Mortgages and Notes Payable

12 Months Ended

Dec. 31, 2011

Debt Instrument [Line Items]

Mortgages and Notes Payable

Mortgages and Notes Payable

Our mortgages and notes payable consist of the following:

	December 31,
	2011		2010
Secured indebtedness: (1)
7.05% mortgage loan due 2012 (2)	$	—	$	186,038
5.45% mortgage loan due 2014 (3)	67,809		—
5.18% mortgage loan due 2017 (4)	123,613		—
6.03% mortgage loan due 2013	125,264		128,084
5.68% mortgage loan due 2013	110,343		113,230
5.17% (6.43% effective rate) mortgage loan due 2015 (5)	40,015		40,199
6.88% mortgage loans due 2016	112,075		113,386
7.50% mortgage loan due 2016	46,181		46,662
5.74% to 9.00% mortgage loans due between 2012 and 2016 (6) (7) (8)	72,640		74,691
Variable rate construction loan due 2012 (9)	52,109		52,109
	750,049		754,399
Unsecured indebtedness:
5.85% (5.88% effective rate) notes due 2017 (10)	391,164		391,046
7.50% notes due 2018	200,000		200,000
Variable rate term loan due 2016 (11)	200,000		—
Variable rate term loans due 2011	—		147,500
Revolving credit facility due 2015 (12)	362,000		30,000
	1,153,164		768,546
Total	$	1,903,213	$	1,522,945

__________

(1) The secured mortgage loans payable are collateralized by real estate assets with an aggregate undepreciated book value of approximately $1.2 billion at December 31, 2011. Our fixed rate mortgage loans generally are either locked out to prepayment for all or a portion of their term or are prepayable subject to certain conditions including prepayment penalties.

(2) We have repaid the remaining balance of this loan as of December 31, 2011.

(3) Includes unamortized fair market premium of $0.4 million as of December 31, 2011.

(4) Includes unamortized fair market premium of $5.5 million as of December 31, 2011.

(5) Net of unamortized fair market value discount of $1.7 million as of December 31, 2011.

(6) Includes mortgage debt related to Harborview, a consolidated 20.0% owned joint venture, of $21.0 million and $21.5 million at December 31, 2011 and 2010, respectively. See Note 8.

(7) Includes mortgage debt related to Markel, a consolidated 50.0% owned joint venture, of $34.0 million and $35.0 million at December 31, 2011 and 2010, respectively. See Note 10.

(8) Net of unamortized fair market value premium of $0.3 million and $0.4 million at both December 31, 2011 and 2010.

(9) The interest rate is 1.14% at December 31, 2011.

6.    Mortgages and Notes Payable - Continued

(10) Net of unamortized original issuance discount of $0.6 million and $0.7 million at December 31, 2011 and 2010, respectively.

(11) The interest rate is 2.49% at December 31, 2011.

(12) The interest rate is 1.78% on our revolving credit facility at December 31, 2011.

The following table sets forth scheduled future principal payments, including amortization, due on our mortgages and notes payable at December 31, 2011:

Years Ending December 31,	Principal Amount
2012	$	85,624
2013	245,917
2014	105,129
2015	406,995
2016	358,480
Thereafter	701,068
	$	1,903,213

In 2011, we obtained a $475.0 million unsecured revolving credit facility, which is scheduled to mature on June 27, 2015 and includes an accordion feature that allows for an additional $75.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for an additional year. The interest rate at our current credit ratings is LIBOR plus 150 basis points and the annual facility fee is 35 basis points. The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody's Investors Service or Standard & Poor's Ratings Services. We 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. Continuing ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates. There was $362.0 million and $148.0 million outstanding under our revolving credit facility at December 31, 2011 and February 1, 2012, respectively. At both December 31, 2011 and February 1, 2012, 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 December 31, 2011 and February 1, 2012 was $112.8 million and $326.8 million, respectively.

In 2011, we repaid the remaining balance of $184.2 million of a secured mortgage loan bearing interest of 7.05% that was scheduled to mature in January 2012 and the remaining $10.0 million of a three-year unsecured term loan bearing interest of 3.90% that was scheduled to mature in February 2012. We incurred no penalties related to these early repayments. We also obtained a $200.0 million, five-year unsecured bank term loan bearing interest of LIBOR plus 220 basis points. The proceeds were used to pay off at maturity a $137.5 million unsecured bank term loan bearing interest of LIBOR plus 110 basis points, pay off amounts then outstanding under our revolving credit facility and for general corporate purposes.

