Real Estate Assets

9 Months Ended

Sep. 30, 2014

Real Estate [Abstract]

Real Estate Assets

Real Estate Assets

Acquisitions

During the third quarter of 2014, we acquired an office property in Raleigh, NC encompassing 374,000 rentable square feet for a purchase price of $83.8 million. We expensed $0.2 million of acquisition costs (included in general and administrative expenses) related to this acquisition. 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.

Pro Forma Disclosure

During the third quarter of 2013, we acquired our joint venture partner's 60.0% interest in our HIW-KC Orlando, LLC joint venture, which owned five office properties in Orlando, FL encompassing 1.3 million rentable square feet, for a net purchase price of $112.8 million. We previously accounted for our 40.0% interest in this joint venture using the equity method of accounting. The assets and liabilities of the joint venture are now wholly owned and are recorded in our Consolidated Financial Statements, including assets recorded at fair value of $188.0 million and secured debt recorded at fair value of $127.9 million, with an effective interest rate of 3.11%. This debt has since been repaid. As a result of acquiring a controlling interest in this joint venture, our previously held equity interest was remeasured at a fair value of $75.2 million resulting in a gain of $7.5 million, which represents the difference between the fair market value of our previously held equity interest and the carrying value of our investment on the date of acquisition. The fair market value of our previously held equity interest was determined by management based on information available at the acquisition date and on current assumptions as to future operations.

During the third quarter of 2013, we also acquired an office property in Nashville, TN encompassing 520,000 rentable square feet for a net purchase price of $150.1 million.

During the second quarter of 2013, we acquired an office property in Atlanta, GA encompassing 553,000 rentable square feet for a purchase price of $140.1 million.

2.    Real Estate Assets – Continued

The following table sets forth a summary of the fair value of the major assets acquired and liabilities assumed relating to the 2013 acquisitions discussed in the preceding paragraphs:

	Total Purchase Price Allocation
Real estate assets	$	445,396
Acquisition-related intangible assets (in deferred financing and leasing costs)	50,595
Mortgages and notes payable	(127,891		)
Acquisition-related below market lease liabilities (in accounts payable, accrued expenses and other liabilities)	(17,818		)
Total allocation	$	350,282

The following table sets forth our revenues and net income, adjusted for interest expense and depreciation and amortization related to purchase price allocations, acquisition costs and equity in earnings of unconsolidated affiliates previously recognized as income assuming the 2013 acquisitions discussed in the preceding paragraphs had been completed as of January 1, 2012:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2013		2013
Pro forma revenues	$	149,754	$	443,178
Pro forma net income	$	49,818	$	90,064
Pro forma earnings per share - basic	$	0.54	$	1.00
Pro forma earnings per share - diluted	$	0.54	$	1.00

The 2013 acquisitions discussed in the preceding paragraphs resulted in revenues of $10.0 million and $10.3 million and net losses of $0.1 million and $0.4 million recorded in the Consolidated Statements of Income for the three and nine months ended September 30, 2013, respectively.

Dispositions

During the third quarter of 2014, we sold:

• five office properties and a land parcel in a single transaction in Raleigh, NC for a sale price of $58.7 million and recorded a gain on disposition of property of $11.7 million;

• 11 office properties in Richmond, VA in separate transactions for an aggregate sale price of $40.7 million and recorded aggregate gains on disposition of property of $17.6 million;

• six office and eight industrial properties in Greensboro, NC for a sale price of $28.2 million (before closing credits to buyer of $1.2 million for unfunded tenant improvements and $0.4 million for free rent) and recorded a gain on disposition of property of $4.7 million; and

• an office property in Greenville, SC for a sale price of $27.2 million (before closing credits to buyer of $5.8 million for unfunded building and tenant improvements and $1.8 million for free rent) and recorded a gain on disposition of property of $2.2 million.

During the second quarter of 2014, we sold two land parcels in Atlanta, GA in separate transactions for an aggregate sale price of $9.5 million and recorded aggregate gains on disposition of property of $5.9 million.

2.    Real Estate Assets – Continued

Impairments

During the second quarter of 2014, we recorded an impairment of real estate assets of $0.6 million on an office property in Greensboro, NC. This impairment was due to a change in the assumed timing of future disposition and leasing assumptions, which reduced the future expected cash flows from the impaired property.