Highwoods' Q3 Net Income Dips, Asset Sales Boost 9-Month Profit

Highwoods Realty Ltd Partnership 10-Q Filing Summary
FieldDetail
CompanyHighwoods Realty Ltd Partnership
Form Type10-Q
Filed DateOct 28, 2025
Risk Levelmedium
Pages15
Reading Time18 min
Sentimentmixed

Sentiment: mixed

Topics: REIT, Office Real Estate, Asset Dispositions, Net Income, Revenue Decline, Debt Levels, Impairment Charges

Related Tickers: HIW

TL;DR

**Highwoods is selling assets to prop up profits, but declining rental revenue and rising debt are red flags for long-term growth.**

AI Summary

Highwoods Properties, Inc. reported a net income of $13.7 million for the three months ended September 30, 2025, a decrease from $15.469 million in the same period of 2024. For the nine months ended September 30, 2025, net income significantly increased to $132.928 million from $107.452 million in 2024. Rental and other revenues decreased to $201.773 million for the three months ended September 30, 2025, from $204.323 million in 2024, and to $602.756 million for the nine months, down from $620.336 million. The company recognized impairments of real estate assets totaling $8.8 million in the current quarter, with no such impairments in the prior year. Gains on disposition of property surged to $87.889 million for the nine months ended September 30, 2025, compared to $42.581 million in 2024, indicating a strategic shift towards asset sales. Total assets increased to $6.139 billion as of September 30, 2025, from $6.029 billion at December 31, 2024, driven by an increase in net real estate assets to $4.946 billion from $4.821 billion. Mortgages and notes payable, net, also increased to $3.404 billion from $3.293 billion, reflecting increased leverage. The company issued $51.819 million in Common Stock proceeds for the nine months ended September 30, 2025, compared to $1.094 million in 2024, bolstering equity.

Why It Matters

Highwoods' strategic asset dispositions, generating $87.889 million in gains over nine months, signal a proactive portfolio management approach in a challenging real estate market, potentially freeing up capital for new investments or debt reduction. The decline in rental revenue and the $8.8 million impairment charge suggest headwinds in their core operations, which could impact future dividend sustainability for investors. Increased leverage, with mortgages and notes payable rising to $3.404 billion, warrants investor scrutiny regarding interest rate sensitivity and financial flexibility. Competitors in the office REIT sector are also navigating evolving work patterns and economic uncertainties, making Highwoods' ability to adapt its portfolio crucial for long-term competitive positioning and employee stability.

Risk Assessment

Risk Level: medium — The company reported an $8.8 million impairment of real estate assets for the three months ended September 30, 2025, indicating potential overvaluation or underperformance of certain properties. Additionally, rental and other revenues decreased by $2.55 million for the three months and $17.58 million for the nine months ended September 30, 2025, compared to the prior year, suggesting a softening in core business operations.

Analyst Insight

Investors should closely monitor Highwoods' future asset disposition plans and the deployment of capital from these sales. Evaluate the impact of declining rental revenues on FFO and dividend coverage, and assess the company's ability to manage its increased debt load in a rising interest rate environment. Consider if the current dividend yield adequately compensates for these operational and financial risks.

Financial Highlights

debt To Equity
1.54
revenue
$602.8M
operating Margin
N/A
total Assets
$6.14B
total Debt
$3.40B
net Income
$132.9M
eps
$0.12
gross Margin
N/A
cash Position
$26.3M
revenue Growth
-3.2%

Revenue Breakdown

SegmentRevenueGrowth
Rental and other revenues$201.8M-1.2%
Rental and other revenues$602.8M-3.2%

Key Numbers

  • $13.7M — Net Income (3 months) (Decreased from $15.469M in Q3 2024, indicating a quarterly decline.)
  • $132.9M — Net Income (9 months) (Increased significantly from $107.452M in 9M 2024, largely due to asset sales.)
  • $201.8M — Rental & Other Revenues (3 months) (Decreased from $204.3M in Q3 2024, showing a dip in core revenue.)
  • $8.8M — Real Estate Impairments (New impairment charge in Q3 2025, signaling potential asset value issues.)
  • $87.9M — Gains on Property Disposition (9 months) (More than doubled from $42.581M in 9M 2024, a key driver of increased net income.)
  • $6.14B — Total Assets (Increased from $6.029B at Dec 31, 2024, reflecting continued investment.)
  • $3.40B — Mortgages & Notes Payable (Increased from $3.293B at Dec 31, 2024, indicating higher leverage.)
  • $51.8M — Proceeds from Common Stock Issuance (9 months) (Significantly higher than $1.094M in 9M 2024, boosting equity.)
  • 109,893,942 — Common Shares Outstanding (As of October 21, 2025, indicating share count growth.)
  • $0.12 — EPS - Basic (3 months) (Decreased from $0.14 in Q3 2024, reflecting lower quarterly net income.)

