, NC for $8.9 million and expensed $0.1 million of acquisition costs related to this transaction.

During 2010, we acquired a 336,000 square foot office property in Memphis, TN for $52.6 million. This purchase price included the assumption of secured debt recorded at fair value of $40.3 million, with an effective interest rate of 6.43%. This debt matures in November 2015. We expensed $0.4 million of acquisition costs related to this transaction. We also acquired a 117,000 square foot office property and 32.6 acres of development land in Tampa, FL for $12.0 million. We expensed $0.2 million of acquisition costs related to this transaction. Lastly, we acquired our partner’s interest in a joint venture that owned for-sale residential condominiums for $0.5 million.

Dispositions

During 2012, we sold:

• three non-core buildings in Jackson, MS and Atlanta, GA for a sale price of $86.5 million and recorded gain on disposition of discontinued operations of $14.0 million;

• five non-core office properties in Nashville, TN for a sale price of $41.0 million and recorded gain on disposition of discontinued operations of $7.0 million;

• a non-core office property in Pinellas County, FL for a sale price of $9.5 million and recorded gain on disposition of discontinued operations of $1.4 million;

• a non-core office property in Kansas City, MO for a sale price of $6.5 million and recorded gain on disposition of discontinued operations of $1.9 million;

• 96 vacant non-core rental residential units in Kansas City, MO for a sale price of $11.0 million and recorded gain on disposition of discontinued operations of $5.1 million; and

• 17 for-sale residential condominiums in Raleigh, NC for a sale price of $5.5 million and recorded a net gain of $0.4 million. All for-sale residential condominiums were sold as of December 31, 2012.

During 2011, we sold an office property and adjacent land parcel in a single transaction in Winston-Salem, NC for $15.0 million and recorded gain on disposition of discontinued operations of $2.6 million related to the office property and gain on disposition of property of $0.3 million related to the land.

During 2010, we sold seven office properties in Winston Salem, NC and six industrial properties in Greensboro, NC in two separate transactions for $24.9 million. In the aggregate, we received cash of $7.9 million, provided seller financing of $17.0 million and committed to lend up to an additional $1.7 million for tenant improvements and lease commissions, of which $0.2 million was funded as of December 31, 2012. We have accounted for these dispositions using the installment method, whereby the $0.4 million gain on disposition of property related to the office properties has been deferred and will be recognized when the seller financing is repaid, and recorded impairment of $0.3 million related to the industrial properties. In 2010, we also recorded a completed sale in connection with the disposition of an office property in Raleigh, NC in the fourth quarter of 2009 where the buyer's limited right to compel us to repurchase the property expired and recorded a gain of $0.2 million.

Impairments

During 2011, we recorded impairments of real estate assets of $2.4 million related to two office properties located in Orlando, FL due to a change in the assumed timing of future dispositions, which reduced the future expected cash flows from the properties.