Financial Performance Overview

Highwoods Properties is a real estate investment trust (REIT) that owns, develops, and manages office properties in several major markets across the southeastern United States. The company’s financial results for the third quarter and first nine months of 2025 show a mixed performance, with some declines in revenue and net operating income (NOI) offset by gains from property dispositions.

Revenues and Occupancy

Highwoods’ rental and other revenues were 1.2% lower in Q3 2025 compared to the same period in 2024, primarily due to lost revenue from property sales, lower occupancy in the company’s same-property portfolio, and properties taken out of service. Same-property revenues decreased due to lower average occupancy and cost recoveries, partially offset by higher average rents per square foot and lower credit losses.

Occupancy in Highwoods’ office portfolio decreased from 87.1% at the end of 2024 to 85.3% as of September 30, 2025. The company expects average occupancy to range from 85-86% for the remainder of 2025. New and renewal leases signed in Q3 2025 had average rents that were 18.3% higher than previous leases in the same spaces.

Expenses and Net Operating Income

Rental property and other expenses were 0.3% higher in Q3 2025 compared to the prior year, primarily due to increased same-property expenses and expenses from recent acquisitions, partially offset by decreases from property dispositions. The company also recorded an $8.8 million impairment charge in Q3 2025 to write down the value of two non-core, out-of-service assets.

Consolidated same-property NOI was 2.7% lower in Q3 2025, and total NOI was 2.0% lower, primarily due to the decrease in same-property NOI and lost NOI from property sales, partially offset by NOI from recent acquisitions.

Cash Flows

Highwoods generated positive cash flow from operating activities, though the amount was 13.5% lower in the first nine months of 2025 compared to the same period in 2024, primarily due to changes in operating liabilities, lower occupancy, and property dispositions.

Cash used in investing activities was 16.8% higher, mainly due to the 2025 acquisitions of Advance Auto Parts Tower in Raleigh and the Legacy Union parking garage in Charlotte, partially offset by higher net proceeds from dispositions.

Cash used in financing activities decreased by 86.9%, largely due to higher proceeds from the issuance of common stock and increased net debt borrowings in 2025.

Capital Resources and Liquidity

As of September 30, 2025, Highwoods had $26.3 million in cash and $529.9 million in unused capacity on its $750 million revolving credit facility. The company’s mortgages, notes payable, and outstanding preferred stock represented 49.1% of its total capitalization and 42.8% of the undepreciated book value of its assets.

Highwoods expects its available cash, operating cash flows, and other financing sources to be adequate to meet its short-term liquidity needs, such as operating expenses, interest, dividends, and existing portfolio capital expenditures. For longer-term liquidity, the company plans to use a combination of operating cash flows, debt financing, equity issuances, and asset dispositions.

Investment Activity

During the third quarter of 2025, Highwoods acquired the Legacy Union parking garage in Charlotte for $110.2 million. The company also sold a building in Richmond for $16 million and recorded a $5.7 million gain on the disposition.

Highwoods is continuously evaluating potential acquisitions and dispositions to upgrade the quality of its portfolio. Over the next six months, the company expects to sell between $50 million and $500 million of assets and use the proceeds to acquire high-quality office buildings in its core markets.

Outlook and Risks

Looking ahead, Highwoods faces several risks and uncertainties that could impact its future performance, including:

• The potential for further deterioration in customer financial health
• Challenges in leasing vacant space or renewing expiring leases on favorable terms
• Difficulties in completing development, acquisition, or disposition projects as anticipated
• Oversupply of office space relative to demand in its markets
• Negative economic or employment growth in its core markets
• Rising interest rates increasing debt service costs
• Increases in operating expenses
• Potential impact of natural disasters and climate change
• Challenges in meeting liquidity requirements or obtaining capital on favorable terms

Overall, Highwoods’ financial results for the third quarter and first nine months of 2025 show a mixed picture, with declines in revenue and NOI offset by gains from property sales. The company maintains a conservative balance sheet and ample liquidity, but faces several risks that could affect its future performance. Highwoods’ strategy of continuously upgrading its portfolio through acquisitions, dispositions, and development remains a key focus as it navigates the evolving office real estate market.