Investments In and Advances To Affiliates

12 Months Ended

Dec. 31, 2011

Schedule of Equity Method Investments [Line Items]

Investments In and Advances To Affiliates

Investments in and Advances to Affiliates

Unconsolidated Affiliates

We have equity interests of up to 50.00% in various joint ventures with unrelated investors that are accounted for using the equity method of accounting. As a result, the assets and liabilities of these joint ventures are not included in our Consolidated Financial Statements.

The following table sets forth our ownership in unconsolidated affiliates at December 31, 2011:



Joint Venture	Location of Properties	Ownership Interest
Concourse Center Associates, LLC	Greensboro, NC	50.00%
Plaza Colonnade, LLC	Kansas City, MO	50.00%
Lofts at Weston, LLC	Raleigh, NC	50.00%
Board of Trade Investment Company	Kansas City, MO	49.00%
Highwoods DLF 97/26 DLF 99/32, LP	Atlanta, GA; Greensboro, NC; Orlando, FL	42.93%
Highwoods KC Glenridge Office, LLC	Atlanta, GA	40.00%
Highwoods KC Glenridge Land, LLC	Atlanta, GA	40.00%
HIW-KC Orlando, LLC	Orlando, FL	40.00%
Kessinger/Hunter, LLC	Kansas City, MO	26.50%
Highwoods DLF Forum, LLC	Raleigh, NC	25.00%
Highwoods DLF 98/29, LLC	Atlanta, GA; Charlotte, NC; Greensboro, NC; Raleigh, NC; Orlando, FL	22.81%
4600 Madison Associates, LLC	Kansas City, MO	12.50%

The following table sets forth combined summarized financial information for our unconsolidated affiliates:



	December 31,
	2011		2010
Balance Sheets:
Assets:
Real estate assets, net	$	536,088	$	580,257
All other assets, net	96,944		92,423
Total Assets	$	633,032	$	672,680
Liabilities and Partners’ or Shareholders’ Equity:
Mortgages and notes payable (1)	$	406,875	$	424,818
All other liabilities	21,808		26,267
Partners’ or shareholders’ equity	204,349		221,595
Total Liabilities and Partners’ or Shareholders’ Equity	$	633,032	$	672,680
Our share of historical partners’ or shareholders’ equity	$	59,584	$	61,022
Advances to unconsolidated affiliate	38,323		—
Net excess of cost of investments over the net book value of underlying net assets (2)	2,460		2,585
Carrying value of investments in unconsolidated affiliates	$	100,367	$	63,607
Our share of unconsolidated non-recourse mortgage debt (1)	$	146,926	$	150,698

__________

4. Investments in and Advances to Affiliates – Continued


(1)	Our share of scheduled future principal payments, including amortization, due on mortgages and notes payable at December 31, 2011 is as follows:



2012 (a)	$	31,101
2013	23,250
2014	56,737
2015	983
2016	1,052
Thereafter	33,803
	$	146,926

(a) Includes our 22.81% portion of a $38.3 million interest-only secured loan provided by us to the DLF I joint venture.

All of this joint venture debt is non-recourse to us except in the case of customary exceptions pertaining to such matters as misuse of funds, environmental conditions and material misrepresentations.


(2)	This amount represents the aggregate difference between our historical cost basis and the basis reflected at the joint venture level, which is typically depreciated over the life of the related asset.



	Year Ended December 31,
	2011		2010		2009
Income Statements:
Rental and other revenues	$	100,958	$	119,868	$	149,856
Expenses:
Rental property and other expenses	44,584		56,868		72,344
Depreciation and amortization	26,430		31,401		35,537
Interest expense	23,762		27,956		35,245
Total expenses	94,776		116,225		143,126
Income before disposition of properties	6,182		3,643		6,730
Gains on disposition of properties	—		—		2,963
Net income	$	6,182	$	3,643	$	9,693
Our share of:
Depreciation and amortization of real estate assets	$	8,388	$	10,471	$	12,839
Interest expense	$	8,163	$	10,545	$	14,074
Net gain on disposition of depreciable properties	$	—	$	—	$	582
Net income	$	2,429	$	1,466	$	2,889

Our share of net income	$	2,429	$	1,466	$	2,889
Purchase accounting and management, leasing and other fees adjustments	2,449		2,355		2,532
Equity in earnings of unconsolidated affiliates	$	4,878	$	3,821	$	5,421

4. Investments in and Advances to Affiliates – Continued

The following summarizes additional information related to certain of our unconsolidated affiliates:

- Lofts at Weston, LLC

In 2011, we and Ravin Partners, LLC (“Ravin”) formed Lofts at Weston, LLC, in which we have a 50.00% ownership interest. We contributed 15.0 acres of land at an agreed upon value of $2.4 million to this joint venture, and Ravin contributed $1.2 million in cash and agreed to guarantee the joint venture's development loan. The joint venture then distributed $1.2 million to us and we recorded a gain of $0.3 million on this transaction. Ravin manages and operates this joint venture, which is constructing 215 rental residential units at a total cost of approximately $25.9 million. Ravin is the developer, manager and leasing agent and will receive customary fees from the joint venture.