In 2010, we repaid $10.0 million of our $20.0 million, three-year unsecured term loan. Additionally, we repaid the $5.8 million remaining balance outstanding on the mortgage payable secured by our 96 rental residential units to unencumber these assets for a planned development project. We incurred a penalty of $0.6 million related to this early repayment, which is included in loss on debt extinguishment.

In 2009, we paid off at maturity $50.0 million of unsecured notes bearing interest of 8.125% and retired the remaining $107.2 million principal amount of a two-tranched secured loan bearing interest of 7.80%. We also obtained a $20.0 million, three-year unsecured term loan bearing interest of 3.90%, a $115.0 million, six and a half-year secured loan bearing interest of 6.88% and a $47.3 million, seven-year secured loan bearing interest of 7.50%. Lastly, we repurchased $8.2 million principal amount of unsecured notes due March 2017 bearing interest of 5.85%.

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

6.    Mortgages and Notes Payable - Continued

Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on the revolving credit facility, the lenders having at least 66.7% of the total commitments under the revolving credit facility can accelerate all borrowings then outstanding, and we could be prohibited from borrowing any further amounts under our revolving credit facility, which would adversely affect our ability to fund our operations.

The Operating Partnership has $391.2 million carrying amount of 2017 bonds outstanding and $200.0 million carrying amount of 2018 bonds outstanding. The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0% in principal amount of either series of bonds can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.

Capitalized Interest

Total interest capitalized to development projects was $0.6 million, $1.4 million and $4.6 million for the years ended December 31, 2011, 2010 and 2009,

Highwoods Realty Limited Partnership [Member]

Debt Instrument [Line Items]

Mortgages and Notes Payable

Mortgages and Notes Payable

Our mortgages and notes payable consist of the following:

	December 31,
	2011		2010
Secured indebtedness: (1)
7.05% mortgage loan due 2012 (2)	$	—	$	186,038
5.45% mortgage loan due 2014 (3)	67,809		—
5.18% mortgage loan due 2017 (4)	123,613		—
6.03% mortgage loan due 2013	125,264		128,084
5.68% mortgage loan due 2013	110,343		113,230
5.17% (6.43% effective rate) mortgage loan due 2015 (5)	40,015		40,199
6.88% mortgage loans due 2016	112,075		113,386
7.50% mortgage loan due 2016	46,181		46,662
5.74% to 9.00% mortgage loans due between 2012 and 2016 (6) (7) (8)	72,640		74,691
Variable rate construction loan due 2012 (9)	52,109		52,109
	750,049		754,399
Unsecured indebtedness:
5.85% (5.88% effective rate) notes due 2017 (10)	391,164		391,046
7.50% notes due 2018	200,000		200,000
Variable rate term loan due 2016 (11)	200,000		—
Variable rate term loans due 2011	—		147,500
Revolving credit facility due 2015 (12)	362,000		30,000
	1,153,164		768,546
Total	$	1,903,213	$	1,522,945

__________

(1) The secured mortgage loans payable are collateralized by real estate assets with an aggregate undepreciated book value of approximately $1.2 billion at December 31, 2011. Our fixed rate mortgage loans generally are either locked out to prepayment for all or a portion of their term or are prepayable subject to certain conditions including prepayment penalties.

(2) We have repaid the remaining balance of this loan as of December 31, 2011.

(3) Includes unamortized fair market premium of $0.4 million as of December 31, 2011.

(4) Includes unamortized fair market premium of $5.5 million as of December 31, 2011.

(5) Net of unamortized fair market value discount of $1.7 million as of December 31, 2011.

(6) Includes mortgage debt related to Harborview, a consolidated 20.0% owned joint venture, of $21.0 million and $21.5 million at December 31, 2011 and 2010, respectively. See Note 8.

(7) Includes mortgage debt related to Markel, a consolidated 50.0% owned joint venture, of $34.0 million and $35.0 million at December 31, 2011 and 2010, respectively. See Note 10.