Key Players & Entities

  • HIGHWOODS REALTY LTD PARTNERSHIP (company) — registrant for 10-Q filing
  • Highwoods Properties, Inc. (company) — parent company and sole general partner of the Operating Partnership
  • New York Stock Exchange (regulator) — exchange where Common Stock is registered
  • $13.7 million (dollar_amount) — net income for the three months ended September 30, 2025
  • $132.928 million (dollar_amount) — net income for the nine months ended September 30, 2025
  • $201.773 million (dollar_amount) — rental and other revenues for the three months ended September 30, 2025
  • $8.8 million (dollar_amount) — impairments of real estate assets for the three and nine months ended September 30, 2025
  • $87.889 million (dollar_amount) — gains on disposition of property for the nine months ended September 30, 2025
  • $6.139 billion (dollar_amount) — total assets as of September 30, 2025
  • $3.404 billion (dollar_amount) — mortgages and notes payable, net, as of September 30, 2025

FAQ

What were Highwoods Properties, Inc.'s net income figures for the three and nine months ended September 30, 2025?

Highwoods Properties, Inc. reported a net income of $13.707 million for the three months ended September 30, 2025, a decrease from $15.469 million in the prior year. For the nine months ended September 30, 2025, net income was $132.928 million, an increase from $107.452 million in the same period of 2024.

How did Highwoods' rental and other revenues change in the latest quarter and nine-month period?

Rental and other revenues for Highwoods decreased to $201.773 million for the three months ended September 30, 2025, from $204.323 million in 2024. For the nine months, revenues were $602.756 million, down from $620.336 million in the comparable 2024 period.

Did Highwoods record any real estate asset impairments in the current reporting period?

Yes, Highwoods recorded impairments of real estate assets totaling $8.800 million for both the three and nine months ended September 30, 2025. No such impairments were reported in the corresponding periods of 2024.

What was the impact of property dispositions on Highwoods' financial results?

Gains on disposition of property significantly contributed to Highwoods' financial results, reaching $5.674 million for the three months and $87.889 million for the nine months ended September 30, 2025. This is a substantial increase from $350 thousand and $42.581 million, respectively, in 2024.

How have Highwoods' total assets and liabilities changed as of September 30, 2025?

As of September 30, 2025, Highwoods' total assets increased to $6.139 billion from $6.029 billion at December 31, 2024. Total liabilities also increased to $3.688 billion from $3.598 billion over the same period, with mortgages and notes payable, net, rising to $3.404 billion.

What is the current number of Highwoods Properties, Inc. Common Shares outstanding?

As of October 21, 2025, Highwoods Properties, Inc. had 109,893,942 shares of Common Stock outstanding. This represents an increase from 107,623,777 shares outstanding at December 31, 2024.

How much cash did Highwoods generate from operating activities in the nine months ended September 30, 2025?

Highwoods generated $259.523 million in net cash from operating activities for the nine months ended September 30, 2025. This is a decrease from $299.858 million generated in the same period of 2024.

What were Highwoods' significant investing activities during the nine months ended September 30, 2025?

Significant investing activities for Highwoods included investments in acquired real estate of $248.017 million, investments in tenant improvements and deferred leasing costs of $110.065 million, and net proceeds from disposition of real estate assets of $153.586 million.

How did Highwoods' debt levels change in the nine months ended September 30, 2025?

Highwoods' borrowings on its revolving credit facility amounted to $390.000 million, with repayments of $274.000 million. Additionally, the company had borrowings on mortgages and notes payable of $31.600 million and repayments of $37.157 million, contributing to an overall increase in net mortgages and notes payable.

What is the significance of the combined 10-Q report for Highwoods Properties, Inc. and Highwoods Realty Limited Partnership?

The combined 10-Q report is intended to better reflect how management and investors view the business as a single operating unit, enhance understanding, and improve efficiency by reducing duplicative disclosure. It presents separate sections for each entity's consolidated financial statements and controls to highlight differences.

Risk Factors

  • Real Estate Asset Impairments [medium — financial]: The company recognized $8.8 million in impairments of real estate assets in the three months ended September 30, 2025. This is a new charge compared to zero in the prior year, indicating potential downward pressure on asset values.
  • Increased Leverage [medium — financial]: Mortgages and notes payable, net, increased to $3.404 billion as of September 30, 2025, from $3.293 billion at December 31, 2024. This indicates an increase in the company's financial leverage.
  • Declining Quarterly Net Income [medium — financial]: Net income for the three months ended September 30, 2025, was $13.7 million, a decrease from $15.469 million in the same period of 2024. This quarterly decline warrants attention.
  • Dependence on Rental Income [medium — market]: Rental and other revenues decreased to $201.773 million for the three months ended September 30, 2025, from $204.323 million in 2024. A continued decline in core revenue could impact profitability.

Industry Context

Highwoods Properties operates in the office real estate sector, which has faced headwinds due to shifts in work patterns and increased remote work. The sector is characterized by long-term leases, significant capital investment, and sensitivity to economic cycles. Companies in this space are increasingly focused on asset optimization and strategic dispositions.