- Highwoods DLF 97/26 DLF 99/32, L.P. (“DLF II”)

In 2009, DLF II sold an office property for gross proceeds of $7.1 million and recorded an impairment charge of $0.5 million. We recorded $0.2 million as our proportionate share of this impairment charge through equity in earnings of unconsolidated affiliates.

- Kessinger/Hunter, LLC

Kessinger/Hunter, LLC, which is managed by our joint venture partner, provides leasing services to certain of our Wholly Owned Properties in Kansas City, MO in exchange for customary fees from us. These services were reduced by us to only leasing-related services in 2009. Kessinger/Hunter, LLC received $2.1 million, $0.8 million and $0.5 million from us for these services in 2011, 2010 and 2009, respectively.

- Highwoods DLF 98/29, LLC (“DLF I”)

At the formation of this joint venture in 1999, our partner contributed excess cash to the venture that was distributed to us under the joint venture agreements. We are required to repay this excess cash to our partner over time, as discussed in Note 9.

In 2011, we provided a $38.3 million interest-only secured loan to DLF I that is scheduled to mature in March 2012, 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. We recorded $1.3 million of interest income from this loan in interest and other income during the year ended December 31, 2011.

In 2009, DLF I sold an office property for gross proceeds of $14.8 million and recorded a gain of $3.4 million. We recorded $0.8 million as our proportionate share of this gain through equity in earnings of unconsolidated affiliates.

- Des Moines, IA Joint Ventures

In 2010, we sold our equity interests in a series of unconsolidated joint ventures relating to properties in Des Moines, IA. The assets in the joint ventures included 1.7 million square feet of office, 788,000 square feet of industrial and 45,000 square feet of retail properties, as well as 418 apartment units. In connection with the closing, we received $15.0 million in cash. We had a negative book basis in certain of the joint ventures, primarily as a result of prior cash distributions to the partners. As a result, we recorded gain on disposition of investment in unconsolidated affiliates of $25.3 million.

- HIW Development B, LLC

In 2011, our joint venture partner exercised its option to acquire our 10.0% equity interest in the HIW Development B, LLC joint venture, which recently completed construction of a build-to-suit office property in Charlotte, NC. As a result, we received gross proceeds of $4.8 million and recorded a gain on disposition of investment in unconsolidated affiliate related to this merchant build project of $2.3 million.

4. Investments in and Advances to Affiliates – Continued

- Other Activities

We receive development, management and leasing fees for services provided to certain of our joint ventures. These fees are recognized in income to the extent of our respective joint venture partner's interest. In the years ended December 31, 2011, 2010 and 2009, we recognized $3.1 million, $2.7 million and $2.1 million, respectively, of development, management and leasing fees from our unconsolidated joint ventures. At December 31, 2011 and 2010, we had receivables of $1.0 million and $0.6 million, respectively, related to these fees in accounts receivable.

Consolidated Affiliates

The following summarizes our consolidated affiliates:

- Highwoods-Markel Associates, LLC (“Markel”)

We have a 50.0% ownership interest in Markel. We are the manager and leasing agent for Markel's properties located in Richmond, VA and receive customary management and leasing fees. We consolidate Markel since we are the general partner and control the major operating and financial policies of the joint venture. The organizational documents of Markel require the entity to be liquidated through the sale of its assets upon reaching December 31, 2100. As controlling partner, we have an obligation to cause this property-owning entity to distribute proceeds of liquidation to the noncontrolling interest partner in these partially owned properties only if the net proceeds received by the entity from the sale of our assets warrant a distribution as determined by the agreement. We estimate the value of noncontrolling interest distributions would have been approximately $14.8 million had the entity been liquidated at December 31, 2011. This estimated settlement value is based on the fair value of the underlying properties which is based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for customers, changes in market rental rates and costs to operate each property. If the entity's underlying assets are worth less than the underlying liabilities on the date of such liquidation, we would have no obligation to remit any consideration to the noncontrolling interest holder.

- SF-HIW Harborview Plaza, LP (“Harborview”)

We have a 20.0% interest in Harborview. We are the manager and leasing agent for Harborview's property located in Tampa, FL and receive customary management and leasing fees. As further described in Note 8, we account for this joint venture as a financing obligation since our partner has the right to put its interest back to us in the future.

- Plaza Residential, LLC (“Plaza Residential”)

In 2009, our taxable REIT subsidiary formed the Plaza Residential joint venture with an unrelated party to develop and sell 139 for-sale residential condominiums constructed above a wholly owned office property in Raleigh, NC. We initially had a 93.0% interest in Plaza Residential. In 2010, we acquired our partner's 7.0% ownership interest for $0.5 million. During the years ended December 31, 2011, 2010 and 2009, we received $3.2 million, $5.3 million and $13.0 million, respectively, in gross proceeds and recorded $3.5 million, $5.0 million and $12.1 million, respectively, of cost of assets sold from condominium sales, including impairment charges, if any.