(8) Net of unamortized fair market value premium of $0.3 million and $0.4 million at both December 31, 2011 and 2010.

(9) The interest rate is 1.14% at December 31, 2011.

(10) Net of unamortized original issuance discount of $0.6 million and $0.7 million at December 31, 2011 and 2010, respectively.

(11) The interest rate is 2.49% at December 31, 2011.

(12) The interest rate is 1.78% on our revolving credit facility at December 31, 2011.

6.    Mortgages and Notes Payable - Continued

The following table sets forth scheduled future principal payments, including amortization, due on our mortgages and notes payable at December 31, 2011:

Years Ending December 31,	Principal Amount
2012	$	85,624
2013	245,917
2014	105,129
2015	406,995
2016	358,480
Thereafter	701,068
	$	1,903,213

In 2011, we obtained a $475.0 million unsecured revolving credit facility, which is scheduled to mature on June 27, 2015 and includes an accordion feature that allows for an additional $75.0 million of borrowing capacity subject to additional lender commitments. Assuming no defaults have occurred, we have an option to extend the maturity for an additional year. The interest rate at our current credit ratings is LIBOR plus 150 basis points and the annual facility fee is 35 basis points. The interest rate and facility fee are based on the higher of the publicly announced ratings from Moody's Investors Service or Standard & Poor's Ratings Services. We 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. Continuing ability to borrow under the revolving credit facility allows us to quickly capitalize on strategic opportunities at short-term interest rates. There was $362.0 million and $148.0 million outstanding under our revolving credit facility at December 31, 2011 and February 1, 2012, respectively. At both December 31, 2011 and February 1, 2012, 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 December 31, 2011 and February 1, 2012 was $112.8 million and $326.8 million, respectively.

In 2011, we repaid the remaining balance of $184.2 million of a secured mortgage loan bearing interest of 7.05% that was scheduled to mature in January 2012 and the remaining $10.0 million of a three-year unsecured term loan bearing interest of 3.90% that was scheduled to mature in February 2012. We incurred no penalties related to these early repayments. We also obtained a $200.0 million, five-year unsecured bank term loan bearing interest of LIBOR plus 220 basis points. The proceeds were used to pay off at maturity a $137.5 million unsecured bank term loan bearing interest of LIBOR plus 110 basis points, pay off amounts then outstanding under our revolving credit facility and for general corporate purposes.

In 2010, we repaid $10.0 million of our $20.0 million, three-year unsecured term loan. Additionally, we repaid the $5.8 million remaining balance outstanding on the mortgage payable secured by our 96 rental residential units to unencumber these assets for a planned development project. We incurred a penalty of $0.6 million related to this early repayment, which is included in loss on debt extinguishment.

In 2009, we paid off at maturity $50.0 million of unsecured notes bearing interest of 8.125% and retired the remaining $107.2 million principal amount of a two-tranched secured loan bearing interest of 7.80%. We also obtained a $20.0 million, three-year unsecured term loan bearing interest of 3.90%, a $115.0 million, six and a half-year secured loan bearing interest of 6.88% and a $47.3 million, seven-year secured loan bearing interest of 7.50%. Lastly, we repurchased $8.2 million principal amount of unsecured notes due March 2017 bearing interest of 5.85%.

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

6.    Mortgages and Notes Payable - Continued

Our revolving credit facility and bank term loans require us to comply with customary operating covenants and various financial requirements. Upon an event of default on the revolving credit facility, the lenders having at least 66.7% of the total commitments under the revolving credit facility can accelerate all borrowings then outstanding, and we could be prohibited from borrowing any further amounts under our revolving credit facility, which would adversely affect our ability to fund our operations.

The Operating Partnership has $391.2 million carrying amount of 2017 bonds outstanding and $200.0 million carrying amount of 2018 bonds outstanding. The indenture that governs these outstanding notes requires us to comply with customary operating covenants and various financial ratios. The trustee or the holders of at least 25.0% in principal amount of either series of bonds can accelerate the principal amount of such series upon written notice of a default that remains uncured after 60 days.

Capitalized Interest

Total interest capitalized to development projects was $0.6 million, $1.4 million and $4.6 million for the years ended December 31, 2011, 2010 and 2009, respectively.