Regulatory Implications

As a publicly traded REIT, Highwoods is subject to SEC regulations and accounting standards. Changes in tax laws or real estate investment regulations could impact its financial performance and operational strategies. Compliance with disclosure requirements is paramount.

What Investors Should Do

  1. Monitor asset disposition strategy
  2. Analyze leverage trends
  3. Evaluate impact of real estate impairments
  4. Assess revenue stability

Key Dates

  • 2025-09-30: End of Third Quarter 2025 — Reporting period for the 10-Q, showing net income of $13.7M and revenues of $201.8M for the quarter.
  • 2025-12-31: End of Fiscal Year 2024 — Balance sheet comparison point, with total assets of $6.029B and mortgages/notes payable of $3.293B.

Glossary

Impairments of real estate assets
A reduction in the carrying value of a real estate asset on the balance sheet when its fair value is less than its book value. (Indicates a potential loss in value of the company's property holdings, with an $8.8M charge in Q3 2025.)
Gains on disposition of property
Profits realized from selling real estate assets. (A significant contributor to net income, with $87.9M recognized in the first nine months of 2025.)
Accrued straight-line rents receivable
Rent revenue that has been earned but not yet received, recognized on a straight-line basis over the lease term. (Represents a significant portion of receivables, totaling $317.1M as of September 30, 2025.)
Noncontrolling interests in the Operating Partnership
The portion of equity in the operating partnership that is not owned by the parent company (Highwoods Properties, Inc.). (Represents a claim on the partnership's assets and earnings, totaling $65.0M as of September 30, 2025.)
Common Stock, $ .01 par value
Represents ownership in the company, with a nominal par value. (The number of outstanding shares increased to 109.6M as of September 30, 2025, with proceeds from issuance bolstering equity.)

Year-Over-Year Comparison

Compared to the prior year, Highwoods Properties has seen a significant increase in net income for the nine-month period, largely driven by a more than doubling of gains on property dispositions ($87.9M vs $42.6M). However, quarterly net income and rental revenues have declined. The company has also increased its leverage with higher mortgages and notes payable, while simultaneously bolstering equity through increased common stock issuance.

Filing Stats: 4,623 words · 18 min read · ~15 pages · Grade level 20 · Accepted 2025-10-28 16:04:31

Filing Documents

- Controls and Procedures; and

Item 4 - Controls and Procedures; and

- Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act

Item 6 - Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2025 TABLE OF CONTENTS Page

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 3 HIGHWOODS PROPERTIES, INC.: Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 3 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 4 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 5 Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2025 and 2024 6 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 8 HIGHWOODS REALTY LIMITED PARTNERSHIP: Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 10 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 11 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 12 Consolidated Statements of Capital for the Three and Nine Months Ended September 30, 2025 and 2024 13 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 15 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31 Disclosure Regarding Forward-Looking Statements 31 Executive Summary 32 Results of Operations 35 Liquidity and Capital Resources 38 Critical Accounting Estimates 41 Non-GAAP Information 41

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 44

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 44

- OTHER INFORMATION

PART II - OTHER INFORMATION

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 45

EXHIBITS

ITEM 6. EXHIBITS 45 2 Table of Contents

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS HIGHWOODS PROPERTIES, INC. Consolidated Balance Sheets (Unaudited and in thousands, except share and per share data) September 30, 2025 December 31, 2024 Assets: Real estate assets, at cost: Land $ 594,825 $ 570,286 Buildings and tenant improvements 6,017,574 5,826,603 Development in-process 3,657 — Land held for development 214,467 221,048 6,830,523 6,617,937 Less-accumulated depreciation ( 1,883,882 ) ( 1,796,586 ) Net real estate assets 4,946,641 4,821,351 Real estate and other assets, net, held for sale 10,490 55,409 Cash and cash equivalents 26,262 22,412 Restricted cash 15,481 11,265 Accounts receivable 30,344 28,287 Mortgages and notes receivable 6,211 11,064 Accrued straight-line rents receivable 317,072 308,853 Investments in and advances to unconsolidated affiliates 497,002 485,726 Deferred leasing costs, net of accumulated amortization of $ 165,547 and $ 170,312 , respectively 225,307 209,967 Prepaid expenses and other assets, net of accumulated depreciation of $ 23,897 and $ 20,626 , respectively 64,683 75,021 Total Assets $ 6,139,493 $ 6,029,355 Liabilities, Noncontrolling Interests in the Operating Partnership and Equity: Mortgages and notes payable, net $ 3,404,707 $ 3,293,559 Accounts payable, accrued expenses and other liabilities 283,905 304,551 Total Liabilities 3,688,612 3,598,110 Commitments and contingencies Noncontrolling interests in the Operating Partnership 65,042 65,791 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), 26,691 and 28,811 shares issued and outstanding, respectively 26,691 28,811 Common Stock, $ .01 par value, 200,000,000 authorized shares; 109,553,557 and 107,623,777 shares issued and outstanding, respectively 1,096 1,076 Additional paid-in capital 3,200,251 3,144,130 Distributions in excess of net income avai

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