Highwoods Realty Limited Partnership [Member]

Schedule of Equity Method Investments [Line Items]

Investments In and Advances To Affiliates

Investments in and Advances to Affiliates

Unconsolidated Affiliates

The following table sets forth our ownership in unconsolidated affiliates at December 31, 2011:



Joint Venture	Location of Properties	Ownership Interest
Concourse Center Associates, LLC	Greensboro, NC	50.00%
Plaza Colonnade, LLC	Kansas City, MO	50.00%
Lofts at Weston, LLC	Raleigh, NC	50.00%
Board of Trade Investment Company	Kansas City, MO	49.00%
Highwoods DLF 97/26 DLF 99/32, LP	Atlanta, GA; Greensboro, NC; Orlando, FL	42.93%
Highwoods KC Glenridge Office, LLC	Atlanta, GA	40.00%
Highwoods KC Glenridge Land, LLC	Atlanta, GA	40.00%
HIW-KC Orlando, LLC	Orlando, FL	40.00%
Kessinger/Hunter, LLC	Kansas City, MO	26.50%
Highwoods DLF Forum, LLC	Raleigh, NC	25.00%
Highwoods DLF 98/29, LLC	Atlanta, GA; Charlotte, NC; Greensboro, NC; Raleigh, NC; Orlando, FL	22.81%

4. Investments in and Advances to Affiliates – Continued

The following table sets forth combined summarized financial information for our unconsolidated affiliates:



	December 31,
	2011		2010
Balance Sheets:
Assets:
Real estate assets, net	$	523,992	$	567,867
All other assets, net	95,504		90,323
Total Assets	$	619,496	$	658,190
Liabilities and Partners’ or Shareholders’ Equity:
Mortgages and notes payable (1)	$	396,977	$	414,265
All other liabilities	21,121		25,858
Partners’ or shareholders’ equity	201,398		218,067
Total Liabilities and Partners’ or Shareholders’ Equity	$	619,496	$	658,190
Our share of historical partners’ or shareholders’ equity	$	59,215	$	60,581
Advances to unconsolidated affiliate	38,323		—
Net excess of cost of investments over the net book value of underlying net assets (2)	$	1,758	$	1,870
Carrying value of investments in unconsolidated affiliates	$	99,296	$	62,451
Our share of unconsolidated non-recourse mortgage debt (1)	$	145,689	$	149,379

__________


(1)	Our share of scheduled future principal payments, including amortization, due on mortgages and notes payable at December 31, 2011 is as follows:



2012 (a)	$	31,075
2013	23,221
2014	56,707
2015	951
2016	1,017
Thereafter	32,718
	$	145,689

(a) Includes our 22.81% portion of a $38.3 million interest-only secured loan provided by us to the DLF I joint venture.


(2)	This amount represents the aggregate difference between our historical cost basis and the basis reflected at the joint venture level, which is typically depreciated over the life of the related asset.

4. Investments in and Advances to Affiliates– Continued



	Year Ended December 31,
	2011		2010		2009
Income Statements:
Rental and other revenues	$	96,771	$	115,826	$	145,143
Expenses:
Rental property and other expenses	42,052		54,695		70,197
Depreciation and amortization	25,184		29,945		33,821
Interest expense	23,062		27,187		34,405
Total expenses	90,298		111,827		138,423
Income before disposition of properties	6,473		3,999		6,720
Gains on disposition of properties	—		—		2,963
Net income	$	6,473	$	3,999	$	9,683
Our share of:
Depreciation and amortization of real estate assets	$	8,232	$	10,318	$	11,877
Interest expense	$	8,075	$	10,449	$	13,969
Net gain on disposition of depreciable properties	$	—	$	—	$	582
Net income	$	2,585	$	1,483	$	2,852

Our share of net income	$	2,585	$	1,483	$	2,852
Purchase accounting and management, leasing and other fees adjustments	2,354		2,311		2,515
Equity in earnings of unconsolidated affiliates	$	4,939	$	3,794	$	5,367

The following summarizes additional information related to certain of our unconsolidated affiliates:

- Lofts at Weston, LLC

- Highwoods DLF 97/26 DLF 99/32, L.P. (“DLF II”)

- Kessinger/Hunter, LLC

4. Investments in and Advances to Affiliates – Continued

- Highwoods DLF 98/29, LLC (“DLF I”)

- Des Moines, IA Joint Ventures

- HIW Development B, LLC

- Other Activities

Consolidated Affiliates

The following summarizes our consolidated affiliates:

4. Investments in and Advances to Affiliates – Continued

- Highwoods-Markel Associates, LLC (“Markel”)

- SF-HIW Harborview Plaza, LP (“Harborview”)

- Plaza Residential, LLC (“Plaza Residential”)

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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